Learn To Take What The Market Gives

One of our basic rules of investing is to be a bull during a
bull market and a bear during a bear market. By positioning our
portfolios in this manner, we ride the long-term trends and
build our assets.

What would be nice is to be able to tell when a current trend
is getting ready to come to an end. As we know from history,
those reversals tend to be sharp and sudden. There are
hundreds, maybe thousands, of people who watch the markets with
bated breath, looking for some hint that the markets are ready
to change direction. These folks fall into the category of
market timers.

If you do any kind of study around the idea of market timing,
what you will find is a lot of gurus promoting their secret
formulas, but not a lot of long-term success. That is because
it is next to impossible to time the turning of the market. Oh,
you can get lucky a time or two, but over the long haul, there
are just too many variables that affect the direction of the
market.

It is much better to look at a few reliable indicators of
overall market risk and develop a probability profile of the
market. If, for example, you determined that the market had a
50% of dropping 20% within the next month, you would want to
make sure that you were either out of the market entirely or
invested in certain defensive securities.

Now there would still be a 50% chance that the market would
continue along and being completely out of the market might
result in missing out on some nice profits. I remember back in
March of 1996, before I developed the Risk Adjusted Asset
Management System, I was just sure that the market had gone as
far as it could go. I liquidated my holdings in a high risk,
high-growth fund and moved to cash. The Dow closed the month of
March at 5683 and some change.

What happened over the next four years is now history. The Dow
went on to close at 11,497 in December of 1999, just before the
big sell-off began. That is over a 100% gain from March of
1996. Now to be honest, I was happy with the 30% gains that I
banked and I doubt that I would have been able to time the
market and get out at or near the highs of 1999-2000, but you
see my point.

A fellow by the name of Thomas Bayes wrote an essay about the
problem of solving problems of chance. His theorem is now
widely used to when dealing with multiple probabilities.
Without going into the intricacies of his work, we will look at
some current market conditions and calculate a probability of a
market drop occurring in the next six months.

If you have read my book, "47 Minutes To Financial Freedom,"
you will know that markets with high price earnings ratios tend
to under perform markets with low P/E ratios. We also know that
historically markets tend to perform poorly when interest rates
are rising.

If we take a look at these market conditions and see how often
they occurred in the recent past along with a subsequent market
sell-off and then plug those probabilities into Baye's Theorem,
we come up with some interesting results.

The probability of a 5% or deeper sell-off in the next few
weeks is a near certainty and the probability of a bear market
beginning sometime in the next six months is over 75%. With
that information, what would you do? Do you cash out and run
for the sidelines? Do you hang in there and hope for the best?
Or do you hedge your bets?

Obviously I recommend the last option. "47 Minutes to
Financial Freedom" shows you how to hedge your bets and stay in
the game. It is easy to do, and only requires 47 minutes once a
year. Does it work? You bet it does. Our portfolio is up over
175% since 2000. Not many people can make that claim. Click
below to get more information and get your own copy of:
"47 Minutes to Financial Freedom."

http://snipurl.com/186dy