I have been successfully investing for over three decades. Yes, I have made my share of costly “educational” mistakes, but we are still here. Mostly throughout this time I have been on my buy and hold plan, kicking back and enjoying the returns. I have always known about the ten-to-twenty-year market cycles, from when I worked on Wall Street, but in the last few years I have been re-educated.

Remember, the learning never stops.

Age brings perspective

Akaisha and I are rapidly approaching 60 years of age.

I am a realist, and in regards to our investing approach, I am now measuring the “long term” in years as compared to decades. After the decline in 2008, I decided I needed to be proactive as compared to holding forever and letting the market whipsaw our net worth.

Where do you stand?

Everyone must find their level of comfort when it comes to investing, and the last few years have definitely tried the patience of many. Some have sworn off the stock market forever and others went to cash and are still sitting there looking for the perfect entry point. A lot of money went searching for safety and poured into bonds. I decided to alter our portfolio, changing from open-ended mutual funds to using Exchange Traded Funds, otherwise known as ETF’s.

I have spoken about this change in my investing approach before.

Real time benefits

ETF’s trade in real time so I can see the price at any point throughout the trading day as compared to the open-ended funds that are priced once daily, at the close of the market. If a change needs to be made – either buying or selling – I do not have to wait until the end of the day to learn at what price the trade was executed. This gives me more flexibility and control over our portfolio.

I am not day trading, and still use SPY, VTI, DVY and DIA as major positions, but have disciplined myself enough to realize quickly when the market is going against my trade and I make adjustments accordingly. Or, for example, if a recent purchase has increased to the point where it’s-too-good-to-be-true, I take the gain.

We are living through some very interesting and challenging times in the financial markets, and I want to be able to take advantage of opportunities as they arise – both on the long and short side of the market. After all, it’s not what we make but what we keep that is important to us at this point in our lives.

Learning from flat line returns

I am neither a perma-bull nor a bear and as the returns so far this century have taught us, riding the market up and down only to finish flat has not been a winning strategy. Markets usually do bounce back, but it takes to time recover the losses and that’s a commodity that we have less of. Successful investors know the secret to building wealth is to limit losses. Now, if you are younger or just starting out this is not so much of an issue. However, as long term gets shorter by the day for us, our goal is to keep more of the profits to better enjoy ourselves for the time we have left here.

No Jobs = No Money = No Honey = No Market Returns

Last Friday, April 5th, 2012, the much-watched March jobs report was released by the Bureau of Labor Statistics and it was not reassuring. Considering that it came in at only 120,000 jobs created, and since the year 2000 the S&P 500 and the nonfarm payrolls chart looks similar, is this an indicator of future market direction offering a way to profit on the downside?

I would have thought that after 3 years and massive amounts of dollars injected by the government into the economy, the job market would be humming by now. There needs to be about 250,000 jobs per month created just to keep up with population growth and to get us back to “normal employment levels.” 120K jobs isn’t going to get us there.

Fed Chairman Bernanke said in last month’s speech to the National Association for Business Economics: “What will lead to more hiring and, consequently, further declines in unemployment? The short answer is more-rapid economic growth.” According to a Bloomberg News survey of economists, growth may slow from 3% last quarter to 2 percent GDP in the first quarter. This is not the direction we need to be going in order to produce more jobs. The difference from 3% to 2% GDP doesn’t sound like much, but is it huge when the average for the last half century is 3.28% annualized.

With the economy barely hanging on and without employment growing fast enough to reduce real unemployment, remember, no job = no money = no purchasing power, and the fact that the consumer spending makes up two-thirds of the economy, the equity markets look to be vulnerable. Add in the European debt problems, and we could be setting ourselves up to have a repeat of last year’s markets.

Present and future approach   

I still have a core portfolio that is not touched, and so far, I have been buying or selling only in our IRA accounts. This negates having any tax nightmare and for now, that is my plan.

I am very much looking forward to the day when I can once again go long and forget about it, putting our portfolio on autopilot. However, I believe we are still a few years off from a generational buying point, and in the meanwhile, there are financial opportunities to be had.

Utilizing ETF’s have offered us possibilities to make money with more flexibility no matter which way the market goes, and that is something our previous buy and hold philosophy didn’t offer.

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Billy and Akaisha Kaderli are recognized retirement experts and internationally published authors on topics of finance and world travel. With the wealth of information they share on their popular website RetireEarlyLifestyle.com, they have been helping people achieve their own retirement dreams since 1991.

Chart courtesy of ChartOfTheDay.com.