Never lose money in the stock market again. Yeah, I know. Don't buy any stock, but that is not what I meant. There is a clear and easy way to protect your capital ? what you have now and what you might decide to buy in the future. And don't count on your broker to tell you this.
As you are aware we have been in a bear market since the beginning of 2000. That is a long time and if you have held your stocks and mutual funds for all this time you have some pretty terrible losses. Losses you did not have to take if you had a knowledgeable broker or financial planner. Financial planners don't know any more than brokers so you can't count on them to save your money from being flushed along with everyone else. It is a shame that brokers and planners are not taught how to protect your capital.
When a broker is hired he is given 2 manuals to study. One is on SEC (Securities and Exchange) regulations so he will not break any rules so his company will not be fined for misconduct. The other is on how to open new accounts - how to get you to send money. There is no training on how to trade ? buy low and sell high. His training manual consists on how to do "research". Research is knowing all about a company to determine if it is well run and they are making money or have the ability to make money some time in the near future.
You can obtain complete reports of everything you want to know and even more from Morningstar. They will bury you in information. This kind of "research" is worthless. Why? Because if you can find it out then everyone in the world knows it and it is reflected in the current price. The one thing you want to know is if you buy it will it go up.
The average broker has about 300 accounts and unless you have lots of money he will not pay much attention to you. As new brokers get a large number of accounts they give away the small accounts (those with less than $50,000) to the new, less experienced brokers so they can concentrate on the big boys with big bucks.
That is why you, and only you, must learn how to protect your investments. In a bear market the one who loses the least is the winner and the way to do it is with Stop Loss Orders. If you bought a stock or mutual fund you must immediately decide how much you will risk if it should go down instead of up. Usually 10% is a good rule of thumb. If you paid $40 per share you should sell it immediately of it goes down below $36. Don't ask your broker because he has been taught to Buy and Hold and that philosophy will break you. As your stock goes up you must raise your stop (never lower it) so it trails 10% behind the closing price posted very Friday in the newspaper. There are literally hundreds of thousands of people today who wish they had done this during the past 2 years.
If you were one of them it is not too late to start now so your retirement account will be there when you need it.
Al Thomas
Author of "If It Doesn't Go Up, Don't Buy It!"
Never lose money in the stock market again.
http://www.mutualfundmagic.com
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