Frog In The Pot
You remember the story about the frog that was put into a pot of cold water on the stove. Hewas not concerned. Someone lit the burner andthe water began getting warm, the frog was verycomfortable and as the water became warmer hewas so relaxed and complacent that he fellasleep ? never to awaken.
Mr. Frog reminds me of today's stock marketinvestors and that includes all folks with IRAs,401Ks and the like. Stocks have been slowlyrising for the past year and a half (the wateris becoming warmer and warmer) and no one ispaying any attention to his investmentpositions. The market is becoming overheated andmany investors are about to become boiled. Toomany are swimming fat and happy in theincreasing warmth with no thought of exit.
Currently the long term market trend is up so complacency reigns supreme. It is doing exactlythe same as in 2000. When 2002 ended we had asurplus of boiled frogs. A smart frog will notbe lulled to sleep and will have a plan to jumpout of the pot. A frog without a plan plans tobe frog soup.
There are many ways for the frog to escape and there are many ways for investors to retaintheir profits or at least not lose their moneythe next time the market heads down. It will ifpast performance is any guide to futuresresults. Any plan to jump out is better than noplan at all.
Whether you own stocks, mutual funds or ETFs (Exchange Traded Funds) you can set a limit asto how much you are willing to lose from thispoint (that's now, today). Any fool (frog) canbuy, but it is the wise man (frog) who knows howto sell (escape the pot).
If you want to have money for retirement youmust protect your capital from loss with a riskmanagement strategy. First protect yourprinciple and then protect the profits you havemade on the recent stock market advance. It isnot difficult to do.
With stocks and ETFs you can place an Open Stop Loss Order with your broker or financialplanner. He won't like this, but it is yourmoney not his. Don't let him talk you out of it.For regular mutual funds you must have a mentalstop and when that price is hit you call yourbroker (he won't call you) or the fund directlyto tell them to transfer your funds to a MoneyMarket account. Cash is a position.
If you are not familiar with stop loss ordersyou can find books in your library and there arehundreds of articles on the Internet. See someof my previous articles on my web site.
The water is heating up. Don't fall asleep and become a poor frog.
Al Thomas' best selling book, "If It Doesn't GoUp, Don't Buy It!" has helped thousands ofpeople make money and keep their profits withhis simple 2-step method. Read the first chapterand receive his market letter athttp://www.mutualfundmagic.com and discover why he'sthe man that Wall Street does not want you toknow. Copyright 2005
Commoditizing the world
Let's discuss commodities; with the latest Enron situation, it is important to understand the way things work. A commodity is anything useful, especially a transportable agricultural product or mining product. This comes from the Latin word "commoditas" meaning roughly advantage, convenience. So then what is a commodity? Well we consider Gold, Silver, wheat, corn, pork bellies, coffee, etc all commodities. If you look in the back of the WSJ or Investors Business Daily you will see a listing of all the commodities traded on the commodities exchange. Enron made some errors no doubt, but let's not judge all commodity markets in haste.
Shorting Stocks ? The Basics, Part I of II
What does it mean to short a stock?
Picking Mutual Funds to Outperform the Market
With over 6,000 mutual funds available, it may be tempting to pick funds from a popular star or index rating system. Savvy investors, however, balance multiple factors in their selection process. Ratings represent only the historical performance of funds and cannot predict the future. Performance consistency, management skill, and expense limitations are among the many factors that influence a fund's prospects. Each must be carefully evaluated to improve your chances of finding a fund to outperform the market.
Trade Stocks for Real
I read a comment by a forum member on another site earlier today that suggested that every investor should back test their system for at least twenty years. I disagree and will now tell you why. Back testing and paper trading seem to be the most over emphasized techniques offered by market theorists, educational elite, market novices and/or market fakes. While learning the pure basics, I can see why a novice investor may want to paper trade; to see the results of the developing system but I will warn that these results are completely false. The results will not contain the emotional decisions that go along with risking your own cash. Anyone and I mean anyone can paper trade successfully. It's simple, place a trade and hope it goes up and if it doesn't, you have no worries because you can't lose. The emotional imbalance that occurs when you really start to lose money is not present. Don't fool yourself by believing the results of your paper trading or virtual simulation portfolio. These things may give you some confidence in your system but they don't prove a damn thing in the real world. The real world, specifically the stock market, is run by emotional human beings. People make decisions that are irrational and base their trading decisions on fear and greed. Paper trading lacks fear and greed because there is no gain and no loss; therefore there is no consequence to deal with.
Stocks & Oil, Sat Jun 18th, 2005
Both the stock market and oil prices rallied recently, which seems to be a paradox, because high oil prices are negative for earnings (i.e. a higher production cost and a higher consumer tax). However, the stock market was worried about another "soft patch," of slower economic growth, and the sharp rise in oil prices suggest the U.S. economy is still expanding at above trend growth.
Lifestyle Funds Provide Greater Security?
With the stock market stubbornly refusing to settle down and smooth out, Wall Street has been scrambling to come up with "product" they can sell to gun shy investors.
Investing in the Stock Market
From the book 'The Stockopoly Plan' by the author Charles M. O'Melia
Where Is The Beef?
Where is the beef? Or maybe it should be where is the bull? Market, that is? The chief investment strategists and analysts of the major brokerage houses have been promising us a new bull market.
In 1960 an engineer working for a watch company in Switzerland discovered that a small crystal would vibrate at a constant rate. He found this was so accurate that it could be used to calibrate time so he took it to company management and said it would make an entirely new kind of watch that had no springs and no gears. They could not imagine who would want such a thing. Swiss watches dominated world commerce. "Why change?", they said. The bosses did not even bother to patent it.
Why Stock Is More Risky Than Options!
You probably have been told that options are risky. Even worse, that you can lose your shirt trading them!
Kick The Tires
Before you buy another car you walk around the lot, kick the tires, slam the doors and look at the mileage indicator. That's an odometer. I know. That is about all the "research" you can do other than what the car salesman tells you and I hope you know better than to believe him.
Long-Term Investment In Todays Market?
The stock market is very unstable at this time going up and down while interest rates are so low you want to be a borrower and not a lender. Would you like some suggestions on how can you get the most out of low interest rates while being assured your principal will not disappear while you are trying to make some money? Of course, there is always the danger of borrowing the money and then spending it just because it is there.
Lemmings Are Gathering
Before they go over the cliff to their destruction these little furry ones get together for a party and celebration. Each tells the other how smart he has been with his investments and buying and selling of stocks and realestate.
How Much Information Do You Need?
You have decided to buy some stock or mutual funds, but wonder which one to buy. You need more information so you call your broker for advice. A so-called "full service" broker will bury you with all kinds of reports, analysis sheets and other pretty pieces of paper, but will probably try to sell you something that makes him the most commission.
I constantly hear the talking heads on CNBC-TV, the radio and other places talking about THE market. Of course, they mean the stock market which actually now is world wide and no longer just concentrated in New York. To every New Yorker New York is the center of the world from which radiates all knowledge and everything else worthwhile.
If you are going to be a winner in the stock market you must have emotional maturity. I did not say you had to be smart or know how to pick stocks and mutual funds.
Mutual funds are doing more and more to discourage investors from leaving them and taking their money to a better performing fund. What does better performing mean? It has nothing to do with who the manager is, what the expense ratio is or how well they performed over the past 5 or 10 years.
Mutual Fund Commissions
You have heard about a particular mutualfund from a friend, saw it advertised on TV or readabout it in some publication thought it would bea good buy. Next you call your broker to get hisadvice before you buy because he is an expertand is there to help you make money.
Overvalued & Underbought
With all the bad news that has been dumped upon the economy for some reason the stock market is going up. Why?
A Personal Stock Market Investment Philosophy
∙ Make every investment in the stock market a long-term investment.
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