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

---

No Load Mutual Funds or Exchange Traded Funds (ETFs)?

If you are fed up with early redemption charges and... Read More

Hedge Fund Advertising

Have you seen all those big full page ads for... Read More

Shadow Bull

As one of my regular readers you know I have... Read More

Quality Investment Information: Standing Firm In the Face of Opposition

THERE'S SOMETHING TO BE SAID FOR standing firm in the... Read More

Stock Market System ... ONLINE STOCK TRADING ... Beyond Day Trading Basics & Tips

Day trading is all about making buy and sell decisions.... Read More

Complacency Indicator

If you haven't heard of the technical indicator with the... Read More

Selling Strategies - Setting a Stop Loss

Sometimes the best way of lowering exposure to risk is... Read More

Again With the Bubbles?

A few years back ? it seems like an eternity... Read More

Emotional Maturity

If you are going to be a winner in the... Read More

Overseas Investing: Going Against the Mainstream

TOO OFTEN, INVESTORS SIMPLY CHOOSE TO follow the crowd. This... Read More

How To Be A Winner

Everyone who invests in the stock market wants to be... Read More

Advantages and Disadvantages of Mutual Funds

Outlined below are some of the advantages and disadvantages of... Read More

Does Japan Matter?

For the last 12 years we have seen the Japanese... Read More

Analysts - Do They Really Know The Stock Market?

When you become interested in a stock or mutual fund... Read More

Municipal Bonds

Because there are so many stocks that are NOT paying... Read More

Psychology ? How to Reduce Negative Thoughts Relating to Trading?

The thinking process of the brain relating to the... Read More

Buy and Hold Investment Philosophy

Wall Street has been preaching the doctrine of Buy and... Read More

Stocks Options Trading

Let's assume that you want to make some serious money... Read More

A Funny Thing Happened on the Way to the Stock Market

On the 40 year journey through the turmoil of a... Read More

Why Investors Use Financial Planners

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

The Club

Yesterday I received my monthly issue of MONEY magazine. This... Read More

Prospering with Mutual Funds: How Anyone can ?Afford? an Investment Advisor

Recently I was invited to appear on a live CNNfn... Read More

Momentum

One of the basic laws of physics states that a... Read More

Learn to Calculate a Stock?s Pivot Point

Stocks breakout from properly formed bases everyday but many investors... Read More

Attitude Is [Almost] Everything

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

Inertia Syndrome

When it comes to buying a stock or mutual fund... Read More

The I Word is Coming to a Town Near You

Hello Inflation, it has been awhile, I see you on... Read More

Commoditizing the world

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

War Market

There is no question that the stock market is being... Read More

Buying Stocks and the Importance of Correct Timing

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

?Fears Only Enemy Is Action?

What a great statement!I just heard someone use it in... Read More

8 Penny Stocks to Avoid

There are many good penny stock investments available, which could... Read More

The Surgeon General

The Surgeon General of the United States says that smoking... Read More