Following are the Frequently Asked Questions by our subscribers. You will find most of your answers here, and if you still have a question, please contact us and we will reply promptly.
1. How do you decide when to buy and when to sell?
That’s an important question because timely buying and selling decisions are the key drivers behind a portfolio’s profitability. We use a variety of market indicators for arriving at our decision to stay in the market or leave the market and convert our stocks/ETFs into cash. So our portfolio uses ETFs and stock for “long” and cash for “short”. A variety of indicators are used to show us about the moving averages of the market, the overbought/oversold positions, the momentum and the volume of trades, the inflows from domestic/foreign institutions and the outflows from domestic and foreign institutions, and also we are able to see the closing prices and how they are behaving on let’s say a week-to-week basis.
2. Do you also use Technical Analysis along with Fundamental Analysis?
Yes. Technical Analysis along with Fundamental Analysis is very important because factors like liquidity and foreign capital flows are not easy to capture with fundamental reasoning alone. We use a variety of technical indicators like Trading Volumes, VIX, Put/Call Ratios, RSI, EMA, etc. And we have learned that no one indicator is perfect, and we must check with multiple indicators to understand the market status and direction. Therefore we use multiple technical indicators and analyze the market over 1 month to 5 year period to see trends. We often go back in time and market history to look for precedents. The capital market evolves with time but it’s possible to learn a lot from history to see what the current market condition is saying, and then decide what our own investment strategy will be.
Sometimes you will expect market to correct from an overvalued position, but if the US government or some other major country makes capital supply cheap, then the market will continue to rise from overvalued to “more-overvalued”. And this rise can go on for weeks or months before reality sets in.
Marcus Goldman, the founder of Goldman Sachs has a simple advice for us: “Go with the flow”. We have learned from experience that it is better to stay with the trend rather than predict a contradictory move and take a contra position. Sometimes it may look like the market is extending itself too much in one direction without caring for fundamentals. Valuations can go from very cheap to absurdly expensive within a few years.
Roger Babson rightly said in the 1920s for such cases: “The irrationality of the market can bankrupt the most rational of investors”. Once a new trend is taking shape, we will rapidly align with it.
3. How do you assess Macroeconomic factors for Market Research & Model Portfolio Decisions?
There are various macroeconomic factors that play a role in market movement and if we know that something is going to come as a major event in coming weeks/months, we know from experience that however much the market may have factored the event, invariably when the event actually happens there will be a sentiment that will move the market sharply. Therefore we have to also plan for those things and if those events are major then those could mean either earning five or ten percent points as gain or losing five or ten percent from the gain that we had. So we try to stay on top of some of the core developments in the global markets. The global capital markets are very tightly connected today.
There are people who say that the global markets of different countries are decoupling. On the contrary, we feel that they are actually more and more tightly coupled today than ever before. Capital flows very efficiently overnight from different markets. For example, capital deployed in the US can move into Asia overnight and work there and move to Europe after Asia and come back by the start of the next trading session in the US! Thus global capital markets are closely linked and news-flow has an impact because just like the global economy, most billion dollar trading houses run parallel trades in different markets, hence the capital flows are truly global and it’s very important to watch the global trends.
4. How can Subscribers benefit from the Saturn Report newsletter?
We do all the market analysis described above, and we maintain a model portfolio with just 5 constituents (S&P500, Nasdaq100, Bitcoin, Gold, and Cash) using ETFs. We do all that as part of our newsletter and summarize everything into a message which is simple in the sense that should we stay in the market or should we go out of the market – that’s the ultimate call that we want to make at any given time. In our Model Portfoio, if we have to stay then we will stay with our ETFs and if we have to exit, then we will convert them to cash. That’s how we have built our gains in our Model Portfolio since 2007. Our newsletter will decribe our market research and analysis for different markets/indices, and the key levels to watch (support and resistance levels) along with the current signal for the market/index as per our system, and what we are doing with our Model Portfolio and you can make suitable decisions at your end. Subscribers have benefited from our market research and analysis year after year since 2008.
5. What is the composition of your Model Portfolio?
We maintain a model portfolio with just 5 constituents (S&P500, Nasdaq100, Bitcoin, Gold, and Cash) using ETFs (Exchange Traded Funds). There are 4 ETFs and there is cash. But out market research covers different global markets, from USA, Europe to Asia (India, China/Hong Kong, and Japan). You have the choice to go with all 4 ETFs or just use one ETF and stay with cash as the other item. For example, one Investor may just hold S&P500 ETF (SPY) and Cash. Another Trader may hold just Nasdaq100 ETF (TQQQ) and Cash. If you are with any of the reputed stock brokers you can easily access all the ETF that we have, and in that sense you can have a really dynamic portfolio. So you do not have to do any extensive stock-specific research. We have found that just by buying the entire market, because when we buy these ETFs they are almost like buying the market, that itself gives good return because you have to understand that despite the best efforts most actively managed funds are unable to beat the market in any longer durations of let’s say one year, two year or three year or more. So the market is a very intelligent creature because it is the collective brain of all the fund managers who are trying to do something better than the others and they are all operating within the market and we believe that the market is extremely intelligent as a collective creature and that it is not an easy task to beat the market on a significantly long duration.
6. How does your model portfolio’s performance compare with the S&P500 Index? How do you maintain your model portfolio performance?
Our model portfolio has consistently ouperformed the S&P500 Index because we have maintained the discipline to sell at higher levels and buy on falls. It has helped us holding a large amount of stock purchased at higher prices. As you will observe from the charts shared in our portfolio, we carefully monitor the ETFs/stocks, and will sell once we feel the ETF/stock is overbought. Overall, it takes constant effort to stay ahead. One can easily beat the market for a day; one can also beat the market for a week or a month, but its not easy to beat the market for over long durations like multiple quarters or multiple years. Our portfolio has been able to do it, while sticking to simple rules of buying and selling, and always keeping some cash, i.e., we don’t believe in investing all our cash, at any time. Very few people have been able to beat the Index over long term, and one person who has been able to do it well is Warren Buffett and he is one of the best investors out there, who knows how to assign value to present cash flows and future growth. He is one of the best in the world and if you see his approach for investments, he has chosen long-term investing where he has stuck with the investments for multiple years at a time. He has not traded with his stocks on daily basis. We operate with a difference. We believe it is fine to buy and sell when the opportunities come, which are about once in a month or sometimes once in a quarter.
7. How often is the Saturn Report newsletter published?
The Saturn Report newsletter is published 4-6 times per month, based on the market conditions. If market conditions are stable, we publish once on each weekend. If market is volatile, then we may have have 5-6 newsletters in a month instead of the default 4 per month. About once every month, the newsletter will cover broader macroeconomics and capital flows into various assets, and will aim to constantly give investors an idea of risk-reward ratio from current market level. The aim is to share whatever analysis we have with you at the earliest possible. Weekend closing levels have significance and they enable longer-term trend analysis. Therefore our newsletter comes on the weekend, usually by Sunday afternoon so that it can be used from Monday morning.
8. How is the newsletter shared with subscribers?
The newsletter comes by email, which is the fastest and most efficient method of communicating our newsletter. We request our subscribers to use an email id that they check regularly. We can send the the newsletter to two email ids per subscriber.
9. How many trades do make in your model portfolio per year?
We have done about 5 to 10 trades per year per index/market/asset. Sometimes we may have just 2-3 trades in an entire year, and they will be very profitable because they would have been in strongly up-trending markets. We use a range of market indicators to enter and exit the market. Overtrading can reduce profits as brokerage costs can eat into gains, and if we enter the market at higher levels, then it often forces an exit soon after the entry because the market may be overbought. It is important to buy and sell at the right levels. Our newsletter will share our portfolio updates, which can help you make decisions at your end.
10. Can you advice on a specific stock or my existing portfolio?
No. Stock specific advice is not in the scope of this newsletter because this is a newsletter service and we can’t answer individual stock questions or advice on your equity investment portfolio. We will publish the newsletter with market trends and market levels for staying and exiting, and we will share what we are doing with our model portfolio, and you are free to do some of the actions that we are doing, all of the actions we are doing or none of the actions we are doing. That’s your call as a reader to the newsletter. We will share what we are doing, and we will be measuring the result of our actions. For individual stock queries please contact us with your requirement, and we will see if we can arrange a consultation for your specific case.