Review Or Go Broke

Some sage words of wisdom here from Al Thomas on the absolute necessity of keeping an eye on your investments no matter how busy with other priorities you think you might be.

Too often, traders get so involved in the minutiae of their particular trading strategy that they fail to watch the fundamental issues.  The lack of basic money management methods, the lack of a stop loss when you most needed one – are all in the same bracket of K.I.S.S. – Keep It Simple, Stupid.

He also touches on the issue that no-one else will look out for you and your money – certainly not your broker.  The only reason that I can see for using a broker is that you are making so much money AND he/she is so tuned in to your trading strategy or method that you can delegate your trading to them.  But you’ve got to be making big bucks to do that, as well as have a lot of faith in them.

Review Or Go Broke
By Al Thomas

Too many investors receive their monthly statements without giving any thought to what is happening to their money. They may glance at it or not even open it. This is the road to the poor house and peanut butter sandwiches for the rest of their retirement life. A few minutes now each month is all it takes to be either rich or poor when they no longer want to or have the ability to create income. They will be glad they spent the extra 15 minutes checking on what is being done with the money.

The average working person or business owner should not own anything but mutual funds or ETFs (exchange traded funds) because these are less volatile and easier to evaluate. However, if stocks are owned the first thing to ask is if they are selling for more than was paid for them. If not the investor should realize this is not where the money should to be. The best course of action is the sell NOW and put that cash to work in a different equity that is going up.

If the investor is in doubt about a particular issue let the market determine whether it should be sold or held by putting a reasonable permanent stop loss order in place. If it continues to decline market action will remove the weak position.

Brokers discourage everyone from doing this. Keep in mind this is not their money, it is YOUR money. He will tell you he will watch your account, but he won’t. The average broker has 300 accounts and unless the investor has a large 6 figure account or trades frequently he does not have time to review.

It is also a good idea to enter a trailing stop on every position. This will protect profits when the next major bear market hits and it will. No one knows just when. A few years ago Enron was on every brokers buy list right up to the day it started down never to recover. A stop loss would have saved investors most of their money.

Stops are the silent protector of money. No watching is required. When equities decline investors need protection. Always be concerned about paying attention. If you don’t the loss is your fault. Small losses are acceptable, but big losses are the killer of dreams.

The investor should call his broker or financial planner monthly to review any weak issue to be sure it is removed. Never allow a big loss. Even in 401Ks and similar tax-sheltered plans the fund manager should be held responsible for losses.

Review or go broke.

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. Copyright 2007 All rights reserved.

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