Your broker and fund manager won’t agree. Not because it isn’t true, but because they won’t make any commission.

When the market is going up it is not a good place for your investment funds. As I have said many times you want to be fully invested while the market is going up and out of equities while it is going down.

The most important thing about investing is to protect your money. The Board giveth and the Board taketh away – the Chicago Board of Trade or any other exchange.

Smart investors learn how to understand market signals and not what some broker tells them. I have outlined several methods in previous columns about how to do this.

Knowledgeable investors do go to cash when the market is declining, BUT currently there is a special long term signal where cash is a secondary option.

If money is left in a Money Market account at 1% interest while true inflation is about 5% then purchasing power is being silently stolen. Of course, that is better than losing 20, 30, 40% or more if left in a mutual fund that is sliding into oblivion.

The cash in the stock is also losing its purchasing power. You can’t win.

WAIT! Yes, you can.

In the last few years there has been created what are called inverse funds, both mutual funds and ETFs. These are equities that move in the opposite direction to the underlying equity. The best known and traded ETF is the SPY that follows the moves of the S&P500 Index. You don’t want to own this when the market is going down. In fact you don’t want to own any stocks or mutual funds when the general market is going down.

There is an inverse ETF of the SP500 Index that moves in the opposite direction with symbol SH. When SPY goes down a dollar, SH goes up a dollar. You may easily confirm this by putting up charts on www.bigcharts.com on any computer.

For reasons not understood brokers have not found out about inverse ETFs and mutual funds or they don’t fathom how their clients can make money while the market is going down.

All brokerage companies have Exchange Traded Funds (ETFs). They trade like stocks with stop loss orders allowed. That is another advantage over mutual funds that do not allow stops.

Not being in the Buy N Hold camp the investor can now make 20, 30, 40% while the market is collapsing instead of losing that amount. If this is a new concept the investor can find complete information by searching the Internet. Once he has some grasp of these great equities he will be able to invest in both directions of the market.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.