We are already in it, but you can’t see it. It doesn’t look like the one we had in ’99. Like the magician who has you watching what he wants you to and with the other hand he is doing something else that is what is happening in the stock market today. The magician is the Dow Jones Industrial Average, the Nasdaq or the S
Posts Tagged retirement
The Surgeon General
Sep 4
The Surgeon General of the United States says that smoking cigarettes is harmful to your health. It is printed on every pack of smokes you buy. When was the last time a smoker read or paid any attention to it?
Don’t you wish your brokerage account had some kind of warning telling you when to sell out of a stock or mutual fund that is going down? How about “If this stock falls more than 12% below its highest closing price the Money General says it should be sold and the money reinvested in a different equity”? Think of what that would have done for your financial health during the past 2 years. Most people would be feeling a lot better.
Your broker is supposed to be a doctor of finance and should be concerned about your financial well being. When you ask him why your portfolio has gone down you probably will get one of two answers ? “Don’t worry, the market always comes back” ? except when it doesn?t. And “Buy and hold is the best strategy when you are in for the long haul”. That long haul may be 20 years to break “even”. Of course, that does not make you feel any better when you see your money disappearing. It all comes down to the fact he does not know how to do this and has not been trained by the brokerage company. The same goes for most financial planners.
Financial planners will tell you how to split up your investment among stocks, bonds, mutual funds, real estate and so forth, but they have no idea when to sell out of a losing position. Neither brokers, bankers nor financial planners have ever heard that cash is a position. Yes, cash in a money market account will not make big returns, but it will protect your money while the stock market is in a general slide down. Think about this: what if your money had been in a simple 3% money market account for the past 2 years. Would you have more money today? Probably.
It is very difficult to find a broker who has any training in protecting your assets. If you ask to see the training manuals for brokers you will find two. One concentrates on learning all the rules and regulations of the Securities and Exchange Commission so they will not be sued and the other is a Sales Manual on how to open new accounts and get investors to put in more money. No instruction on how to protect the investors money when a stock or fund starts down. The one thing they are never taught is when to sell.
If you expect to have financial health you must learn how to wisely invest your money. There is no Money General or Easter bunny. You cannot rely on any “expert”. Just as you are responsible for the health of your body by what you put into it so your financial health is up to you by making sure you do not lose what you are putting away for your retirement.
Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he’s the man that Wall Street
does not want you to know.
Copyright 2005
Writen By : Al Thomas
What To Buy Now
Sep 4
I am sure that if you have a brokerage account with a “full service” broker you have been getting calls about what to buy and sell. If you have big losses in certain stocks you might be hit with that great Wall Street lie to buy more so you can ‘Dollar Cost Average’. It doesn’t work.
In a recent study going back for 5 years a dollar cost averaging program was set up buying the S
How To Be A Winner
Sep 4
Everyone who invests in the stock market wants to be a winner. Each person’s definition of a winner will be somewhat different, but there is hardly one who isn’t looking for that stock that will double in price within one year.
Can it be done? Yes, but when you look at the odds you may want to find a better or maybe slower and safer way. The chance of finding that mother load is 1 in 200, about ? percent. Of the 11,000 listed securities you have a choice of 55. Even the pros don’t like those odds. What makes you think you are better?
We have been in a great bull market from 1982 to 2000. Then the bubble burst. Yet the investing public continues to believe that we are going to see double digit returns every year. According to the Financial Research Corporation’s study the mutual fund pros return was only 10.92% and the average investor had gains of about 8.7%. The great Warren Buffett says the bull is over and that we will be looking at a 5% return not the 12% to 15% that has occurred in the recent past.
As I mentioned in my recent column the returns for the past 126 years has only averaged 7% with 2/3 of the return coming from dividends which are about nonexistent today. Instead of looking for the rainbow with the pot of gold at the end my suggestion is to limit your losses and let your winners run. You have heard that clich? before, but have you every understood what it means in the stock market? The floor traders and hedge fund managers do not look for home runs. They look for slow and steady and never allow any major losses. The key to long term investment success is to limit your losing positions and never give back profits you have earned.
If tech investors in 1999 had followed this principle they would have kept about 80% of their profits. Wall Street says you should Buy and Hold and they have told this lie so often that it has become conventional wisdom. It is absolute stupidity. A simple trailing stop-loss order would have protected the investor’s capital. Almost no broker and certainly no brokerage house recommends loss limit orders. No one is taught the basic winning concept of the market ? an exit strategy. Until that is learned you are doomed to give back your winnings and take losses when a stock doesn’t go up and heads down.
Most investors have no plan as to how much money they would like to accumulate nor how to intelligently go about it. They don’t know where they are going and they don’t want o be late.
When you have decided how much you need to save the next important step is not what to buy, but how to exit in the event what you do buy happens to go down instead of up.
Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he’s the man that Wall Street
does not want you to know.
Copyright 2005
Writen By : Al Thomas
Low Tide
Sep 4
When you stand on the ocean shore and watch the waves breaking you might become aware that the tide is coming in or going out. It is a slow process to watch the water retreat and when it finally gets to its lowest point it is almost impossible to tell if it has stopped or will retreat further. Plenty of wave action, but going nowhere.
This reminds me of our current stock market. It still looks like the tide is going out because for the last 2 months all the major stock indexes have been inching down. Even the talking heads on CNBC are saying you must be cautious. They would be fired if they told you to sell. How can you tell what is gong on? Almost every analyst and broker looks at the major market indexes ? the Dow Jones Industrial Average, the S
Complacency
Sep 4
During the month of January the Dow Jones Industrial Average, usually referred to as the DOW, had an almost 1,000 point range, most of it down and the average investor has yawned and said ‘so what, this has happened many times before’.
Is there any reason to worry now?
The terrible event of September 11 shocked investors who sold heavily and then watched the market climb back to where it was on September 10. The investing public as well as many professional money managers now believe that soon this year we will see the DOW move back up for another bull market like we had in 1999. Let’s hope they are right, BUT suppose they are wrong. What will happen to the stocks and mutual funds you own now?
What will be the valuation of those equities if the DOW smashes through the 8,000 level and goes even lower? Do you have anything in place that can protect you from such a catastrophe? Is there a solution to that potential disaster?
Yes, there is. And it is very simple.
If you believe that the market is going lower you could sell every stock you own and buy some bonds, but no one knows for sure. If the stocks and mutual funds you own go up you will kick yourself. Here is a sure-fire way to protect your money. Place an open stop-loss order of about 10% under its most recent low price. That way if it goes up you will be able to move the stop up to lock in additional profit and if it goes down you will not take a bigger loss. This is how every professional trader makes money. You allow yourself to take big winners and only small losses.
The biggest problem with doing this is YOU. Huh? Yes, it is the fact that few people want to sell even with a small loss. They prefer to sell with a big loss. I’m not joking.
I know the story all too well. Investors say, “When it goes back up, I’ll sell and get out even” Or “It can’t go any lower. I’ll hold on.” How about this one, “How can I sell it now when it has dropped this far?” Folks, things aren’t going to get any better. If you had had that stop-loss order in you would have been out at a much higher price. With mutual funds you cannot put in a stop order so you must call in your order when it breaks the price barrier you have set. Do not rely on your broker to do it for you and do NOT let the broker talk you out of it unless, of course, he wants to guarantee in writing that it won’t go any lower. And pigs can fly.
You cannot become complacent and believe the great Wall Street lie that the market always comes back. It may, but it might not be before you retire. Only you can protect your money.
Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he’s the man that Wall Street
does not want you to know.
Copyright 2005
Writen By : Al Thomas
It’s Snowing
Sep 4
The Winter Games for the Olympics are coming up soon and many will want to go to see the giant slalom event. That’s the one where the skier starts off from the little hut at the top of a long slope, picks up speed and makes his way around poles on the way down. Each turn about a pole is precarious and some fall on the way down and are wiped out.
Kinda reminds me of the current stock market. Starting off slowly down from the safety of the top and as it become steeper it picks up speed. Each turn on the way down looks like a place to rally, but shortly thereafter it heads down again at even higher speed. And many are wiped out ? financially.
If you are not an expert you should not be on the course. If you are a beginner you better head for the “bunny” course where you won’t get hurt. Safer, not as thrilling, but you will get to the bottom all in one piece. The “bunny” course in the retirement race is all in CDs and T-Bills; however, everything is guaranteed. It takes a long time to get there and you won’t win any gold. You will have some silver.
Many have tried the steep championship financial course and been wiped so they hired an instructor such as a broker or financial planner. It is unfortunate that most of these instructors cannot make it to the gold at the bottom of the hill. How do you make it safely to the bottom with all your cash and yet do better than the CD people?
The next safest place is in no-load mutual funds, but there is a catch. You have to review your mutual funds every month. And what do I mean by that? Review? You must keep yourself from being wiped out on one of those steep downturns by selling any fund that goes below its previous 3-month price level. It is really that simple. If your fund went from $40 to $90 and was then trading at $80 with the previous 3-month low of $70 you would sell it as soon as it closed below $70.
This is as simple as it gets, but it means YOU must DO something and not sit there and watch your money disappear like the melting snow.
The secret of success in the stock market is selling. Learn to protect your profits and also protect yourself from losses when you buy. It’s your money.
Al Thomas’ book, “If It Doesn’t Go Up, Don’t Buy
It!” has helped thousands of people make money
and keep their profits with his simple 2-step
method. Read the first chapter at
http://www.mutualfundmagic.com
and discover why he’s the man that Wall Street
does not want you to know.
Copyright 2005
Writen By : Al Thomas