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

---

The 10 Commandments

Wall Street has been preaching for years and years to... Read More

Staying Sane While Wall Street Crashes

Everybody is riding the Wall Street Roller coaster. Even if... Read More

Dont Fight The Fed

One of the great truisms of Wall Street is "Don't... Read More

Getting Even

I know there are a lot of you out there... Read More

Oil Stocks CHK WLL - What Is Their Worth?

(1) CHK stock price $16.74, NAV $32.5CHK is my favorite... 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... Read More

The Secret Method to Selecting a Winning Trading System

Every successful trader has a winning system. There are of... Read More

Traders, Defend Against the Dreaded Death Spiral.

It has often been said that there is only two... Read More

Whitewater Stock Market

Ever done any whitewater rafting or canoeing? Long periods of... Read More

Smart Day Trading Strategies to Help You Make Money in the Stock Market

Stock trading can be a very profitable activity. You can... Read More

10 Tips For Creating Wealth From the Stock Market

1. Do not spread your money too thin.My friend has... Read More

Protect Your 401K

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

Time Out

Are you paying any attention to your retirement savings? Do... Read More

Selection Vs Direction

As I have said many times before in this column... Read More

Using Sector Funds to Construct Diversified Mutual Fund Portfolios

'Sector funds are too risky.' 'I doubled my money with... Read More

Precision Money Management

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

Nest Eggs and Omelets

Do you have a nest egg? You know, a place... Read More

How to Maximize Your 401k Mutual Fund Returns

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

Losses, not Profits, will Stop You from Trading in the Market

Should the market turn against you, it is important that... Read More

Economists

In today's volatile and confusing stock markets everyone is searching... Read More

The Shadow

The Shadow knows. There used to be a radio program... Read More

Investing in the Stock Market - When To!

Is really not as important as to how you invest... Read More

Stocks Options Trading

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

Alfred E. Newman

What! Me worry?Many of you remember the cover of MAD... Read More

Ignore Stock Market Talking Heads

You should ignore analysts on TV, the radio, the newspaper... Read More

Its A Bull, Its A Bear, Its Suptertrader!

The higher the market goes the more confusing are the... Read More

Investment Lawyers and Trash Stocks

The trash business in its efforts to cook their books... Read More

Understanding the Bulls and the Bears

If you've ever flipped on the television to CNN Financial... Read More

The Value of Stocks of a Company

The debate rages all over Eastern and Central Europe, in... Read More

What is the Most Important Indicator of All?

Most stock market traders have a favorite technical indicator.The one... Read More

Stock Trading Diversification

This is the continuing story of our two imaginary traders,... Read More

Pension Plans

If you have a pension plan at work you will... Read More

So, What is This Stock Market Thing Anyway?

We've all heard of the stock market and probably have... Read More