When to get back into equities?

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This white paper discusses a tactical asset allocation process utilizing a simple moving average (SMA). When the reference index level moves above the 200 day SMA its time to invest in equities. When it moves below the 200 day SMA you sell. Unless you invest in an ETF that replicates your preferred benchmark this isn't easy to implement for most investors. However, it can be used as a piece of the mosaic regarding how and when to increase/decrease your equity allocation. As the chart below shows:



the approach has some merit. It's also clear the spread between the S&P index value and its 200 day SMA was at its largest recently and is now closing. As a piece of the mosaic, it would suggest now is not the time to increase your allocation, however, if as I've mentioned before, you're dollar-cost-averaging, or are considering doing so, now may be an appropriate time to start. If the spread continues to improve you're averaging through the buy signal. If it weakens, you can suspend contributions until an appropriate time. If you happen to be completely out of equities, you can average in or simply wait for the spread to turn positive. Keep in mind though, that the chart shows several periods in the 04-07 where the all or nothing approach would have required multiple trades. Know your risk tolerance, all or nothing if you can handle it otherwise cautiously average in.