My Top secret Mutual Fund Investing Strategy Revealed!

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As a financial planner I was probably a small more than-careful about making sure that my clients did not lose money. But then, rule number 1 was that clients do not like to shed money. So, I created a mutual fund investing strategy that I by no means shared with anyone … until now. I will tell you how it functions by way of a true story.

In 1987 I sat down with a new client who had about $100,000 in an IRA, one hundred% of which was invested in stock money. Jeff was a dentist, and becoming self-employed wanted help simply because he really didn’t know how to invest, and his IRA was going to be a substantial component of his long term retirement safety.

At that stage in time I was extremely unpleasant with the stock marketplace. Jeff was extremely unpleasant with his present adviser because he was dropping money with him.

He wanted me as his adviser, and needed to rollover his IRA as a first step in our new relationship. I informed him that I was with him all the way, but initial there was 1 thing I needed him to do as I handed him the telephone. I had his current mutual fund statement in front of me, and had him dial the toll-totally free services number.

“Tell them to transfer all of your money to their safe money market fund,” I suggested, and he did. I wanted him to do this because, like I stated, I was not comfortable with marketplace circumstances and a rollover can consider weeks before the paperwork goes through and the transfer of money actually takes location. I did not want him to lose his shirt in the interim.

I set the paperwork up so that all of the money that went into his new IRA with me went into OUR money market fund. This transaction would pay me exactly zero in commissions, because money market funds are extremely secure and extremely liquid and versatile. However, they pay the representative (me) zero.

Five weeks later the transfer of money took place, and it occurred at the end of the worst investing day in the background of the U.S. stock market. Stocks misplaced about 23% that day. Jeff saved nicely over $20,000, simply because he had been sitting secure in a money marketplace fund when it happened.

Now, here’s the investing strategy we then pursued and how I subsequently made some commission for my efforts.

Jeff had $one hundred,000 securely tucked away in our money marketplace fund, and this money could be moved around at will into any other fund in the fund family members. When it moved into stock or bond money, I made a commission. Plus, we set issues up so that he had money flowing into his IRA instantly every month from his checking account as new IRA contributions.

All money flowing into his mutual fund IRA went into his money market fund.

We then transferred half of his $100,000 from the money marketplace fund similarly into four various stock money, so that he was fifty% invested in stock funds. Our objective was to get him up to 75% in stock funds, keeping all four stock money about equal, more than the subsequent few of many years. To achieve this I set issues up so that money flowed from the money market fund into each of the stock money each month. In this way he was easing into the market over time. This is known as DOLLAR Cost AVERAGING.

When we attained our goal of 75% stock and 25% money market, I turned off the spigot.

Our lengthy-term investing strategy was to maintain the seventy five-twenty five ratio, and to keep the worth of the four stock money about equal. Whenever the numbers received out of line by a few percentage points, we merely moved money around to deliver them back again in line. In other words, we REBALANCED his portfolio periodically.

Two powerful investing tools were employed in our investing technique: dollar price averaging and rebalance. Plus, Jeff had optimum versatility in managing his complete portfolio.