Cash Is A Position






I go to the Money Show every year to visit with friends who have booths and are speakers. Then when folks are filing out of lectures I listen to their comments on what I know the speaker has been saying.



The Money Show is for investors from all walks of life; however, my guess is the median age is close to 60. Those who go have accumulated a nest egg and now are retired or very close to retirement. They came to learn more about how to make their money grow.

Last year there were 256 separate events not counting what was given in the Exhibition Hall. Almost without exception speakers were showing how cash can accumulate faster if the listener bought his product whether it was a mutual fund, stock, bond, partnership or who knows what. Are there that many money makers out there?

One speaker had an hour telling the market was due to crash and the thing to do was buy long term put options. He also said if you would not do that to buy some government bonds which were paying about 2 to 3%. The exit comments I heard were pretty well summed up by one lady who said, "Is he nuts. How can we live off 2%?"

When you are in a bear market the old saying is, "He who loses the least is a winner". No, you can't live on that small a return, but you can lose large sums by trying to be invested at all times. There have been many years in the past where cash with no percent return beat the heck out of the stock market.

Go back to 2000 and remember the NASDAQ lost 78% of it value in 3 years. Since March 2000 investors in the 50 hottest-selling mutual funds have lost an average of 42% according to the Lipper Analyst. Fidelity Magellan, the largest fund at that time remains a loser of 23% and Janus, 4th largest, is down 45%.The Buy N Holders have still not recovered their investments.

If you had sold out near (I did not say at) the top, say within about 10 or 15% your account would have been pretty darn healthy when it finally did start back up. You would not have lost 30 to 40% or more of your hard-earned money. That is what I refer to as a "reverse profit".

If you had put a loss limit on your portfolio of 10% on each position and taken out just enough to live on it probably would that have been less than letting it stay invested in the market? You can easily check that.

Putting 100% of your money in a money market while the market is declining does not mean you are not invested. You are invested ? in cash. This protects your savings from huge losses that can and do occur regularly in market cycles. I have written about those 16-year cycles previously.

The smartest investors set a limit from where they bought from the highest price their equity has reached as to where they will sell if it starts going down. Usually 10% is the rule of thumb, but it can be 5% or 20%. That is your choice.

All investors must learn that cash is a position or they are sure to lose their money.

Copyright 2005

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.

 Continue for more related information:
RELATED RESULTS:


 

Its A Bull, Its A Bear, Its Suptertrader!
The higher the market goes the more confusing are the "experts". In the September 14 issue of Investor's Business Daily new...

Successful Trading ? Taking Profits - Part 1
So you're started trading, you bought some positions with your online broker, you've set some reasonable stop-losses to ...

Market Globalization
Just 30 years ago the stock market was a shadow of what it is today. There were many fewer shareholders and the daily volume was a fraction of w...

What the SEC Really Thinks About Mutual Funds!
Let's go into the details of why non-indexed mutual funds are such a bad deal. When Arthur Levitt became the head of t...

Stock Trading Diversification
This is the continuing story of our two imaginary traders, Peter and Paul. ...

Stock Insurance
You have a lock on your house. You have a lock on your car. You have a lock on your tool shed. Do you have a lock to protect your stock market invest...

Planning Your Dive and Diving Your Plan ? Trading!
A colleague of mine just returned from a scuba diving trip inCozumel, which just happens to be one of my favorite p...

Acapulco - The Stock Market Dives
There is a famous cliff on the ocean in Acapulco where experienced divers jump into the sea. It is very dangerous because the water...

Some Good News for A Change
Before we get into all the good news out there, let us first take a look at what the term "news" really means. By definition, the term "n...

Swing Trading Strategies
Using Swing Trading Strategies and Technical Analysis when Trading Stocks to Make Consistent Trading Profits. ...
Table of Contents | Article-Max Directory