"Keep it Simple"

05/05/2006 12:00 am EST

Focus:

Jim Rohrbach

President and Founder, Investment Models, Inc.

With his "Keep it Simple" system, Jim Rohrbach has developed a very successful long-term record as a market timer, often scoring at the top of the Timer Digest ratings. Here's a look at his proprietary indicator, and his suggested funds to employ his strategy.

"Investing can be very complex, and very frustrating. If we have too many indicators or too many factors to consider when making a decision to invest, we can't be sure if we are making the correct decision. Add to that the problem of knowing the correct time to make an investment, and you have a very difficult decision. In order to make an easy investment decision, we need to strip away all of the variables and make the decision become a mechanical decision that does not require any thought and certainly any guessing. But how can investor do that?

"As a market timer my first priority is knowing when the trend of the stock market changes up or down. When I decided to time the stock market, many years ago, I set my objective to make it mathematical, simple to understand, and it had to be dependable. I accomplished that objective after about seven years of testing my formula. That's when I started using it in real time for my personal investing, in 1970.

"Over seven years of testing my formula, I developed the RIX Index and have now been computing this mathematical formula for 34 years. This timing indicator converts the action of the stock market into a number that represents the trend of the stock market. That provides me with a metric that identifies the changes in the trend. As part of my Keep it Simple approach, I decided back in 1974 that I would not invest in individual stocks, but rather switch between a stock fund in up markets and a money market fund in down markets.

"For my personal trading, I have been using two funds from the FundX family, which you might consider. I like them because they invest in other funds. They maintain a top fund list and replace funds that do not stay on that list. What a beautiful concept. For my NYSE RIX signals, I like the FundX Upgrader Fund (FUNDX ). Below are the results of using these signals with this fund since March 2003.

"For more aggressive investing, I use the FundX Aggressive Upgrader Fund (HOTFX). Here are the results since March 2003 by using this fund.

"I would point out that both of these are no-load funds, but they charge a 2% redemption fee if you stay invested less than 30 calendar days. As you see we have gotten whipsawed and had to pay penalties. But it's very rare that our buy signals last less than one month. Gains or Loses in the tables above are calculated from Buy Signal to the next Buy Signal so we can include interest earned and any penalties.

"There is something going on under the surface of the stock market that isn't obvious to the average investor, and quite frankly, isn't obvious to me. But then the market surprises me a lot. I know that I can't predict what it will do, so I rely on the RIX Index to tell me when to get in and when to get out. So for now, we are sitting on cash, awaiting our next buy signal."

Editor Note: One day after going to press, Jim's system issued a buy signal. He writes, "This morning, after the Jobs Report was issued, the Dow broke threw the 10,430 resistance level and never looked back. I am sure that caused many 'shorts' to run for cover. The power of this move was enough to trigger RIX Buy Signals for both the NYSE and NASDAQ."

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