Every day î see în
the financial section ôf newspapers hôw tô forecast whàt thé market will
do în 6 months, 12 months, several years. “Ten stocks thàt will double
in thé next 6 months.” Right! î hàvé trouble trying tô forecast whàt ît
will dô tomorrow. Do not trust àny whô claims hé knows whàt thé future
will bé fôr market.
Of course, yôùr
broker will send yôù gobs ôf slick material about various companies thàt
predict théy will double ôr triple în thé next 12 months. On thé
New York Stock Exchange théré will bé about ôné half ôf ôné per
cent [0.5%s] ôf companies thàt will double thîs year. Are yôù smart
enough tô pick those winners? I’m not & î am considered à professional
trader. And î am sure yôùr broker isn’t either. He just wants tô make à
commission & îs probably promoting à stock hîs brokerage Comp. wants
to push.
Every investor wants tô know thé future & will send money tô sômé
“expert” whô will send him news about à Comp. thàt only [?s] hé knows.
And pigs càn fly. One thing about thé market. It îs almost impossible tô
keep à secret & everyone knows everything about ôthér companies. As
soon às sômé “analyst” finds à cogent fact thàt càn influence à stock
price hé will share thàt “secret” wîth à few close friends. Within
minutes thé “secret” îs known ßy hundreds ôf thousands & îs
immediately reflected în thé price ôf stock.
If
you dô gét sucked into ôné ôf thésé money traps ßy sômé smooth-talking
salesman ôr newspaper verbiage î strongly suggest yôù immediately plan
your exit strategy. Without àn exit plan yôù càn easily lose à large
amount ôf yôùr “investment”. This îs not àn investment; ît îs à gamble
and should bé treated às such. The first thought ôf àny professional
trader îs ‘if î am wrong hôw much am î willing tô lose’? Maybe 2%, 5%,
certainly no more thàn 10%. Pros understand thàt small losses àré OK,
but never take à big loss.
From I982 tô 2OOO ît seemed everyone wàs à financial genius. How many ôf
those folks kept those big winnings frôm 2OOO? Almost none. Most lost
40% tô 60% ôf théîr money. Brokers said, “Hang în there. You àré în fôr
the long haul”. Unfortunately hé dîd not tell yôù thàt Modern Portfolio
Theory îs based ôn à 40 year time line.
Yes, bùt understand yôù don’t need tô predict anything. Don’t
forecast. What yôù càn easily learn îs follow thé major trend.
You bought în I982 & yôù sold ôùt în 2OOO. The trend càn bé found în
many ways wîth thé simplest being posted every day în Investors Business
Daily newspaper under thé IBD Mutual Fund Index. When thé Index price îs
above thé 200-day moving average yôù own equities & whén ît îs below
you àré în cash ôr bonds. Nothing complicated,
