User:Shaun2011/ISA Trend Investing

ISA Trend Investing

ISA Trend Investing evolved from Trend Investing (also known as momentum investing) by combining with current tax opportunities, leading to an even more powerful investment strategy.

ISA Trend Investing was pioneered by Stephen Sutherland, who along with his brother founded ISACO - regarded as one of the UK's leading Trend Investing companies.

ISA Trend Investing contains two main components:

The first is Trend Investing - Trend Investing is an investing system that follows the momentum of the market, an example of this would be buying stocks or other securities that have had high returns over the past three to twelve months, and selling those that have had poor returns over the same period.

The philosophy behind Trend Investing is that the person conducting the analysis of the market is not trying to predict the market, which according to Covel (2009) in his book Trend Following, compares to those who undertake Fundamental Investing. Covel (2009) suggests the Trend Follower is looking at the current momentum of the market and following those that provide the strongest history of return.

A key concept in Trend Investing / Trading is Market Sentiment. This is the general attitude of investors in regard to a particular investment. If the consensus is positive, market sentiment is said to be bullish, if negative, market sentiment is said to be bearish. Gauging the market sentiment on various levels of time e.g. daily, weekly, monthly, enables the investor to trade with momentum.

One of the best ways to gauge the momentum of the market is to undertake technical analysis, also known as Charting. Technical Analysis is a security analysis discipline which utilises historical price data to aid with making market forecasts. Technical Analysis follows three principles, these are: market action discounts everything - this assumes that the current market price of the security is already factored into the price, this follows the efficient market hypothesis; the second principle is that prices move in trends, technical analysts believe prices trend directionally, whether that be up, down, sideways or a combination; the third principle is history repeats itself, technical analysts believe that investors will follow the same behavioural patterns as those who precede them - this is evidenced by the historical boom-bust cycle.

After gauging the market sentiment, William O'Neil, in his book How to Make Money in Stocks, recommends following a stock selection procedure based upon various figures. His stock selection method is known as CAN SLIM, which stands for: Current big, or accelerated quarterly earnings; Annual earnings increases (look for big growth); Newer companies, new products, new management; Supply and demand; Leader or laggard; Institutional sponsorship; and Market direction.

Stephen Sutherland, in his highly recommended book, Liquid Millionairecomplements the strategy outlined above and recommends a number of important things to consider when engaging in investing and/or trading. These include using the right investment vehicle that match one's goals. One should keep in mind their level of risk aversion, desired outcomes, and how long they are prepared to invest to realise these goals; then select the most appropriate investment vehicle which corresponds to their profile. Stephen points out that when one get's into an investment, it should be a carefully considered choice and this choice should be maintained until the market shows signs of weakness, when this happens the investor may wish to exit their investment and move their funds into a cash based investment as this would be a safer option during a market crash.

Overall, Trend Investing has its own philosophies, tools and strategies. Just as equally as Warren Buffett has become very wealthy from Fundamental Investing, others have become very wealthy through Trend Investing, including George Soros.

However, this is only one part of ISA Trend Investing. The second component in ISA Trend Investing is ISA Investing.

ISA stands for individual savings account. They were introduced in the UK on the 6th April 1999. There are a few varieties of ISA's available, the two main ISA's being the Cash ISA and the Stocks and Shares ISA.

These ISA's have two commonalities: they are tax-free and there is a limit to how much can be invested each year in them. The size limits have been increasing each year since they were initiated. The current ISA limits for 2011/12 is £5,340 for a cash ISA and £10,680 for a Stocks and Shares ISA. The investor may utilise the whole Stocks and Shares allowance for investing in stocks and shares or the investor may choose to hold up to 50% in a cash ISA.

Due to the tax-free nature of this investment vehicle, the investor can cut out a significant cost and reach their goals much faster by being able to reinvest their profits within the investment vehicle.

Eager investors can search online for various providers of ISA's, however investors should keep in mind that even though the providers will be providing a homogeneous tax-free investment vehicle, what will vary will be the commission charges and of course the quality of service.

The ISA Trend Investing Strategy is essentially the combination of these two powerful investing methods. By successfully employing the Trend Investing strategy and integrating that within a tax-free vehicle, the gains can be significant, if undertaken correctly.

For further information regarding ISA Trend Investing, see reference list.

References

Books

Liquid Millionaire by Stephen Sutherland Trend Following by Michael Covel How to Make Money in Stocks by William O'Neill 24 Essential Lessons for Investment Success by William J O'Neil How to Trade In Stocks by Jesse Livermore How I Made $2,000,000 in the Stock Market by Nicolas Darvas Market Wizards: Interviews with Top Traders by Jack Schwager Reminiscences of a Stock Operator by Roger Lowenstein The Next Big Investment Boom: Learn the Secrets of Investing from a Master and How to Profit from Commodities by Mark Shipman

Websites

www.isaco.co.uk

External links

• isaco.co.uk

External links

• stephensutherland.com