As people get older, their earning years fade into the distance and it becomes increasingly important to protect what’s left of your nest egg. If you don’t have a strategy to sell in those times, many investors simply find a strategy of their own, and it tends to be an emotional one, further hurting their portfolios.
While it’s true that “nobody rings a bell at the top”, you can ring your own bell if you have a disciplined sell strategy. This will leave you with more money to invest when a new uptrend develops elsewhere.
If you do choose to stick with asset allocation, what are your rules for selling? What will you do with the cash? Be sure you know the answers to these questions.
Advisors and investors need simple, specific rules in order to follow an investment discipline over an extended period of time. We use the 200-day moving average strategy to determine when we’re in and when we’re out. When a position is above its 200-day, it’s a buy signal. When it drops below or 8% off the recent high, it’s a sell signal. [New year, new strategy.]
For more information on trend following, visit our trend following category.
Max Chen contributed to this article.