Welcome to the Inner Circle!

Hello, Scott Bennett here…and I’d like to welcome you as a new member of the INNER CIRCLE.

While working at Fidelity, I came to realize that many investors, even the most sophisticated, lacked rules and discipline and frequently bought at market tops and sold at the bottom. Hence I set out on a path to help people invest with rules.

So what is INVEST with RULES?

It starts with a thesis…namely that billion dollar investment funds like hedge funds, trust companies, pension funds, insurance companies, mutual funds, exchange traded funds, and registered investment advisors and many others throughout the world employ hundreds of MBAs, quants, industry experts, and PhDs, who are more informed than any one individual investor.

I figured out a little known but entirely ethical way to learn what some of the the largest investment funds in the world are accumulating.

But that’s just the beginning…it’s important to be sure that the accumulations are happening month after month…and by several funds, not just one or two. And it’s critically important to consider total market capitalization. Example: If funds acquire $1 billion of Apple stock, that’s meaningless considering that Apple has a market cap of >$3+ trillion! But take a stock with a market cap of $10 billion (10% accumulation by the funds) …that definitely gets my attention. You get the idea.

So let’s say 10 stocks that funds are accumulating look interesting. More work is needed.

Think about a surfing analogy…we first wanted to make sure the tide (buying activity by funds) was coming in strongly for the ten stocks we’ve identified as interesting. But just like the surfer, we still have to choose which wave to ride. Some waves (stocks and ETFs) are much better to ride than others.

Here’s where I look at where the company is located (US, Europe, Asia, etc.), large cap vs small cap, emerging vs developed market, not buying tech when the broad market is moving to value, etc., etc. Basically I don’t want us to be overweight in any single area nor going against broad market trends.

Based on this analysis, the number of candidates for investment comes down to, say, five stocks. But I’m not done. Still more work is needed to pick the right wave.

Next I bring in the ‘Trend Roadmap’ that uses a multi-timeframe price momentum model that analyzes both the daily and weekly trend to identify the best technical setups.

In the end, the initial 10 stock candidates come down to maybe one or two ideas that not only have strong incoming buying momentum, but also meet all the other trend rules criteria.

And finally, I look at the other side of the coin…what if things don’t work out? Investing is art, not science. Large funds (and I !!!) are sometimes, … dare I say… wrong. So the key is to let winners run…and keep losses small. Here’s where Rules comes in again.

NO MATTER WHAT THE REASON, I don’t want any member (or me) to ever lose big on any one position. In practice, sometimes I’ll move the trailing stop be a little tighter based on technical trends and volatility.

Sure, we may hit the brake just when the stock is poised to rise again…but over time managing downside risk is critical. RULES ARE RULES.

Is selling at a loss somehow a failure in the INVEST with RULES system?

Absolutely not. Not all ideas, no matter how many funds are buying, will work out as expected. In fact, I’m confident that a fair number will not work out. That’s the reality of the markets where trillions of dollars are constantly moving around the world. And let’s face it…most investors…and even many huge investment funds get things wrong at times. But by identifying and riding major incoming buying momentum, sticking to the Rules, and by harvesting small losses while letting gains run long, we’ll succeed.

Finally, a question…are you a short term trader or a medium term (6-12 months) or a long term (years) investor? The INVEST with RULES system can suit a trader or an investor. Just like I study buying activity by funds and then spend hours subjecting the stock to more scrutiny,…I also will track over time what positions large funds are divesting so that I exit positions on a timely basis. Knowing when to sell is just as important as when to buy. All of this takes time.

So we’ll likely never buy at the absolute bottom…nor sell at the very top…but I can assure you based on recent history we’ll capture major moves, and by following the rules, we’ll make sure we don’t make the classic mistake so many other investors make…namely, buying on emotion at the top and selling on fear at the bottom!!

In closing, thank you again for becoming a Member and for your confidence.

I'll see you on the Live Sheet!

Scott