A layman’s guide to managing your workplace retirement accounts. Part 3 How to spot major market inflection points.
UPDATE 3/22/17: I no longer move my money between a mutual fund and a money market account based on market conditions. It proved to not work as well as intended, and added more time to my already busy schedule. I intend, at some point, to find a better system for that strategy. I buy and hold the best fund available currently. I do monitor to make sure I am still in that fund, but I no longer rotate my money.
However, the rest of the guide which details how to choose a fund is still very relevent and useful.
In part 1 I explained some of the reasoning behind the idea of having a strategy for your retirement account. In this part I would like to show you the strategy and you can decide for yourself if you think it would benefit you. Keep in mind if you show this to one of the many “professionals” they will probably laugh at you. Why? Well they want you fully invested into funds at all times because they make money from that in the form of expense ratios. They will ease your concerns by saying they will be able to manage the major market crashes by rotating into safer investment vehicles. There are many rules and reasons why this is not the case, but I will perhaps get into that some other time.
To understand this strategy please first read my terms and definitions post(Part1) and have it up as a reference while you read this. If you are already and experienced trader you will understand all these terms.
The Implementation
To implement this strategy I will use a website called Freestockcharts.com. On this website I made an account that I use to track all of my watchlists that I have for my individual stock trading(I use the paid version called telechart, but the functionality on freestockcharts will be enough to implement this strategy). I also have a watchlist for the market indices that I track. In Freestockcharts you can also create and save layouts. The main layout I use is the weekly moving average layout. On this layout I put a 17 and 43 Exponential Moving Average on top of a candlestick chart with a weekly time period (See the terms and definitions post for an explanation of these things.)
After you have set up the charts, create a watch list called Markets or whatever you would like to call it. Put the tickers COMPQX, DJ-30, DWCF, NYSE, RUT-X, and SP-500 into this watch list. I essentially want to see at least two of these indexes issue a sell signal. The sell signal is a weekly close of the 17 EMA below the 43 EMA.
Keep in mind I look at a lot more than this in my weekly analysis of the market so I do leave some discretion for my decision making, but these cross overs are my primary indicator for my retirement account. I also take into consideration Stockbee’s Market Monitor and his Lemonade System for retirement accounts. Generally once these indicators have crossed I have already been out of individual stocks for weeks or more. I sell my retirement account funds later as I wait for further confirmation, and I have more limitations than I do in my brokerage or IRA accounts.
I will be updating my blog with the current status of my retirement account. However, you should absolutely be researching this yourself so you can understand how the process works.
Other posts in the managing your workplace retirement accounts series:
Originally published at Speculate Freedom.
