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Hedging your mutual fund investment bets

- Alan Lavine and Gail Liberman

Wondering whether to get in or out of this crazy market?

Aggressive investors can use trend following analysis to get into stocks or stock mutual funds when the market is moving higher and out of stocks when it goes lower.

One of the easiest ways to take advantage of share price trends is to use a moving average for say, 200 days.

Compare the current week's mutual fund share price to its average share price over the past 200 days. If the current week's price breaks above this moving average, you have a "buy" sign. It's an indication that prices could go higher. If the current week's price is below the average price, you have a sell signal. Prices can drop.

Go to www.finance.yahoo.com, and enter your stock or mutual fund symbol. You can calculate a number of moving average time periods on mutual funds and stocks by clicking on "basic tech. analysis" under "charts."

The big danger with the moving average: Over the short term, you can invest and your stock or mutual fund will go in the opposite direction.

Longer term, you won't hit a home run using moving averages either. Investment returns typically track the market averages. However, some believe this tactic may help you avoid large market declines.


Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

To read more columns, please visit the column archive.

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