I'd like to introduce the
50 Week Moving Average Strategy to anyone who doesn't want to obsess over each tick of global markets. This is a much more passive approach to investing that utilizes macro investing principles in an effective manner.
The above is a weekly chart of the
S&P 500 index dating back to 1999. I used 2 different
moving averages in the above chart; the 10 week in Red & the 50 week in Blue. I went back to the year 1999, so that it is easy to illustrate multiple Bear (2) & Bull (2) markets.
Facts about this strategy:
1. If you choose to use this strategy, you will never sell at the very top or buy at the very bottom; however, you will catch the major trends in both directions.
2. You will occasionally get chopped around, but that is where your discipline as an investor comes into play. You must stick with the strategy to make it work & remove all emotion from your decisions.
3. With the use of index funds (i.e.
$SPY,
$QQQ,
$IWM,
$FXI,
$EEM, etc.), which I highly recommend for this strategy, you will be well diversified.
4. Most index funds pay a dividend. For example, the
$SPY is currently paying 2.10% yield at the time of this post.
5. The strategy will beat the market if you stay disciplined.
How the Strategy Works
Its a very simple, passive strategy that will take a max of 15 minutes a week (I know this sounds almost too good to be true, but bare with me). The thought process behind the strategy is to own the market or a particular portion of it when it is acting "healthy." When the market is acting unhealthy, I prefer to invest my money in safe havens such as precious metals & treasuries, but you can choose to keep yours in cash.
1. Buy an index fund that is currently trading above it's 50 week moving average right before the close for the week (I recommend the
$SPY). Weekly candles normally will finish completing on Friday's unless it is a shortened trading week. In my opinion, the S&P 500 is the best barometer for the US Market, but if you prefer something different (Nasdaq, Small Caps, China, Japan, Europe, etc.) then by all means choose which one you are most bullish on. Ideally, we are entering a market/index that has been below the 50 Week Moving Average and is crossing above it for the first time in a good while (possible major trend change). This is not a requirement, but you will likely see higher returns &/or get chopped around.
2. As long as the index you bought closes above it's 50 Week Moving Average on a weekly basis, then you do not have to make any changes. It is best to save a chart in any various charting programs available to easily track the weekly market close. I recommend
Trading View or
Stockcharts.com (both free sites), but any charting program will do.
3. If the weekly candle closes below the 50 Week Moving Average for the index you chose, then sell the full position. At this point you have the option to put your money in safe havens such as
Precious Metals or
Treasuries (my preferred strategy) or merely leave it in cash.
4. When the index/market regains the 50 Week Moving Average, get back in.
So in summary, you want to be in the market when it is acting "healthy" (my preferred barometer is the 50 Week Moving Average), and out when it is acting "unhealthy." This strategy removes your emotion in investing & completely blocks out the noise and narratives attached to each trading day.
