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Best Small Investment Ever!
Why is it that the older and richer people become, the more conservative they are with their money? Have you ever done or know someone who has made an investment that promised a 10% interest or profit per month? Everyone wants to make above average...
Keep Your Investment Profits
KEEP YOUR INVESTMENT PROFITS Have you had one of those huge investment winners – a stock that went from $2.00 to $80.00? Or any other numbers you want that gave you a gigantic percent profit? Did you take the profit or did you watch the equity...
Mid-Cap Stocks: Asset Class with an Identity Crises
Much like the middle child, mid-cap stocks have long struggled to find their identity. Carved out from the upper echelons of the small caps and the lower end of the large caps, the mid-cap sector has a rough definition of stock with a market...
Six Things To Do In A High Risk Market
When the market turns against you, what should you do? Sell everything? We discussed that choice in a recent column. Selling everything draws your “line in the sand” and announces that you have determined there is no future for you in the market.
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Small-Cap Stocks: The Beginning Of The Journey
When an individual investor wants to roll up his sleeves and do some research in the pursuit of the next big winner in the stock market, the place many start is in the small cap sector.
As with the other capitulation sizes (capitalization is a...
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PORTFOLIO INSURANCE
THE ALCHEMIST by ALTHOMAS
PORTFOLIO INSURANCE
For the past few weeks the market has had a very nice advance breaking out of an eight month sideways pattern. Then the brick wall. Several
days of slamming down taking back some of the nice profits that have been accumulating.
Now what? We know which way is up, but we don’t know how high is up? Don’t think you are confused. So am I and I am considered a professional trader.
The market is giving mixed signals. Some technicians claim their signals are bullish and
others say their signals are bearish. The fundamentalists (those folks including many economists) are also on both sides of the fence.
Is there anything folks can do to protect their investments?
Wall Street says buy and hold. We have seen what happened with that scenario in 2000. Many investors lost their shirt, pants and underwear.
Less than 1% of brokers called their clients to tell them to sell. They did not know either because they have not been taught how to protect
portfolio profits. Many investors said I can’t sell here because I will have to pay huge taxes. Well, they didn’t have to pay any taxes because
they gave back all their profits and in some cases much of their original investment. Can that happen
again? You betcha sweet bibby it can. Has your broker learned anything since 2000? More importantly have YOU learned anything from the 2000 debacle?
There is what I call portfolio insurance that helps you identify how high is up. Really? Yes,
really. Having been an exchange member
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and floor trader for 17 years I learned very quickly (or you go quickly broke) that I had better have my exit
strategy planned before I buy.
Did you know that when a general makes a battle plan he also has a retreat strategy for his
troops? If the battle does not go well he wishes to withdraw with as many of his troops in tact as possible. The same strategy should be employed for
your investments. When you buy any stock or mutual fund you must have a plan to sell before you lose
all your money. Any fool can buy. It is the wise investor who knows when o sell.
Your automobile may cost $15,000 and I will bet you have a policy that has a deductible amount to protect you from a total loss in event of an
accident. This also the way you should think about buying stocks or mutual funds. The deductible is
your stop loss order for every position in your portfolio. No one is 100% right when buying so you must know how much you are risking before you buy
and place the open stop loss the moment your order is executed.
When you buy your portfolio insurance (and it is free) it is also prudent to raise that stop as
your stock advances so you will not give back your profits. Every professional trader uses stops. You
can too.
About the Author
F*R*E*E investment letter www.mutualfundmagic.com
Author of best seller "IF IT DOESN'T GO UP,DON'T BUY IT!" Never lose money in the market. Copyright 2004 Albert W. Thomas All rights reserved.
Former 17-year exchange member, floor trader and brokerage company owner.
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