Finance Articles

Author Challenges Buy-and-Hold Investment Strategy for 401(k)s and IRAs in "The Wall Street Traffic Light"

Tulsa, OK (PRWEB) March 24, 2008 -- For investors desiring high returns with reduced risk in their 401(k) and IRA portfolios, a new book on personal investing titled "The Wall Street Traffic Light" describes a powerful and simple investment strategy.

"I wrote this book to help de-mystify the stock market for 401(k) and IRA investors and give them peace of mind with their investment decisions," author John K. Harris said. "This book focuses on relevant history of the S&P 500, which accounts for 75 percent of the value of the U.S. stock market."

Harris, a former professor and CPA with a Ph.D. in accounting, was inspired to write the book in 1996 when his wife's friend asked him a simple question: "Is now a good time to sell my 401(k) stock funds?"

For an answer, Harris developed an investment strategy that offers the potential for 401(k) and IRA investors to achieve higher returns while reducing risk compared to the widely recommended investment strategy of buying-and-holding an S&P 500 index fund. This strategy is easy for even novice investors to use, has minimal costs and requires little time.

"The Wall Street Traffic Light" disputes the conventional view that the S&P 500 moves unpredictably from year to year. According to Harris, the S&P 500 has actually been predictable with a high accuracy rate over short-term periods.

The Wall Street Traffic Light strategy is based on the S&P 500's annual returns and short-term movements from 1935-1969. Harris then tested his model against data from 1970-2006.

According to Harris, for 1970-2006, the WSTL strategy achieved nearly a 3 percent higher average annual rate of return with considerably lower risk compared to buying-and-holding the S&P 500. This performance was accomplished with only 13 trades out of and back into the S&P 500.

Of his model's 37 yearly forecasts during 1970-2006, 29 were accurate: an accuracy rate of 78.4 percent. Six of the inaccurate forecasts resulted in exactly the same performance for the WSTL investor and the buy-and-hold investor.

"That makes the 'acid test' accuracy rate 94.6 percent," said Harris.

"People make their investment decisions in various ways," said Srikant M. Datar, senior associate dean of Harvard Business School. "Some favor looking at history. If you like that approach, you should consider the Wall Street Traffic Light strategy set forth in this book. Using the annual returns and short-term movements of the S&P 500 Index for more than seven decades, Dr. Harris presents practical 'stop and go' signals that can be easily understood and implemented by investors."

Join Harris will be at a book signing on March 30 (1:00-3:00 pm) at Steve's Sundry, Books & Magazines in Tulsa, Okla.

Order your copy of "The Wall Street Traffic Light" today at Amazon.com (http://www.amazon.com/The-Wall-Street-Traffic-Light/dp/0980191483/ref=sr_1_1?ie=UTF8&s=books&qid=1200091309&sr=8-1).

Get the latest updates on how current market conditions affect "The Wall Street Traffic Light," at http://www.thewallstreettrafficlight.com/.

About the Author

John K. Harris, Ph.D., is a "numbers guy" who in this book turns an analytical eye on the S&P 500. Before his retirement, he was a professor of accounting at the University of Tulsa and a CPA for 25 years. In recent years, "Barron's" has published his stock market research.

Wall Street Traffic Light

Published January 2008

174 pages

Paperback $19.95

ISBN: 978-0-9801914-8-6

Press release provided by Xeal Inc.

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