Timing the markets part 1

I am a big fan of timing the markets. Market timing involves buying low and selling higher and selling high and buying lower. There are many “authorities” on the subject who will not agree with me. Motley Fool states “Trying to time the market isn't a smart idea” CNBC states “Trying to time the market is a losing game”. I could site more articles but I won’t bore you just Google “market timing doesn’t work”.

I do not agree with the experts. I don’t know about you but my parents taught me to time the markets at a young age. From the time I was little my mother would scour the Kroger ad when it came for deals. I dreaded when chicken was on sale. I grew to dislike chicken. Chickens were on sale at the store for 9 cents each limit two per customer. My dad had four chickens on the belt. The lady behind the register said sorry sir limit 2 per customer. My dad told me to stand behind him, took two of the birds and placed them in front of me on the belt and handed me two mercury head dimes and told me to give them to the lady when she asked me to pay. My mom would cut the chickens up and we would eat two that week fresh and freeze the others. Yes others as my dad worked close to the store and would buy more chickens every day. My mother got very creative when it came to cooking chicken. Did you ever have chicken cupcakes? It is cornbread chicken and whatever veggies were on sale. My parents would buy cuts of beef, pork and at times whole turkeys when the price was right. By timing the market in this case the food ad my parents were able to feed our family are a lower price.

How about you have you ever drove by a gas station and saw they raised the price, driven by another gas station that had not raised their price, drove in and filled your tank? If so you have engaged in market timing.

In a similar way any one can time the stock market. The goal of market timing is to beat buy and hold. Most investment advisors like the buy and hold philosophy. They also subscribe to dollar cost averaging which I will discuss in a later post. (I strongly agree with the concept of dollar cost averaging.). Buy and hold means you take a sum of money and buy an investment. Unless you have a life changing event you keep it and do not sell it.

It does not take a lot of thinking to realize that when you fill your tank as described in the example above you are going to save money on your average cost of gasoline. The same can be said when you invest in the market.

So how does one time the market? I do have a complex set of mathematical equations which I use to time the market. I do not recommend this to anyone unless they are willing to put hours of research and practice into timing the market. To get improved results in your portfolio all one must do is add money to the market when you hear on the radio the market is down badly and sell some of your stock mutual funds when the market is at record highs.

High Octane Exchange traded funds.

Exchange traded funds sometimes referred to as ETFs can be a great investment. In the last decade a product called leveraged ETF’s has emerged. One fund which I actually own is TQQQ. The company that runs the fund states “ProShares UltraPro and UltraPro Short ETFs offer 3x and -3x exposure to major market indexes. They offer what, for many investors, is a more direct and efficient way to capitalize on market opportunities using leveraged and inverse exposure.” This fund is not for the faint of heart or the casual investor.

Substantial gains can be made using these funds. Let’s assume that I bought $10,000 worth of TQQQ when it first traded nine years ago on February 11, 2010. On August 30, 2018 it would have been worth over $450,000. Nice gain! By Christmas Eve it would have been worth only $186,000! Kind of hard to take that loss! Losses like this are nothing new to this fund. From July 26, 2011 to August 19 of the same year the fund lost almost one half of its value. Looking back if I would have bought on Christmas Eve I would have got in excess of a 50 percent gain as of this writing.

There is a wide array of leveraged ETF’s more than 160 that anyone can count. They are not for everybody. I do not recommend putting more than a small percentage of my assets in these funds.

Leveraged ETF’s can be helpful if you are timing the markets which will be the subject of my next blog.

Great mutual fund tips Gabelli Dividend & Income Trust symbol GDV

Now that I have some time on my hands I am going to blog again on investing and mutual fund tips. Today I am going to point out the virtues of a fund that I bought a few weeks back. From the Gabelli web page their description is “The Gabelli Dividend & Income Trust, or the Fund, is a diversified, closed-end management investment company whose objective is to provide a high level of total return.” In plain English this is a closed end mutual fund. Closed end mutual funds are funds that trade like stocks and they have a fixed pool of money. Unlike a traditional mutual fund which have their total assets increase when people invest more money into them and decrease when people redeem their shares. In a traditional mutual fund a manager must constantly be wary of mass redemptions as well as getting too much money sometimes called mutual fund bloat where the manager cannot find good investments for the fund’s assets. A closed end fund does away with those problems.

So why do I like Gabelli Dividend & Income Trust? Lots of good reasons. This is a relatively low volatility fund with a handsome return. In the last 10 years this fund has produced 13.45% per year. Get that from your local credit union! This fund is diversified as of their last report there were 475 different holdings. More holdings equal less risk. This fund has a net asset value of $22.64 (today) and the last sale today on the New York Stock Exchange was $20.82 (I invested at $19.87 two weeks ago. I’ll discuss more in the future.) The net asset value is what the fund is worth if it were liquidated and everyone paid their portion. At $20.82 the fund is selling at a discount today. I would never buy a closed end fund if it were not selling at a discount. This fund has a handsome discount right now relative to historical norms. I also like this fund because the managers of the fund attempt to invest along Catholic / Christian principals. It pays an 11 cent per share dividend per month which is great for an old retiree like me.

I doubt you can buy Gabelli Dividend & Income Trust in your 401K. You may be able to buy it in your IRA if you can buy stocks or exchange traded funds.

Buying at $19.87 is something called “market timing” which I am going to discuss in a future blog.