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

---

What Our Investment Advisor Wont Say Off The Bat

Most advisors will tell you they can beat the market.... Read More

Long-Term Investment In Todays Market?

The stock market is very unstable at this time going... Read More

Your Job

There are so many kinds of work that needs to... Read More

The Problem With Hedge Funds

Are hedge funds a suitable investment for you? Hedge funds... Read More

Forecasting the Stock Market

Every day I see in the financial section of newspapers... Read More

When?

When will the stock market stop going down and start... Read More

Stock Insurance

You have a lock on your house. You have a... Read More

DIY Portfolio Management

Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More

You Wont Like This

Why? Because I am going to shatter your conventional wisdom... Read More

Buying Mutual Funds

It looks like the market is ready to start up... Read More

What Does it Take to be a Stock Trader?

It takes a total mental commitment to the task. It... Read More

Complacency

During the month of January the Dow Jones Industrial Average,... Read More

Market Experience of a Naïve Stock Operator

Sometime in the third quarter of 1997, someone told me... Read More

Market Success

Who are the successful investors?There are those who follow the... Read More

The Elephant

Four blind men were asked to give a description of... Read More

Trading Tips No 5: Stock Trading Curve Drawdown and Commitment

All stock trading and investing methods must deal with the... Read More

Stock Analysis

I receive emails from Morningstar. This company provides statistics and... Read More

Mr. Market

I constantly hear the talking heads on CNBC-TV, the radio... Read More

Outsourcing

It's about time someone spoke the truth concerning outsourcing. The... Read More

Market Psychology

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

This Market Is Different

All of the talking heads have been telling us that... Read More

Basics of Stock Market

Financial markets provide their participants with the most favorable conditions... Read More

Mutual Funds are Dead

You may have wondered why your mutual funds have been... Read More

The Right Mutual Funds For Baby Boomers

If you are a baby boomer, time is not on... Read More

The Information Age

It is wonderful to be alive in the information age.... Read More

Lemmings Are Gathering

Before they go over the cliff to their destruction these... Read More

Long Term Investing

In his wonderful book, 'Multiple Streams of Income', best selling... Read More

Is Active Trading The Answer?

One of the main reasons many of us get into... Read More

Investing in Trash Company Stocks

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

Stuff

I continually hear from economists, talking heads, other market letter... Read More

How to Evaluate Load vs. No Load Mutual Funds

If you have been dealing with mutual funds for any... Read More

An Old Proverb for Investing

"If you don't know where you are going, any road... Read More

Good Stock Market Tip; Good Return!

Forget making a profit; instead focus on the income provided... Read More