This month’s allocation for the Value Model is Level 4, which calls for a mix of six stocks and 10 defensive positions. The defensive portion of the Model is composed of stocks, ETFs, bonds and cash.
When the stock market moved to a level of higher risk in October, I changed my risk level to 4, indicating the need for 10 defensive securities. My objective is to increase the defensive holdings in the Model when the stock market becomes overvalued, and decrease the defensive holdings in the Model when the market falls and becomes undervalued. I believe my strategy of increasing or decreasing the number of defensive positions will help you reduce your risk and enhance your profits.
If the Dow Jones Industrial Average, which is currently 17,888, falls to 16,373, my allocation mix will change to eight stocks and eight defensive positions, or Level 3. If the Dow rises to 19,212, my allocation mix will rise to Level 5, comprised of four stocks and 12 defensive positions.
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