It's easier to identify buying opportunities at times of extreme pessimism than it is to spot market peaks, which are more likely to be accompanied by complacency than by obvious euphoria. The Common Sense system sidesteps these issues by imposing purely mathematical criteria: When the market falls 10 percent from a previous high, it's an occasion to buy, as is every subsequent 10 percent decline. When the market rises 25 percent, it's an occasion to raise cash by selling.

What percentage of a portfolio to buy or sell at a trading opportunity is a decisions best left to individual investors. But one simple approach is to rebalance a portfolio divided between stocks and fixed income and cash on the other. At buying opportunities, when stocks are cheaper, you buy stocks to restore to a target ratio, such as 70 30 or 60 40, of stocks to fixed income. When there's a selling opportunity, you do the opposite.

The Common Sense system yielded a return of 20.8 percent over the decade we studied. That was five percentage points better than strict buy-and-hold