I know because I've been using this strategy with my clients since 2005. And the proof is in their actual returns, as verified by their brokerage statements. 

Instead of suffering through big market declines and waiting for them to be over, wouldn't it be better to make them work for you? That's what the Z-Series Defensive Plans are designed to do.

The idea is simple - by limiting your exposure to the worst parts of bear markets, you get to keep more of the gains you've accumulated during bull markets. Isn't that just common sense? 

The results speak for themselves, as you'll see in a moment, but for now let's take a look under the hood and see what drives the Z-Series Defensive Plans.

This is where you choose among the 3 versions of the Z-Series Strategy. The two primary differences between them are the expected returns, and the amount of trading activity required to keep things on track.

I first discovered the basic framework for the Z-Series Defene Strategy back in 2000, when I was searching for an answer to the following question:

"Why are the returns for the most popular defensive strategy in use today 

so lukewarm and inconsistent from one decade to the next?"

The strategy I'm talking about here is the 50 day/200 day Moving Average Crossover. It has several variations, but the concept is a simple one - when the short-term price trend (50 day moving average) crosses below the long-term price trend (200 day moving average), it's a red flag that should be heeded by investors who are not married to a strict buy & hold approach. Sometimes this type of technical formation is called a "death cross."  

Going the other way, when the short-term trend crosses above the long-term trend, it's a green flag and investors can begin to move back into a normal risk profile again. This event is often called a "golden cross."

Other variations that are popular are the 1-month/10-month crossover, and the 1-month/12-month crossover. It's a matter of personal preference, because there is no definitive answer to the question of which version is best. That had always bothered me, which is why I undertook the research project - I wanted to find an answer.

Then in 2005 I finally put the pieces of the puzzle together and had my aha moment. According to my research, the reason these variations of moving average crossover strategies don't perform very well is that market conditions are constantly shifting from "risk-on" regimes to "risk-off" regimes. Some variations work well in one regime but not the other, and vice-versa. That's why the results had been great for a while, and then terrible for a while. No consistency.

Another problem was whiplash. The old legacy crossover strategies were prone to long stretches of time where the market couldn't make up its mind about which way it wanted to go. If the market was trading sideways while the 50-day and 200-day moving averages were in close proximity to each other, the result would be a string of days where you were in today and out tomorrow or the next day. Back and forth. In and out. Very frustrating, time consuming, and costly.

The way I solved this and other problems with the legacy strategies was by introducing "confirming" or "dis-confirming" indicators that ran concurrently to the crossover signals. That means you can have the crossover giving a sell signal, but the other indicators not confirming, in which case you wait. Less whiplash.

The net result of my adjustments to the legacy model is that the returns are far superior to a traditional buy & hold approach, and they are far more consistent over time - regardless of the risk regime the market is in.

For more details, download the documentation and read through it. It might be worth your time.

By this point I'm pretty sure you have a good handle on what this defensive strategy is all about. What follows is a quick review of what we've already learned. If you're pressed for time, you can skip this section.