your keys to successful investing

Your Keys to successful Investing

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Special Report 1 of 6

Your Keys to

Successful Investing

Successful investing requires a few keys, all of which anyone, including you, can easily understand and use.

These keys are:

Strategy

Method

Goals

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2 Defining Your Goals

Investment goals revolve around your personality, your resources and, yes, how much money you want to make. Defining your investment goals requires more than just saying I want to make money.

Failure to define your goals will result in not achieving the profits you deserve and secretly want. Sometimes we are afraid to voice or write down what it is we really want, yet not doing so actually sets us up for mediocre results.

The keys to achieving the best investment results come from knowing what you are aiming for and what resources you bring to the table.

In general the keys to establishing and achieving your goals revolve around:

Personality

Time

Future

Resources

Profit Uses

Current

Resources


3 Personality: Be honest with yourself and ask your spouse or friends if necessary: Are you a risk taker? If so, how much? Are you willing to lose money in order to make money? In other words, if you were managing a baseball team how likely would it be for you to call for a squeeze bunt play? Or would you (with one friend) go for an all day hike in the back country of Glacier National Park (famous for its stunning mountain vistas and grizzly bears)? In other words, are you more likely to be a conservative or an aggressive investor, or perhaps your personality falls somewhere in between?

Time: Does work and family or sports and hobbies chew up most of your time? Can you find 30 minutes a day or an hour, or just 30 minutes a week to manage your investments? Would you rather be fishing, out on a date, watching a movie or TV than making investment decisions? A super aggressive investor will have time almost every day to make investment decisions while a conservative investor can usually spend just 30 minutes a week or maybe just every other week or two reviewing his portfolio. If youre in the middle then you are a typical moderate investor.

Current resources: How you diversify your investment portfolio is influenced by your personality and time to make decisions but if you have minimal resources aggressive goals may need to be handled carefully so as not to endanger your cash and future growth. This doesnt mean you have to take a totally conservative investment stance, but that you may need to have multiple goals in order to find balance.

Future resources: Building your investment portfolio with additional cash each week or month can allow you to pursue more moderate or aggressive goals because your investment base is growing.

Profit Uses: How you plan on using your investment profits is an important consideration. How soon you want to reach a certain cash level can push you towards either a conservative, aggressive or middle of the road approach in making your decisions. Are your profits going to fund a college education, a vacation, new computer or secure your retirement income?


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Combining your honest answers to these five aspects of developing your investment goals should help you focus on the investment method that works best for you. You should write down, briefly, the answers so that you keep your focus and dont allow one-time events or conversations to sway you off track.

Developing Your Investment Strategy

Successful investing requires a strategy or a series of strategies. A strategy is like a roadmap that guides you from your home to your next vacation spot; without one you could get lost or waste your time and money.

There are principles to be followed in setting up your investment portfolios:


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I suggest that each portfolio have about eight investment positions of stocks or mutual funds or ETFs. You may want a portfolio for retirement, for emergency funds, for vacation money or for education. By having a variety of portfolios you can concentrate on making money to fit the cause.

Another key principal here may sound contrary but it is critical to the overall performance of your portfolio, of each of your portfolios. This principle is:

Each investment position is derived from an individual strategy, and most likely the strategy is unique to that investment. In other words, one shoe does not fit all your strategies, all your groups of potential investments. This principle helps you to diversify your investments to both achieve greater gains and limit potential loses. Some portfolios may even invest in the same stock, fund or ETF but to meet different goals and purposes.

Let me give you a few examples. Out of eight investments one position is based on a group of foreign ETFs and another position is based on a group of Fidelitys Select mutual funds. Each group will result in one investment choice and each group will have a different strategy for determining that investment. The reason each group will have a different set of strategy rules is because the ticker symbols in each group are unique and move differently. Yes, you can use the same buy/sell rules for each strategy but you will not come even close to maximizing your potential profit. Its just like being a baseball pitcher; you wouldnt throw the same pitches in the same sequence in the same location to every batter.

This example focuses on technical analysis using relative strength with buy and sell rules. The method of deciding what to buy can be the same for each group, for example:

Alpha Alpha with standard deviation Relative strength momentum Return

However the strategies for the different groups may differ on how many trading days or weeks are analyzed to recommend new purchases.

Likewise you may find that having a preferred holding time for a position could vary anywhere from a week to three months. The same will apply to


6 what kind of stops you set to prevent losses. There are a number of other variable sell rules you can set in a strategy that will impact the overall performance of the strategy.

In most cases the various rules, when customized for each particular group of ticker symbols will result in the best potential return for that group. When I have tested such buy and sell rules I cant recall ever having two identical set of rules that resulted in the best performance for each group. Since some software programs such as Dynamic Investor Pro will let you do back testing you can find the rules that work best for your objectives to give you the best possible returns on your investments.

What this means is that just because a stock is moving up doesnt mean it is the best stock to own from your group of stocks. There may be another stock that is moving up faster. Along that line, a mutual fund you are holding may be moving up very slowly and may not trigger any sell rules because its slow growth may still be safe growth and the other funds in your group may be going down or showing erratic up/down moves. The individual back testing effort and customizing of your buy/sell rules (parameters) will see all this and help you develop the best strategy for each of your particular investment groups.

Using Proven Analysis

How do you know how to analyze and pick the best stocks or ETFs or Mutual funds? One answer is to use technical analysis and this sounds scary because almost none of us know how to do this. But we dont need to.

Using technical analysis is a surefire way to make the best choices and all you need is a software program like Dynamic Investor Pro that will do the job for you. Obviously you want a program that has a proven, reliable track record. Such technical analysis software will easily give you double digit gains and out-perform the S&P 500 or the Dow Jones.

Michael J. Carr wrote a book in 2008 and the second edition was released in April, 2011, titled Smarter Investing in Any Economy. The sub-title is The definitive Guide to Relative Strength Investing. In other words, Carr, a chartered market technician (CMT), has thoroughly examined technical analysis.

Carrs analysis delves into the nitty-gritty. The first part of his book is a bit dry and sometimes over my head until I read it a second time, but he


7 explains and tests formulas based on different theories and concepts over different time frames. He talks about investing in ETFs, mutual funds and stocks, so the book (and Dynamic Investor Pro) fits with whatever investment or diversification desires you may have.

Technical analysis can involve studying data in a spreadsheet format and/or reviewing charts.

There are numerous formulas for analyzing the data, for example: Alpha Relative strength momentum Return Price oscillation Relative strength index

And you can add standard deviation to any of these.

Charting price movement or analyzing with charts is very popular and there are dozens upon dozens of chart types. Some of the most popular charts are:

Return Moving average Stochastic Relative strength Moving average crossover Bollinger bands Rate of change Exponential moving average

One chart that Carr highly recommends is the Equity Curve. This is a moving average chart with both the fast and slow settings being identical. When the price line of the ticker symbol or the group being charted drops below the equity curve it is considered a signal to exit the strategy or the markets.

While Carr shows and tests different formulas he shows how investing based on relative strength will provide returns equal to your objectives. Using an Alpha formula with a standard deviation component helps to reduce risk and provides an excellent means of analysis for a more conservative investment approach. Using just an Alpha formula or other relative strength formula can be a more aggressive investment approach.

The key to technical analysis lies not in being a mathematician, leave that to Carr, or even being a expert with Excel, but in finding user-friendly software like Dynamic Investor Pro that implements technical analysis; preferably software that doesnt require months to learn.


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Relative Strength Investing Vs.

Momentum

The differences between relative strength and momentum investing are substantial yet many investors confuse them or even think they are identical. The same can be said for making investment decisions based solely on charts instead of comprehensive technical analysis.

As Ive said, Michael Carr defines his book, Smarter Investing in Any Economy, as the definitive guide to relative strength investing. Anyone wishing to learn about relative strength investing in depth and how it can be applied in various ways should read Carrs book. However, the basic concept of relative strength investing is not simply to buy a stock (or ETF or Mutual Fund) that is moving up in the markets but to buy one whose strength is greater than the others.

Momentum investing is simply buying what is going up and selling when it goes down. This is the basis for most charting software and investment decisions based on looking at charts. This is like saying I can strike out any batter with a curve ball. Really?

Relative Strength investing, for example, involves calculating the difference of the momentum of an ETF versus other ETFs and an index or benchmark like the S&P 500. While a chart can be created for any particular ticker symbol versus the benchmark, the important answer is how does each ETF relate to other ETFs? The answer shows the relative strength of each symbol to others within any particular group or universe of symbols.

In other words its like comparing horses at the Kentucky

Derby.

We know that every horse on the track can probably run

faster than any other horse in the world; so each horses

momentum is greater that my neighbors quarter horse out on

the range. But picking the winner on this basis is just like

buying based on Momentum alone. Yes, they are all winners, but

only one is going to be The Winner, and only a few are going to

bring home any prize money.


9 On the other hand, Relative Strength investing says that

a particular horses speed is greater than the average horse and

also is greater by a specific amount than every other horse on

the track. And if you know the running speeds and durability

factors of each horse (or each ticker symbol) you can bet on or

buy the most likely winner based on relative strength.

This sounds complicated, but it doesnt have to be mind boggling. There are formulas for calculating relative strength. In fact there are a variety of relative strength formulas and while you can tediously do this in a spreadsheet, the easiest way is to use a software program that performs technical analysis that includes Alpha or simple Relative Strength Momentum.

A great way to use relative strength analysis is to combine it with momentum and selling rules so that you get the best of these worlds.

A software program that offers all three aspects will include; Alpha or relative strength analysis A variety of charts Selling rules Ability to adjust the analysis to fit your buying goals and time frame A melding capability of the analysis, charts and selling rules

Dynamic

Investor

Pro

Momentum

Analysis

Relative

Strength

Analysis

Selling

Rules


10 By blending momentum with relative strength investing you will be more likely to buy the winners and also more likely to sell and preserve profits while minimizing losses.

Dynamic Investor Pro is your proven investment software program that provides reliable investment decisions in moments. Michael J. Carr, CMT, author of Smarter Investing in Any Economy, is a user and advocate of the program.

It is the only program available that focuses on relative strength momentum. It features analysis by alpha plus more than 30 methods for recommending stocks, ETFs and mutual funds along with a variety of charts. An Exit Signal tells users when to get out of the market to preserve their cash! The program works with each persons individual style of investment and includes an exclusive one button Decision Maker with ability to analyze data and charts, plus the program allows users to create and optimize strategies for any group of symbols. Sell signals based on a variety of criteria are generated to preserve gains and limit losses.

The program is widely used by both individuals and professional financial planners and advisors. It can be used as provided or customized to fit any users goals whether they be conservative or aggressive, long term investors or short-term. Although it is not intended for use by intra-day traders, investors can reap rewards with as little as 30 minutes a week or day. It comes with a 30-day no quibble guarantee!

Your Keys to Successful Investing, copyright by Raymond Dominick, Investment Solutions.

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