Investing with the NTSM System (Rev 27 November 2018)

I have revised the graphics and communication strategy to provide more understandable and consistent guidance regarding my investment stance. My previous page on "How to Use the NTSM System" is no longer needed.

Over the years, I have become much more conservative in my investing as would be expected after retirement.  A young person can make mistakes in the stock market, lose money and recover those losses during their additional income-earning years. A retiree does not have that luxury.

A simple rule for the amount an investor should have in the stocks market is to subtract your age from 100 and the resultant is the amount to own in stocks. A 30-year old might have 70% invested in stocks while a 50-year old might have 50% invested in stocks. These are a little too conservative for most people. 50% invested in the stock market seems like a reasonable minimum, even for retirees. For me, fully invested is 50% in stocks. “Stocks” includes ETFs, Mutual Funds, or any investment that holds stocks.

The key is to adjust investment risk due to varying conditions. After bottom of the year 2001 dot.com, stock-market crash, I was 100% invested in stocks for a time. As the markets rose after a crash, the prudent move was to reduce stock exposure.

In 2018, I think it is prudent for ALL investors to be cautious and reduce stock holdings to conservative levels.   

Markets can be very volatile. Back in 1987, the stock market lost 20% in value on one day.  That is enough reason for me to keep a lower amount in stocks.

The easiest way to adjust risk (and follow the NTSM system) is to allocate a certain percentage of your investment portfolio to an NTSM position; invest that amount in an S&P 500 (SPY) or Total Market ETF (VTI).  You can then switch positions (cash or invested) with only one click of a mouse.

In my case, I shift about 30% of my investments in or out of the market thru an S&P 500 401k account so there are no tax consequences of shifting funds.  Leaving 30% invested in stock is perfectly OK; even if the market loses half of its value, I’ll only lose 15% of my total portfolio value.  Leaving 30% invested will also help me make some $ if NTSM is wrong since it hedges the bet.)