I love roller coasters. The steeper the better. High and fast and curvy. Yahoo! Let's go again. But to get to the drop off point you have a slow grind up.
Kinda reminds me of the stock market for the past 3 years. From 1982 to 2000 it was 18 years of up, up and away with very little down. From 2000 it was over the edge, down, down, down with few hints that we are going up. Recently, since October, there has been a respite and we have seen an advance of about 25%. Can we get back to the top? Gosh I hope so, but I have to remember this is a roller coast and it goes back to where it started. Oh, NO! That is OK for amusement rides, but in the stock market that is not amusing.
In the roller coaster I expect to be let off where I got on, but in the stock market I want to stay up near the top because if I don't I will lose my money and that is no fun at all. Is there any way I can protect my money when I am near the top and not give it back to go to the bottom where I have to start all over again?
The first thing you need to know is whether the stock market is going up or down. Despite what Wall Street tells you this is relatively easy to do. I know because I have been doing it for years. Here is one simple way and won't require any work on your part. In the Investor's Business Daily newspaper there is a Mutual Fund Index. When the price of the index is above the 200-day moving average the market is going up and you will want to be a buyer of stocks and mutual funds. What you buy is up to you. When the price of the index is below the 200-day line you should sell out of everything and be in cash, money market account or bonds. That simple. Anyone can do it.
One of the big Wall Street lies is that you cannot time the market. Wrong. If you don't believe it you can prove it to yourself by doing a historical study of what I have just said. Buy as many shares of the S&P500 Index as you can with $10,000 starting back in 1998 and sell the shares each time you have a penetration of the IBD Index. Buy and sell going back as many years as you like. Now compare the amount you have using this method with that same amount if you had just bought it and held it continuously.
I won't tell you, but you will be in for a shock. Buy and hold will show a loss while getting off the down roller coaster each time weakness occurred you would have protected your investments.
Roller coasters can be fun, but not in the stock market.
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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