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Byline: JONAH KERI
A hot trend can work wonders. The rampant popularity of Ugg boots has propelled shoemaker Deckers Outdoor to huge gains, for one.
It also pays to follow the market's trends. That means buying large-cap stocks when the big dogs rule, small caps when the little guys fare best.
Your first step should be to gauge the broad market's health. Invest only during bull rallies. Stay in cash when the market hits a downtrend.
Following the trend of large caps (generally speaking, those with a market cap of $10 billion or more) vs. small caps (less than $1 billion) helps you squeeze out more gains from an already favorable situation.
To gauge which way fund managers are leaning, check out the daily Small-Cap Growth Funds vs. Big-Cap Growth Funds chart in IBD's Mutual Funds section, today on Page A8. Located just below the main IBD Mutual Funds Index chart, the chart lets investors track the overall performance of growth mutual funds that invest in small-cap stocks vs. those that favor large caps. When the line slants upward, small-cap funds rule.
You can also use the major indexes to gauge the market's preference. The S&P 600, ...