Momentum

One of the basic laws of physics states that a body in motion will continue in motion in the direction it is going until interrupted by another force.

That basic physics law also applies to stocks and mutual funds. To see this trend it will be very apparent in a weekly or monthly chart rather than a daily chart. The daily chart shows too much noise (random movement).

In the Friday edition of Investor's Business Daily you will find 37 weekly charts on the back page of Section 2. One of the common occurrences among these issues is the steady upward progression of price, many with an angle of 30 degrees or more. The up movement of price may have been going on for many months. This is the kind of stock you want to own and even add to your position as it continues upward.

Most brokers talk about dollar cost averaging and mean adding to a stock as it goes down. That is stupid. There is only one right way to dollar cost average and that is when it is going up - NEVER down. Averaging down will put you in the poor house.

Today's stock market (end of 1999) we see the upward momentum of almost all the major stock averages - the DOW Jones Industrials, the S&P500, the Russell 2000 and many more. Some of these indexes are headed for the stratosphere. No, I have no idea how high or how far is up, but remain 100% invested to take advantage of this runaway bull. The market will tell me when to sell.

For anyone holding individual stocks about the only thing you can do is set a trailing stop-loss order so that when the issue turns you will be out with a nice profit. Don't try to predict the top because you will sell too soon. Let the stock itself tell you when to get out. The amount of the stop will be up to you, but I like about 10% of Friday's closing price. Never move the stop down.

There are people who buy mutual funds and put them away and never look to see how they are doing. This is a mistake. You are hurting your financial future if you do not regularly review your funds. Monthly is best, never less that quarterly. Momentum applies here too and even more so because many funds have a bias to a particular sector of the market. There are big caps, small caps, regional, international, value, etc., etc., etc. A policy to enhance your income is to see which sectors or groups are doing best and be invested in a fund that is heavily in that sector.

Mutual funds of a certain sector will run up for months at a time, even years, but when that sector becomes weak you should sell immediately and buy a stronger one. If you are with a discount broker there will be no commission to switch and, of course, you only buy no-load funds. Never blindly buy and hold any fund.

As you become aware of the momentum of various sectors and switch to stay with the strongest you can easily double your current return.

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

al@mutualfundstrategy.com; 1-888-345-7870

Maximizing a Stock Market Investment

Maximizing a stock market investmentThere are several factors an investor in the stock market should... Read More

Making Outsized Returns in the Stock Market - Using the Dow Theory

The Dow TheoryCharles H. DowRobert Rhea... Read More

Planning Your Dive and Diving Your Plan ? Trading!

A colleague of mine just returned from a scuba diving trip in Cozumel, which just... Read More

Value Investing: Selecting From The Bargain Bin

Picking a beaten-down stock requires a different kind of selection process. Normally, most companies beaten... Read More

Stock Trading Secrets?

How often have you come across an advertisement or e-mail proclaiming to "teach" you the... Read More

One Way Street

Ever turn down a street, get half way and suddenly realize it is one way... Read More

What Does it Take to be a Stock Trader?

It takes a total mental commitment to the task. It becomes a complete way of... Read More

Trading Stocks ?Never Forget About A Past Trade

We all know that emotions control every decision that an investor makes in any type... Read More

What is a Trading Plan ? and Why You Need One?

How do you make money without picking tops and bottoms?I am glad you asked...Successful trading... Read More

Investing in Trash Company Stocks

Refuse is a serious issue in any society, about as serious as cleaning the water... Read More

Being Wrong Buying Stock is Okay

Being wrong is OK, but let's not carry it to extremes. That applies to everything,... Read More

What the Hell is a Stock option?

A 'stock option' is a contract between two parties giving the buyer (also known as... Read More

Hedge Funds

You read and hear a lot about hedge funds. Unfortunately, most of what you hear... Read More

How (NOT) to Buy Mutual Funds

When it comes to mutual funds, there is a lot more to success than just... Read More

The Great Stock Market Secret

When the stock market is going up and all your stocks and mutual funds are... Read More

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?... Read More

Catnip of the Stock Market

I have watched my cat play with a bag of catnip. At first he is... Read More

Mutual Fund Expense Lies

When purchasing mutual funds we are cautioned to read the prospectus, look at past performance,... Read More

Play another Day

Money management starts with protecting your capital, realizing profits and cutting losses. As I have... Read More

Historical Briefing: Stocks, Finance and Money

The World Bank claims that some two billion of the world's citizens live on $1... Read More

Lies, Damn Lies and Mutual Fund Returns

How many times has this happened to you? You're at a social function and the... Read More

NASDAQ 800?

In November of 2000 when the NASDAQ was trading at 3000 I wrote in this... Read More

Shorting Stocks ? The Basics, Part II of II

After the publication of the first part of this two part series, I had a... Read More

Low Tide

When you stand on the ocean shore and watch the waves breaking you might become... Read More

Attitude Is [Almost] Everything

I often play a little game with myself when I have to go shopping; to... Read More

Moving Averages

Every day on CNBC-TV they show a 200-day moving average line superimposed on the stock... Read More

Dividend Reinvestment Plans: Investing on Automatic Pilot

If you're like many investors who squander those small dividend checks from your stock portfolio,... Read More

Investment Clubs

Because you don't feel too sure about which stock or mutual fund to buy you... Read More

Pathways

During our travel down life's path we come to many places where the trail divides... Read More

Market Success

Who are the successful investors?There are those who follow the advice of their brokers and... Read More

The Holy Grail (of Investment)

Every year I go to the Money Show in Orlando, Florida. Thousands attend. It is... Read More

Eternal Sunshine

There is a current movie entitled "Eternal Sunshine of the Spotless Mind". It is about... Read More

Dollar Cost Averaging

Dollar cost averaging is one of the most popular ideas in the investment community. Everyone... Read More

The Stock Market Doesnt Care if You are a Beginner?. Get Prepared to Succeed at Trading

Stock trading remains a very competitive field and the stock market doesn't care if you... Read More

The Next Bull Market

We are already in it, but you can't see it. It doesn't look like the... Read More

How to Pay Less and Get More: Discount Broker vs Professional

How do you invest? What do you really pay? At the end of the day,... Read More

War Market

There is no question that the stock market is being affected by war jitters. When... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term investment.My Mother worked as a... Read More

Why Stock Is More Risky Than Options!

You probably have been told that options are risky. Even worse, that you can lose... Read More

Stops Make Money

During the day I watch CNBC-TV, the stock market channel. Fortunately, I keep the sound... Read More

Trading For A Living

How many times have you said to yourself, "I'd like to quit this job and... Read More

Buying Mutual Funds

It looks like the market is ready to start up again so it is time... Read More

Rebalance And Diversify

The stock market has not been very kind to your investments lately. Your broker knows... Read More

Stock Chart Reading

As an investor you will want to check out any equity before you buy it.... Read More

Risk Control

Everything you invest in has risk so you want to do your research before you... Read More

Laws and Efficiencies and Theories of Diminishing Returns

The basis of diminishing return discussions surround such simple notions; that when you have a... Read More

How to Pick Winning Stocks

There is nothing more exciting than finding an undervalued stock and seeing it explode out... Read More

Series 7 Exam

What is the Series 7 Exam? If you are looking to become a... Read More

Online Investing & Online Stock & Share Trading: Difficulty in Taking Stop Losses in the Market

This is an extract of an article which was first printed in Daryl Guppy's Newsletter... Read More

Fake Money

Reach in your pocket and take out that big roll of bills. Depending on how... Read More