CPM Investing LLC - Research Publications
Building Blocks of Model Portfolios:
The Plant/Wait/Harvest designations are part of "Strategy Two" described in the section below and in the video at the end of this section.
The strategies discussed below are for the timing of your relatively infrequent contributions and distributions to and from your accounts invested in the stock market. The strategies are not to be confused with trades that we will make among the ETFs of the model portfolio throughout the year. For most of your time using Focused 15 Investing, the strategies below will not be needed.
As an example of contributions and distributions, those in their early careers making major contributions to their retirement accounts should consider these strategies for determining when to invest those contributions. For retirees, the strategies can be considered when you need to take money out of your account (distributions) for living expenses.
Although we know that we should buy low, many people become interested in the stock market after it has appreciated dramatically. Thus, they are more likely to put money into the stock market near the peak of a price cycle.
While the Focused 15 Investing portfolios seek to avoid losses, we don't avoid them completely. This post lists strategies for moving money into the ETF model portfolio you have selected from the Focused 15 Investing publication. These strategies can help you avoid putting all your money in the ETFs at the top of a meaningful stock price cycle.
Likewise, there is a tendency to sell after major decline to reduce any additional pain of falling stock prices. These strategies can help you avoid taking money out of your retirement account (distribution) at low points, or bottoms, of meaningful cycles.
Assume you plan to invest $10,000 into an account that you will trade tracking a Focused 15 Investing portfolio. Put the $10,000 into your account, and then use one of the following strategies for investing all of that $10,000.
Strategy One: One-Third Every Three Weeks (Moving In or Out)
Strategy Two: Money Moving Seasons (Moving In or Out)
I indicate three different "seasons" for moving money based largely on the Micro Market Resilience Index (MRI) cycle. The seasons are Plant, Wait, and Harvest.
These are also discussed in the video at the end of this section.
Strategy Three: Hybrid
For moving money in, move one-half of your money into the model portfolio in each of two Plant seasons. Since there are roughly two Plant seasons a year, this strategy takes the longest to fully invest the desired amount.
For moving money out, move one-half of your money out of the model portfolio in each of two Harvest seasons. Since there are roughly two Harvest seasons a year, this strategy takes the longest to fully invest the desired amount.
Please see this video for a general discussion of the Plant/Wait/Harvest seasons.
The Focused 15 Investing publications each have series of model portfolios. The names can be confusing but there is a structure we follow, described below. Also, remember that each model portfolio has a sleeve group (sg) number that stays with it regardless of the name. Please refer to the sg number when in doubt.
Main "Loss-Avoidance" Signal Sets:
Examples of "Relative Leadership" Signal Sets:
Names of the main ETFs driving risk and return within the sleeve:
An investment industry adage says, “a bull market climbs a wall of worry.” We’d like to elaborate on that adage with a few additional thoughts.
Consistent with the image of the wall of worry, we should expect a bull market to begin while there is still bad news in the marketplace. We should not wait for all the bad news to go away before becoming more aggressive. However, we need to focus on the MRI (Macro, Exceptional Macro, and Micro) and valuation measures at key points in time to be able to take advantage of the natural tendencies of bull and bear markets.