|
Let me start by saying that Dick Fabian developed this plan. He gets, and deserves, 100% of the credit. I only want to
make you aware of it and give you the basics of how it works. The information here will not be 100% complete. It will be up
to you to do your own research, as I have, to see if this plan might be for you. As I said above, Dick's books are a good
place to start.
The plan has been modified slightly over the years as times have changed. Enhanced and inverse mutual funds designed for
trading, like Rydex and ProFunds, are now available. ETF's are low cost alternatives and can be used in the place of mutual
funds. There are now enhanced and inverse ETF's. All new tools that should make it easier to attain your financial
goal.
There are many new tools available but the basic plan that Dick developed long ago has not changed.
Let's get started. When I refer to "the plan" in this information, please understand I am referring to Dick
Fabian's Compounding Plan.
After serving in the Navy during WWII, Dick Fabian attended Cornell University and graduated with a degree in economics.
Soon after, he became a student of the market and an astute observer of investors. When Dick Fabian began his financial career
in the late 1960's, a very impressive Bull Market was in progress. With the market rising steadily, individual investors had
discovered mutual funds as a way to invest. Mutual fund companies began creating new funds in large numbers. It was during
this time Dick Fabian became a stockbroker. Armed with his knowledge of the power of compounding (which will be outlined later)
he sold mutual funds advocating the traditional "buy and hold" strategy. Unfortunately (but fortunate for us), that Bull Market
ended in late 1968. After experiencing the Bear Market of 1969-1970 and seeing many of the mutual funds he owned, and sold
to others, decline by 30% and more, Dick realized he had to re-evaluate his investment approach. Dick quickly realized that
these 30%-40% declines would require a rebound of 40%-70% just to break even. Wasting that much growth, and time, just to
play catch up during the next uptrend was not going to allow him to attain his investing goals. He set out to look for a better
way.
Knowing that the key to wealth was compounding, Dick wanted a plan that would be safe over time. He also wanted liquidity
so he didn't have to tie up his money for long periods of time. Through his research he discovered that the markets move in
trends, both up and down, for periods of a few months to several years. He also discovered the 200 day moving average and
its ability to identify the trend of the market.
What did he do? After doing the research, he invented his own plan that had all the elements he felt were essential. Dick
gave up his broker’s license for a license to be a Registered Financial Advisor. In this capacity he could manage investment
dollars for others using his new mutual fund trend following plan. He then went back to the people he had sold mutual funds
to and gave them three options.
1) They could accept their losses and abandon the market.
2) They could continue to be "Buy and Hold" investors and risk loosing money again.
3) They could join him and adopt his new trend following plan that could protect them from devastating market losses.
Most chose to follow his new trend following plan.
The rest is history.
Click here to read Dick Fabian's report, "Behaviors of Successful Investors'"
Click here to read Dick Fabian's report, "Take Control of Your Financial Future."
The Fabian Compounding Plan has only five simple steps:
1) Simplicity.
2) Know and follow the current trend of the market.
3) When it is time to buy, use 100% of your available dollars, purchase only high momentum funds.
4) Monitor your progress, rotate up as needed.
5) Follow a SELL discipline.
To emphasize how simple the Fabian Compounding Plan is, there are only two
rules.
When to BUY (see step 2)
When to SELL (see step 2 & 5)
|
