Last week I said that I wanted to take "a more flexible, natural course" to managing the Model Portfolios. This doesn't mean that we're going to discard all the rules and techniques we have used in the past, but with four portfolios, three prudent and one aggressive, being illustrated, it makes sense to focus more on the techniques Prudent and End-of-Day Investors could use in building and managing their portfolios as compared to those that Aggressive Investors and Traders might use. Here are the guidelines of how I plan to manage these portfolios:

WHEN TO BUY. VectorVest believes in buying rising stocks in rising markets, so we will continue to use the VectorVest Market Timing System for guidance on market direction. We will always plan to buy stocks long when the Primary Wave is Up. Occasionally, however, if we think a rally is imminent, we may plan to buy stocks long even when the Primary Wave is Dn.

Before the market opens, we will always check the stock Futures to see if the likely direction of stock prices is in agreement with our plan. If it is, we will proceed with our plan. If the direction of the Futures is not in agreement with our plan, we will wait to see what the market does at the Open. If the Futures indicate that the market is likely to make a big move contrary to our plan, we may abort the plan. End-of-Day Investors should check the Futures as close to the open as you can before placing your orders.

After the market opens, we will make a final assessment of market direction by waiting until the DJI, SPX, and IXIC are all higher than their previous day's close before buying any stocks long.

WHAT TO BUY. Whenever a new campaign is launched, we will recommend at least three Strategies which we deem appropriate for each portfolio. The reason for recommending more than one Strategy for each portfolio is to avoid a stampede into the stocks that a single Strategy would return.

Once we have decided to enter the market, we will select stocks from the top 10 stocks returned by the best performing Strategy, i.e., the one showing the best combination of percent price gain and percent winners. We will buy a stock only if its price is higher than its previous day's High. End-of-Day Investors may use "Buy-Stop-Limit" orders to emulate this technique. See my essay of December 24, 2009 on how to do this.

Although we have traditionally used model portfolios with 10 stock positions in them, we will build some portfolios with up to 20 stock positions because portfolios with 20 positions not only allow more diversification but they also allow the use of a 20% Stop-Loss instead of a 10% Stop-Loss without increasing single-stock risk. Moreover, portfolios with 20 stock, 20% Stop-Loss portfolios frequently perform better than 10 stock, 10% Stop-Loss portfolios.

WHEN TO SELL. Stop-Prices are the first line of defense on when to sell a stock. VectorVest gives a Stop-Price on every stock, every day. These are designed for Prudent Investors, not Traders. Even so, we generally will start out with a 10% Trailing Stop on new positions because we don't want to risk more than 1% of our portfolio value on any single stock position. We often will tighten our Stops when we see the market heading south, i.e., the Primary Wave turns from Up to Dn.

Traditionally, we have exited all long positions by the time the Price of the VectorVest Composite has given a C/Dn signal. We will continue this practice for the Riding-the-Wave and the Yellow Brick Road Portfolios. We will not feel compelled to exit all positions in the High Income and Premier Growth Stocks portfolios because we view these portfolios as suitable for less active investors. However, we will not violate the Stop-Loss criteria we have set for these portfolios.

WHEN TO GO SHORT. We will continue to go short in the Riding-the-Wave portfolio upon receiving a C/Dn signal. We may or may not go short in the Yellow Brick Road portfolio, depending upon market conditions. We will not go short in the High Income and Premier Growth Stocks portfolios.

I'm sure there's more I should have put into this essay, but we will learn what that is as we go forward, Managing the Model Portfolios.

LOW COST INSURANCE - THE COLLAR OPTION.
Many investors have racked up large unrealized profits in their stock portfolios recently, leading many of them to ask, "How can I protect these profits with the increasing uncertainty in the markets lately?" Please join Mr. David Thornton, Director of Sales and Marketing, at the VectorVest University to see this week's terrific "Strategy of the Week" presentation: "Low Cost Insurance - The Collar Option."

With interest rates at historically low levels, more and more senior investors are adding dividend paying stocks to their retirement portfolios. This message has resonated throughout the financial services community and Barron's magazine has now entered the fray with a cover story on "10 Terrific Dividend Stocks."

My first reaction to any article such as this is to ask, "What would VectorVest say about these stocks?" In this case, I was familiar with all ten of the stocks, CVX, INTC, JNJ, MCD, NVS, NSRGY, PEP, PG, STD and VZ cited in the article because they all represented large, well established companies. So I created a new WatchList Group called "Dividend Stocks." I put the 10 stocks into a WatchList called, "Barron's 10 Terrific Dividend Stocks." Oops, Nestle, a pink sheet ADR, was not found in our database and was not added to the WatchList. (We are seeing if we can get the data required to add it.)

Nevertheless, the WatchList showed that on 11/20/09, seven of the 9 stocks were rated "B" and two "H." The average RV and RS of the 9 stocks were above 1.00, and that is good. The average Forecasted Earnings Growth Rate, GRT, was -1, and that is not good. The average Dividend Yield, DY, was an acceptable 3.50%, but the average Dividend Growth, DG, was only 3.00%/Yr. Overall, I thought this was an OK portfolio, but not too exciting.

Could VectorVest do better? To answer this question, I created five more WatchLists, one for each of the five Retirement Strategies we have created, and put them into the Dividend Stocks WatchList Group as well. Here's a summary of what I found as of 11/20/09:

Name...........	Avg$/Sh	AvgRV	AvgRS	AvgGRT	AvgEPS	AvgDiv	AvgDY	AvgDG
Barron's 10	49.63	1.24	1.16	-1.0	3.85	1.72	3.50	3.0
Blue Chip Bnzs	52.78	1.47	1.18	11.0	4.72	1.16	2.20	13.0
Don's Dandies	29.36	.32	1.02	6.0	2.32	0.93	3.20	6.0
Optionable 2x4s	32.98	1.59	0.95	19.0	4.13	3.36	10.20	12.0
High VST+YSG	50.93	1.57	1.41	19.0	2.98	0.54	1.10	16.0
High Yield	24.18	1.48	0.89	13.0	3.38	3.29	13.60	7.0

Life is a matter of trade-offs. If you want high performance, i.e., the WatchList with the highest RVs, RSs and GRTs, you get low yield. If you want high yield, you get low safety. All of the WatchLists created by VectorVest searches had higher average RVs, higher average GRTs and higher averages DGs than the stocks in the Barron's 10 Watchlist. Only two of the Vectorest WatchLists had higher average RSs, and only two V V WatchLists had higher DYs than the Barron's 10.

If I had to pick one strategy to run with, I'd pick the High VST+YSG strategy and trade Covered Calls to generate income. But you, dear reader, can pick and choose your stocks one by one. See if you can put together a 10 stock WatchList that is better, in all respects, than Barron's 10 Terrific Dividend Stocks.

CHERRY PICKING HIGH PERFORMANCE STOCKS.
The VectorVest RealTime Tote Board makes it incredibly easy to see which strategies have performed the best each day. But the real question is which strategies are most likely to perform the best tomorrow? We want to pass this information on to you because the best way to make big profits is to place your bets BEFORE the market opens. How can you do that? Mr. Jerry D'Ambrosio, Product Support Specialist and Instructor, will show us how. So visit the VectorVest University to see this week's terrific "Strategy of the Week" presentation: "Cherry Picking High Performance Stocks."

Let's suppose you own a stock that was trading at $23.80 per share and someone offered you $2.60 a share to buy it at $25.00 within the next month. Would you take the offer?

Off the top of my head, it sounds like a pretty good deal to me. But there are several things I would have to consider before accepting it. First, I'd have to decide whether the stock's price would be more likely to go up or down during the offer period. If I thought it would go above $27.60 per share and stay there, I'd reject the offer and keep the stock. If I thought it was likely to go down and stay below $21.20 for a long time, I'd reject the offer and sell the stock. If, however, I thought that the stock's price would stay between $21.20 and $27.60, I'd take the offer. It would be a nice way to generate some cash while the stock's price didn't do very much. So how would I go about making these assessments?

First, I would look at VectorVest's Market Timing Graph to see what the market was doing. Right now it appears that the rally is stalling, so I would conclude that the chances of my stock soaring higher have lessened a bit. Next, I would check the stock's Relative Timing, RT, indicator. If RT were above 1.00, the stock's price would be in an uptrend. If RT were below 1.00, the stock's price would be in a downtrend. This information would definitely affect my analysis.

Then I would use VectorVest's Option Pricing Model to see if the offer of $2.60 per share were fair. I could also see whether it would even be worth considering the offer. Finally, I could get an idea of the probability of my stock closing above $25.00 a share a month from now. If I wanted to see the probability of this stock's price staying between $21.20 and $27.60 per share, I would use VectorVest's Options Analyzer.

To be honest, nobody has actually offered to pay me $2.60 a share to buy my $23.80 stock at $25.00 within the next month. But I know I can cause this to happen by selling September 25th Calls against it @ $2.60 per share. I would then have a "Covered Call" position and it would yield a juicy 157.71% annualized rate of return if the stock closed at or above $25.00 per share at expiration.

If you're interested in finding trades such as this, you would definitely want to use VectorVest's Options Rate of Return tool. It's a marvelous tool and, unfortunately, we don't talk about it often enough. Frankly, we don't talk often enough about any of the VectorVest Option Tools.

I have been invited to teach a one-day Options Course at The Forex & Options Expo to be held at Ceasars Palace in Las Vegas, August 2-4, 2009.

I was delighted to accept the invitation because I love Las Vegas and I love to teach Options. I am also looking forward to this event because it will present a special opportunity for VectorVest subscribers. Not only will Don Payton, our options Wizard, and I be giving the course, but it's being offered at the Special Low Price of $495.00 per person. Never before have we offered this course for less than $795.00 per person, and you can sign up at the very special low price of $445.00 per person if ordered before July 9, 2009.

The course was named, "Winning Big with Directional Option Trades," because VectorVest is virtually alone in teaching direction rather than volatility as the primary consideration in selecting the best option trades. We do not ignore volatility, of course, but our system of Timing the Market along with our vast array of Bullish and Bearish Strategies greatly increase your chances of placing the right trades at the right time.


Don't be afraid to sign-up for this course even if you have never traded options before. We will start out with the basics; then move on to more sophisticated trades. You will be able to understand everything we say and do. In fact, VectorVest will guarantee your satisfaction. Moreover, we will be offering our comprehensive Options Course CD Set and Options Analyzer at very favorable prices. The CD Set and Options Analyzer will allow you to understand virtually any options trade you can imagine. Finally, each attendee will receive a CD having many of our best "Strategy of the Week" presentations involving Options.

Put it all together and you're looking at the deal of a lifetime. Come join us at The Forex & Options Expo in Las Vegas.

VECTORVEST USER GROUP INFO CENTER.
No more excuses. You can no longer use the excuse that you didn't receive an email notification of the next VectorVest User Group Meeting in your area. Now you are able to get this information directly from VectorVest.

Simply access the User Group Section of VectorVest Views on the most recent Friday, or Thursday if the market was closed on Friday, and click on the link of your choice. All the information you need will pop up before your eyes.

In looking at a number of the notices, I was impressed by the variety of presentations and discussion topics being covered. If I were a User Group Leader, I'd sample some of these notices for ideas. Perhaps we are seeing the birth of a VectorVest User Group Info Center.