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.)
