Your Keys to successful Investing

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Special Report 1 of 6

Your Keys to
Successful Investing

Successful investing requires a few keys, all of which anyone, including
you, can easily understand and use.



These keys are:



Strategy
Method
Goals
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Your Keys to successful Investing

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Defining Your Goals

Investment goals revolve around your personality, your resources and,
yes, how much money you want to make. Defining your investment goals
requires more than just saying I want to make money.

Failure to define your goals will result in not achieving the profits you
deserve and secretly want. Sometimes we are afraid to voice or write
down what it is we really want, yet not doing so actually sets us up for
mediocre results.

The keys to achieving the best investment results come from knowing
what you are aiming for and what resources you bring to the table.

In general the keys to establishing and achieving your goals revolve
around:








Personality
Time
Future
Resources
Profit Uses
Current
Resources
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Personality: Be honest with yourself and ask your spouse or friends if
necessary:
Are you a risk taker? If so, how much? Are you willing to lose
money in order to make money? In other words, if you were managing a
baseball team how likely would it be for you to call for a squeeze bunt
play? Or would you (with one friend) go for an all day hike in the back
country of Glacier National Park (famous for its stunning mountain vistas
and grizzly bears)?
In other words, are you more likely to be a conservative or an
aggressive investor, or perhaps your personality falls somewhere in
between?


Time: Does work and family or sports and hobbies chew up most of your
time? Can you find 30 minutes a day or an hour, or just 30 minutes a
week to manage your investments?
Would you rather be fishing, out on a date, watching a movie or TV
than making investment decisions?
A super aggressive investor will have time almost every day to
make investment decisions while a conservative investor can usually
spend just 30 minutes a week or maybe just every other week or two
reviewing his portfolio. If youre in the middle then you are a typical
moderate investor.


Current resources: How you diversify your investment portfolio is
influenced by your personality and time to make decisions but if you have
minimal resources aggressive goals may need to be handled carefully so
as not to endanger your cash and future growth. This doesnt mean you
have to take a totally conservative investment stance, but that you may
need to have multiple goals in order to find balance.


Future resources: Building your investment portfolio with additional
cash each week or month can allow you to pursue more moderate or
aggressive goals because your investment base is growing.


Profit Uses: How you plan on using your investment profits is an
important consideration. How soon you want to reach a certain cash level
can push you towards either a conservative, aggressive or middle of the
road approach in making your decisions. Are your profits going to fund a
college education, a vacation, new computer or secure your retirement
income?
Your Keys to successful Investing

4 Combining your honest answers to these five aspects of developing
your investment goals should help you focus on the investment method
that works best for you. You should write down, briefly, the answers so
that you keep your focus and dont allow one-time events or conversations
to sway you off track.



Developing Your Investment Strategy

Successful investing requires a strategy or a series of strategies. A
strategy is like a roadmap that guides you from your home to your next
vacation spot; without one you could get lost or waste your time and
money.

There are principles to be followed in setting up your investment portfolios:










Your Keys to successful Investing

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I suggest that each portfolio have about eight investment positions of
stocks or mutual funds or ETFs. You may want a portfolio for retirement,
for emergency funds, for vacation money or for education. By having a
variety of portfolios you can concentrate on making money to fit the cause.

Another key principal here may sound contrary but it is critical to the
overall performance of your portfolio, of each of your portfolios. This
principle is:

Each investment position is derived from an individual strategy,
and most likely the strategy is unique to that investment. In other
words, one shoe does not fit all your strategies, all your groups of
potential investments. This principle helps you to diversify your
investments to both achieve greater gains and limit potential loses.
Some portfolios may even invest in the same stock, fund or ETF
but to meet different goals and purposes.

Let me give you a few examples. Out of eight investments one position is
based on a group of foreign ETFs and another position is based on a
group of Fidelitys Select mutual funds. Each group will result in one
investment choice and each group will have a different strategy for
determining that investment. The reason each group will have a different
set of strategy rules is because the ticker symbols in each group are
unique and move differently. Yes, you can use the same buy/sell rules for
each strategy but you will not come even close to maximizing your
potential profit. Its just like being a baseball pitcher; you wouldnt throw
the same pitches in the same sequence in the same location to every
batter.

This example focuses on technical analysis using relative strength with
buy and sell rules. The method of deciding what to buy can be the same
for each group, for example:

Alpha
Alpha with standard deviation
Relative strength momentum
Return

However the strategies for the different groups may differ on how many
trading days or weeks are analyzed to recommend new purchases.

Likewise you may find that having a preferred holding time for a position
could vary anywhere from a week to three months. The same will apply to
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what kind of stops you set to prevent losses. There are a number of other
variable sell rules you can set in a strategy that will impact the overall
performance of the strategy.

In most cases the various rules, when customized for each particular
group of ticker symbols will result in the best potential return for that
group. When I have tested such buy and sell rules I cant recall ever
having two identical set of rules that resulted in the best performance for
each group. Since some software programs such as Dynamic Investor
Pro will let you do back testing you can find the rules that work best for
your objectives to give you the best possible returns on your investments.

What this means is that just because a stock is moving up doesnt mean it
is the best stock to own from your group of stocks. There may be another
stock that is moving up faster. Along that line, a mutual fund you are
holding may be moving up very slowly and may not trigger any sell rules
because its slow growth may still be safe growth and the other funds in
your group may be going down or showing erratic up/down moves. The
individual back testing effort and customizing of your buy/sell rules
(parameters) will see all this and help you develop the best strategy for
each of your particular investment groups.



Using Proven Analysis

How do you know how to analyze and pick the best stocks or ETFs or
Mutual funds? One answer is to use technical analysis and this sounds
scary because almost none of us know how to do this. But we dont need
to.

Using technical analysis is a surefire way to make the best choices and all
you need is a software program like Dynamic Investor Pro that will do the
job for you. Obviously you want a program that has a proven, reliable
track record. Such technical analysis software will easily give you double
digit gains and out-perform the S&P 500 or the Dow Jones.

Michael J. Carr wrote a book in 2008 and the second edition was released
in April, 2011, titled Smarter Investing in Any Economy. The sub-title is
The definitive Guide to Relative Strength Investing. In other words, Carr,
a chartered market technician (CMT), has thoroughly examined technical
analysis.

Carrs analysis delves into the nitty-gritty. The first part of his book is a bit
dry and sometimes over my head until I read it a second time, but he
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explains and tests formulas based on different theories and concepts over
different time frames. He talks about investing in ETFs, mutual funds
and stocks, so the book (and Dynamic Investor Pro) fits with whatever
investment or diversification desires you may have.

Technical analysis can involve studying data in a spreadsheet format
and/or reviewing charts.

There are numerous formulas for analyzing the data, for example:
Alpha
Relative strength momentum
Return
Price oscillation
Relative strength index
And you can add standard deviation to any of these.

Charting price movement or analyzing with charts is very popular and
there are dozens upon dozens of chart types. Some of the most popular
charts are:
Return
Moving average
Stochastic
Relative strength
Moving average crossover
Bollinger bands
Rate of change
Exponential moving average

One chart that Carr highly recommends is the Equity Curve. This is a
moving average chart with both the fast and slow settings being identical.
When the price line of the ticker symbol or the group being charted drops
below the equity curve it is considered a signal to exit the strategy or the
markets.

While Carr shows and tests different formulas he shows how investing
based on relative strength will provide returns equal to your objectives.
Using an Alpha formula with a standard deviation component helps to
reduce risk and provides an excellent means of analysis for a more
conservative investment approach. Using just an Alpha formula or other
relative strength formula can be a more aggressive investment approach.

The key to technical analysis lies not in being a mathematician, leave that
to Carr, or even being a expert with Excel, but in finding user-friendly
software like Dynamic Investor Pro that implements technical analysis;
preferably software that doesnt require months to learn.

Your Keys to successful Investing

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Relative Strength Investing Vs.
Momentum

The differences between relative strength and momentum
investing are substantial yet many investors confuse them or even
think they are identical. The same can be said for making investment
decisions based solely on charts instead of comprehensive technical
analysis.

As Ive said, Michael Carr defines his book, Smarter Investing in Any
Economy, as the definitive guide to relative strength investing. Anyone
wishing to learn about relative strength investing in depth and how it can
be applied in various ways should read Carrs book. However, the basic
concept of relative strength investing is not simply to buy a stock (or ETF
or Mutual Fund) that is moving up in the markets but to buy one whose
strength is greater than the others.

Momentum investing is simply buying what is going up and selling when it
goes down. This is the basis for most charting software and investment
decisions based on looking at charts. This is like saying I can strike out
any batter with a curve ball. Really?

Relative Strength investing, for example, involves calculating the
difference of the momentum of an ETF versus other ETFs and an index or
benchmark like the S&P 500. While a chart can be created for any
particular ticker symbol versus the benchmark, the important answer is
how does each ETF relate to other ETFs? The answer shows the relative
strength of each symbol to others within any particular group or universe
of symbols.

In other words its like comparing horses at the Kentucky
Derby.
We know that every horse on the track can probably run
faster than any other horse in the world; so each horses
momentum is greater that my neighbors quarter horse out on
the range. But picking the winner on this basis is just like
buying based on Momentum alone. Yes, they are all winners, but
only one is going to be The Winner, and only a few are going to
bring home any prize money.
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On the other hand, Relative Strength investing says that
a particular horses speed is greater than the average horse and
also is greater by a specific amount than every other horse on
the track. And if you know the running speeds and durability
factors of each horse (or each ticker symbol) you can bet on or
buy the most likely winner based on relative strength.

This sounds complicated, but it doesnt have to be mind boggling. There
are formulas for calculating relative strength. In fact there are a variety of
relative strength formulas and while you can tediously do this in a
spreadsheet, the easiest way is to use a software program that performs
technical analysis that includes Alpha or simple Relative Strength
Momentum.

A great way to use relative strength analysis is to combine it with
momentum and selling rules so that you get the best of these worlds.




A software program that offers all three aspects will include;
Alpha or relative strength analysis
A variety of charts
Selling rules
Ability to adjust the analysis to fit your buying goals and time frame
A melding capability of the analysis, charts and selling rules

Dynamic
Investor
Pro
Momentum
Analysis
Relative
Strength
Analysis
Selling
Rules
Your Keys to successful Investing

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By blending momentum with relative strength investing you will be more
likely to buy the winners and also more likely to sell and preserve profits
while minimizing losses.




Dynamic Investor Pro is your proven investment software program that
provides reliable investment decisions in moments. Michael J. Carr,
CMT, author of Smarter Investing in Any Economy, is a user and
advocate of the program.
It is the only program available that focuses on relative strength
momentum. It features analysis by alpha plus more than 30 methods for
recommending stocks, ETFs and mutual funds along with a variety of
charts. An Exit Signal tells users when to get out of the market to
preserve their cash! The program works with each persons individual
style of investment and includes an exclusive one button Decision Maker
with ability to analyze data and charts, plus the program allows users to
create and optimize strategies for any group of symbols. Sell signals
based on a variety of criteria are generated to preserve gains and limit
losses.
The program is widely used by both individuals and professional financial
planners and advisors. It can be used as provided or customized to fit
any users goals whether they be conservative or aggressive, long
term investors or short-term. Although it is not intended for use by
intra-day traders, investors can reap rewards with as little as 30
minutes a week or day. It comes with a 30-day no quibble guarantee!


Your Keys to Successful Investing, copyright by Raymond Dominick, Investment
Solutions.

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