After years of trading stocks and mutual funds we found that there is a distinct pattern in the market which everyone knows exists, but few can capitalize on it. You may think, what can this be? All markets go up, then hit a certain point, then a drop in price, consolidate and get ready to move up once again.  This drop can be violent as in 1929,2000 or milder ones as in 1973,1987,1998, 2007, and the list goes on.  These drops are where people see their investments lose ground; decreasing in value.

Now is the time to position yourself so your portfolio does not experience those losses.  We have been asked many times. "Why do you show Maximum System DrawDown percentages when most others will not?" We believe that this is a very important part of any trade system. Without knowing this, one would not have any idea what the expected drop in value their portfolio may see during a trade.

First lets look at Maximum DrawDown (MDD). This is the maximum loss (computed, not annualized) that the manager ever incurred during any subperiod of the entire time period. Conceptually, the calculation looks at all subperiods of the time period in question and calculates the compound return of the manager over that period. The maximum drawdown is the minimum of zero and all these compound returns.

If your portfolio experiences a 25% Mdd then you will have to make 35% return just to break even from that point. If your investment experienced a 60% loss as many did when the markets dropped in 2000 you would need to make back 150% from that point just to break even. This is one of the most important issues when investing yet many people will not show you this number.

Why are we called Mutual Fund System since this works on ETF's too? When we set out to develop this system we were looking for a robust system that offered lower Mdd than anything else offered to the general public. We desired a system that was not curve fitted on past data (in hopes that the market would perform the same in the future as it did in the
past), as most systems offered to the general public are constructed. In completing this system we found that it was able to show the trends in the market so well and rank the funds/etf's in such a way that it was profitable for both. We are now using this system on stocks with great results, and will offer it in late 08' after we have two years of real time trends to look at.

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Below is the chart of how all the accounts have been doing since 8/30/2004 and the indexes for comparison. This also shows the MDD of each. For those that have been trading for a while remember what the OTC is, ( NASDQ now) You can see that the Indexes have not performed well compared to any of out accounts. The Indexes MDD though has outpaced ours by 2:1 most of the time ( Lower is better ) and their AnnGains are much lower than ours. Your choice to keep your buy and hold or as one of our members have called it "Buy and Hope" or join our winning team.

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HOW ARE YOUR CURRENT INVESTMENTS REALLY DOING?

YEAR TO DATE January 1, 2008 through July 24, 2008.........Profunds Model +1.79%......ETF Model +1.79%.....Fidelity Model +1.79%.....Rydex Model +1.79%.....Long/Short Model +64.19%.....HighYieldBond #1  +15.60%.....HighYieldBond #2  +7.00%..........NASD -14.03%......Dow Jones -14.44%....S & P 500 -14.70%......Russell 2000 -8.31%