Trendinvestor Evolution - Phase Three
I had now been able to avoid the bear market rallies, and the particularly large rally that signifies the trend change at the bottom of a bear market. Throughout the whole period of the bear market, i was able to sit in Cash/Gold and ride this out. This also means that i could actually sleep at night.
So how can i minimise the largest Bull market corrections, and the correction that eventually morphs into the new bear market every 7 to 10 years?
Because if i could do this, i felt that i had a near perfect system.
I needed something that was quantifiable, and that reacted exponentially against market direction. I was willing to pay a defined price against our bull market profits to secure this protection. This makes it easier for investors and also myself.
It is like paying car insurance on a monthly premium, the vast majority of time it is not needed, until that rare moment when you are involved in an accident, when your insurance pays out.
I have now found a very good solution, that effectively provides insurance, this is the culmination of Phase Three. It worked particularly well in March 2020 when the market had its largest monthly drop ever because of COVID leading to a loss in the S&P 500 of -12.51% because we are normally leveraged 3 to 1 that would have magnified this loss by 3, so a loss of 37.53%.
We actually ended March 2020 UP 2.64% because although we took the full leveraged market loss of 37.53% our insurance payout on March 2020 was actually greater leading to March 2020 being a positive month.
The work for Phase Four will concentrate on the best way to use funds throughout a defined bear market. Cash? Gold? Or maybe something else? That is where i will concentrate my research.
I am actually very happy, and very proud with the Trendinvestor System as it stands 26 years after inception. It has been a lot of work, but always very satisfying, to get to this stage.