Look at the charts below and you'll see some of the experience we've had owning individual stocks. Time and time again we experienced sudden drops in the price of a stock we owned, many times for no good reason. Even if there was a good reason, we were the last to learn about the information that caused the stock to drop suddenly.
For the most part, we have switched from owning individual stocks to buying and selling broader market tracking instruments that are far less volatile than individual stocks. The total market may move three percent in one day, but it's not likely to drop 25% in a single day.
Notice how the broad market, as plotted with the NYSE Composite Index, usually gives lots of notice before experiencing sharp drops. Even when it does drop sharply, it drops at a much slower rate than individual stocks. Avoiding these major drops in the market is our most important objective, as it should be for every investor. By investing in funds that track the NYSE Composite Index we minimize our exposure to these sharp drops.
Notice the difference in the scale of the chart below and the other charts. We've shown three years on the NYSE Composite Index chart to show the way our signals have given advance notice of pending downturns.