Buying New Issues

Has your broker been calling you recently with the "great opportunity" to get in on a new Initial Public Offering? With friends like that you don't need any enemies.

I don't care how good this new stock offering sounds. The chances it will stay even or go up are about 1 in 3 and I don't want to play those odds with my money.

Most of the new IPOs these days are from the technology sector. That is where the romance and big money has been, but the NASDAQ topped out on March 10 this year. It is a good idea to take a look at what has happened to these new offerings since that time.

The S&P500 Index has dropped only 3% since March 10 while the NASDAQ Composite has fallen 43%. Here are a couple of numbers you will want to remember for the rest of your life if you have any interest in the stock market. Sixty percent of the move in any stock is due to the category or sector it is in. Twenty percent of a stock price is due to the overall market movement and 20% is caused by the quality of the company itself. You can immediately recognize that even if you have bought the best stock it has only a 1 in 5 chance of going up if the other 2 factors are not working for you. Since March 10 the New Issues Index is down 67%.

With all the major market indexes in the sewer there is little hope for ever finding one of those new issues that comes out at $10 and runs up to $200. Those days are gone forever - at least in the technology field. The NASDAQ has a better chance of going to 1500 before it ever goes back to 5000.

For the next year, maybe longer, we are going to see the number of new issues dry up and almost disappear. And there are many other good reasons other than the overall market. In a new issue you have no idea how the company will perform. Will management make its projected goals? Is there any possibility of a profit? You have no track record for their price performance. Will the stock price trend up or down? The more of these unknowns you throw into the mix the less chance there is that the stock will go up.

Last year we had a raging bull charging through fences and tearing everything up and we all loved it. All we had to do was follow the bull. The bear has taken his place and is ruining the landscape. And you know what bears do in the woods. Be careful where you step - or put your money.

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

---

Precision Money Management

This article describes the model of a natural relationship between... Read More

What Can Model Airplanes Teach You About Trading?

I was devastated!I just couldn't believe it. I was 10... Read More

Stock Market Diversification

In one of my previous articles (Investing in the stock... Read More

Stock Market Course .... Day Trader Online Seminar ... Can You Generate Profits Trading from Home?

When it comes to stock market trading it PAYS to... Read More

Its Snowing

The Winter Games for the Olympics are coming up soon... Read More

How to Pick Winning Stocks

There is nothing more exciting than finding an undervalued stock... Read More

Intervention

Intervention. Now don't let that big word scare you. The... Read More

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

After some forty years of banking and investments, I retired... Read More

Protect Your 401K

Checked your 401K lately? Going back to about a year... Read More

3 Components Needed for Beating the Market

Time to look back2004 is over, now we are in... Read More

The Big Bad Bear

The big bad bear is stirring again. So far he... Read More

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

How do you invest? What do you really pay? At... Read More

What Are You Waiting For?

Do you own any mutual funds? In an IRA or... Read More

Buy and Hold Investment Strategy

"Buy and hold" is one of the most heralded investment... Read More

Trading For A Living

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

Why the Majority Fail at Stock Investing

The gleam and bright lights of Wall Street lure in... Read More

Your Trading Objective: Why is that so Important?

You've decided to try your luck at trading stocks or... Read More

Play another Day

Money management starts with protecting your capital, realizing profits and... Read More

Investment Research - The Dalbar Study

Very few people, even professionals, have heard of the Dalbar... Read More

Two for the Money

Look back over the years and try to remember how... Read More

How to Maximize Your 401k Mutual Fund Returns

When it comes to 401k's there is an overabundance of... Read More

Investing in Dividend Paying Stocks

I was recently interviewed for a press release through a... Read More

Market Psychology

Today we are inundated with tons of information about the... Read More

Invest, Be Wrong, and Make Money in the Stock Market

I have been trading for several decades and was an... Read More

Analyzing Growth Stocks: An Important Focus For Any Investor

Analyzing growth stocks is an important focus for any investor.... Read More

The Next Bull Market

We are already in it, but you can't see it.... Read More

Attitude Is [Almost] Everything

I often play a little game with myself when I... Read More

Buying Stocks and the Importance of Correct Timing

An investor can find and research the best stock on... Read More

A Common Misconception about Stock Prices

I cringe every time I hear a novice investor tell... Read More

Oil Stocks As A Long Term Investment

The demand for world oil is increasing while world reserves... Read More

A Personal Stock Market Investment Philosophy

∙ Make every investment in the stock market a long-term... Read More

Box Of Chocolates

Ever have one of those sample boxes of candy? Each... Read More

What To Buy Now

I am sure that if you have a brokerage account... Read More