During our travel down life's path we come to many places where the trail divides and we must make a decision. Some involve psychological (emotional) choices ? marriage, divorce, leaving home, career changes, etc. Others are monetary ? buying a new car, home, starting your own business, investing, etc. Many are interwoven having aspects of both psychological and monetary.

The marriage decision means you have decided to live and share everything with a partner and also support that partner in every way including financial.

Investing in anything is at first mostly financial, but as you accumulate a larger and larger amount it begins to have a grip on your emotions. Greed and fear are the two great motivators in the investment community. Everyone wants to buy that $1.00 stock that goes up to $200 per share. Unfortunately, for most, the pot of gold remains at the end of the rainbow. As the years pass by and your investments become larger and larger fear of loss creeps into the subconscious. No one wants to lose.

During the past 3 years we have seen many people lose a great deal of their stock market investments. Both fear and greed have taken their toll. Wall Street has not taught you how to prevent loss and they never will. Until you have experienced losses you go along with the program and too late you realize there must be a better way, another path. Once you have found it you now have the decision to break away from old conventional wisdom. You realize that you have been following the wrong path.

Wall Street's maxims of Buy and Hold, Do Research and Dollar Cost Average have been and still are false. Once you have come to this understanding you will be on the road to successful investing. You will have taken the right turn on the path.

Losing money is not only a financial hardship but also a psychological burden. No one likes to be wrong, but hear this bit of advice about the stock market. It is OK to lose a small amount, but never OK to lose a large amount. Protection of your capital is of prime importance.

Whenever you buy a stock or mutual fund your first consideration should be how much am I willing to lose if it goes down instead of up? You can set that parameter at 5% to 20% of your investment. For stocks you can have the broker put in a permanent stop loss order, but for mutual funds you must set the price and make the call to tell the broker to sell you out. You are on the right path because you are in control. If you do sell with a 10% loss remember you now have 90% of your money remaining so you can find a more profitable vehicle. Ask around to find out how many of your friends now wish they had had one of those stop orders in place during the past 3 years.

The secret pathway to success in the stock market is selling, not buying.

Al Thomas

Author of "If It Doesn't Go Up, Don't Buy It!"

Never lose money in the stock market again.

In The News:

The 5 Best Stock Funds for Retirement Savers  Kiplinger's Personal Finance

Mr. Market

I constantly hear the talking heads on CNBC-TV, the radio... Read More

How to Make Big Money Safely in Stock Market

(1) Stock Market is Tough Place to Make Any Money... Read More

Market Globalization

Just 30 years ago the stock market was a shadow... Read More


First let's see what protectionism is. According to Mr. Webster... Read More

Understanding a Stocks PEG Ratio

A PEG ratio cannot be used alone but is a... Read More

Stock and Fund Dividends

When is a dividend not a dividend?The latest thing "conservative"... Read More

I Love You, Warren Buffet

Sometime around 1980, can't remember exactly, there was a flight... Read More

Fools Gold

The stock market has been in an up trend for... Read More

Shorting Stocks ? The Basics, Part II of II

After the publication of the first part of this two... Read More

Finding A Good Stock

One of the things people are always asking me is... Read More

Understanding Stock Market Indexes

A stock market index is a statistical measure of changes... Read More

Stocks & Oil, Sat Jun 18th, 2005

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

Paddle Your Canoe

At some time in your life you have been on... Read More

Selling Strategies - Setting a Stop Loss

Sometimes the best way of lowering exposure to risk is... Read More


Intervention. Now don't let that big word scare you. The... Read More

Play another Day

Money management starts with protecting your capital, realizing profits and... Read More


The Law of Chaos is the theory of random unpredictable... Read More

The Top 10 Reasons to Invest in Mutual Funds

Everyone who follows the financial news has heard of mutual... Read More

Investment Research - The Dalbar Study

Very few people, even professionals, have heard of the Dalbar... Read More

True Investment Road Maps

If you don't know where you are going any road... Read More


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

Dont Ask Your Broker

Unfortunately, most of you who are reading my column are... Read More

My Neighbor Got A New Car

I don't know what kind it is, but I saw... Read More

Evaluation II

As I said in Part I everyone in the insane... Read More

Good Stock Market Tip; Good Return!

Forget making a profit; instead focus on the income provided... Read More