Free Stock Market Course Part 34: The SMAC Strategy

Free File downloads
Course notes, Audio files, Assessments, Transcript files, and Course Outline: https://spxinvestingblog.com/downloads/
My Exclusive Free Workshop The Four P's of Building a Successful Investing Program → https://spxinvesting.mailchimpsites.com
Blog: https://spxinvestingblog.com
Facebook Public Group: https://www.facebook.com/groups/433843641082343
Chapters:
00:00 The SMAC Strategy Definitions
02:52 Idealized Approach
04:21 Advantages
08:11 Disadvantages
14:44 Mutual Funds vs ETFs
16:45 Example
19:21 Strategy: SMAC System
25:02 Charts
28:58 Money Market Accounts
30:53 Vehicle Alternatives
33:27 Conclusion
Module 5 Section 7
SMAC Investment Strategy
Definitions
Chart
A daily chart of an index or stock.
Line Chart
Bar Chart
Candlestick Chart
Moving Average
50 Period Moving Average
200 Period Moving Average

Idealized Approach
No Emotion
Purely mechanical
Long and Short positions
Long: up
Short: Down

Advantages
Compared to other strategies, this is considered simple.
Only index equity funds or ETFs are needed.
The tools needed can be found online for free.
This system will keep you on the right side of the trend most of the time.
Adaptable:
Can be used to go long, short, or both.
Flexibility:
Market movements can be captured in a simpler way than by going long or short with individual stocks.
An investor can get out (money market) during bear markets (down) and get in during bull markets (up).
Can be used with mutual funds and/or ETFs.
Aggressive and conservative methods can be implemented
An investor may go many years before needing to make a decision or make changes.
Disadvantages
This strategy is not perfect:
Whipsaws and fake-outs can happen.
During times of choppy market conditions, there will be losses.
Can be emotional at times and go against logic.
This system can take time to generate a signal.
There is a lag time when entering or exiting.
May require a move to mutual fund companies that have inverse index funds if this approach is desired.
Long-term positions can lead to complacency and forgetfulness.
A decision must be made whether to use this as a completely mechanical system or if an investor will try to tweak things by acting outside of the defined parameters.
Mutual Funds Vs. ETFs
Mutual funds have provided an excellent low-cost method for individuals to invest.
Over the last 20 years, there has been an explosive growth in the popularity of ETFs.
For many, ETFs are preferred over mutual funds.
Other posted videos cover deeper explanations and alternatives, as well as the advantages and disadvantages of each.
Example
Two vehicles will be used:
1. Vanguard 500 Index Fund Admiral Shares (VFIAX)
Mutual fund
Based on the S&P 500
Only Long positions (up)
2. SPY
ETF
Based on the S&P 500
Both long (up) and short (down) positions
Simple Moving Averages (SMA) are used rather than Exponential Moving Averages (EMA).
Either, or both, can be used.
The differences, strengths, and weaknesses of SMAs and EMAs are covered in other videos.
Strategy: SMAC System
The 50/200 Simple Moving Average Crossover System.
Execution Rules:
A long position is initiated when the 50 SMA crosses above the 200 SMA. (Short positions, if any, are closed)
A short position is initiated when the 50 SMA crosses below the 200 SMA. (Long positions, if any, are closed)
Usually, this is a long-term strategy.
Optional parameters for initiation:
It is usually best to initiate a new position as close to the market close as possible.
This may not be possible for some investors.
A new position is initiated if the market closes in the direction of the strategy.

Money Market Accounts
If only long positions are used, there will be times when an investor is out of the market.
Funds not in the market are placed in a Money Market Account
Money Market Accounts are:
Available at mutual fund companies and brokerages.
Typically where funds go when a deposit is made.
Very safe
Very liquid
Interest bearing, typically compounded daily.
Used as a place to “park cash.”
Sometimes “Cash is King.”
Vehicle Alternatives
There are many different investment vehicles which can be used to implement this strategy.
Vehicles:
SPY
S&P 500 ETFs
Regular & Enhanced SPX Index Funds
Enhanced (Juiced) ETF’s
Inverse SPX Index Mutual Funds
Inverse ETF’s
Conclusion
The 50/200 Simple Moving Average Crossover (SMAC) Strategy is a mechanically-based investment system that is relatively simple to implement, which can be used to take advantage of long-term trends.
Flexibility allows for:
Minimum effort required.
Free tools to be used
Avoidance of losses, or profit capture during major market declines.
Long, short, and/or long and positions.
Conservative to aggressive variations can be implemented.
Adjustments to current accounts may be needed.
No system with be correct 100% of the time.
Investors must understand there will be minimal losses.