401K-itis

Are you one of those many people who dread reading their 401K statements? You have been watching it decline for about 2 years and are wondering if will ever stop. Just about everyone says the market will come back. Brokers say you are in for the long haul so don't worry. Any account that drops to a 50% loss has to go up 100% to get "even" and that is a very difficult phenomenon. If you have an 80% loss as has already occurred in the Nasdaq you would need a 400% rally to get "even". At 90% you have to see a 900% rise to that mythical "even".

Buy and Hold has been preached so long and so loudly that everyone believes it. As Adolph Hitler said when you tell a lie tell a big one. Wall Street has been screaming this one down the throats of investors for so long it has become conventional wisdom. Look at your 401K today and compare it to 2 years ago and tell me you believe in Buy and Hold. Common sense will not allow it.

Every broker has been taught that market timing doesn't work. Yes, they teach them that and they have been good students. The problem is they have had a bad teacher. Within the funds you now own the fund managers buy and SELL many times during the year because there is a time to sell. Selling is the key to successful stock market investing.

A friend mine came to me with his wife's 401K from United Airlines. It is composed of 8 Fidelity mutual funds. The employee can pick any one or more. Since the first of the year six of the eight are down from 3% to 27% (average 10.77%) and the other two were up an average of 3%. The two that are up are fixed income funds otherwise known as bond funds. If you have a 401K, IRA or SEP or almost any mutual funds the only place to preserve your capital during this secular bear market is in a bond fund - a no-load bond fund. Do NOT pay commission for these. And there are many of them.

For years Wall Street has condemned those of us who use market timing. Well, you can call me what you want, but I will have my money when the Buy and Holders are broke.

Stock mutual funds do not work in a long-term bear market. Mutual funds, as we have known them for the past 20 years, are dead. You now have only two choices within your retirement account for your money - a bond fund or a plain money market account. Don't cry that you will only make 5% on your money. Think about the 20% to 40% you will not lose. According to Lipper 99% of U.S. equity funds lost money in the second quarter. I have been telling investors for years - cash is a position.

Enronitis broke thousands of people because they would not (could not) sell as the stock broke down. Don't let 401K-itis break you.

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 2005

In The News:

15 Best Fidelity Funds for the Next Bull Market  Kiplinger's Personal Finance
And the No. 1 Stock-Fund Manager Is…  The Wall Street Journal
What is a mutual fund?  Economic Times

Stock Options Trading Strategies - Lean

Professional stock options traders use the term lean to refer... Read More

Leverage - Margin Debt

What is leverage?Here is a definition of leverage from an... Read More

The Holy Grail (of Investment)

Every year I go to the Money Show in Orlando,... Read More

Choosing A Fund

For years I have been saying you must have a... Read More

How To Beat The Mutual Fund Companies At Their Own Game

You'd have had to be living on a desert island... Read More

Lights of the Stock Market

There are red lights, green lights, blue lights and spot... Read More

Struggling Stocks, Booming Commodities

04/28/2005NASDAQ dropped -12.5% year to date in 2005. S&P500 index... Read More

Mutual Funds: The Modern Den of Thieves!

Mutual funds were created with the idea that one person... Read More

War Market

There is no question that the stock market is being... Read More

Advantages and Disadvantages of Mutual Funds

Outlined below are some of the advantages and disadvantages of... Read More

The Seven Mistakes All Novice Traders Make and How to Correct Them

We learnt the following the hard way! If any of... Read More

Prospering with Mutual Funds: How Anyone can ?Afford? an Investment Advisor

Recently I was invited to appear on a live CNNfn... Read More

Is Your Garage Full Of Junk?

I have a 2-car garage. There are nice shelves on... Read More

How to Maximize Your 401k Mutual Fund Returns

When it comes to 401k's there is an overabundance of... Read More

When?

When will the stock market stop going down and start... Read More

Rebalance And Diversify

The stock market has not been very kind to your... Read More

Will the Stock Market be Lower in October?

The stock market often closes a week in the middle... Read More

Online Investing & Stock & Share Trading: 4 Reasons Why Most Online Investors & Traders Go Broke

Are you attracted to the idea of being in control... Read More

Stocks & Oil, Sat Jun 18th, 2005

Both the stock market and oil prices rallied recently, which... Read More

How to Evaluate Load vs. No Load Mutual Funds

If you have been dealing with mutual funds for any... Read More

This Market Is Different

All of the talking heads have been telling us that... Read More

Economists

In today's volatile and confusing stock markets everyone is searching... Read More

The Next Bull Market

We are already in it, but you can't see it.... Read More

Stock Insurance

You have a lock on your house. You have a... Read More

Trading Tips No 5: Stock Trading Curve Drawdown and Commitment

All stock trading and investing methods must deal with the... Read More