Enron Cure

Let's hope you did not have any of the Enron stock. Maybe you know someone who did and lost everything, but you certainly might know several people who owned stock that lost almost everything. They probably aren't talking about it.

According to Investor's Business Daily newspaper there are 1,387 companies that lost more than 90% of their value from the highest point during the last 5 years. That is almost as bad as Enron except the folks that own this junk have hopes that someday their stock will go back up. And pigs can fly.

Do you realize that if a stock loses 50% from its high it must gain 100% to get back to the old high? And there are literally thousands of stocks that fall into that category. The people that own these dogs are waiting for them to rally so they can get out "even". What this means is that the stock has an effective cap or ceiling on it's price. Each time it sticks its head up it will meet with thousands of folks who will sell. The chance of it ever getting back to the old high is almost nil, never, nada, zip. From my experience as a professional floor trader on the exchange I can tell you it will take a minimum of 5 years of repeated rallies before the investors who are waiting to get out are finally exhausted.

There is a better plan. Why would anyone buy something and let it go against them 60 or 80%? Why do investors believe the greatest Wall Street lie of Buy and Hold? Psychologically people don't want to admit they are wrong. Your broker tells you you don't have a loss until you sell. Believe that and I have a nice bridge in Brooklyn I will sell you.

If you consider yourself a conservative investor then you must set limits on how much you are willing to lose if the stock you buy does not go up and instead goes down. One of the best rules of thumb is about 10% either from where you bought it or from its most recent high. That 90 dollar Enron stock would have been sold at about $80 and you would have a nice profit instead of a loss.

Your broker will discourage you from putting in a loss limit order called a stop-loss because then he will have to watch it which he won't. You see, and I know you know this, there is only one person who cares about your money and that is you.

Setting small loss limits when you buy something and following up a winner with a stop-loss so you won't give back profits you have made are the way to guarantee that your investments will grow every year.

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

---

Some Good News for A Change

Before we get into all the good news out there,... Read More

Complacency

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

Prosperity

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

Patterns

The Law of Chaos is the theory of random unpredictable... Read More

10 Tips For Creating Wealth From the Stock Market

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

Picking Mutual Funds to Outperform the Market

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

A Stock Market Investment Plan that Never Lets You Down

The bulls and bears of the stock market are both... Read More

Starbucks Stock is Up

Starbucks earnings are up again and so is their stock... Read More

Investment Clubs

Because you don't feel too sure about which stock or... Read More

Trend Trading - Trading Stocks Using Technical Analysis and Swing Trading Strategies

Peter is a professional trader, Paul is not. Peter has... Read More

Play another Day

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

Trading Stocks ?Never Forget About A Past Trade

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

Mutual Fund Expense Lies

When purchasing mutual funds we are cautioned to read the... Read More

Catnip of the Stock Market

I have watched my cat play with a bag of... Read More

Bad News is Good News

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

The Seven Mistakes All Novice Traders Make and How to Correct Them

We learnt the following the hard way! If any of... Read More

How To Be A Winner

Everyone who invests in the stock market wants to be... Read More

Perfect Storm

Having lived aboard a sailboat for 2 years I was... Read More

What Does it Take to be a Stock Trader?

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

Robert Rodriguez Weathers the Stock Market

Robert Rodriguez likes to buy stocks at their lows. When... Read More

DIY Portfolio Management

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

Why Change Funds?

On November 17 I bought 7 different mutual funds and... Read More

What is Involved in Peak Performance Trading?

There is so much involved in developing peak performance, that... Read More

Understanding the Bulls and the Bears

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

Dividend Paying Stocks

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

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Hedge Funds

You read and hear a lot about hedge funds. Unfortunately,... Read More

Social Insecurity

Just about everything you have been told about Social Security... Read More

Moving Averages

Every day on CNBC-TV they show a 200-day moving average... Read More

Why Technical Indicators

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

Stock Valuation using the SMP Model

Disclaimer: Please note that I do not necessarily purchase, own,... Read More

The Information Age

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

How Much Information Do You Need?

You have decided to buy some stock or mutual funds,... Read More