Evaluation II

As I said in Part I everyone in the insane asylum looks normal, but at least the doctors are sane. Unfortunately, in the insane asylum known as the stock market all the doctors (brokers) are also insane.

The doctors in the insane asylum went to medical school to learn how to treat the patients so the could get well. On Wall Street you go to the doctor (broker) who is supposed to help you become financially well, maybe wealthy. Almost none of these Wall Street experts ever learned their profession. They have all been taught the three great prescriptions that make no sense at all: Do Your Research, Buy and Hold and Dollar Cost Averaging. This is what the brokerage houses teach.

As I said previously research is worthless, as it will not tell you if a stock is going to go up. Buy and Hold is taught the wrong way. It is OK to Buy and Hold as long as the stock is going up, but not when it goes down. No broker is taught how to protect a customer's money.

When I was a floor trader I learned in a hurry not to hold on to something that was losing money. The very simple prescription for this is called a Stop Loss Order. Brokers hate them and will discourage you from entering them. Why? Because it means he will have to watch your account because if a stop order is not properly and timely executed he must pay it out of his pocket.

Brokerage houses do not teach brokers how to use this simple method to protect capital. The house does not want to become known that it will sell a company's stock when it turns weak. The brokerage company makes more in good will from the poor performing company than they do in commissions from you because if they ever encourage selling it means they will not get a chance to handle an Initial Public Offering (IPO) for that company. Suppose they did have a stop protection policy for customers and they then had an IPO that came out at $30 per share, but instead of going up it went down. The customers would not lose more than $3 or $4 per share because of their protective stops, but the house would then be stuck with all the unsold stock. It is OK for you to have this money-losing dog, but they sure don't want it in their inventory. You can see how logical this is, but you won't hear it from a broker. Stop orders are not insane.

The insane conventional wisdom that both brokers and customers have been taught cannot remain once it is exposed to truth.

You must take the initiative with the stocks you own to protect yourself from loss of capital. If your broker argues with you there is one solution - fire him and find a good broker who will protect your money. Just because he has learned an insane system doesn't mean you have to be nuts too.

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

Perfect Storm

Having lived aboard a sailboat for 2 years I was stricken when I saw the... Read More

Hold Em and Fold Em

When most analysts, financial planners, fund specialists and investors try to decide whether to buy... Read More

Why Is The Macedonian Stock Exchange Unsuccessful?

The Macedonian Stock Exchange (MSE) is not operating successfully. True, some of the parameters which... Read More

The Holy Grail (of Investment)

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

Basics of Stock Market

Financial markets provide their participants with the most favorable conditions for purchase/sale of financial instruments... 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

Different Ways of Buying Stocks

Let's say you are interested in this one company. You read its annual report, like... Read More

Quality Investment Information: Standing Firm In the Face of Opposition

THERE'S SOMETHING TO BE SAID FOR standing firm in the face of opposition. Interestingly, most... Read More

The Importance of Using Stop Loss Orders When Spread Trading the Financial Markets

A Guide to Using Stop Loss Orders Stop losses are market orders designed to allow... Read More

Trading Baskets II: The Crapolio, A Roll of the Dice in the Stock Market

In a previously written article, we expanded the use of the term "Trading Baskets" to... Read More

China Syndrome

There has been great condemnation recently because China has been selling its goods on the... Read More

High Price/Earnings Ratios and the Stock Market: a Personal Odyssey

After some forty years of banking and investments, I retired in 2001. But since I... Read More

How to Find Value in No Load Mutual Fund Investing

What are you thinking when it comes to your no load mutual fund selections? Are... Read More

Why Investors Use Financial Planners

Do you have a financial planner? Does one of your friends have a financial planner?... Read More

Look Out The Window

Quick, look out the window. It's raining. No, the sun's out. No, it's cloudy. Wait... Read More

Good Stock Market Tip; Good Return!

Forget making a profit; instead focus on the income provided from your stock portfolio. That's... Read More

Trading as a Business

What can I expect to make my first year of trading?We get questions like this... Read More

Intervention

Intervention. Now don't let that big word scare you. The talking heads on TV have... Read More

Successful Trading ? Taking Profits - Part 2

Suppose your position has made a big move and you moved your stop to your... Read More

Commoditizing the world

Let's discuss commodities; with the latest Enron situation, it is important to understand the way... Read More

Hedge Funds

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

KISS Formula

There are formulas for just about everything, but it has been shown that the simpler... Read More

Inverted Interest Rates

Inverted interest rates? What's that? Who cares? Even if you don't understand what Mr. Greenspan... Read More

Your Job

There are so many kinds of work that needs to be done and you are... Read More

Robert Rodriguez Weathers the Stock Market

Robert Rodriguez likes to buy stocks at their lows. When there are not enough stocks... Read More

How Much Information Do You Need?

You have decided to buy some stock or mutual funds, but wonder which one to... Read More

Direction

It is difficult to make money in a bull market, but what do you do... Read More

Buying New Issues

Has your broker been calling you recently with the "great opportunity" to get in on... Read More

How to Short Stocks? How to Make Money when Your Stocks Go Down by Shorting

The stock market can present you with a lot of hot stocks every day. Many... Read More

Advisory Service for You?

It depends on your level of understanding of the market and the amount of money... Read More

Cash Is A Position

I go to the Money Show every year to visit with friends who have booths... Read More

Analyzing Growth Stocks: An Important Focus For Any Investor

Analyzing growth stocks is an important focus for any investor. This is especially important, since... Read More

Trading Tips No 8: Picking the Best Stock Market Price

Carefully thinking through your goal as a trader is of prime importance, when picking the... Read More

Good News?

As the man said, "I've got some good news and I've got some bad news.... Read More

Managing Investing and Stock Market Risks

Reduce your investing and stock market risks by:Setting your sights on the long term, patiently... Read More

Pension Plans

If you have a pension plan at work you will want to read this and... Read More

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

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

Starbucks Stock is Up

Starbucks earnings are up again and so is their stock slightly. It appears they are... Read More

A Stock Market Investment Strategy

I feel that an investment strategy in the stock market can instill in the individual... Read More

365/7/24

What does it take to be a stock trader? It takes a total mental commitment... Read More

Defining a Long-Term Investment in the Stock Market

For some "long term" would mean holding a stock position over the weekend. For others,... 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

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

Forces that Move Stock Prices

Among the largest forces that affect stock prices are inflation, interest rates, bonds, commodities and... Read More

On Line Stock Trading: Small Cap & Micro Stocks Go Up and Down - How Can You Profit?

Success in small cap & micro cap stock trading like with any other business in... Read More

Exchange Traded Funds Primer

Exchange Traded Funds (ETFs) are a group of passive index funds that trade on an... Read More

Attitude Is [Almost] Everything

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

Price to Earnings Ratio - P/E

After finding the price of a particular stock, usually the next number everyone looks at... Read More

Discipline

One of the great "secrets" of successful people is discipline and it doesn't make any... Read More

Political Investing

We have two candidates for president that have really different ideas on how to make... Read More