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Most of you probably don't spend much time browsing our Web site so we'd like to point out a couple of good recent press articles which we posted on our "In the news" page.


Signal Update
Current Signal Performance as of 12/05/2003
Signal Type
Trade Date
Return since issued
Buy
04/03/2003
+31.53%

Cumulative Returns since First TimingCube Live Signal (06/18/2001) as of 12/05/2003
Long Only
Long Only with Margin
Long & Short
Long & Short with Margin
Buy & Hold
+82.72%
+196.49%
+237.77%
+800.10%
-17.82%

Note: Performance and Returns above are obtained by using QQQ as the investment vehicle.

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Market Update
After hitting the 2000 mark for the first time since January 2002 on Wednesday, the Nasdaq Composite index retreated to finish the week lower by 1.14% while QQQ lost 0.96% over the period. Once again, the 2000 level on the Nasdaq Composite is proving to be a tough hurdle to overcome. Not that 2000 has any significance in itself, but it is a nice round number that is acting as a psychological barrier. Selling accelerated on Wednesday after the Nasdaq failed to crack 2000 decisively. On Friday, investors also appeared disappointed by the latest economic news and took some profits off the table. However, it should be noted that Friday's drop occurred on reduced volume. Despite this week's loss, our current Buy signal remains active.

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Trend Timing School
The power of compounding

The power of compounding is a key cornerstone of any serious long term wealth building program, including TimingCube's Trend Timing. It is compounding, together with time, which can cause even modest investments to miraculously multiply into fortunes. Compounding is a very simple yet widely misunderstood concept. The straightforward definition of compounding is to earn interest on both the principal and on the accrued interest, or the ability of reinvested returns on an investment to generate their own returns. Most people like to think in terms of simple additions and fail to appreciate that when you let investments compound by reinvesting the returns, the growth is not linear but rather exponential through multiplication. What exponential means is that instead of growing in a straight line by the same amount year after year, your investment grows like a snowball, in larger and larger chunks and under constant acceleration.
The best way to illustrate this is through an example with real numbers. In the table below you can see what an initial investment of $10,000 becomes when compounded over several years at different rates of return. In just a few years the initial investment becomes negligible because it is swamped out by the return on the reinvested returns, i.e. the power of compounding.

Future Value of a single $10,000 investment

 
Yearly Return Rate
Year
5%
10%
15%
20%
25%
30%
5
$12,763
$16,105
$20,114
$24,883
$30,518
$37,129
10
$16,289
$25,937
$40,456
$61,917
$93,132
$137,858
20
$26,533
$67,275
$163,665
$383,376
$867,362
$1,900,496
30
$43,219
$174,494
$662,118
$2,373,763
$8,077,936
$26,199,956
40
$70,400
$452,593
$2,678,635
$14,697,716
$75,231,638
$361,188,648


While it's hard for most of us to think of millions - or tens of millions - of dollars as realistically achievable wealth, it's exactly what we all can achieve when we harness the power of compounding. The numbers in the table are not as far fetched as they seem. For starters, most of us try to save and invest as much as we possibly can every year, not just once. Past results are no guarantee but even this year's results are evidence that the TimingCube Model has at least the potential to consistently return 30% per year. Very few of our subscribers are 20 years young anymore, but with life expectancy approaching 80 years in the U.S., even someone starting in their forties or fifties can accumulate significant wealth.

We firmly believe that the power of compounding is one of the most important lessons for all of us to assimilate - and possibly the biggest gift we can bestow on our children and grand-children - if we just remember how to apply it to our wealth building program:

  • Start saving/investing early
  • Keep saving/investing as often and as much as possible
  • Commit to a long term, all-weather investment strategy
  • Stay disciplined, don't quit
  • Let compounding achieve its miracles

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FAQ of the Week
Question: Can the TimingCube Model be used to invest retirement funds such as 401(k) and IRA?

The answer is an emphatic yes. Moneys you set aside for your retirement are the funds that most necessitate a sound, disciplined, long-term, all-weather investment method. Retirement funds have a number of ideal characteristics as investment assets, namely that you are unlikely to withdraw and spend them in the short term and that gains and dividends are typically reinvested. Even if you are already retired and are living off the nest egg, you still have a long term perspective for your retirement assets. In addition, if the funds are in a qualified retirement plan such as an IRA or 401(k), you further benefit from tax deferred growth. By fully reinvesting dividends and capital gains and not having to pay taxes until you start withdrawals, you unleash the full power of compounding as we discussed in the Trend Timing School topic above.

The most common challenge in qualified retirement plans is finding available investment vehicles and in turn adapting to the most appropriate strategy. By law, the use of short selling and margin trading are prohibited in retirement accounts. If your IRA account is with a large financial services or brokerage firm you most likely have access to mutual funds that track broad market indices or their opposites, with or without leverage, such as ProFunds and Rydex families we describe in the "Our Service" page, which should allow you to fully implement any of the four strategies you decide is right for you. Even if your brokerage firm or 401(k) administrator offers only a few choices there typically is at least one index fund suitable to implement the Long Only strategy. While not the most aggressive strategy, Long Only should still let your retirement capital substantially outperform Buy and Hold.

Warm wishes and until next week.

The TimingCube Staff

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