By Kevin Grewal, Editorial Director at www.SmartStops.netNEW YORK ( TheStreet) - 2008 was a devastating year for most investors who saw their investment portfolios diminish and dwindle down to unheard of levels. All three major U.S. indices took a bath, with the Nasdaq leading the way dropping nearly 41%, followed by a nearly 37% decline by the S&P 500 and an approximately 32% drop by the Dow Jones Industrial Average. With these large declines, the average investor thought that losing value in his or her portfolio was inevitable. Additionally, systemic risk took everything down at once with no safe places to hide. That ultimately led to portfolio rebalancing tactics being about as effective as rearranging the deck chairs on the Titanic. As a result, many just sat around and debated on what to do, and the end result was that they didn't do anything. 2008, in effect, created a "graveyard market", where no one wanted to get in and no one could get out. Investors unfortunately found the commonly held practice of buy and hold doesn't work, as recent research suggests. Consider the S&P 500. Over the past 10 years, the most diversified and well represented market index hasn't done anything and neither has the Dow Jones Industrial Average. In fact, if an investor bought the DIAMONDS Trust Series 1 ( DIA) in 1999 and held onto it, he would have a negative inflation-adjusted return as of today. So how can an investor prevent this from happening and protect his portfolio. It is easy. It calls for you to have and follow an investment strategy, stay educated about the markets and not allow "gut" feelings determine which stocks to buy and sell and when to buy and sell these stocks.
Now that the Dow has crossed the 9,000 mark, it is pretty safe to say that we are in an uptrend and protection is needed. To further support this notion the following indexes have seen nice gains: The DIAMONDS Trust Series 1, an index that tracks the Dow Jones Industrial Average, has rebounded nicely from a March low of $65.44 to close at $90.97 on July 24, a jump of 39% The SPDR ( SPY), which tracks the S&P 500, up 44% to a July 24 close of $98.06 from a March low of $68.11 The PowerShares QQQ ( QQQQ), which tracks the Nasdaq 100, closing at $39.05 on July 24 up 52% from its March low of $25.74. To protect one's portfolio and mitigate the risks involved with equities, like the indexes mentioned above, an exit strategy with specific exit points is vital. According to www.SmartStops.net, the price levels at which the uptrend of these three broad based indexes would be in trouble are: DIA at $86.34; SPY at $92.60; QQQQ at $37.18. You can keep abreast of the daily market changes as well as other updated data at www.SmartStops.net. Reported by Kevin Grewal in Laguna Niguel, Ca.