Buying New Issues

Has your broker been calling you recently with the "great opportunity" to get in on a new Initial Public Offering? With friends like that you don't need any enemies.

I don't care how good this new stock offering sounds. The chances it will stay even or go up are about 1 in 3 and I don't want to play those odds with my money.

Most of the new IPOs these days are from the technology sector. That is where the romance and big money has been, but the NASDAQ topped out on March 10 this year. It is a good idea to take a look at what has happened to these new offerings since that time.

The S&P500 Index has dropped only 3% since March 10 while the NASDAQ Composite has fallen 43%. Here are a couple of numbers you will want to remember for the rest of your life if you have any interest in the stock market. Sixty percent of the move in any stock is due to the category or sector it is in. Twenty percent of a stock price is due to the overall market movement and 20% is caused by the quality of the company itself. You can immediately recognize that even if you have bought the best stock it has only a 1 in 5 chance of going up if the other 2 factors are not working for you. Since March 10 the New Issues Index is down 67%.

With all the major market indexes in the sewer there is little hope for ever finding one of those new issues that comes out at $10 and runs up to $200. Those days are gone forever - at least in the technology field. The NASDAQ has a better chance of going to 1500 before it ever goes back to 5000.

For the next year, maybe longer, we are going to see the number of new issues dry up and almost disappear. And there are many other good reasons other than the overall market. In a new issue you have no idea how the company will perform. Will management make its projected goals? Is there any possibility of a profit? You have no track record for their price performance. Will the stock price trend up or down? The more of these unknowns you throw into the mix the less chance there is that the stock will go up.

Last year we had a raging bull charging through fences and tearing everything up and we all loved it. All we had to do was follow the bull. The bear has taken his place and is ruining the landscape. And you know what bears do in the woods. Be careful where you step - or put your money.

Cash

How many people went to a cash place this week? There is no inquiry that this market have scared the bajebers out of many investors, me included. Fortunately, I started going to cash some clip ago, but I did give back a significant amount of my profit.

Your broker never desires you to be in cash. You might take it out or put it in something else. "Don't worry, the market always come ups back." Yes, and hogs can fly. Fund managers are even worse. Because I urge selling out temporarily and going to cash makes not intend I don't have got a long-term program. It intends I don't desire to take part in a down market. CASH IS A POSITION. It is the same as owning Vanguard Index 500 when the market is going up and being in a Money Market Fund earning interest while the market is going down, but not losing your principle. Brand sense?

Brokers will state you over and over that you cannot "time the market". WRONG. Just because they are not smart adequate to make it makes not intend it cannot be done. I have got got been doing it for old age and have never been caught in a bear market. Even the Federal Soldier Modesty Board published a paper saying that "market timing" works. There are timing programs or services that tin be bought that are very simple and easy to understand. To protect your retirement finances you must have got this in place.

In my column last hebdomad I called the market a Stealth Bear. It looks like it have come up out of its den. You don't desire to be around when the bear is running loose. It can ache you.

During this past few hebdomads we have got seen some technical school pillory lose 80, 90% of their value, but how about good ole Proctor & Gamble dropping 30% inch one day? That is a stock held in a high percentage of retirement portfolios and hundreds, if not thousands, of common funds. It is going to be a long clip before we see new highs in the Nasdaq Complex and the ground is very simple. There are people and monetary fund managers who have many pillory that they would wish to sell to get "even". Know anyone like that? This effectively sets a cap on any resurgence back to the top.

I have got no thought if the market is going to travel lower, but the inclination is toward more than selling, not buying. This is a good clip to have got a place called CASH.

Investment Capital Gains

Have you bought any common finances this twelvemonth or late last twelvemonth while the market was doing its skyrocket thing? Last twelvemonth it was hard to lose money. This twelvemonth it have got been easy.

You should be calling your common monetary fund (they all have 800 numbers) to happen out if and when they be after to pay their capital additions and dividends. You might state to yourself, they won't be paying anything this twelvemonth because the monetary fund is selling for less now than it did at the beginning of the year. Think again. It is very likely that the common monetary fund manager took net income on many high circulars that he bought cheap last year. According to the manner finances are put up those net income are taxable to holders of the common monetary monetary monetary fund and not to the fund itself.

It is possible you bought a fund at $40 per share that is now selling at $30 per share and be hit with a 25% capital additions statistical distribution of $10. On paper you now have got a $10 per share loss and a tax measure based on the $10 per share distribution. That is adding injury to insult.

With this as a possible scenario it might be prudent to sell your monetary fund for less than you paid for it. You should work the numbers with your accountant to see if this mightiness reduce your tax bill. But you have got to make it now. You can't wait until after the common monetary fund declares its capital additions distribution. This is especially true if you have got purchased any high technical school or international finances during the past year. You can carry losings forward to adjacent twelvemonth to offset against net income and statistical statistical distributions next year.

The top numbers of common finances declare these distributions near the end of the year, usually starting in November with most of them in December. The rumours I hear are that the statistical distributions will be early this twelvemonth because of the poor public presentation of the bulk of funds.

This uses to everyone who makes not have got a tax shelter of some sort such as as a 401k, IRA, September or other similar investing vehicle.

One piece of advice I desire you to heed. Don't purchase any common finances now because they are "cheap". Wait until after they declare their capital additions and dividend distributions. You could be whacked with a large tax bill.

Choosing An Investment Stock Broker

If you desire one.

And I don't urge any broker with whom to merchandise who will be giving you advice on what to purchase and sell. When a broker talks it is a encomium for your money. My definition of a broker is one who do you broker.

The ground I state this is that when I owned my brokerage company I hired and supervised over 300 brokers. The existent number of good bargainers I could number on one manus and have got fingers left over.

Let's understand that a broker is hired by a brokerage company for one ground - to generate commission, not to do you money. He is trained to analyse pillory or common funds, but not to protect your capital. Pitifully, he believes he is. They never state you to sell before a stock falls to 50% of its value. Most of the clip brokers are left to themselves as to what they urge to their customers, but there are many brokerage houses that volition take a firm stand that they force some peculiar stock of the twenty-four hours or new Initial Populace Offering (IPO). Many modern times he have a quota - and you're "it".

Don't deal with a relative. Bash Iodine have got to explicate this?

If you dwell in a small town, don't deal with anyone who also dwells there. You don't desire everyone knowing your business and anyone in that local office can see your account if they desire to.

The average broker have 300 accounts and you cognize those with six and seven figure amounts are the 1s he calls. Those people with less then 100K seldom get attention. Understand you are on your ain which in most cases is best.

Be careful of any broker who recommends fading the market. I can hear him now, "This stock have gone so low it have to come up back". This is a death wishing for your money. Bottom choosers end up with fetid fingers.

A broker who names you and states he have a "system" must be highly suspect. If that system is so good then why is he willing to share it with you? He should be independently affluent by now. Be fishy of any broker who names you out of the bluish with a "story". I don't care how good it is if you don't cognize this "Billy Sol". These cats mention to you as mushrooms. I inquire why. Maybe because mushrooms are grown in the dark and Federal horse manure.

Never merchandise trade goodss with a stockbroker. There is a human race of difference in trading pillory and commodities. Stockbrokers don't believe fast enough. You shouldn't have got person who is used to drive a kiddie car trying to manage a Formula One.

Make any broker turn out what he says. Get references. What you desire from a brokerage company is proper executing of your order at a low price, not advice. Your best stake is a price reduction broker because they are not allowed to give you "advice".

Buy Low - Sell High

Now where have got I heard that before? I know. It was my broker.

So I took his advice and bought some of the pillory he recommended. I am still waiting for the 'sell high' portion of the equation. Everything he touted went up for a piece and now it is lower than when I bought it. It is so low Iodine can't convey myself to sell it. My capital have shrunk about 60% from where I started. That's a batch of money to me because it took a long clip to salvage it. What happened?

The brokerage company that your broker plant for put option out recommendations almost very hebdomad for assorted companies listed on the major stock exchanges. They have got simple things like Buy or Strong Buy. Then they have got a complex grouping of words used when they downgrade a stock. It never travels from Buy to Sell. No, it goes Accumulate, Underperform, Attractive, Market Perform, Neutral or some other meaningless term. If any stock is ever downgraded even one notch sell it immediately. Finally after a stock have lost 50% Oregon more than of its value it goes a 'Hold". And you cognize where you are holding it.

Last twelvemonth the brokerage companies gave over 33,000 stock recommendations to their customers. Of those lone 125 were Sell. On the NASDAQ exchange alone there were over 1,000 pillory that lost more than than 90% of their value. The "experts", known as analysts, were all revealing you to buy. Your child could have got thrown a dart at the Wall Street Diary in 1999 and done as good a occupation as almost any analyst. What I desire to cognize (and I believe you make too) is if they were smart adequate to state you to purchase then why weren't they able to state you to sell?

I'll state you why. Brokerage companies never give sell signalings because they don't desire to pique a company that mightiness come up out with a public offering on which they will do a killing. It is better to kill a few clients than lose out on respective million dollars. You pay committee and inquire for honorable advice, but you are being Federal disinformation.

Is there any manner you can protect yourself from this nonsense? Yes! It is called a stop-loss order. Brokers don't like them because then they have got to watch your account. He will state you you don't need it as he will watch your account. And hogs can fly. The average broker have got 300 accounts and unless you have a large 6-figure account you will be on the underside of the pile.

Anyone can put a protective unfastened stop-loss order for stocks. Most are about 8% to 15% below the highest shutting price. I urge that each Saturday morning time time you look in the paper for the Friday shutting terms of your stock and topographic point your unfastened halt each Monday morning with the broker. As your stock moves up maintain raising the halt and you will sell near the high. Never lower it. This volition lock in your net income or take you out of a losing position. I can guarantee you your broker will never name you to sell. Brokers are not taught to protect your capital.

This is the lone manner to purchase low, sell high, protect your capital and lock in your profits.

Bull or Bear?

Cat or dog? Maybe Zebra. Shucks, I don't know, but my broker maintains telling me it is a bull and to purchase this and that. It looks like he is right - for a change. I retrieve he said the same thing in 1999 and 2000 and I ended up losing most of my money. But it looks good right now.

Yes, it makes expression good now and I have got been a buyer since the center of last year. Are this another bubble? The talking caputs on CNBC-TV state we are back in the bull market again.

My one regulation have been to purchase when the market turns up and it sure have done that; however, there is another regulation that have kept me from losing money and that is to sell when the market starts going down. The nice thing about this is you don't have got to be a market "expert" to cognize when this happens. All you have got to look at is the terms of one of the major indexes such as as the S&P500 or the NASDAQ Complex to see when they penetrate their 200-day moving average. One that I watch all the clip is the Investor's Business Daily Mutual Fund Index that is in the first subdivision of the paper. You don't even have got to purchase it as you can read it at the library.

Anyone who states you he foretells when or where the top or underside of a market will be is usually guessing unless he have a proved existent clip path record of making those phone calls for many bull and bear markets. Predictors are usually wrong, but tendency followers are almost always right. The ground is simple. Once the implicit in facts, whether physical or emotional, come up into drama and a new direction is establish the stock market will follow that course of study until another major set of facts come ups into play.

This tin be seen when the market goes very overbought and overvalued as it was in 2000 and very oversold as it became in October 2002. A new set of fortune were initiated and the general market took off in another direction. These long-term trends are relatively easy to determine by anyone who will to listen to the voice of the market.

Long term tendency following have a drawback. You will not be a buyer at the underside or a marketer at the top because of the clip delay, but you will never lose large sums of money of money as many did from 2000 to 2003. The usage of this simple method will not necessitate research or tons of useless information that Wall Street take a firm stands you need. You will be able to determine on your ain when a major tendency changes and then move accordingly to either bargain or sell.

Those who have got got been wise adequate to detect proverb the tendency change and became buyers last Spring and Summer and now have nice profits.

Yes, it is a bull.

Buy and Hold Investment Philosophy

Wall Street have been sermon the philosophy of Buy and Hold forever. The worst portion about it is the small investor (and some large ones) actually believe it. Brokers and financial contrivers believe it, but when you demo them they can get a better tax return by timing the market they just say, "It can't be done". They are either lazy or stupid.

Most brokers have got not learned their trade - investing. John Webster states that agency putting money into something (stocks) for the intent of obtaining an income or profit. When people look at their brokerage statements these years they must inquire where their broker went to school. Investors could have got done better with a dartboard.

Brokers are not taught to do money. They are taught all the ordinances that come up out of American Capital that must be followed so the brokerage company will not be sued. To my knowledge none of them are taught the basic basics of increasing customers' wealthiness or protecting the customers' capital from loss.

Brokerage houses engage people to make reports about companies. They name them analysts, but today those occupations have got deteriorated into snowfall occupations to get people to purchase stock in a peculiar company. When you read the report you will happen it very professionally done with pretty images and graphical records and charts. Wow! I'll purchase that. And a few calendar months later you will wish you hadn't. When you have got a loss the criterion answer is, "Don't worry. You are in for the long haul. The market always come ups back". In your lifetime? Today there are 100s of pillory that have got lost 50% to 90% of their value and there is absolutely no hope they will ever retrieve those losses. But….you are in for the long haul. You now have got got the Buy and Hold philosophy.

Why make so many people cleave to this doctrine?

You have a stock you bought for $40 per share that went up to some profitable number and now is down below $10/share. You're come out of the closet 75% of your money. You are waiting for it to travel back up so you can get out "even" and I will state you "even" is a loser.

Many old age ago I heard a narrative about how they used to catch monkeys in Africa. A hole was made just large adequate for the monkey to get his outstretched manus in a hollowed out coconut meat shell. Fruit and Sweets were placed inside. The monkey set his manus in and gripped the goodies, but could not take his clinched fist. It refused to allow travel even when the huntsman came to set him in a cage. All the monkey had to make was allow spell of the candy and he could have got escaped.

Many investors are the same manner about the stock they bought. They won't allow go. The investor makes not desire to acknowledge he was wrong. You are not incorrect until you sell - just broke. Small losings will not ache you, but retention on tin set you in the poorness cage. Buy and Hold conventional wisdom will interrupt you. Learn to allow travel of the also-rans quickly and you will continue your capital.