Cash Is A Position

I go to the Money Show every year to visit with friends who have booths and are speakers. Then when folks are filing out of lectures I listen to their comments on what I know the speaker has been saying.

The Money Show is for investors from all walks of life; however, my guess is the median age is close to 60. Those who go have accumulated a nest egg and now are retired or very close to retirement. They came to learn more about how to make their money grow.

Last year there were 256 separate events not counting what was given in the Exhibition Hall. Almost without exception speakers were showing how cash can accumulate faster if the listener bought his product whether it was a mutual fund, stock, bond, partnership or who knows what. Are there that many money makers out there?

One speaker had an hour telling the market was due to crash and the thing to do was buy long term put options. He also said if you would not do that to buy some government bonds which were paying about 2 to 3%. The exit comments I heard were pretty well summed up by one lady who said, "Is he nuts. How can we live off 2%?"

When you are in a bear market the old saying is, "He who loses the least is a winner". No, you can't live on that small a return, but you can lose large sums by trying to be invested at all times. There have been many years in the past where cash with no percent return beat the heck out of the stock market.

Go back to 2000 and remember the NASDAQ lost 78% of it value in 3 years. Since March 2000 investors in the 50 hottest-selling mutual funds have lost an average of 42% according to the Lipper Analyst. Fidelity Magellan, the largest fund at that time remains a loser of 23% and Janus, 4th largest, is down 45%.The Buy N Holders have still not recovered their investments.

If you had sold out near (I did not say at) the top, say within about 10 or 15% your account would have been pretty darn healthy when it finally did start back up. You would not have lost 30 to 40% or more of your hard-earned money. That is what I refer to as a "reverse profit".

If you had put a loss limit on your portfolio of 10% on each position and taken out just enough to live on it probably would that have been less than letting it stay invested in the market? You can easily check that.

Putting 100% of your money in a money market while the market is declining does not mean you are not invested. You are invested ? in cash. This protects your savings from huge losses that can and do occur regularly in market cycles. I have written about those 16-year cycles previously.

The smartest investors set a limit from where they bought from the highest price their equity has reached as to where they will sell if it starts going down. Usually 10% is the rule of thumb, but it can be 5% or 20%. That is your choice.

All investors must learn that cash is a position or they are sure to lose their money.

Copyright 2005

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.

---

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

Stock Investment Advice

Stock investment advice is easy to find. Do you get... Read More

A Good Fund Manager

Every Wall Street analyst, financial planner and broker will tell... Read More

Dont Buy Stocks based on P/E Ratio alone

I use the P/E ratio as a secondary indicator for... Read More

Boiler Room 7/17/00

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

Traders, Defend Against the Dreaded Death Spiral.

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

The 1% Solution

You probably know the story of Sherlock Holmes and the... Read More

Hill of Hope

Just about now everyone is confused as to which way... Read More

Trade Stocks for Real

I read a comment by a forum member on another... Read More

Cash Is A Position

I go to the Money Show every year to visit... Read More

Choosing a Stock Broker

If you were to find that you had some severe... Read More

Discover the Biggest Trading & Investing Online Mistake

Any online investor / trader seeks an excellent off or... Read More

Stock Insurance

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

Stocks: Understand What You Buy!

"There is nothing more frightful than ignorance in action!" Johann... Read More

Stock Trading Secrets?

How often have you come across an advertisement or e-mail... Read More

Trading For A Living - Part 1

There can't be many traders who haven't at least considered... Read More

Stock Market Course .... Day Trader Online Seminar ... Can You Generate Profits Trading from Home?

When it comes to stock market trading it PAYS to... Read More

Selling

The stock market has been going up for more than... Read More

Online Trading Strategy: Collecting Cash when Stocks Go UP - It PAYS to Know More than Others

When it comes to stock market trading it PAYS to... Read More

Precision Money Management

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

Analysts - Do They Really Know The Stock Market?

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

How to Short Stocks? How to Make Money when Your Stocks Go Down by Shorting

The stock market can present you with a lot of... Read More

Fools Gold

The stock market has been in an up trend for... Read More

Its A Bull, Its A Bear, Its Suptertrader!

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

Look Out The Window

Quick, look out the window. It's raining. No, the sun's... Read More

The Club

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

Trading Baskets II: The Crapolio, A Roll of the Dice in the Stock Market

In a previously written article, we expanded the use of... Read More

Complacency

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

Hedge Fund Advertising

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

A Penny for Your Stocks

According to Investopedia Inc. the penny stock market has seen... Read More

A Stock Market Investment Strategy

I feel that an investment strategy in the stock market... Read More

Stock Market Investments

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