Question:
During the wealth building phase chart while it shows green, but starts its decline, is this the time to sell or is it better to wait until the green phase ends and it starts to dip below the line? As I understand from the video tutorial, the market is still increasing during the entire phase of the green above the line part, but that it can be difficult to sell as the green phase is ending.
Answer:
You are correct: So long as the blue line is above the ‘zero’ line, the market is appreciating.
Once you are already invested, because of the transaction cost and effort to sell, I don’t get too concerned about minor up/down gyrations in the blue line so long as the TAPS indicators are showing at least neutral or better strength and the STAR indicator’s long term indicators are green.
I personally view the END of the Wealth Cycle as the “FINAL” confirmation indicator to sell (assuming you’re a “Local Market Master” and are not looking to invest in other hot, emerging markets.)
Usually, long before the Wealth Phase ends, the STAR and the TAPS tools BOTH start showing signs of weakening. Depending on your risk profile, market concentration/diversification, what’s happening in nearby markets, etc… you may not want to wait until the Wealth Phase chart comes to an end.
If you’re not ‘stuck’ in a single market, WHEN you leave a market is more a question of “OPPORTUNITY COST” rather than milking any single market for the last bits of appreciation.
In general, as a market accumulates more red STAR icons (losing momentum) AND the TAPS indicators are consistently getting weaker, it means the risks of decline are increasing; the likelihood of big appreciation is lessening. The risk/reward trade-off isn’t as strong.
As a “Total Market Master” looking to ride appreciation waves from one market to the next, I focus more on the Hot Market Finder tool (rather than the Wealth Phase charts) to track where my markets are RELATIVE to other markets nationwide (if you have access to those other markets). That way, I can jump into new, emerging markets that may offer significantly higher appreciation at lower risk.
