I am full in cash now even in 401K

Oh man, I like that. I might have to steal that quote as a trading philosophy.

 

Thanks. Now the time is 11:42 ET and market is down. I believe S&P will rally toward the close and we will close in green. I am not bullish about the market but today's selloff is overdone.

 

securing your 401 is important

 

The mutual fund industry for years cajoled investors with the “90% of investors lose in spectacular fashion” BS. Every newsletter for the last 50 years from Fidelity to T. Rowe Price is filled with warnings to investors to stay the course or risk losing their shirts. There is a good reason why this is true. I will reveal it shortly.

For me it all began in the late 80’s and early 90’s when I began to read interviews from some big named mutual fund managers who had retired. I desperately wanted to learn the “secret” to how they traded. But one day while reading one of these interviews I got a big shock.

One disgruntled fund manager (I can’t remember who) stated in their interview that these so call reports and surveys about “keep it all invested or lose” was crap made up by the mutual fund industry to scare investors. He said that the big mutual funds were convinced if they did not “brain wash” investors into keeping a “buy and hold” attitude on their positions that the equity mutual funds would see huge outflows to lower fee treasuries funds or out their fund group during down turns. Consequently the mutual funds would miss out on the big fees they scraped out of equity based funds in inactive accounts during down turns.

This idea haunted me from then on. So “buy and hold” was just propaganda to collect fees from me. This was about the same time pensions began to disappear and I was stuck with the majority of my retirement in a 401K. It became scarier and scarier as markets some years looked like a roller coaster. So I resolved to find a way to avoid being a “buy and hold” sucker with such a large part of my future hinged to a 401K account.

Over the years my “escape” mechanism has changed quite a few times. From the very crude one I started with in the mid 90s of “Sell all in the 401 account when the S and P 500 index brakes below a weekly 15 SMA” , to using channel break outs and eventually to programming my own indicators and strategies.

And the proof is in the pudding so to speak. By the late 90’s I had an average “pull all out of the 401K” system working. So when the signal came in late 2000 I cashed out even though I felt stupid at the time (October 2000 week of the 6th I think). However in weeks and months that followed it was relief. I had managed to keep my retirement savings from Wall Street’s wolves. But,i’m not perfect. I was back in and out 2 times before May of 2003 and lost a chunk of change trying to find the new bull trend.

However, by ignoring “buy and hold” in 2000 I preserved most of my capital (the first rule of investing or trading) and I took an early retirement in 2002. If I had not built this method I probably would have sold in panic as I listened to some CNBC’er shouting “the sky is falling…the sky is falling…” and still be working my ass off as a mainframe DBA in some sweat shop being on call 24 hours a day and wondering if I could ever retire.

Is my system perfect? Hell no. I have lost money many times from the false signals to exit or reenter the market. But when I add up the big pain I missed from the huge losses I would have taken using a “buy and hold” strategy the risk of doing this is more than worth it. I can tell you the same story starting in January 2008. It’s a never ending battle If you go this route.

Do I think my protection method is gambling? Yes, I do. All of my life was filled with gambles. The bottom line is I can choose to protect myself or not. So because I’m gambling my retired future with a 401K I do know I have to draw a line in the sand that when crossed I will protect myself from my gamble to be long.

Like today I noticed the S&P 500 weekly index broke below the 15 SMA. Does it mean anything today? I don’t know? I don’t call market tops or bottoms. I’m no good at it. But again this not about market calls it is about protecting me.

For those that must know I am only partially in cash in my 401K. My system is different today.

P.S. When you see a few “spectacular” down days or weeks it can really twist you up emotionally. It is on those days (like yesterday) I resolved further to use this method.

 

Condition! the marketplace tanks, It would be defeated but regarding 3% less than other natives who grip mfs in their 401K.