Updated: Mar 7, 2021
So many are looking for a way to invest in stocks while reducing risks. It isn't that easy to do, but here is a simple strategy that could help you avoid a market downturn, providing the market does so over a few months rather than a flash crash or overnight 20% drop.
Here is the simple tip: You make a list of your 401ks' investment menu (or create your own from a list of style box ETF's) or list of index funds including stocks and bonds. Each quarter or even every two months you the rank the performance from best to worst looking just at the quarterly or bi-monthly performance. You take the price plus the dividends at the end of the month and divide it by the price at the beginning of the quarter then subtract the number 1 from it and that is the percentage gain. Whichever percentages of the top three funds is highest is where you invest. It is a way to follow the momentum of the market while at the same time keeping it simple. Disclaimer: this isn't going to work if you are following penny stocks and any other highly volatile stocks because their prices swing way to much throughout the same time period as say a Russell 2000 ETF. This is better for diversified ETF's and/or index funds.