IF YOU MISSED THE BUY SIGNAL, WHAT SHOULD YOU DO NOW?
Bob Brinker Fan Club
|Excerpt from David K's Interpretation of Moneytalk (Bob Brinker Host) March 23, 2003 Newsletter
MARKET NUMBERS AS OF FRIDAY, MARCH 21, 2003
Dow: 8,521.97IF YOU MISSED THE BUY SIGNAL, WHAT SHOULD YOU DO NOW?
S&P 500: 895.90
10-Yr. Bond: 4.095%
This caller has plenty of cash reserves and wants to become fully
invested again. Her financial planner has advised her to be cautious
about going back into the market, and suggested that she dollar cost
average back into the market. Bob first pointed out that his
subscribers had ample opportunity to lump sum back into the market at
the time he issued his buy signal on the morning of March 11, 2003.
Even the following day, and the rest of that week, the market was very
low. Bob said that anyone who went fully invested during the week he
issued his buy signal was able to get very good prices. This week,
however, the market took off with the biggest up week in the market in
20 years. For people who are looking to get back into the market now,
Bob thinks dollar cost averaging back into the market is a good idea.
Later on in the broadcast, Bob reiterated that in terms of new money
going into the market at this juncture, Bob thinks it makes sense to
take a dollar cost average approach, using periods of weakness to do
so. Bob doesn't like to chase rallies.
Bob's view makes sense, although in practice it doesn't always work
out. For example, one of my subscribers pointed out that during last
weekend's broadcast, Bob said the same thing -- don't chase rallies,
and buy on weakness. Well, if you heeded that advice, you would have
missed the rally this past week. This is an issue that Bob is obviously
aware of, because he took several calls from people who did not get
back into the market yet and are anxious to do so. Read on.
Click to get our FREE newsletter.and information on how to get David's reports delivered to your email box.
This caller was out of town when Bob issued the buy signal, and only
received the bulletin by mail on Friday. Bob got a little defensive and
pointed out that he posted the bulletin on his web site at March 11,
2003 at 2:00 a.m.
can attest to that fact. I checked his site about 1:00 a.m. on March
11th and it hadn't been posted. The following morning around 7:30 a.m.,
I noticed it had been posted, and was able to notify my subscribers
before the market opened on the March 12th that the bulletin had been
posted. How's that for service!
This caller missed the buy signal completely and wants to know what
level of the S&P500 Index would be a good entry point? Bob said he
is very comfortable with the level it was when he issued his buy
signal (807.48). Although the signal was given before the market opened on
Tuesday, March 11th, Bob is using the closing number of 800 for the
S&P500 Index for purposes of calculating his model portfolio since
the portfolio invests in no-load mutual funds. In the absence of the
market returning to those levels, Bob would use market weakness to
dollar cost average back into the market. The caller wanted to know
over what kind of time frame he should dollar cost back in? Bob said it
would vary by the investor, since it depends on how much risk you want
to take. When you chase a rally, you diminish your potential return and
increase your potential risk. Therefore, you have to decide how much
you are willing to invest and the risk you are willing to take given
the market has already had a great run -- especially this last week.
Since Bob's timing model was triggered at the close of the market on
Monday, March 10, 2003, I am using the S&P500 Index's closing
number on that date of 807.48 for purposes of keeping track of his
Bob Brinker Fan Club Mailing List.
Click to get our FREE newsletter.
Click for a
free issue of Kirk’s newsletter
Other Investment Gurus
Other investment gurus to keep an eye on.
Caller: This caller
has $300,000 in his IRA with about $150,000 in cash. He is interested
in putting the cash back to work in the market, and wanted Bob's advice
on what time frame they should dollar cost average back into the
market. First, Bob pointed out that if he is right, then the most you
can hope for is that this is a cyclical bull market which will have a
limited duration (typically 1-3 years). At some point, Bob expects to
issue a sell signal, book the gains, and then raise cash reserves in
anticipation of the next cyclical bear market. With that said, Bob
noted that if you are looking to put cash back into the market on the
heels of a 12% gain in just 7 trading sessions, you have to be
realistic and recognize that your risk/reward ratio has increased. As a
rule, Bob doesn't feel comfortable chasing rallies, and instead
recommends reentering the market through dollar cost averaging during
periods of market weakness. If, however, you see continued strength in
the market, there will not be much of an opportunity to get back in.
Right now, the market already has built in the law of diminishing
returns and increased risk given the run-up.
EC: The time frame
for dollar cost averaging back into the market is a critical one for
those who missed Bob's buy signal and still want to get back into the
market. The issue is important because if the market takes off from
here, and never looks back, the shorter the dollar cost averaging
period the better. On the other hand, if the market pulls back in the
months ahead, it would be better to dollar cost average over a longer
period of time.
66-year old caller in retirement is invested in Bob's Model Portfolio
III. Bob interjected noting that for 14 years, he has advised that
people who are in or near retirement to utilize a balanced approach to
investing, which is the design of Model Portfolio III. The caller then
noted that he was out of town, and didn't really have a chance to catch
this rally. Bob reiterated what he said in response to the last caller,
which is that if you are coming into the market at this level no matter
what type of investor you are (i.e. aggressive/moderate/conservative),
it makes sense to be "judicious" and "disciplined" in your approach.
Specifically, Bob recommended that investors dollar cost average any
new money that is not yet invested in the stock market as opposed to
putting it all in via a lump sum investment. In addition, Bob said if
the opportunity presents itself, he would take advantage of periods of
stock market weakness to dollar cost average back into the market. If
you are able to do that, dollar cost averaging will spread out your
time risk following such a big rally.
EC: That was fairly
specific advice coming from daBrink. He certainly didn't want to say
jump in with all of your money Monday morning, because if he says that,
and the market tanks after that, he is going to be criticized. His last
comment suggests that he does believe there will be periods of market
weakness to take advantage of getting back into the market, although
the question is will they be periods of weakness below the current
levels, or above the current levels. That is an answer I do not expect
that Bob will give on air. As noted at the beginning of my newsletter,
I will be patient in waiting for periods of market weakness before I
begin investing my remaining amount.
INTERNATIONAL EQUITY ALLOCATION
Have you increased your recommended weighting in international funds?
No. Bob said he put all of his stock market cash reserves into mutual
funds that invest in United States companies.
Before the buy signal, Bob had only recommended 5% of a total portfolio
in international funds, and 5% in European funds. Together, these would
constitute 10% of a total portfolio. As Bob discussed today, he elected
not to increase that percentage, and thus his bullish market outlook is
primarily directed to the United States stock market.
- David K
DISCLAIMER: This e-mail is neither sanctioned by, nor written under the
auspices of ABC Radio Networks, Moneytalk or Bob Brinker. This e-mail
is not a substitute for listening to Moneytalk, it is only my
interpretation and commentary of some of what is discussed on
Moneytalk, along with additional educational information that I
include, editorial comments about the market and helpful financial
links. If you want to know what was said verbatim on Moneytalk, listen
to the show live or subscribe to "Moneytalk on Demand" which allows you
to listen to the show in case you missed it live. The web site,
bobbrinker.com has all the links to the ABC Radio Network stations that
broadcast the show live.
VGTSX = Vanguard Total International Stock Fund
PRASX = T. Rowe Price New Asia Fund
VEURX = Vanguard European Fund
Back to Bob Brinker Fan Club Home Page
Money Talk, Moneytalk, Marketimer Newsletter, Market timer Newsletter
Last Updated 1/14/06