The Purpose of This Book

My goal is to provide you with a nonemotional, systematic approach to investing that will make money in bull markets and protect your portfolio, and even make money in bear markets. This will be accomplished with a simple-to-implement strategy that has less risk than buy-and-hold because you will be out of the market during those market declines. Based on the fact that bear markets follow bull markets, if you use a buy-and-hold approach you will always lose money in bear markets. That is why you need to abandon that approach and use a proactive approach that avoids these deadly market debacles, such as the one that cost investors $11 trillion in losses during the last bear market. As an investor, you need to realize that since 1900 there have been 121 market declines of at least 10%, and 32 of these declines were 20% or more.^[2]

This book provides insight about the never-ending cycle of bull and bear markets, and how to take advantage of the market’s volatility. It will explain the true risks and rewards of investing, and above all provide an investing plan to sidestep the brunt of future bear markets. As a self-directed investor, you will be provided with a complete step-by-step investing approach to capture the market’s upside and minimize losses, if any, when the market starts to change its trend and begin to sink. Moreover, this book provides a realistic investing approach using a time-tested strategy to first determine the market’s direction based on a handful of indicators. Then after providing an appropriate universe of exchange-traded funds (ETFs) for investors of different risk levels (conservative, moderate, and aggressive) to consider, the focus shifts to using relative strength analysis to act as the filtering mechanism to select the best-performing ETFs for your investment dollars. Because ETFs have the edge in many respects, as is delineated in Chapter 4, “Exchange-Traded Funds—The Most Suitable Investment Vehicles,” stocks and mutual funds are not recommended as the investment vehicles for this strategy.