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There
are no fixed rules to investing. The rules keep changing and you
need to change with them if you expect to continue to make money. Most
of the change is rapid, and continuous, so we look for what remains
relatively stable. Investor emotion (or investor psychology) has
remained very consistent over the years. Optimism and pessimism
shape the way we invest. Emotions will have a great
effect on investing for many years to come. Using investor emotion
can provide us with a clear advantage. It also helps to have
a good view of the economy since in a good economy companies hire,
consumers spend and most of the news is good. In a poor economy the
reverse is true. Our T-Index is a good reflection of the economy
and provides us with an investing edge.
Palisades
Research prefers to look at investing from a risk-avoidance point of
view. It is harder to predict things that will happen a year from
now than to predict what will happen next month. The same for two days
compared to one. A few years ago you couldn't reasonably trade one
day at a time due to commission and slippage costs. Today there is
no penalty for investing one day at a time, and much to be gained.
On
average, the market ends the day up only a few percent more often per
year than it goes down. But every day you have money invested,
that money is at risk
and that is not good. A major league baseball player
does not swing at every pitch. And we wait for our emotion driven
signals. It makes sense that somewhere between optimism and
pessimism lies a gray area of unknown and when that happens we stay in
the money market fund.
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