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Up, Down or Sideways markets! Who cares?  

23 April 2008

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On March 25th 2008 the American S&P500 index of shares closed at 1352.99.
In April 1999 the S&P 500 was at 1362.80.

Basically the S&P has not progressed in the best part of a decade. The market has gone through many up and downs over that period but in essence has not finished in positive territory. There have been a number of static decades such as this in the last 100 years. In each of the static periods the market has had volatility but has made little or no progression over the decade.

The result for the share investor, who is not a spectacular stock picker, is a varied return on capital invested. Sometimes good gains are mingled with periods of not so good losses but unless the overall momentum of the market is continually rising it is difficult to pocket consistent returns. Just look at the performance of some of the Managed Funds and Superannuation Funds over those years even with their specialists managing the money. The Buy and Hold strategy works well where markets rise consistently over a ten year period, as does Dollar Cost Averaging even when the market fluctuates but generally rises over time. The problem occurs where the returns are negligible or even negative over a decade because the market finishes roughly at the place it began ten years earlier. This is often not he best use of all of your funds and some diversity into the market utilising alternatives to get a better mix is more practical.

Trading Index Options caters for markets that move up, move down or move sideways. Trading Options strangles is a strategy has stood the test of time. Directing part of your capital into trading Index Options creates diversity in your portfolio in all market conditions.

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