As we have written so many times, "market timing is the following of a long term strategy to profit from the financial markets, that also protects us from the inevitable down trends that occur along the way."
Many investors, who understand the potential of market timing, pay little attention to the potential of diversification. Many novice market timers jump right into an aggressive timing strategy with little thought about how they will handle a period of losing buy and sell signals.
But there is a way to jump right in, and also realize the long-term potential of even the most aggressive strategies. It does require a bit more work, but not all that much. Just a few minutes a day to check for changes and make adjustments.
Aggressive Market Timers Can Benefit
Many market timers already follow well-defined investment plans that include diversification. But as we just discussed above, some do not.
If you are one of those who do not... consider changing. Diversification is not only for those who are afraid of volatility. It has an important place in even the most aggressive of portfolios.
We have been market timing since the early 1980s and although we are quite aggressive, we diversify our timing funds, not just for safety, but also to "enhance" our profit potential.
Those who follow our Bull & Bear Pro Timer strategy will make a great deal of profit over long time frames. Because the markets tend to trend most of the time and the aggressive strategies will catch all trends in "both" directions.
But non-trending markets can be quite frustrating, and aggressive market timers in our experience, become frustrated more quickly than most.
Aggressive timers.... try this strategy: Use the Bull & Bear Pro Timer strategy for 20% and no more than 30% of your timing portfolio. Use the Sector Fund Strategy for the other 70% to 80%. Or our Diversified Portfolio (discussed below).
Although the sector funds go to cash on sell signals, these industry specific funds are big winners when they trend. Often they will trend much further, by 100% to 200%, than the rest of the market.
When the bear growls, you will make money, but have only a small percentage of your timing portfolio at risk.
During a bull market, you will be fully invested most of the time, except in those few industry sectors that are not doing well.
Plus, we have a Diversified Portfolio available that has posted excellent profits for many years. You can also consider this strategy and not even worry about which sectors to select. We have done the work for you!
Diversified portfolios have a dramatic effect in controlling volatility and drawdowns. Yet they can be extremely profitable over time. The best of all worlds.
Consider at least some diversification for your market timing funds.
Diversification can dramatically help control volatility and drawdowns.
Diversification, when properly applied to your portfolio, will actually enhance your profit potential over time.