Enron Cure

Let's hope you did not have any of the Enron stock. Maybe you know someone who did and lost everything, but you certainly might know several people who owned stock that lost almost everything. They probably aren't talking about it.

According to Investor's Business Daily newspaper there are 1,387 companies that lost more than 90% of their value from the highest point during the last 5 years. That is almost as bad as Enron except the folks that own this junk have hopes that someday their stock will go back up. And pigs can fly.

Do you realize that if a stock loses 50% from its high it must gain 100% to get back to the old high? And there are literally thousands of stocks that fall into that category. The people that own these dogs are waiting for them to rally so they can get out "even". What this means is that the stock has an effective cap or ceiling on it's price. Each time it sticks its head up it will meet with thousands of folks who will sell. The chance of it ever getting back to the old high is almost nil, never, nada, zip. From my experience as a professional floor trader on the exchange I can tell you it will take a minimum of 5 years of repeated rallies before the investors who are waiting to get out are finally exhausted.

There is a better plan. Why would anyone buy something and let it go against them 60 or 80%? Why do investors believe the greatest Wall Street lie of Buy and Hold? Psychologically people don't want to admit they are wrong. Your broker tells you you don't have a loss until you sell. Believe that and I have a nice bridge in Brooklyn I will sell you.

If you consider yourself a conservative investor then you must set limits on how much you are willing to lose if the stock you buy does not go up and instead goes down. One of the best rules of thumb is about 10% either from where you bought it or from its most recent high. That 90 dollar Enron stock would have been sold at about $80 and you would have a nice profit instead of a loss.

Your broker will discourage you from putting in a loss limit order called a stop-loss because then he will have to watch it which he won't. You see, and I know you know this, there is only one person who cares about your money and that is you.

Setting small loss limits when you buy something and following up a winner with a stop-loss so you won't give back profits you have made are the way to guarantee that your investments will grow every year.

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

[email protected]; 1-888-345-7870

In The News:


Barron's

ETFs Chasing Mutual Funds as Stock Buyer
Barron's
Mutual funds' outflows since last year have driven their equity ownership to a nearly 13-year low, according to Goldman Sachs. ETFs, meanwhile, are growing by leaps and bounds as a stock market force. “Corporations and ETFs will continue to drive ...


Bloomberg

ETFs Are Giving Mutual Funds a Run for Their Money - Bloomberg
Bloomberg
Nobody owns more U.S. stocks than mutual funds. But with their position slipping, the question is how much longer can they control the market? Mutual fund ...

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WealthManagement.com

Mutual Funds Still Dominate the Stock Market, But Here Come ETFs
WealthManagement.com
Mutual fund ownership of equities is at its lowest level in nearly 13 years, according to a research note from Goldman Sachs Group Inc. Meanwhile, exchange-traded funds are becoming an even bigger force in the stock market, the team led by Chief U.S. ...


US-based stock mutual funds take in most cash in a year -ICI
Reuters
By Trevor Hunnicutt NEW YORK, March 1 Fund investors' aversion to riding the market's highs showed signs of waning as stock mutual funds attracted the most cash in a year in the latest week, Investment Company Institute data showed on Wednesday.

and more »

Utility Stocks for Retirement Investors: 1 Stock, 1 ETF and 1 Mutual Fund
Investorplace.com
But here's the real kicker for utility stocks. The Fed is raising rates, and that has caused them to flounder. But the sector has historically realized faster dividend growth than the pace of interest rate increases and inflation. For retirement ...


TheStreet.com

Hedge Funds Love These 4 Stocks -- Should You? - TheStreet
TheStreet.com
Here's a closer look at four stocks pro investors love for 2017....BAC.

and more »

Forbes

5 Best Funds For Your 401(k) And IRAs
Forbes
Over the last few years, mutual fund companies and discount brokers have been duking it out to see who can offer the lowest-cost ETF. An ETF is like a mutual fund that pools a wide range of stocks and bonds, only it trades on stock exchanges. It's an ...

and more »

CNBC

Why mutual funds could be on their way to another lousy year
CNBC
The improvement comes amid multiyear lows in the tendency of stocks to correlate up and down together, as well as an elevated level of dispersion, or the difference between returns for various sectors. Stock pickers in actively managed mutual funds ...
Stock pickers lift performance in battle of the benchmarksFinancial Times

all 4 news articles »

5 Aggressive Growth Mutual Funds to Buy in March
Zacks.com
This category of funds also invests heavily in undervalued stocks, IPOs and relatively volatile securities and seeks to profit from them in a congenial economic climate. The securities are selected on the basis of a company's potential for growth and ...

and more »

Market Realist

How Hedge Funds and Mutual Funds View Financial Stocks
Market Realist
According to Goldman Sachs (GS), hedge funds have reduced their position in financial stocks (XLF). However, mutual funds have strengthened their position in financial stocks. In the last one month of market rallies, financial stocks have led the gains ...

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