I’d like to give investors a preview of just what the Strategic Stock Accumulation (SSA) is all about, before investing any time and ‘hard earned’ buying it. Briefly summarizing the six steps below, necessary for its implementation will help, I think, to make the reading decision easier. Also, it is not really a difficult strategy to understand, if a reasonable amount of time is devoted to learning it. The year-end only buying rule takes a lot of the time-related stress out, compared to most other stock investing strategies. Try it, (I believe) you’ll like it!
The Strategic Stock Accumulation Strategy, or SSA, can be summarized in six steps to give you an overview of how it is structured and what is involved with its implementation. I would not advise, however, attempting to put the strategy into action without first reading the book. There are a number of reasons for this, the most important being that this summary here is simply not a complete explanation of the whole system. The idea, as mentioned above, is to get a good idea of what its all about, before investing time in it.
The Strategic Stock Accumulation Strategy has been developed, as explained in the book, with the purpose of accumulating large amounts of stock strategically at year-end only, as the market drops during a severe correction or market crash. The idea is to buy stock “on sale” during times when it definitely is on sale. It is based on a deliberate rules-based strategy that is independent of any emotions or mental guesswork, such as trying to decide if the market is undervalued at any point in time.
There are some other stock investment strategies that involve buying stock during a bear market, but those strategies also involve buying during a bull market. An example is Dollar Cost Averaging, a method whereby the investor buys stock at regular intervals, whether the stock market is going up, down, or sideways. The idea is that since the overall trend of the stock market over time is up, then more stock will be bought at lower prices. This is true. The problem is in risking that the market may stay in a bull market for years at a time, and more stock would then be bought at overvalued prices.
The investment strategy of Strategic Stock Accumulation focuses on buying stock only during a market crash or correction. In the following six steps, I’ll summarize how each step is implemented and leads to the next:
Step one: Choose which index funds to include in your asset allocation.
You will want to consider eight to ten stock index funds, two bond funds, and one money market fund. The decision of eight or ten stock index funds is determined by which asset allocation you choose (as fully described in my book) that best matches your situation.
We will invest in eight to ten different stock index funds in the stock portion of the asset allocation. Index funds only are included in the asset allocation because they are diversified and low-cost; more details, again, can be found in my book. The bond-cash portion of the asset allocation will have two short-term bond index funds and one money market fund.
So as you can see, the asset allocation is divided into basically two categories: one includes stock index funds, and the other includes bond index funds and a cash or money market fund. This asset allocation provides diversification, negative correlation, and rebalancing potential, all three of which are vitally important to investors.
Step two: Determine your stock/bonds-cash ratio.
There are three stock/bond-cash ratio options within the SSA Strategy:
35/65 stock and bond-cash
This means in the first example, we would have 65% stock index funds in the stock portion of our asset allocation and 35% bonds-cash in that portion of our asset allocation. Likewise, the 50/50 and 35/65 numbers would have those ratios in their respective stock/bonds-cash ratio. Now how do we determine our best stock/bonds-cash ratio? Primarily by age: Beginning investors to age 40 would be at 65/35; 41-55 years of age is at 50/50, and 56 years old to the end of investment life is at 35/65.
These parameters are strongly advised in the SSA system to make allowance for the appropriate age-based level of risk. Younger investors have time on their side, the most valuable investment attribute that one can possess after investing knowledge and experience. On the other hand, an older and/or retired investor is very interested in reducing risk as much as possible. The SSA Strategy is relatively low-risk over time. However, it is definitely possible (and desirable) that much, or possibly all, of the bond-cash position will be converted into stock as stock is bought “on sale” during a correction or crash.
Step three: Plug your chosen index funds into your stock/bonds-cash ratio.
You will need to plug your chosen 8–10 index funds into your stock/bonds-cash ratio to complete your asset allocation. For example, a younger investor up to age 40, who chooses asset allocation Chart 1 from my book, would have ten stock index funds comprising 65% of his portfolio, plus two bond funds and one money market fund together making up the remaining 35% of his portfolio.
Step four: Follow the specific Buy Rules.
The Buy Rules of SSA involve buying stock in 7% downward increments during a stock market crash or correction. Specific dollar amounts are bought with the bond-cash portion of the SSA investor’s portfolio, which is explained further in my book’s Pyramid Buy Chart. The goal during a stock market crash or correction is to buy as much stock as possible at lower and lower prices as directed by the Pyramid Buy Rules.
Rebalancing occurs every year, either because of stock purchases or for simple internal stock and bond rebalancing. This internal rebalancing occurs regardless of any stock purchases being triggered by a market crash or correction. You will want to read “How to Make a Fortune During Future Stock Market Crashes With Strategic Stock Accumulation” for the exact procedure on how to accomplish this.
Step five: Follow the specific Sell Rules.
You will want to pay close attention to the following conditions: (1) The stock market must have retraced back up to at least its previous high since before the most recent stock market crash by year-end; (2) the P/E-10 ratio must be at least 20 or more by year-end; (3) the Federal Reserve must be raising interest rates within certain parameters; (4) the inflation rate must have averaged at least 2.75% for the year by year-end; (5) Buy Rules always “trump” the Sell Rules; and (6) a rule involving the “Fed” raising interest rates past 2%. These Sell Rules are explained in detail in Chapter 8 of my book.
Step six: Maintain your Reestablished Stock/Bond-Cash Ratio until the next market crash or correction at year-end.
Don’t do anything, except internally rebalance at year-end, unless the Buy or Sell Rules are triggered. This may be the hardest rule to follow for some investors. They will frequently be tempted to do something, such as either buying or selling. Resist the urge until either the Buy or Sell Rules indicate that such action should be taken.
The above steps are a brief summary only and should not be attempted until the SSA system is completely understood. This summary should give you a very good idea of how the strategy is structured. There is no other stock investment strategy I’m aware of that focuses only on buying stock when it is “on sale” during stock market corrections and crashes. It is a totally unique and profitable strategy.