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TheStreet Open House

Investing 'Systems' Take the Guesswork Out of Making Money

Stocks in this article: AAPLASTX

NEW YORK ( TheStreet) -- When it comes to investing ideas that sound too good to be true, they're usually unverifiable. Yet hundreds of thousands of investors and traders are always looking for the next "never-before-offered, one-of-a-kind system" that will beat the investment markets most of the time.

If you're fully invested in the hottest sectors and you don't own shares of Apple (AAPL) or precious metals stocks, you're most likely not going to be as interested in this topic.

On a day like April 3, wouldn't it have been great to be the owner of a few hundred shares of Astex Pharmceuticals (ASTX), which popped almost 10% when the company announced that 13 of its abstracts have been accepted for presentation at the American Association of Cancer Research, which begins April 6 in Washington, D.C.


Or perhaps, like myself, you'd be satisfied to own shares of iShares Japan Index ETF (EWJ), which, as the following chart shows us, has had an impressive year preceded by a few dismal ones. EWJ Chart EWJ data by YCharts

An investing system that tells you when to get in and out of a stock holds a great deal of appeal, of course. For instance, the "Seasonal Investing Strategy," as spelled out by two professors at Pepperdine University's Graziadio School of Business and Management, found that, "... if a seasonality strategy had been adopted and coupled with the DJIA, returns would have been five times greater than the buy-and-hold strategy. Risk would have been reduced by more than half."

That was pointed out in an article written at a most auspicious point in market history: April 2009. It was the culmination of a test of the market over the preceding 38 years, and its results are amazing.

For the Pepperdine University study, the authors chose two seasonality strategies; one took an approach of investing in the DJIA during a six-month favorable period (November-April of the following year) and then remaining in money markets or commercial paper for the next six-month unfavorable period (May-October).

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