People are always asking me when should I sell my stock or mutual funds?
There are some relatively easy answers to this. In fact, so simple that you won't believe them, but they are things I have learned over the past 30 years as a professional trader on the floor of the commodity exchange in Chicago. These ideas apply equally well to stocks and mutual funds and to just about any kind of investment.
First let's examine what the Wall Street mavens tell you about mutual funds. Ever heard this one? Buy a good fund and stick with it even when it is going down. WRONG! Go with a good fund manager and follow him from fund to fund. WRONG! Don't buy the current "hot" fund, as it will go down when this fad is over and you will lose your money. WRONG!
Let's look at the one basic reason all these ideas are promoted. The mutual fund industry which is the biggest owner of individual stocks in the world doesn't want you to take your money out of their particular fund so they all band together to promote the above ideas even when you are losing money. Fund managers are not paid for performance. They are paid by the amount of your money the fund keeps.
Do you want to stick with anything that is going down in value week after week? The great cry of stockbrokers is, "The market always comes back". But when? In your lifetime?
I don't know of any individual fund manager that has made money for the investors every single year. They all run hot and cold, even the best of them. You can put the best jockey on a slow horse and he is not going to win the race.
The Wall Street gurus talk about "hot money" flowing from one fund to another and want you to feel guilty just because you want to make more profit. Hey, what is your money in there for - cold pizza?
There is one basic rule that will keep you outperforming the pack. If your mutual fund is not currently (meaning in the past 12 months) outperforming the S&P500 Index you should sell it immediately and buy a different no-load fund. Don't buy any fund that charges commission. You can buy directly from the fund itself (phone numbers listed in IBD very day) or through a discount broker such as Waterhouse, Datek, E-Trade and many others. The maximum commission charge should not be more than $25 no matter the size of the buy or sell with no restrictions on how long you must hold it.
Where do you find the best performing funds? Each day Investor's Business Daily publishes a list of these funds. Look for the day they publish the top performers for the past 12 months.
Don't pay any attention to the longer-term statistics. Each week you should look to see if your fund is still listed in the top 25. If it isn't, sell it and buy the one at the top. Simple. Forget the 3-year, 5-year and 10-year records. My philosophy is 'What have you done for me lately?'.
As far as selling stock this is what I do. I keep at 10% trailing stop which I change every Monday morning with my discount broker. The open stop is 10% of the previous Friday's close. This may or may not be the top of the move but I don't care. I'm either stopped out with a small loss or a profit, but my money is always protected. When I have doubled my money I will sell half my position and let the rest ride with the following stop. Protection of your capital is the most important thing you can do.
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.
1-888-345-7870; http://www.mutualfundmagic.com
Do you have a nest egg? You know, a place... Read More
As GuruFocus updates the stock buys and sells of gurus,... Read More
Now where have I heard that before? I know. It... Read More
On Monday, November 25, 2000 Investor's Business Daily listed on... Read More
For years investors have been taught to look into the... Read More
You probably know the story of Sherlock Holmes and the... Read More
Are you paying any attention to your retirement savings? Do... Read More
If you've ever flipped on the television to CNN Financial... Read More
The stock market can present you with a lot of... Read More
04/28/2005NASDAQ dropped -12.5% year to date in 2005. S&P500 index... Read More
It is commonly reported that the stock market averages about... Read More
How do you invest? What do you really pay? At... Read More
Ever notice how behavior in one area of life can... Read More
There can't be many traders who haven't at least considered... Read More
This is a rather simple strategy with which I am... Read More
A few years back ? it seems like an eternity... Read More
After some forty years of banking and investments, I retired... Read More
When is a dividend not a dividend?The latest thing "conservative"... Read More
Who are the successful investors?There are those who follow the... Read More
Financial markets provide their participants with the most favorable conditions... Read More
Mutual funds and brokers are always preaching not to buy... Read More
Should the market turn against you, it is important that... Read More
(1) CHK stock price $16.74, NAV $32.5CHK is my favorite... Read More
Let's hope you did not have any of the Enron... Read More
When you stand on the ocean shore and watch the... Read More
O'Hare Chicago prom limo ..Just 30 years ago the stock market was a shadow... Read More
Is really not as important as to how you invest... Read More
A common problem I often see when working with living... Read More
A few years back ? it seems like an eternity... Read More
If you don't know what a Roth IRA is then... Read More
Just about now everyone is confused as to which way... Read More
Right now there doesn't seem to be any "gold fever".... Read More
Sometime in the third quarter of 1997, someone told me... Read More
As the man said, "I've got some good news and... Read More
How many people went to a cash position this week?... Read More
Question: How does it get better when it gets worse?Last... Read More
Ever have one of those sample boxes of candy? Each... Read More
One of the things people are always asking me is... Read More
I don't know what kind it is, but I saw... Read More
Whenever I see mutual fund comparisons in the trade publications... Read More
Everyone who invests in the stock market wants to be... Read More
Before they go over the cliff to their destruction these... Read More
Both the stock market and oil prices rallied recently, which... Read More
If you've ever flipped on the television to CNN Financial... Read More
Four blind men were asked to give a description of... Read More
Analyzing growth stocks is an important focus for any investor.... Read More
I read a comment by a forum member on another... Read More
Ever turn down a street, get half way and suddenly... Read More
Last time we looked at the real performance of the... Read More
It is difficult to make money in a bull market,... Read More
Stocks & Mutual Fund |