You remember the story about the frog that was put into a pot of cold water on the stove. He was not concerned. Someone lit the burner and the water began getting warm, the frog was very comfortable and as the water became warmer he was so relaxed and complacent that he fell asleep ? never to awaken.
Mr. Frog reminds me of today's stock market investors and that includes all folks with IRAs, 401Ks and the like. Stocks have been slowly rising for the past year and a half (the water is becoming warmer and warmer) and no one is paying any attention to his investment positions. The market is becoming overheated and many investors are about to become boiled. Too many are swimming fat and happy in the increasing warmth with no thought of exit.
Currently the long term market trend is up so complacency reigns supreme. It is doing exactly the same as in 2000. When 2002 ended we had a surplus of boiled frogs. A smart frog will not be lulled to sleep and will have a plan to jump out of the pot. A frog without a plan plans to be frog soup.
There are many ways for the frog to escape and there are many ways for investors to retain their profits or at least not lose their money the next time the market heads down. It will if past performance is any guide to futures results. Any plan to jump out is better than no plan at all.
Whether you own stocks, mutual funds or ETFs (Exchange Traded Funds) you can set a limit as to how much you are willing to lose from this point (that's now, today). Any fool (frog) can buy, but it is the wise man (frog) who knows how to sell (escape the pot).
If you want to have money for retirement you must protect your capital from loss with a risk management strategy. First protect your principle and then protect the profits you have made on the recent stock market advance. It is not difficult to do.
With stocks and ETFs you can place an Open Stop Loss Order with your broker or financial planner. He won't like this, but it is your money not his. Don't let him talk you out of it. For regular mutual funds you must have a mental stop and when that price is hit you call your broker (he won't call you) or the fund directly to tell them to transfer your funds to a Money Market account. Cash is a position.
If you are not familiar with stop loss orders you can find books in your library and there are hundreds of articles on the Internet. See some of my previous articles on my web site.
The water is heating up. Don't fall asleep and become a poor frog.
Al Thomas' best selling 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 and receive his market letter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2005
limousine chicago service1. Do not spread your money too thin.My friend has... Read More
Stocks breakout from properly formed bases everyday but many investors... Read More
In a previously written article, we expanded the use of... Read More
Well, not really. What I mean is I don't mind... Read More
If you were to find that you had some severe... Read More
When most analysts, financial planners, fund specialists and investors try... Read More
Most stock traders know that momentum trading can be a... Read More
Have you been listening to the talking heads on CNBC-TV?... Read More
Exchange Traded Funds (ETFs) are growing. Investors are choosing low... Read More
The trash business in its efforts to cook their books... Read More
This is a rather simple strategy with which I am... Read More
Disclaimer: Please note that I do not necessarily purchase, own,... Read More
Why? Because I am going to shatter your conventional wisdom... Read More
A stock market index is a statistical measure of changes... Read More
The higher the market goes the more confusing are the... Read More
Many people would like to diversify their portfolios to expand... Read More
Economists know more about how the fragments of society work... Read More
Time to look back2004 is over, now we are in... Read More
Before you buy another car you walk around the lot,... Read More
We all know the expression, "My country, right or wrong",... Read More
Let's discuss commodities; with the latest Enron situation, it is... Read More
Mutual fund investing is a lot like Thai cooking. Everyone... Read More
I cringe every time I hear a novice investor tell... Read More
The ABC's of Stock Trading SuccessStock trading success...why is it... Read More
I often play a little game with myself when I... Read More
neptun lighting induction garage led lighting Pete's produce ..To become a successful trader you must have some kind... Read More
Every successful trader has a winning system. There are of... Read More
Is really not as important as to how you invest... Read More
"There is nothing more frightful than ignorance in action!" Johann... Read More
What a great statement!I just heard someone use it in... Read More
Recently I watched my favorite football team lose a vital... Read More
The broker told me not to sell because the mutual... Read More
If it walks like a duck, quacks like a duck... Read More
Sometime in the third quarter of 1997, someone told me... Read More
Every Wall Street analyst, financial planner and broker will tell... Read More
Dollar cost averaging is one of the most popular ideas... Read More
We all know that emotions control every decision that an... Read More
Refuse is a serious issue in any society, about as... Read More
If you go to Haiti or other places in the... Read More
Duck! No I don't mean a quack, quack. I meant... Read More
Intervention. Now don't let that big word scare you. The... Read More
The Shadow knows. There used to be a radio program... Read More
If you are fed up with early redemption charges and... Read More
Everyone who invests in the stock market wants to be... Read More
Ever turn down a street, get half way and suddenly... Read More
When purchasing mutual funds we are cautioned to read the... Read More
1. Do not spread your money too thin.My friend has... Read More
In today's volatile and confusing stock markets everyone is searching... Read More
I often hear from people, "I don't trade. I invest.... Read More
I don't know what kind it is, but I saw... Read More
Stocks & Mutual Fund Stocks & Mutual Fund |