Hold Em and Fold Em

When most analysts, financial planners, fund specialists and investors try to decide whether to buy a particular stock they immediately go to the financial statements to determine the growth potential of the company. Numbers and more numbers. Then management analysis and industry speculation. Unless you are an experienced financial analyst (and there are not very many good ones) the numbers in the reported statements can be very misleading - just as the company Controller wants them to be.

Let's not consider fraud as there has been plenty of that both here and abroad. They are all honest (I hope). Most corporate executives want to remain within the law so they report statements that are true to the FASB - Financial Accounting Standards Board.

As the old saying goes, "Numbers don't lie, but liars can figure". If you are good with accounting techniques you can make a bankrupt company look good - on paper. On CNBC-TV many folks watch the CEOs telling a great story about their company. You sure don't expect them to tell you the whole truth and nothing but the truth, do you? That is why I always hit the mute button. And many times when you look to see what the insiders are doing in this wonderful (?) company this executive and his buddies are selling out.

Then there is Morningstar that gives us those twinkling heavenly bodies. Nothing like a 5-star mutual fund - that has lost money for the past 4 years. So much of their information is old and if they know it you can be sure that has already been factored into the current price. How about those peer groups? Suppose this particular peer group is ranked 99th out of 100 or even 15th or lower. One question: why do you still own it?

Why are you putting your money in the stock market at all? The idea was to make more money. Right? Yet the majority of little investors will hold a stock or mutual fund while it goes down and down. Wouldn't it make more sense to sell out once it loses a certain percentage from its highest price after you buy it? If you bought it at $20 and it is now $40 is it now time to sell? I don't know so why not let the price action tell you. If you only wanted to risk 10% when you bought your stop-loss would have been $27. It now should still be 10%, so you will be out at $36 if it starts down. Suppose you tracked that stop all the way up to $80? This is why I have always preached that stops make you money.

The best (?) analysts know very little more than you. They just have a bigger vocabulary about the market. You and your dart board can do as well. All any truly smart investor needs is common sense and the ability NOT to fall in love with any position. Know when to hold 'em and know when to fold 'em.

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

Decoding Dick Davis Digest Cabot Wealth Advisory, MA - 7 hours ago For investors interested in more than just individual stocks, mutual funds and ETFs are also covered in the Digest. Diversification is an important ...

Law School to Provide Tax Help Inside INdiana Business (press release), IN - Jan 5, 2009 Taxpayers with annual income of $42000 or less are eligible for the help if they have not received income from the sale of stocks, mutual funds or homes or ...

$72 billion was pulled from market in October The Tennessean, TN - Dec 24, 2008 By ES Browning • THE WALL STREET JOURNAL • December 24, 2008 One of the hallmarks of the long market downturns in the 1930s and the 1970s has returned: ...

Valparaiso University law school to provide tax help nwitimes.com, IN - Jan 5, 2009 Taxpayers with annual income of $42000 or less are eligible for the help if they have not received income from the sale of stocks, mutual funds or homes or ...

New Money features for you USA Today - Dec 15, 2008 They include: •Year-to-date returns for stocks, mutual funds and exchange-traded funds (ETFs). These can be found by entering the name or ticker symbol in ...

Like other stocks, mutual funds show heavy losses during 2008 LubbockOnline.com, TX - Dec 27, 2008 By Tim Paradis | AP NEW YORK - There was one safe bet that mutual fund investors could make in 2008 - that the stock market was a place to lose a lot of ...

High school investments team wins game Greenwich Post, CT - Jan 4, 2009 The Greenwich High School investment course is more akin to a college-level course covering stocks, mutual funds, bonds and other securities. ...

Value? Growth? Both! Motley Fool - Jan 2, 2009 The distinction between value and growth stocks is such a bedrock assumption that Morningstar routinely classifies stocks, mutual funds, and ETFs as one or ...

Be wary of US treasury bonds in 2009 Stockhouse, Canada - Jan 5, 2009 They pulled money out of stocks, mutual funds, money market accounts, even bank savings accounts and CD’s, and poured it into US T-bills and bonds at a ...

City pension funds may cost taxpayers Allentown Morning Call, PA - Jan 4, 2009 ... the crumbling economy has pummeled Allentown's pension funds, which rely on stocks, mutual funds, real estate and other investment tools for growth. ...