How To Be A Winner

Everyone who invests in the stock market wants to be a winner. Each person's definition of a winner will be somewhat different, but there is hardly one who isn't looking for that stock that will double in price within one year.

Can it be done? Yes, but when you look at the odds you may want to find a better or maybe slower and safer way. The chance of finding that mother load is 1 in 200, about ½ percent. Of the 11,000 listed securities you have a choice of 55. Even the pros don't like those odds. What makes you think you are better?

We have been in a great bull market from 1982 to 2000. Then the bubble burst. Yet the investing public continues to believe that we are going to see double digit returns every year. According to the Financial Research Corporation's study the mutual fund pros return was only 10.92% and the average investor had gains of about 8.7%. The great Warren Buffett says the bull is over and that we will be looking at a 5% return not the 12% to 15% that has occurred in the recent past.

As I mentioned in my recent column the returns for the past 126 years has only averaged 7% with 2/3 of the return coming from dividends which are about nonexistent today. Instead of looking for the rainbow with the pot of gold at the end my suggestion is to limit your losses and let your winners run. You have heard that cliché before, but have you every understood what it means in the stock market? The floor traders and hedge fund managers do not look for home runs. They look for slow and steady and never allow any major losses. The key to long term investment success is to limit your losing positions and never give back profits you have earned.

If tech investors in 1999 had followed this principle they would have kept about 80% of their profits. Wall Street says you should Buy and Hold and they have told this lie so often that it has become conventional wisdom. It is absolute stupidity. A simple trailing stop-loss order would have protected the investor's capital. Almost no broker and certainly no brokerage house recommends loss limit orders. No one is taught the basic winning concept of the market ? an exit strategy. Until that is learned you are doomed to give back your winnings and take losses when a stock doesn't go up and heads down.

Most investors have no plan as to how much money they would like to accumulate nor how to intelligently go about it. They don't know where they are going and they don't want o be late.

When you have decided how much you need to save the next important step is not what to buy, but how to exit in the event what you do buy happens to go down instead of up.

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

---

Economists

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

Exchange Traded Funds Primer

Exchange Traded Funds (ETFs) are a group of passive index... Read More

Investing in the Stock Market - When To!

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

Your Trading Objective: Why is that so Important?

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

Jack and Jill

Jack and Jill went up the hill to fetch a... Read More

Online Broker Trade History Not Doing the Job

Let me start by saying that...Most online brokers do not... Read More

Bad News is Good News

For weeks, no, months we have been bombarded with nothing... Read More

When Should I Sell?

People are always asking me when should I sell my... Read More

The Stock Trading Plan - Why You Must Have One To Trade Successfully

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

Picking Mutual Funds to Outperform the Market

With over 6,000 mutual funds available, it may be tempting... Read More

Stock Market Investments

If there is one term over-used when talking about making... Read More

What Our Investment Advisor Wont Say Off The Bat

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

Emotional Maturity

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

Performance Funds

Mutual funds are doing more and more to discourage investors... Read More

Advantages and Disadvantages of Mutual Funds

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

Paddle Your Canoe

At some time in your life you have been on... 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

No Load Mutual Funds: Boost Your Portfolios Returns

Investors who exclusively use broadly diversified, no load mutual funds... Read More

Investment Attorneys and Garbage Stocks

How is it possible that trash Companies are posting less... Read More

Market Timing?

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

Play another Day

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

Option Trading Basics

Options trading can increase the profits you make when trading... 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

Shorting Stocks ? The Basics, Part II of II

After the publication of the first part of this two... Read More

Market Globalization

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

Leverage - Margin Debt

What is leverage?Here is a definition of leverage from an... Read More

Wall Street Paradigm

In 1960 an engineer working for a watch company in... Read More

The Right Mutual Funds For Baby Boomers

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

Understanding a Stocks PEG Ratio

A PEG ratio cannot be used alone but is a... Read More

Stocks & Oil, Sat Jun 18th, 2005

Both the stock market and oil prices rallied recently, which... Read More

365/7/24

What does it take to be a stock trader? It... Read More

Boiler Room 7/17/00

On Friday or Saturday evening my wife gets a movie... Read More