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March 21, 2011


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If you could come up with a sponsor, I'd be happy to test these theories out and report back in a couple years to let you know if I was able to remain rich ;)

Since taking over the management of my finances in 1992 after retirement, if I had based my investment choices primarily upon the management fees involved there is no question in my mind whatsoever that I would be much poorer today, 18+ years later.

The success of the approach that I have taken centers on "Fund Selection". I always own diversified mutual funds that are in good, Low Volatility uptrends. Once I decide that the uptrend has faltered I immediately switch that fund into a new one that is in the type of Low Volatility uptrend that I desire.

With this approach I have not had a losing years since I retired and have produced total returns that outstrip all of the broad market indexes. I try to hold a fund for at least six months if possible to avoid a Fidelity imposed fee of $75 for selling a (No Transaction Fee) NTF fund held less than 180 days but if it really has to go then I don't hesitate to pull the trigger, let it go, and pay my $75. Usually my position in a fund is between $500K and $1M so $75 is a very small percentage to pay for switching from a loser into a winner. Some funds impose the $75 fee upon purchase, they are called Transaction Fee (TF) funds, with those there are no additional fees to pay when they are sold regardless of how long they have been held.

Many people seem to think of the "Market" as an average of hundreds or even thousands of individual stocks. I don't think of it that way at all. To me a mutual fund can be diversified in the number of issues that it contains but be can very concentrated in quite a narrow segment of the financial world. The average investor has no way of making really good investment choices other than from funds that track the well known broad market sectors. The proprietary database to which I have subscribed ever since I retired now contains the daily, distribution adjusted, history of almost 12,000 mutual funds and more importantly it contains almost 800 families representing these funds grouped into many different categories. With this data at your fingertips, and the software it comes with, it is possible to search the database and find just the few mutual funds that have the type of performance you are looking for over any particular time period that you specify. With these tools at your disposal you can find the best of the best of what you are looking for. Without this it would be like searching for a needle in a haystack.

I should add however that learning how to take full advantage of this database and software is not an easy or trivial task, but once mastered you realize it's the only way to go. Success also requires that you follow what is happening in the world of finance and use that knowledge as a guide to finding what you are looking for. What I am looking for these days bears no resemblance to what I was looking for 18 years ago. Today's world is totally different from what it was when I retired.

@Old Limey - You should consider a newletter with your recomendations based on your approach. Considering your success I bet you could get a good following! Heck you should try a blog. Evidently there can be good income streams with these.

In a way I've been there and done that.
I didn't write a newsletter - there's already a ton of newsletters out there.
Instead I wrote a large software program of my own that linked in to the database that I use but was menu driven in such a way that it was incredibly easy to use and became very popular with the other database users. The software was written in the only language that I knew, and that was also available on PCs in the early nineties, it was called Microsoft QBASIC and it ran under the MS-DOS O/S which doesn't even run on Win'7 computers and even on Win'XP computers is gradually dying due for lack of conventional DOS memory, which in Bill Gates infinite wisdom he limited to 640K on the first PCs and hasn't changed since.

In July 2008 the database underwent a large expansion and so many of my modules stopped working that I decided to take my software off the market. I then gave it, free of charge, to the owner of the company that puts out the database. He then added most of its capabilities to his company's software, which is of course Windows based, and today I use that and find that it does almost everything I need.

The other reason I am not interested in providing market recommendations to others is that I don't have the right personality to have any sort of responsibility for other people's money. Just imagine all the letters, e-mails, and phonecalls you could get from unhappy customers during very volatile markets. That's the last thing any retiree wants to deal with. In the bubble of the nineties I was a very aggressive investor and even with the money I managed for my children, I managed theirs the same way I managed my own and they are very happy with the results. These days I am an extremely conservative investor and I still manage their money the same as my own and they haven't complained.

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