So you have a simple choice here—you can do it the hard way like I did, or benefit from my experience and do it the easy way. Now by easy way I don’t mean some foolproof method that removes all effort and thought like throwing your money in a mutual fund and hoping for the best. Maybe we’ll call it the smart way instead.
Here’s the hard way. The markets can climb or fall 400 points in a day. So you buy into an uptrend, thinking it will continue, it drops, you panic and sell at a loss. You bought high and sold low.
Oops, that’s backwards, isn’t it? You know you are supposed to buy low and sell high. Then you do it again — and again. Loss, loss, loss. It doesn’t take too many of these to wipe out your investments.
And here’s the smart way. You can benefit from my experience learning how to control losses, and over time see your wins outpace your losses.
I learned this one the hard way as I got into the commodities markets years ago. Commodity markets have often been volatile like this because they are highly leveraged.
For example, when I was trading crude oil, if the price went up a dollar a barrel I made $1000. And if it went down a dollar, I lost $1000. Oops. Note to self: Need to learn how to minimize losses. It was great real world experience, including the time I almost wiped out one of my commodity accounts before I caught on.
You could go do the same thing, that is, almost wipe out an account, and learn the hard way. I guarantee you this is a learning experience. Or you can take advantage of the stop loss lessons I learned and avoid the pain, taking the smart way.
Or here’s another case of the hard way. Markets and stocks can also go into a long downward spiral. And many people hang on, hoping and wishing it will turn around. I call this the hoping, wishing, praying syndrome. And they watch their stocks auger into the ground and can’t recover. I learned that one the hard way years ago while trading options on Boeing stock — which I felt sure would turn around. Talk about a plane crash — I rode that one right into the ground.
You can take that plane ride too — another real learning opportunity I assure you — or you can benefit from my experience — taking the smart way —and know when to get out by learning my simple stop loss rule—before you crash land.
And you can blindly buy and hold stocks. But those days are over — that leads to the hard way. I said blindly for a reason. Because there are certain stocks you can buy and hold. But you have to know how to find them. I show you this—the smart way — so you can sleep better at night.
But don’t try to guess because they aren’t necessarily what you think. I know there are stocks out there everyone thinks are great — I mean — it’s just common knowledge — but in fact they are not.
That common knowledge can cause you some real financial damage — the hard way. I can think of one stock right now, considered great, that is on the verge of bankruptcy. And just the other day a work associate was telling me proudly how he had invested in it. I mean, he was seriously proud of this investment. It was a great company. Note I said was. Was as in years ago. But not today. He’s heading for a crash landing.
You don’t want to be doing what he’s doing — that’s the hard way. Not when you could be learning how to …
• Find special stocks that truly are buy and hold quality.
• Get better returns on your money
• Review just the bare essentials you need to increase your odds of success.
Now success in the stock market these days may seem an odd turn of phrase to you. After all, I said these are perilous times. And they are.
But they are not hopeless times.