One of SMI's main goals is to simplify investing for the average person. Our two primary investing strategies (Fund Upgrading, Just-the-Basics) are sufficiently conservative that either can be used as the core of your portfolio (i.e., where the bulk of your assets are invested). However, we also have investing techniques that are more time consuming or perhaps a bit too volatile for the average investor. These items, which are not part of our model portfolios, are featured on our Advanced Strategies page. Understand that these strategies are completely optional.
The best of our indexing and active-management strategies are combined in our Enhanced Just-the-Basics strategy. The indexed half of your portfolio runs on autopilot, much like a Just-the-Basics portfolio, while the other half uses an approach similar to Upgrading, except that changes are only considered once per quarter rather than each month. This strategy requires a little more attention than Just-the-Basics, but offers the potential of market-beating returns as your reward.
Because of the volatility involved, SMI recommends that Sector Rotation be limited to a supplemental role within your overall investment strategy framework. It is intended for experienced and mature investors willing to take significant risks in pursuit of strong long-term returns.
This strategy is based on research that shows the stock market goes through predictable six-month "favorable" and "unfavorable" periods each year. Moving money into the stock market during the seasonally favorable period has provided superior returns over the past half century.
The SMI philosophy is that your portfolio should be divided between stocks and bonds as determined by your age and risk temperament, not by what the market outlook happens to be at the moment. Typically, fine-tuning your stock/bond mix occurs only once a year during the annual rebalancing process.
Notwithstanding our advice, there are times when SMI readers desire to temporarily boost their stock holdings (go for more growth) or cut back on same (reduce their risk). They've asked for our help in identifying the larger bull- and bear-market trends so they can adjust their portfolios with a higher level of confidence than the proverbial "shot in the dark."
In response to those requests, we've researched and created two key indicators. The "Bear Alert" indicator attempts to measure the likelihood that a new bear market has begun (last signal: January 18, 2008 — the bear market didn't hit bottom until over a year later, at prices more than 40% lower); and the "All Clear" indicator signals when one has ended. These indicators will not call market tops or bottoms, but they do a reasonably good job of letting us know when the market trend has changed direction.
Strategies | 
