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Article Title:
How We Eluded the Bear in 2000

Article Description:
The date October 13, 2000 will forever be embedded in my mind. It 
was the day after our mutual fund trend tracking indicator had 
broken its long-term trend line and I sold 100% of my clients' 
invested positions (and my own).

Additional Article Information:
545 Words; formatted to 65 Characters per Line
Distribution Date and Time: Fri Feb  3 16:40:11 EST 2006

Written By:     Ulli G. Niemann
Copyright:      2006
Contact Email:  mailto:[EMAIL PROTECTED] 

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How We Eluded the Bear in 2000
Copyright © 2006 Ulli G. Niemann

The date October 13, 2000 will forever be embedded in my mind. It 
was the day after our mutual fund trend tracking indicator had 
broken its long-term trend line and I sold 100% of my clients' 
invested positions (and my own) and moved the proceeds to the 
safety of money market accounts. Some people thought we were 
nuts, but I had come to trust the numbers.

The shake out in the stock market, which started in April 2000, 
had all major indexes coming off their highs, violently followed 
by just as strong rally attempts. The roller coaster ride was so 
extreme that even usually slow moving mutual funds behaved as 
erratically as tech stocks.

By October, the markets had settled into a definable downtrend, 
at least according to my indicators. We sat safely on the 
sidelines and watched the unfolding of what is now considered 
to be one of the worst bear markets in history.

By April 2001 the markets really had taken a dive, but Wall 
Street analysts, brokers and the financial press continued to 
harp on the great buying opportunity this presented. Buying on 
dips, dollar cost averaging and "V" type recovery were 
continuously hyped to the unsuspecting public.

By the end of the year, and after the tragic events of 911, the 
markets were even lower and people began to wake up to the fact 
that the investing rules of the '90s were no longer applicable. 
Stories of investors having lost in excess of 50% of their 
portfolio value were the norm.

Why bring this up now? To illustrate the point that I have 
continuously propounded throughout the 90s; that a methodical, 
objective approach with clearly defined Buy and Sell signals 
is a "must" for any investor.

To say it more bluntly: If you buy an investment and you don't 
have a clear strategy for taking profits if it goes your way, 
or taking a small loss if it goes against you, you are not 
investing; you are merely gambling.

The last 2-1/2 years clearly illustrate that it is as important 
to be out of the market during bad times, as it is to be in the 
market during good times. Want proof?

According to InvesTech's monthly newsletter it turns out that, 
measuring from 1928 to 2002, if you started with $10 and you 
followed the famous buy-and-hold strategy, that $10 would become 

If you somehow missed the best 30 months, your $10 would only be 
$154. However, if you managed to miss the 30 worst months, your 
$10 would be $1,317,803! Thus, my point: Missing the worst 
periods has profound impact on long-run compounding. There are 
times when you end up better off by being out of the market.

Interestingly enough, if you missed the 30 best months and the 30 
worst months, your $10 would still be worth $18,558, which is 80% 
higher than the buy-and-hold strategy. This all comes about 
because stock prices generally go down faster than they go up. 
Wall Street and most people tend to overlook the value of 
minimizing loss, and that is exactly why the bear demolished 
more than 50% of many peoples' portfolios while I and those who 
trusted my advice escaped the worst of the beast's rampage.

© Ulli G. Niemann

Ulli Niemann is an investment advisor and has been writing about 
objective, methodical approaches to investing for over 10 years. 
He eluded the bear market of 2000 and has helped countless 
people make better investment decisions. To find out more 
about his approach and his FREE Newsletter, please visit:



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