This fact creates risk no matter what we do and opportunity is the reward for the risk.
You can bet on this golden rule as sure as the sun will rise.
For example, did you know that in 2020, the top performing investment class was gold, up 24.2% versus US Large Stocks being up 18.4%?
The chart below from Keppler Asset Management shows that, long term, equities have been better performers than gold, but not in the year 2020.
Who would have guessed in advance? How many of us caught this spurt?
I did in a way, only because I keep a portion of my portfolio in gold.
A correctly diversified investing portfolio holds a variety of assets so no matter what the spurt, the portfolio catches some of it. But I had no idea that this precious metal was going to be the number one performer that year. I simply know that long term, the best returns on any volatile investment comes from being in—all the time.
The reason for the long term approach is that not only is the golden rule (there is always something we do not know) in effect all the time, but also the biggest profits come in unexpected spurts.
Another Keppler chart (below) shows how important catching these spurts is for making the best, long term, steady returns.
The chart above shows that if an investor missed the best 5% of market spurts for the past 95 years, almost every penny of profit, beyond the US Treasury Bill yield, was lost.
An article at Kipplinger.com “If you want to make money in the stock market, you have to be in—all the time. (1)” explains why market timing is foolish.
The article says:
The timer correctly called the bull markets in years 1 and 2 but missed the first bad market in year 3. He then redeemed himself by calling the serious bear markets in years 4 and 5, avoiding a 35% loss. Unfortunately, while waiting for confirmation that the market had turned, he missed the dramatic bull markets in years 6 and 7 (remember, you have to decide when to get back in as well as when to get out). The result: Patient investor, 4.6% annual return; Timer, 3.9%.
The part of human nature that leads us to avoid loss more than to gain profit, makes it less likely that we are capable of capturing the best spurts.
Buying during market panics and getting out when markets are hot is contrary to human nature. Consequently most of us (I am this way for sure) are not good market timers.
There is one way to kinda time markets when using the Keppler Top Value Market approach that we teach in our Purposeful Investing Course.
The approach is to invest in country ETFs that invest in Top Value Markets ranked by Keppler Asset Management.
The Top Value Model Portfolio currently holds etfs that invest in the nine“Buy”-rated markets Austria,Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom at equal weights.
According to Keppler’s analyses, an equally weighted combination of these markets offers the highest expectation of long-term risk-adjusted performance.
Good Value Market Weighting Timing
A sensible way to use the market timing concept is to increases a portfolio’s equity weighting when the when the Keppler Equally Weighted World Index (green line in chart below) is below Keppler’s four year forecasts. This has only happened three times since Keppler began in 1993, in 2002, 2008 and 2019. Each time that index has dropped below Keppler’s projections, there has been a strong global equity correction.
Right now is not the time to add extra equity weight, but it is time to watch for a correction because there is considerable evidence that markets are over bought.
Keppler’s projections have been highly accurate since they began, and currently because markets have performed so well in the last year, the projections for the next four years have dropped strongly. The projection is that stock market prices overall will be slightly lower then they are now, in three to five years.
The drop could come from continual volatility that allows markets to drift down, or the drop could come from one big correction.
I am watching for that big correction.
I do not know if that big drop will come, but I am watching and if global markets experience a significant sell off, I’ll reduce the liquid portion of my portfolio and increase my equity position. I’ll keep the same equal weighting of the nine top value markets shown below (or whatever the top value markets might be at the time of the sell off).
My equity position is already in a great value position. The Top Value Markets are now undervalued by 36% compared to the MSCI World (Standard) Index, by 47% compared to the MSCI USA Index and by a 64% compared to the MSCI World Growth Index.
At some stage those valuations will work their way through the market into the pricing.
“There is always something we do not know”. We cannot see into the future, but another part of human nature means we rarely can stop trying. One way to take advantage of this part of our nature is to load up on extra good value, when markets implode, as described above.
Stress Less Investing
The stock market has always been the best place of places to protect and increase wealth over the long haul. Yet it’s also been the worst place to lose money, a lot of it, quickly.
There are only three reasons why we should invest. We invest for income. We invest to resell our investments for more than we had invested. We invest to make our world a better place.
The goal of investing should be to stabilize our security, bring feelings of comfort and the elimination of stress!
We should not invest in social networked protests that guarantee loss. This is like burning our houses down in protest.
If we want to change the world, we should invest in good equities that bring profit and use the extra wealth to create something beneficial for mankind.
We should not invest for fun, excitement or to get rich quickly. We should not divest in a panic due to market corrections.
This is why my core stock portfolio consists of 16 shares and this position has hardly changed in five years. During this time we have been steadily accumulating the same Top Value ETFs and have traded only a few times.
The study below shows how a value based model portfolio that dates back to 1969 has outperformed almost every stock market in the world.
The US market has not been even close to the top performer over the long term.
The DQYDJ Dow Jones Industrial Calculator (1) shows that an investment in the Dow Jones (with dividends reinvested) has risen at an average of 10.74% over the last 50 (51 actually) years.
That’s 10.74% is pretty good, but an analysis of 51 years performance of all the developed stock markets shows that (using country indices as hypothetical investments) investing in the top value (not top performing) markets would have returned 12.5%.
The chart below shows the analysis.
An annual return of 12.5% compared to the 10.74% US return is a 1.76% per annum difference. This may not seem like much,
In the long term the difference is huge. Calculations from the investor.gov site (2) shows that $10,000 invested at the 10.74% compound rate turns $10,000 into $1,817,734.62 in 51 years.
Wow, that sounds pretty good until you look at the results of the 12.5% rates. $10,000 grows to $4,062,362.22!
Investing in the top value (not the top return) markets earned $2,244,627.60 EXTRA!
$4,062, 362.22 means you would have $2,244,627.60 MORE by investing in good value markets versus $1,817,734.62 earned investing in the US market. That almost 125% more money!
Here are the best value developed markets at this time (as of end of March 2021).
No matter how we look at it, over time, value investing always wins!
Our portfolio is built around a strategy that’s taught in my Purposeful Investing Course (Pi). I call these shares my Pifolio. The course shows how to use the value analysis of Keppler Asset Management to create a portfolio of ETFs that cover undervalued stock markets. I have combined my 50 years of investing experience with the study of the mathematical market value analysis of Michael Keppler, CEO of Keppler Asset Management.
In my opinion, Keppler is one of the best market statisticians in the world. Numerous very large fund managers use his analysis to manage billions of dollars in funds. However because Keppler’s roots are in Germany (though he lives and operates from New York) all of his funds are registered for the European Union citizens, Americans cannot normally access his data.
I was lucky to have crossed paths with Michael over 25 years ago, so I am one of the few Americans who receive this data so I can share it with Pi subscribers.
The Pifolio analysis begins with Keppler’s research that continually monitors 46 stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return. Keppler looks at these numbers and takes market’s history into account.
Michael Kepler CEO Keppler Asset Management.
Michael’s analysis is rational, mathematical and does not worry about short term ups and downs. Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each good value (BUY) markets.
This is an easy, simple and effective approach to zeroing in on value. Little time, management or guesswork is required. You are investing in a diversified portfolio of good value indices.
A BUY rating for an index does NOT imply that any one stock in that country is an attractive investment. This eliminates the need for hours of research aimed at picking specific shares. It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries. Investing in the index is like investing in all the shares in the index. You save time and gain incredible diversification because all you have to do is invest in the ETF to gain the profit potential of the entire market.
To achieve this goal of diversification the Pifolio consists of Country Index ETFs.
Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that track an index of shares in a specific country. ETFs do not try to beat the index they represent. The management is passive and tries to emulate the performance of the index.
A country ETF provides diversification into a basket of equities in the country covered. The expense ratios for most ETFs are lower than those of the average mutual fund so they provide diversification and cost efficiency.
Here is the Pifolio I personally held at the beginning of 2021. There have been no changes since.
70% is diversified into Keppler’s good value (BUY rated) developed markets: Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.
30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: China, Brazil, Chile, Colombia, South Korea, Malaysia and Taiwan.
There is one trick Pi subscribers learn about China which is different from the rest of the funds.
iShares Country ETFs make it easy to invest in each of the MSCI indices of the good value BUY markets.
For example, the iShares MSCI Germany (symbol EWG) is a Country Index ETF that tracks the investment results of the MSCI Germany Index. The fund invests at least 80% of its assets in the securities of its underlying index that primarily consists of all the large-and mid-capitalization companies traded on the Frankfurt Stock Exchange.
iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.
There is an iShares country ETF for every market in our Pifolio.
This year I celebrate my 53rd anniversary of writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in our seminar.
How you can create your own good value strategy.
Stock and currency markets are cyclical. These cycles create extra profit for value investors who invest when everyone else has the markets wrong. One special part of your course looks at how to spot value from cycles. Stocks rise from the cycle of war, productivity and demographics. Cycles create recurring profits. Economies and stock markets cycle up and down around every 15 to 20 years as shown in this graph.
The effect of war cycles on the US Stock Market since 1906.
Bull and bear cycles are based on cycles of human interaction, war, technology and productivity. Economic downturns can create war.
The chart above shows the war – stock market cycle. Military struggles (like the Civil War, WWI, WWII and the Cold War: WW III) super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine, production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet. The military technology shifts to domestic use. A boom is created that leads to excess. Excess leads to correction. Correction creates an economic downturn and again to war.
Save $124.50 If You Act Now
Subscribe to the first year of The Personal investing Course (Pi). The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking that down to $174.50 in this special offer. Plus I am reducing annual renewals from $299 to only $99.
I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use. I call this strategy Purposeful Investing (PI). You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.
You get this course when you enroll in our Purposeful Investing program (Pi) with a triple guarantee.
Enroll in Pi. Get the 130 page basic training, a 46 stock market value report, access to all the updates I have sent in the past five years right away, plus numerous updates over the next year.
#1: I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.
#2: I guarantee to send you monthly updates that are based on a study of every share in 46 stock markets around the world. These updates will show the values, the earnings of all these markets and categorize each market as Top Value (buy), Neutral Value (hold) or Poor Value (sell)
#3: If you are not totally happy, simply let me know. I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.:
You have nothing to lose except the fear. You gain the ultimate form of financial security as you reduce risk and increase profit potential.
When you subscribe to Pi, you immediately receive a 120 page basic training course that teaches the Pi Strategy. You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.
You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last five years so you can back track if you desire. Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.
Subscribe to a Pi annual subscription for $174.50 and receive all the above.
Your subscription auto renewal will only be $99 a year from now, if you renew, but you can cancel at any time.