Kinetic Trader

Avoiding Stock Market Declines

If you are active with your investments or follow stock market news then you might have heard of the term “Black Swan” events, which is a term to describe “unforeseeable events that are thought of as not being possible based on previous experiences”.

In other words, events that cause panic in the markets because no one saw them coming.

These Black Swan events are used to describe past extreme moves in the market like the default of Long Term Capital or the day of the Flash Crash(caused by an error trade),etc….

Most investors realize that stocks as an asset class outperform other asset classes over time because they carry higher risk than other investments like bonds or Bank CD’s and therefore stock investors must deal with the historic ups and downs of the market to realize those higher returns.

What is concerning to more and more investors though is the number of these Black Swan type of events that have occurred over the last decade and the effects it has had on many peoples portfolios. These large market moves have caused more and more investors(including young investors) to outright avoid owning stocks and caused many investors to be happy feeling safe with little to no returning fixed income.

Well, the reason for this website is share information that will help people become more proactive and knowledgeable about how to manage their investments, whether you are a short term trader of long term investor.

That is why I am excited to share this free report below written by Mebane Faber, who is a financial manager and author of a popular market timing system – see my past post about it. It is a terrific research report that succinctly analyzes and explains the effect of past black swan events on the market and demonstrates that most of these big events occur in declining markets and that following a trend following system that stays invested only during stock market uptrends (which was demonstrated in his past white paper) would have helped you avoid many of these events.

Here is a link to the free report.

Enjoy !

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