Complacency

During the month of January the Dow Jones Industrial Average, usually referred to as the DOW, had an almost 1,000 point range, most of it down and the average investor has yawned and said 'so what, this has happened many times before'.

Is there any reason to worry now?

The terrible event of September 11 shocked investors who sold heavily and then watched the market climb back to where it was on September 10. The investing public as well as many professional money managers now believe that soon this year we will see the DOW move back up for another bull market like we had in 1999. Let's hope they are right, BUT suppose they are wrong. What will happen to the stocks and mutual funds you own now?

What will be the valuation of those equities if the DOW smashes through the 8,000 level and goes even lower? Do you have anything in place that can protect you from such a catastrophe? Is there a solution to that potential disaster?

Yes, there is. And it is very simple.

If you believe that the market is going lower you could sell every stock you own and buy some bonds, but no one knows for sure. If the stocks and mutual funds you own go up you will kick yourself. Here is a sure-fire way to protect your money. Place an open stop-loss order of about 10% under its most recent low price. That way if it goes up you will be able to move the stop up to lock in additional profit and if it goes down you will not take a bigger loss. This is how every professional trader makes money. You allow yourself to take big winners and only small losses.

The biggest problem with doing this is YOU. Huh? Yes, it is the fact that few people want to sell even with a small loss. They prefer to sell with a big loss. I'm not joking.

I know the story all too well. Investors say, "When it goes back up, I'll sell and get out even" Or "It can't go any lower. I'll hold on." How about this one, "How can I sell it now when it has dropped this far?" Folks, things aren't going to get any better. If you had had that stop-loss order in you would have been out at a much higher price. With mutual funds you cannot put in a stop order so you must call in your order when it breaks the price barrier you have set. Do not rely on your broker to do it for you and do NOT let the broker talk you out of it unless, of course, he wants to guarantee in writing that it won't go any lower. And pigs can fly.

You cannot become complacent and believe the great Wall Street lie that the market always comes back. It may, but it might not be before you retire. Only you can protect 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

---

Dividend Paying Stocks

I would like to share with the reader an article... Read More

What Are You Waiting For?

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

Investment Lawyers and Trash Stocks

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

The Cub; II

We keep hearing about this bear market and that the... Read More

A Triple Dipper: How to Make 3 Profits on 1 Stock Trade

This is a rather simple strategy with which I am... Read More

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

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

Market Globalization

Just 30 years ago the stock market was a shadow... Read More

Planning Your Dive and Diving Your Plan ? Trading!

A colleague of mine just returned from a scuba diving... Read More

Trading Systems

To become a successful trader you must have some kind... Read More

Trading Stocks ?Never Forget About A Past Trade

We all know that emotions control every decision that an... Read More

Trading Tips No 5: Stock Trading Curve Drawdown and Commitment

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

What is a Trading Plan ? and Why You Need One?

How do you make money without picking tops and bottoms?I... Read More

Municipal Bonds

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

Inertia Syndrome

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

I Love You, Warren Buffet

Sometime around 1980, can't remember exactly, there was a flight... Read More

Why Technical Indicators

The fight continues to rage among traders who use technical... Read More

Selling Strategies - Setting a Stop Loss

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

The Secret Method to Selecting a Winning Trading System

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

Outsourcing

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

Analysts - Do They Really Know The Stock Market?

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

Why the Majority Fail at Stock Investing

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

Play another Day

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

Long Term Investing

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

Mutual Fund Honor Roll ? Buy High, Sell Low by Chasing Performance

Buy high and sell low -- It's not a typo.Millions... Read More

Stock Market Education; Day Trading for Beginnners; How to Pick Stocks

The trading method you employ to approach the stock market... Read More

Bargain Basement - Finding Stocks That Go Up

Have you been listening to the talking heads on CNBC-TV?... Read More

Trading Tips No 6: The High Cost of Low Cost Stock Market Information

It has been said that low cost or even free... Read More

Prosperity

It has fallen upon the consumer to make our economy... Read More

Market Timing?

The recent criminal fiasco in the mutual fund industry is... Read More

Keep Your Profits

It looks like we have now entered a new bull... Read More

Option Spread Trading

Spread trading is a technique that can be used to... Read More

Rebalance And Diversify

The stock market has not been very kind to your... Read More