401k / IRA investing risk control strategy

401k Investment Consulting in Boise, ID

SP500 Index 1997 - 2013 courtesy of finance.yahoo.com.

"I hate loosing money!" in my 401k

The chart to the left (or above) shows the performance of the large cap SP-500 Index from 1997 to 2013, a period of 17 years (chart courtesy of finance.yahoo.com).  

Major market downturns like those in the three-year period of 2000, 2001 and 2002, and then again in 2008, caused a 50%+ loss each time to our account values. If you stayed in using the "buy and hold" method during this long period of time, there was no growth in your account values. 

If you got out of the "turmoil" with severe losses, then you are not prepared to get back in when the market reverses into a new uptrend. The last thing you want to do is lose more. So you freeze up and remain in limbo.

I just know that everyone hates losing money regardless of your risk tolerance - great or small!  It's painful. I hate losing money. It is gut-wrenching hard to watch severe losses to your account values. When you have experienced severe losses it is mentally and emotionally difficult.  

But the money lost, and the sleepless nights, are not the only key issues here. TIME. Almost 20 years has gone by. A very BIG part of anyone's retirement plan. Maybe you were expecting $1,000/month from your plan due to expected average returns. However, the reality now is that you can only expect $500. That's real hurt! And many Americans still have not fully recovered!

Let's learn how to avoid major losses! This is our first objective. And this is the place for you to learn how to stop the erosion of your financial future in your 401k, 403b, or 457b plans at work, or your own personal IRA. 


"I love making money!" in my 401k

The second objective is to make money in major market up-trends.  

Hardly anything makes your day go better than to know that your account values are going up, and your investment goals are on track. Especially 401k or IRA retirement accounts because they are so vital to your financial stability and success. There is no better place than the market to realize what Einstein stated so wisely. 

Wouldn't you like a coach with a proven method to show you the "ins and outs" of the market?  

You have one here! With ProfitCycle's (PCIM) $10 monthly subscription, you can learn when to take advantage of growing account values during major stock market up-trends.  And just as importantly - avoid the major downturns - a strategy to conserve your gains. The subscription can be cancelled any time.

You do not have to do this alone!


ProfitCycle Investing Method

The true value of this strategy is shown in the chart on the left (or above) with the cumulative growth of $1,000 beginning in 1980 through 2018 - a 38 year history. Illustrated is Fidelity's FDVLX mutual fund, a typical 401k plan mid-cap stock fund. The chart compares the "buy and hold" method (blue line) vs. the same fund using the ProfitCycle Investing Method (red line).

In this method of investing, there is only one decision to act upon - growth or safety.  We are either in a mutual fund (equity) position, where there is greater risk to our money, and potential for growth - or, we are in a default money market fund (cash) position, where there is less risk to our money, and potential for safety.

By email, subscribers receive valuable and timely information to act upon depending on whether there is an entry into an up-trend, or an exit from a down-trend. 

It's that simple!  We are either in an equity fund for growth in a major uptrend, or we are in cash (money market fund) for safety in a major downtrend. These are the only two positions. Common sense and plain dealing!

Additionally, we do not control, nor do we have access to, your account to process the deduction of fees. Your only cost is the monthly subscription price. And you can cancel anytime.

To maximize growth and reduce volatility, ProfitCycle Investing Method works most effectively with a growth mid-cap mutual fund, or an exchange traded fund (ETF), commonly used in 401k / IRA type plans. When you exit an equity position, your money will automatically be deposited into a money market (cash) position unless you specify otherwise. 

The $10/month subscription is timely educational commentary and motivational information related to its overall mission. We can't wait to assist you improve your results.  We honestly believe that what we offer is a way your 401k / IRA can change for the better.

How does the 401k ProfitCycle Investing Method work?

What is a ProfitCycle?


Historically, stock markets don't go up forever, or down forever. It often repeats itself over and over again, i.e., bulls vs. bears! And this holds true for 401k investing as well.

Because of this repeatable behavior, and using our proprietary tools, we can enter, and exit, at the appropriate time in the bull vs bear cycle. In an uptrend, the entry (buy) point to the exit (sell) point is a ProfitCycle.  

Our method catches most of the gains during this period. The real key, however, is knowing when to exit (sell) so as capture the gains during the ProfitCycle. It makes no sense to make it only to lose it. 

Our exit method gets you out of (sell) the equity (mutual fund) position and automatically into a money market fund (cash), a safe place to put your money while the market continues its downward path (shown above from market wave peak to market wave valley).

When a new uptrend begins after the market wave valley, a new entry (buy) point opportunity emerges. But this time, when you enter, you will have a much higher dollar value with which to grow.  Doing this time after time develops a very powerful compounding effect.

The ProfitCycle Conceptual Chart, shown above, illustrates how this works theoretically. We don't get in at the bottom (market wave valley) and we don't get out at the top (market wave peak). However, most of the upward trend's gains will give you good growth results, and we keep most of that when we exit to safety - cash!  Then we start over again, and again, and again.

The ProfitCycle Process


This step-by-step positioning chart shows how the process evolves. This truly is what Emerson calls, "common sense and plain dealing."

We use only two asset classes in our method - Equity (mutual fund of stocks) and Cash (money market mutual fund). There are at least seven major asset classes. An asset class is a type of investment vehicle. Stocks, bonds, commodities like oil, precious metals etc., real estate, cash, currencies, etc. These are the major different asset classes.  All of these have risk involved. Cash is "King" when it comes to safety, although there is an amount of risk to everything.

We reduce our risk by controlling when (and even how much) we want to put out there in the risk environment. Why complicate our portfolios with a number of different asset classes?  Isn't one enough? Well, we think so. And cash, as another asset class, gives us the benefit of simplicity and safety. In our method, it is our default position. We enter the equity position only if it is worth the risk.


When You Control the Risk, Potential for Growth Increases

Buy and Hold Method vs. ProfitCycle Investing Method

The above Annual Growth % bar chart compares year by year from 1980 to 2018 the mid-cap fund of domestic stocks in Fidelity's FDVLX (ticker symbol) mutual fund. The blue bar shows the "buy and hold" method's annual growth percent verses the red bar representing ProfitCycle Investing Method.

During the worst years of 2000, 2001, and 2002, the ProfitCycle Method shows positive all three years.  Also noteworthy, 2007 and 2008 showed ProfitCycle Method with no losses, while the "buy and hold" method lost significant value during those years.  

Using the ProfitCycle Method does not guarantee there won't be losses, but our back-tested model shows minimal losses during the nearly four decades since 1980. Some years there were no gains, but no losses, while overall, the annual performance was greater than just simply holding on during major downturns in the fund's history.

Though there is no perfect investing method, ProfitCycle Investing Method significantly improves the risk/reward scenario inherent in an equity position like FDVLX, a mid-cap stock fund. And it empowers the compounding affect that Albert Einstein called the "8th wonder of the world".

Sign up for PCIM's educational subscription service. $10/month. Cancel anytime.

Want to know even more about 401k investing ?

There's much to see in the 2 part video series "I love making money in my 401k!"

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I would love to hear about your 401k investing experience!

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