Where to Invest in 2012

The author has at times been very actively interested in the stock market.  At other times not at all.  When he has been interested and invested actively, he has regularly gotten returns of about 20% per year. 

He will stay invested as he did in 2011.  He invests in 4 sectors.  There is a small cap stock mutual fund and a mid cap one.  Morningside data showed each to be the most profitable in its class over the past 10 years.  A third sector is gold and precious metals.  This can be in a precious metals mutual fund that tracks the prices of gold and silver closely, or it can be invested in the metal itself.  A mutual fund is a bit easier and costs less to sell and buy.  The fourth sector is cash, which can be invested in Treasury bonds or notes and/or in money market accounts.  Having a portion in a money market makes moving money in and out of cash easier.  This is not a buy and hold scheme.  It requires periodic monitoring and action by the investor.

In addition to buy and hold there are 2 other truisms for investing.  They are diametrical opposites.  “Buy low, sell high” is the first.  “Buy winners, sell losers” is the second.  The author uses a no judgment plan in order to buy low and sell high.  Most research shows that practically no one is a good and consistent judge of what the markets will do in the future.

His plan may be monitored as seldom or as frequently as an investor wishes, daily or at the least often, quarterly:  dealer’s choice.  Alternatively, disparities of certain sizes between the sectors  as prices change can be used as action points to buy and/or sell.

The author monitors every Saturday and takes action on Monday if the week’s market actions made differences of more than a certain amount between the four sectors.

In starting a fund like this, equal amounts of cash are invested in each sector.  The plan can be complicated as much as desired.  For example, adding a Euro or any country’s cash fund can bring in foreign investment, as can mutual funds invested in any of the world’s markets.  It is also possible to dollar average into the fund, which is another good investment method.

As the markets move, the investor buys and sells to keep the various sectors equal.    This does require doing some arithmetic, but requires no judgment at all.  And automatically, the investor is buying low and selling high!  May luck be with you!  Or, may your judgment be excellent.