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No. of Recommendations: 3
Rog -

You raise some good points. The purpose of my column was simply to highlight a method that has worked well for one fellow (who happens to be a walker for TMF's retirement site.) As Doug Short told me and as I state in the column, a 10-month MA may not outperform buy-and-hold in the next 15-20 years; markets have a way of crushing winning strategies. But I know plenty of people who wished they had followed MA in the last 10-15 years. So if nothing else, the column introduces a tool that some of us may want to follow, just as some of us like to follow Shiller's 10-year PE, the Baltic Index, and the spread between the 3-month LIBOR and the 3-month Treasury. The more tools, the better.

Anyone interested in learning more about moving averages should put Mebane Faber's name in a GOOG search; he has studied this subject in detail.

As for dividends...don't forget, when our market timer is in cash I do not give him any interest income. So, the loss of dividends is cancelled out (mostly) by the loss of interest income.

Concerning taxes, Doug says this strategy makes the most sense for folks in or near retirement, who do not have the time to recoup a big loss. For investors with more money than time, avoiding a loss is more important than a missed opportunity. Also, it stands to reason that retiree tax deferred accounts are a substantial portion of their total investable assets. Thus, senior citizens can use a buy-and-sell strategy and not worry about incurring capital gains taxes.

As for your dollar-cost-averaging point, again, this is correct for someone who is working. But a retiree is probably not making any contributions. They are withdrawing money.

Thanks for the kind comments on my book. I am working on a column about a well-known company, which should appear on these pages soon.

How do you feel about a column on demographics and stock market returns between now and 2020?


Hewitt
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