Page 14 - DIY Magazine June 2018

FOLLOWING A TREND CAN WORK WONDERS FOR YOUR RETIREMENT POT.
Douglas Chadwick
Founder and Chairman of Saltydog Investor, explains that ‘momentum investing’ is a proven way of making money in the stock market; ‘buy high and sell higher’
When we think of trends, we might think of things like fashion, cuisine, interior decoration or garden design; not many of us think of trends and investment funds in the same sentence, but we should.
Trend Investing - also known as ‘trend following’ or ‘momentum investing’ - is a proven method of making money in the stock market and goes back over one hundred years. It’s fascinating how trend investors in very different times, and places, have come up with uncannily similar rules for making good profits.
There are four basic rules for success.
• You must have a constant supply of accurate up-to-date fund performance data.
• Don’t always be invested in the market; in times of market uncertainty, cash is a good home for your money.
• Test the validity of a new trend with small investments first.
• Once a trend is established it’s more likely to continue in that direction as it gains momentum, be it up or down.
Jesse Livermore, one of the most famous and successful trend investors from the last century, is quoted as having said ‘If after a steady rise the stock levels off and turns down with only occasional rallies;
it is obvious that the line of least resistance has been changed from upwards to downwards. There is no need for explanations, now is the time to sell’. The reverse is also true and then it is the time to buy.
Perhaps now is the time to discuss briefly the origins of the Saltydog investment system. I spent my formative eight working years in the Merchant Navy, finishing up as a navigator, before going to university as a mature student and gaining a degree in theoretical physics. In 1975 I formed my own flat pack furniture manufacturing business selling it successfully ten years later. In 1988 I formed another business, also selling flat packs to
‘ON A MISSION TO EMPOWER RETIREES AND ALL LAY INVESTORS, YOUNG AND OLDER TO TAKE CONTROL OF THEIR FINANCES
the likes of IKEA and MFI with significant contracts in America and throughout Europe, retiring from this work in 2008. You should be able to tell from this brief resume that I am reasonably numerate.
After the sale of the first business in 1985, I was advised by an IFA to invest some money into two investment bonds. Fifteen years later, when I started to take an interest in the performance of these investment bonds,
I was ashamed to find out that they were just marking time and going nowhere. It made me look stupid and a fool for trusting the IFA to manage this investment.
A big lesson learnt; like so many people, I had believed that financial advisors actually ‘advise’, that wealth managers actually ‘manage’, and that the financial industry has individual investor’s best interests at heart. Enough was enough, it was time to take control myself, and thus began the road that lead to the Saltydog trend investing system.
At first I simply pored over the performance numbers of around seventy funds, and over the months it became obvious that patterns were emerging. Some funds would move together in the same direction, up or down, as
if in tandem. After several months of researching this phenomenon it dawned that these funds were in the same sectors of the market.
There are literally tens of thousands of funds available distributed amongst thirty or so recognised sectors - now was the time to get serious.
Richard Webb a former colleague joined in and ‘The Saltydog Investor’ came into being. Richard became the Managing Director and designed algorithms that sifted through all of these funds and put them into their correct
DIY Investor Magazine | Jun 2018 14