Why not make 2015 the year you finally take control of your investments? It’s not as hard as you might think. The market is less complicated than it’s made out to be in mainstream financial media. It’s a set of fluctuating prices that can be monitored for when they rise above a level indicating a time to sell, or fall below a level indicating a time to buy. That’s all it is, and opinions count for nothing in this construct where numbers and math can do the job. The showmen won’t tell you that, though. They prefer bloviating about where they think the market will go next, and they’re wrong half the time. They won’t tell you that last part, either.
On February 24, my new book, The 3% Signal, will be published. It shows why the usual methods of investing fail most people over time because they’re based on the false premise that it’s possible to time the market through forecasting. Then, it introduces a better way. Not just a better way, but the stock market’s new best practice: the 3% signal, or 3Sig to those already familiar with it. The former best practice was dollar-cost averaging, which is just sending more money to an investment on a regular basis regardless of market activity. The signal system is better because it reacts intelligently to where prices have gone, guiding the investor to add more capital when prices are weak and to harvest profits when prices are strong. This requires no predictive forecasting, only a proper response to prices that have already appeared.
The book presents in exacting detail how to put the plan to work in your investment accounts, including a 401(k) or other retirement account. The days of stress-free pensions are long gone. Everybody has been thrown into the market to sink or swim on their own in various forms of defined-contribution plans, whether they have an interest in investing or not. In this free-for-all, 3Sig is the ally everybody needs. It’s easy even for people who would rather not invest but are forced to do so in order to retire one day or send a child to college, but sophisticated and effective enough for even seasoned market participants to appreciate its results. Market veterans are the first to nod when reading the plan’s particulars, because they’ve learned the hard way that popular techniques don’t work and can see that 3Sig’s systematic nudging of performance beyond the market’s is all the edge anybody needs.
For a sneak preview of the plan’s basics, see “Value Averaging for Steady Growth” on page 119 of the 2013 edition of The Neatest Little Guide to Stock Market Investing. The section has been in my book for several editions now, but not with enough detail behind the superb 3Sig method to give readers the confidence to begin. You and others need to be convinced before abandoning mainstream financial media banter in favor of a methodical formula that needs prices fed to it only four times per year, not conjecture by zero-validity pundits sporting 50 percent mistake rates. On February 24, my new book devoted solely to this technique will do the convincing and give you the confidence to make the switch.
You read that part about feeding the plan prices just four times per year right. If you join the rest of us running 3Sig, you’ll beat the market and almost all pros (because the vast majority of them loses to the market, despite their projected confidence on TV, etc.) while checking in on your investments just four times per year. A 15-minute calculation at the beginning of each quarter is all it takes. I know, you think this is too good to be true, but read the book and you’ll see the history behind the method, its track record, and how easy it is to implement. You’ll wonder why it’s remained secret for so long — until you grasp that Wall Street is worried sick that it will catch on, thereby reducing trading profits and expensive research fees. Big firms don’t want clients to know that fees paid to them are money wasted. The 3Sig plan uses super-cheap index funds and low-frequency trading to keep costs minimal, and it still beats the blatherers. Watch for Wall Street’s coordinated attack on the book when it hits shelves in February, and watch famous pundits decline my challenge to compete head-to-head with the plan.
Enough background. You’re probably looking to get your retirement account and other stock accounts on a firmer footing this year, so let me offer a little brass tacks advice to help you get onto 3Sig and leave the noisy, ineffective frenzy of Wall Street in the dust.
First, start backing out of your current portfolio holdings. All of the stock ideas-of-the-day you’ve picked up over the years, all of the one-time all-star mutual funds that fizzled out, all of the detritus that accumulates in the portfolios of people who tune into mainstream financial media needs to go. If this happens in a retirement account, you can sell it all and sit in cash until the end of February without any tax consequences. In a regular brokerage account, you’ll need to report capital gains and losses in your 2015 tax return next year. Even so, you need to back out of all this investment garbage in order to make a clean break from mainstream folly and a fresh start with 3Sig, which will minimize future tax consequences while boosting overall profits. You may want to double-check the impact of selling capital gains in your regular brokerage account before proceeding, but will probably find that it’s going to be worth it over the long-term of 3Sig success in your future.
Put the cash in the cheapest medium-term or general market bond index fund in your account for a couple of months. No kidding, ignore all the new-year stock and fund ideas in the press and just put the cash in bonds. Go skiing or something to bide your time. There is no rush to jump on any pundit’s hot tip du jour. You’re done with that discredited approach. Such random ideas come in a never-ending stream and half of them crash and burn anyway, so just reject the whole sham out of hand while you wait to begin 3Sig. Keep your regular contributions going to the bond fund in the account, but don’t take any action.
While you’re waiting, pre-order The 3% Signal so it will be delivered to you exactly on February 24, its publication date. Read it right away and you’ll be ready to participate in the live Twitter Q&A session I’ll be hosting on Tuesday, March 3 at 7pm EST. This gives you a week to read the book and prepare a list of questions. I’ll summarize the session afterwards in an article at jasonkelly.com as well.
Finally, take what you learned in the book and the Q&A session to get going. It’s easy to do, requiring only the cheapest small-cap index fund and bond fund available in your account, and knowledge of how the system moves capital into and out of the stock market based on price fluctuation: no commentary required, just the unvarnished clarity of prices alone. Let the herd tune into the false promise of “what’s hot now” and other distractions. You’ll just glance at prices once per quarter and run 3Sig to beat all the so-called pros.
I wish you a happy new year! With this plan on your side, life will be different on the investing front, which I believe will also improve other aspects of your life as you leave behind low performance and high stress in favor of high performance and low stress. You’ll be amazed at how much of your mind and time 3Sig frees up, enabling you to focus your talents on the parts of life where intuition and skill make a difference. In the zero-validity environment of the stock market, they don’t. If you doubt this, read the book.
Look insideThe Kelly Letter
Looking forward to your new book on Feb. 24. Trying to get more knowledge on value stocks how and when to buy and when to sell.
As a retired person, it’s hard to know when to sell value stock with “good” dividends unless you need losses.
Happy New Year! Hope it goes well.
Thank you, Wells. I do, too. The beauty of the signal system is that it tells you whether to buy, and how much, every quarter based only on the dispassionate 3% quarterly growth rate. This takes away all the indecision and stress of listening to forecasters and poring through our own research. As the market gets more and more efficient, human intuition and ideas count for much less. Let math do the job!
Please read the book and get your questions ready for the Q&A session.
Obviously I do not know the all details of the 3Sig system, however I have contemplated something I think may be very similar. My question is…Do you believe the system will work when there is not NEW capital to invest? I am retired and the only income I have is from Social Security and income generated by my portfolio.
Yes, Arthur, the system does work even without new capital coming in on a regular basis. In fact, I run a version of it without new capital in my newsletter, the Tier 1 section of the portfolio. All investment plans work better when a stream of new cash adds buying power, but in retirement and when such a stream is not available before retirement, plenty of plans can keep going just fine without fresh cash. 3Sig is one of them. It moves capital between the stock and bond side of its portfolio based only on price movement, automating the goal of buying low and selling high. So, you’re in good hands!
Like your value averaging approach and have already ordered the book. I suppose that things have always been messed up, but doesn’t it seem that the current scale of overleveraging and massive derivative gambling has never been seen before? Does your plan need some kind of failsafe in case we go down and stay down for a long time. I’m 74 and fear I could be pouring my savings down a rat hole. Time is not on my side.
I enjoy your comments and also have your other book. ( 2010) edition. Currently, I use long term timing systems composed of moving averages of price and volume. They do cut down the drawdowns and give a moderate return. However, they are hard to follow because sometimes we think we know better. Usually, I didn’t.
You’re not alone in discovering that you usually didn’t know better, Tom. Even pros are wrong half the time, remember. You’re also right to notice that there are so many factors at work in the market these days that human intuition isn’t worth a darn anymore. Nobody knows anything! Therefore, let a rational formula make the calls. It beats the market and the pros, and all of our own gut instincts. The media is no help, what with its focus on shrill reporting to goose interest. Tuning out is the new best way to stay informed!
There’s no “failsafe” in the plan other than limiting its additional investment amounts on the way down, which happens naturally because the market rarely just plunges through all buying power in a single quarter. It’s possible, but hasn’t happened yet. The worst-case scenario with 3Sig is that the investor runs out of all buying power and then just holds when the plan says to buy more shares. This isn’t so bad, really, because even in such moments the signal can provide confidence. It reminds us that the market has been here before, the commentators were just as panicked in the past as they are now, and eventually things get better. Those who puke at the bottom, lose. Those who stay put eventually recoup what they lost. Running out of buying power is rare, but can happen, and when it does the plan just treads water until a sell signal is generated. No big deal.
I was just trying to decide whether to hire an investment manager, but now I think I’ll wait to read your book first (just pre-ordered it).
But it’s a bit laughable, don’t you think, to claim that “Wall Street is worried sick” about your “secret,” and will launch a “coordinated attack on the book”? Does “Wall Street” even know who you are? You should spare your readers that kind of marketing hyperbole, which is better suited to weight-loss cures and the like (“doctors are worried sick you’ll discover this weight loss secret,” etc.).
Thank you for ordering, Michael. You’ll be happy you chose to take this route rather than hiring an investment manager.
It’s not laughable to say that Wall Street is worried about this idea gaining traction. The publisher and I know this for a fact because we made the rounds looking for support and couldn’t find a single voice willing to back the book — not even the ones who backed my previous books. (Which reminds me: Yes, they know who I am.) It makes sense that Wall Street banks and brokers would despise a plan that puts all investors in the cheapest index funds available and recommends ignoring all brokerage advice, doesn’t it?
As for a coordinated attack, we’ll see. Their first strategy is to ignore the idea and hope it fades away, but if enough media voices support the book then the industry may have no choice but to create a public response with spokespeople. It’s already seeing a massive exodus from actively managed funds to index funds. This book will exacerbate that trend.
Hi Jason, Looking forward to yr new book. Any chance it will be released in eformat? Cheers, Toni
Yes, Toni, it will be availabe as an e-book. However, I strongly recommend getting the printed paper edition for the charts and formatting that we all worked so hard to make beautiful. E-books cheapen the efforts of a whole team of designers and typesetters by allowing incorrect breaks, crummy chart formatting, and other quality issues to creep in. I know e-books are convenient but for all but just plain-text, printed paper books remain the highest quality availabe. Besides, the paperback of this book is only $12 (discounted from the sticker price of $16). It’s worth it.
Jason, I pre-ordered a copy of your new book. I look forward to reading it.
Thank you, Tony! Yes, read it and get your questions ready for the Q&A.
Jason, I just pre-ordered four copies, one for me and one for each of my children (whether they want it or not).
You’re my kind of guy, Richard! Thank you for this. I look forward to seeing you in the Q&A.
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