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.

---

How to Pay Less and Get More: Discount Broker vs Professional

How do you invest? What do you really pay? At... Read More

Finding A Good Stock

One of the things people are always asking me is... Read More

Keep Your Profits

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

Mid-Cap Stocks: Asset Class with an Identity Crisis

Much like the middle child, mid-cap stocks have long struggled... Read More

Traders, Defend Against the Dreaded Death Spiral.

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

Nest Eggs and Omelets

Do you have a nest egg? You know, a place... Read More

How Eating Bitumen Made Me a Better Trader

Trading is a fascinating activity.There are so many layers to... Read More

What To Buy Now

I am sure that if you have a brokerage account... Read More

Bollinger Bands Strategies

The Bollinger Band theory is designed to depict the volatility... Read More

Momentum

One of the basic laws of physics states that a... Read More

Pamplona, the Wild Investment Bulls

You remember (they show it on TV every year) the... Read More

Starbucks Stock is Up

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

Stocks & Oil, Sat Jun 18th, 2005

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

Cash Is A Position

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

Hold Em and Fold Em

When most analysts, financial planners, fund specialists and investors try... Read More

The Club

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

Hot Stock Trader: How to Pick Momentum Stocks with Ease and Simplicity

Most stock traders know that momentum trading can be a... Read More

Choosing A Fund

For years I have been saying you must have a... Read More

Investing in Trash Company Stocks

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

Stealth Bull

If you have been watching the stock market at all... Read More

Political Investing

We have two candidates for president that have really different... Read More

Forecasting the Stock Market

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

Why Is The Macedonian Stock Exchange Unsuccessful?

The Macedonian Stock Exchange (MSE) is not operating successfully. True,... Read More

Understanding the Bulls and the Bears

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

Lights of the Stock Market

There are red lights, green lights, blue lights and spot... Read More

Dont Ask Your Broker

Unfortunately, most of you who are reading my column are... Read More

Emotional Trading

The single most expensive stock market trades are those made... Read More

Why Stock Is More Risky Than Options!

You probably have been told that options are risky. Even... Read More

Rebalance And Diversify

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

What Can Model Airplanes Teach You About Trading?

I was devastated!I just couldn't believe it. I was 10... Read More

Shadow Bull

As one of my regular readers you know I have... Read More

Its Snowing

The Winter Games for the Olympics are coming up soon... Read More

Price to Earnings Ratio - P/E

After finding the price of a particular stock, usually the... Read More