Stock Market System Sense: Technical Analysis Trading vs. the Diversification Myth

On March 28, 2010 in Uncategorized

The behemoth investment companies like Fidelity Investments continue to pump this legendary myth till they die so as to protect status quo of their age-old investment strategy reliant upon: Diversification. Does it work?

Recently, Fidelity Investments headlined the following pro-diversification article: “Don’t Give Up on Diversification”. The moral of the article was a warm reminder and exhortation that even though diversification lost money last year you shouldn’t give up or even consider other alternative investing options. If you do than you just don’t understand diversifiction as one of the best, time honored investment principles. Which is light years behind current stock market system approaches.

Asset allocation in theory combines various asset classes don’t quiet fit together thereby separating and in turn protecting a portion of assets during market draw downs while your other assets suffer losses. In short as professional money managers we have to admit that we don’t know how any particular asset classes are going to profit or plunge this year or next so to hedge your bets, it’s best to play it safe and spread out your investments so you don’t lose everything.

And though diversity may help you keep your wealth longer, but it won’t make you wealthy. The lame promise of diversity only offers slightly smaller losses during bad market times and substantially reduced gains in good times.

Problem is in recent years that theory has failed.

In the end, diversification with its buy and hold investing strategies hasn’t survived in recent economic conditions and it’s a dated way of managing your portfolio. Its a recipe for mediocrity at best and an overall dissatisfying return from your portfolio long term.

So, how long are you willing to let “professional economic strategists” and financial analysts tell you what really works today? Do these guys really profit themselves? I took both macro and micro economics that essentially taught me once you lose all your money, why you lost it. There isn’t anyone, not me or your broker who cares about your portfolio like you care. The earlier you are able to get educated to trade on your own the better.

I’ve heard it said that THEE way to accumulating wealth isn’t putting your eggs in various baskets. It’s putting your eggs in one basket, watching it very close…but making sure you have the right basket. ETF Trend Trading system uses technical analysis trading giving you all the tools so you know what basket is right. After you learn the system it only takes 5-10 minutes per night to average 6% each month.

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