| |
| |
|
|
Stocks and Mutual Funds |
|
Wall Street Paradigm
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. They did not even bother to patent it. The inventor took his new idea to a commercial trade show, set up his booth and tried to interest manufacturers to produce his new kind of watch. Of the thousand people only 2 were willing to try it - Texas Instruments and Seiko Corp. of Japan. Ten years later the Swiss manufacture of watches had shrunk to 10% of it former production. It took a complete change of thinking to produce this new model because most people are rooted in the old way and are reluctant to change. The new model, the new paradigm is refused. Now I want you to think about another paradigm. This time a model for your investment portfolio. Wall Street has been teaching since time began to Buy and Hold. When your stock or mutual fund heads south you are not to worry about it because "the market always comes back". But my question is, "In your lifetime?" There are thousands of stocks that go up then go down and never recover. You might have some of those in your bank vault. Here is the change in thinking you need to incorporate. Instead of blindly holding and suffering through a major decline, place a stop-loss order about 10% or 15% below the price. This is especially true when you first buy. The most important thing every professional investor does is protect his capital. You never need worry about how much you will make. Your major concern should be how much will I lose if this turns into a mangy dog. After you have owned this gem and it does go up you can replace the stop-loss order at a higher level and continue to do that (monthly) until you are finally stopped out (sold out) when this puppy starts down. Your broker will not want to do this for one very simple reason. He then becomes responsible to see that the order is executed because if it isn't he will have to make up the difference out of his pocket. He will actually have to watch your account for a change. If he gives you a hard time find another broker. Customers are not taught this simple method of thinking about the stock market because it creates additional paperwork for the brokerage company. You must change your thinking. This is a better way than how the big brokerage houses tell you. This paradigm will allow you to make more money because when you are sold out and have cash in your account you will be able to find a better stock or mutual fund. Strangely there is a similarity to the Wall Street thinking and that of the Swiss watchmaker. If the watch manufacturer had opened his mind he could have expanded his business and held on to the world dominance of timepiece manufacture. If the major brokerage houses taught their brokers and customers to make money (which they don't) they would increase their income and have many satisfied investors. Instead of holding on to a losing position the customer would be sold out (another commission) and have cash to buy into a different stock or mutual fund (another commission). It would result very quickly in doubling the amount of trading and protect their clients from substantial losses. Brokers almost never tell their people to sell. Of the more than 8000 listed stocks there are currently only 87 sell recommendations. It is customary after a stock loses 50% of its value to be downgraded to "hold". And you know where you are holding it while you watch it go lower and lower. You are obviously smarter than your broker. No one will take better care of your money than you do. Isn't it time to adopt this old, but unused paradigm? 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. 1-888-345-7870; al@mutualfundstrategy.com
MORE RESOURCES:
Stocks-Mutual-Funds - Google News |
|
|
|
RELATED ARTICLES
The I Word is Coming to a Town Near You Hello Inflation, it has been awhile, I see you on your way back again. Inflation? What inflation? Oh things like; Energy, diesel fuel, Aviation Fuel, Gasoline, Natural Gas, Milk, Wheat, Corn, Beef, Poultry, Hogs, Soy Beans, Building materials, paper, housing, Auto Prices, Health Care, Insurance, etc. Dollar Cost Averaging Dollar cost averaging is one of the most popular ideas in the investment community. Everyone seems to like it and it has become a watchword among stock and mutual fund brokers. Boiler Room 7/17/00 On Friday or Saturday evening my wife gets a movie from Block Buster and after dinner we sit, hold hands and watch. This week she brought back one that I think every investor or anyone contemplating investing in the market should see. Mutual Fund Honor Roll - Buy High, Sell Low by Chasing Performance Buy high and sell low -- It's not a typo.Millions of investors guarantee their failure by selecting mutual funds and stocks based on quarterly or annual performance records. Rebalance And Diversify The stock market has not been very kind to your investments lately. Your broker knows this so you may have received a call from him suggesting it is time to 'rebalance and diversify' your portfolio. Struggling Stocks, Booming Commodities 04/28/2005NASDAQ dropped -12.5% year to date in 2005. Why Change Funds? On November 17 I bought 7 different mutual funds and went to a 100% invested position. One of the funds I bought was Robertson Stevens Information Age (RSIFX) and it has made money as have the other six. Analyst Reports When you become interested in a stock or mutual fund you can call your broker and he will send you reports on how the company is doing, what their management is like and what might be the projected earnings for the company and how the industry is doing. Great information. You Wont Like This Why? Because I am going to shatter your conventional wisdom as I have many times in previous columns about the lies that Wall Street continues to tell you. This time we are going to go deeper into the economy to unearth the truth about lies the politicians are telling you. Stock Analysis I receive emails from Morningstar. This company provides statistics and analysis of just about every publicly traded stock company you can think of as well as voluminous information on mutual funds around the world. Social Insecurity Just about everything you have been told about Social Security is an obfuscation. That is a big word for convoluted truth or lie. Stocks Options Trading Let's assume that you want to make some serious money and you have chosen to take things into your own hands rather than depend upon a "professional trader" to make your trading decisions. This is usually only recomended if you can afford to lose the money that you are trading with, and you appreciate the fact that there is much more upside potential with this added risk. I Love You, Warren Buffet Sometime around 1980, can't remember exactly, there was a flight of money from many countries to Switzerland. The clock makers had so much money pouring in that the banks took interest rates to zero and even for a period of time were actually making you pay ˝% interest to them to put your money in their banks. Investing in Stocks and The Game of Monopoly To begin, you might look at playing the stock market as though you were playing a game of Monopoly. That's right; for playing the stock market 'game' is not unlike playing a game of Monopoly. Getting Even I know there are a lot of you out there who would like to "get even" with the stock market. Many are on the diet of "I hope, I hope". NASDAQ 800? In November of 2000 when the NASDAQ was trading at 3000 I wrote in this column that the NASDAQ Index would fall to 1500 and I got lots of heat for saying it. Microsoft had fallen from $129 to $60 per share. Trading Systems To become a successful trader you must have some kind of method or system to follow that will keep you on track. You may be buying and selling on tips, the weather or phases of the moon (there is a system like that). 10 Tips For Creating Wealth From the Stock Market 1. Do not spread your money too thin. 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. DIY Portfolio Management Exchange Traded Funds (ETFs) are growing. Investors are choosing low annual expense and market return over high annual expense and promised performance.
|
||||||||||||||