Stock market question from a "dummy"

[so.cal.fan]

Most of you long time PA members know So. Cal. Fan is very bitter and distrustful of the stock market, since I lost a good deal of my money in it in the crash of 2000.
However unfortunate, I still own a few of these "losers".
Some have even increased a little in value of late, no where near what this sucker bought them for, of course.
Anyway, my question is:
I have a book that a lady suggests using the 10% plan.
Had I followed this, my bank account would be much more today.....<SIGH> anyway, this is the plan:
You buy a stock and if it goes down 10% or more you sell it.
If it goes up....you hold, but then promptly sell from it's highest closing price when it drops 10%.
Is this a sound method?
Thank you in advance.....all theories will be carefully thought out by me! I really am interested in learning.:confused:

[trying2win]

So Cal Fan,

I've made a profit on the odd individual stock or stock fund in the past. However, collectively over the long run it's been a losing proposition for me when "investing" in these types of equities. I've made a commitment to not buy stocks or stock funds anymore. I compare buying them to trying to make money on casino games over the long run.

On the good side, over the years I'm ahead on the income investment securities such as mortgage funds and bond funds. The best over the past five years, have been investments in a few royalty trust income funds, like oil and gas funds and power generation income funds. They've returned excellent cash dividends with good income tax reduced features to them.

Even with royalty trust income funds, there are risk factors. Of course in the fine print with royalty trust income funds, they state that cash dividends are not guaranteed to be paid out every month (but so far they have to me). Also, oil and gas fund trusts must keep purchasing new oil and natural gas fields to keep the cash flow coming in. The price of the funds is also attached to the market demand and supply scenario. The good thing, is that after several years of collecting cash dividends, that lowers my overall price I paid for the fund. (lessens the concern of price drops).

I was willing to take the risk, and invest several thousand dollars in these types of royalty trust investments, but not all my investment dollars. I have more money invested in lower risk (not no risk) securities such as mortage funds and bond funds. Seems you can't get away from the risk versus reward scenario, when investing your money.

I'm retired now, so it's nice to have those cash dividends coming in from the royalty trust income funds. As we all know, the cost of living keeps going up. Quite often more than the meagre increase they give you in some pensions every year, so it helps to have extra income coming in.

Now, if I could only rely on a steady income from betting on the horse races LOL.

T2W

[sq764]

The way the economy and stock market have been, I would put any investment money on 'hold' into an ING Orange account and accept the 2% interest you will get. This is a modest, but solid return and it's guaranteed..

[so.cal.fan]

Trying2win:
Can I purchase those funds through Charles Schwab?

Sq764:
How long to do have to tie up your funds in an ING account?

[ljb]

I have found individual stocks to be somewhat like playing the horses. I do make a little bit of money on an index fund. Just something that follows the s&p 500. Most brokerage accounts have such funds. A fellow named Joey Adams once said. " The difference between playing the market and playing the horses is, one horse must win".

[sq764]

socal, you can withdrawal any time you want.. It's simply an online bank account.. We use it for our 'emergency savings fund'..

You get your cash in 2 days usually

[JustRalph]

Originally posted by sq764
The way the economy and stock market have been, I would put any investment money on 'hold' into an ING Orange account and accept the 2% interest you will get. This is a modest, but solid return and it's guaranteed..

No Way! Depending on what kind of money you are talking about, this is crazy........ So.Cal...............there are much better things to do with your money. There are a hundred questions that need to be answered before anyone can provide you with decent advice on this subject. Not for this forum.

So.Cal. let us see how this thread plays out...............
sq764

the S&P 500 was up 16% last year (that is from a google search, don't kill me if it is wrong) That is a middle of the road, right down the middle of the plate investment.........you can do better than 2% pretty safely.

[sq764]

ok, so after ridiculous fees and hoping you choose the right stock, what does that leave you??

I mean this is someone who got smoked on stocks and is contemplating testing the 10% plan, which means selling AFTER YOU LOSE 10% of your investment???

after this 10% loser is sold, I am up 12% plus any fees that were paid for the purchase and the sell.. so likely in the neighborhood of 15%..

[sq764]

Right after writing my previous post, I thought back to my college business classes.. And it's a no brainer that you must diversify...

Put some portion in ING and get your guaranteed $$

Put some in a CD and get your guaranteed $$

Put the 3rd portion into a solid stock


To agree with one thing Justralph said, you need to consider the amount of $$ involved and the length of time you are considering for this venture. (I disagree with the other 95% of his post)

[chickenhead]

SQ's right,

Long term investment=High risk=High Reward.
Short term=Low risk=low reward.

In all cases you should diversify, but if you're looking at long term you absolutely MUST diversify, buy index's, stocks in different sectors, foreign stocks, bonds, gold, spread your money around, oil, banks, high tech, low tech, CD's, don't get locked up in one place, some sector or another is always going up, and the trend is for them all to be moving up over time. You just need to keep from tapping out during the periodic rough spells any one sector will have.

And, ignore everything I just said, JR is on the money, don't take investment advice from me or anyone else on this board, get some real help.

[Tee]

so.cal.fan,

The best advice I could give u is educate yourself even further regarding investments & u can sift through the nonsense that even a so called expert might provide.












Disclaimer,
The above post is in no way intented to dismiss the knowledge of any PA member regarding business/investment know-how.:) :)

[cj]

Most people who lost a ton in the last crash made the same mistake. They got in at the wrong time, and/or they got out at the wrong time. Remember, you haven't lost one cent until you sell at a loss! I sold some, enough to not lose anything overall, and now I am reaping the rewards as I bought back most of what I sold within a year. I wish I had sold it all, but I'll know next time!

It is no different then horse racing, don't buy when everyone else is! When the tech craze hit, and you started seeing huge returns, it was time to sell, not time to buy more. When all the stocks hit the skids, it was time to buy. It really is pretty simple, don't do what everyone else is doing.

Forget the 2% thing, there are much better returns out there on very safe investments.

[JimG]

We're horseplayers...we have an opinion on most things. But think about it, would you go on a stock market board and ask for serious advice on betting the horses?

Jim

[osophy_junkie]

I would suggest the book "A Random walk down wall street" by Burton G. Malkiel. Great read for anyone interested in how the market works, and how to make money in it.

[JustRalph]

now you are getting good advice. From both directions.........

try this reading list..............

http://www.bobbrinker.com/books.asp

[so.cal.fan]

Jim:
Serious horseplayers have always impressed me as being some of the smartest people I know.
Some of the best financial adivce I have ever recieved has been from handicappers.
Some of the worst has been from so called "experts" in the field.
Had I listened to the advice of a man who sometimes posts on this board in March of 2000, I would have had considerably more money in the bank to invest.
This man begged me to sell all my high tech stock.......he was convinced of a big crash. Another lady who posts on another horsercacing chat room......told me the same thing one day in Feb. of 2000 at Santa Anita. I didn't listen.....thought they were wrong and kept buying more of the Nasdaq 100 at sky high prices.
I still own it, but I sure haven't gotten even yet.
I consider the advice of good handicappers concerning any investments very seriously.
Another man I knew years ago at the track who was very wealthy, told me that he had invested in stocks with brokers for years and years......and was about EVEN. He had the finest advice, or so he thought.
I am considering reviewing this thread.......possibly diversifying my funds following the advice of you handicappers.
Betcha I do okay!;)

[PaceAdvantage]

Originally posted by JimG
We're horseplayers...we have an opinion on most things. But think about it, would you go on a stock market board and ask for serious advice on betting the horses?

Jim

But you'd be pretty amazed how similar the posts are between the two (racing and trading stocks)....

Nobody really believes anyone else is making money, and those that claim to make money or are selling something are con men...LOL

[so.cal.fan]

PA
I disagree, the stock market message boards are way over the top and out to lunch for the most part.
We have a few of the types you mention, but most of us are far more hard working and honest.
I know this sounds crazy, but horseracing is probably a more honorable pursuit than stock trading! LOL

[PaceAdvantage]

But not as profitable.....

[so.cal.fan]

It depends when one got in and out of the market, PA.
so.cal.fan has never made big bucks on horses, but I can honestly say over the past 40 years that I have made modest gains.
Of course horseracing is our family business and my main focus.
I foolishly got into the stock market, because I was often making about a thousand dollars a day during the big tech boom!
I really was naive enough to think I'd get rich! I just loaded up on all the chip stocks and some biotechs........I did manage to make very large profits on Nextel.....sold at the right time.....but foolishly re-invested all my profits in the QQQ. at prices so high, I may get even if I live another 20 years!
I started this thread because I respect the opinions of many of our members......they are solid thinkers and probably don't invest unless they have researched very carefully.
I would like to invest a little again in the markets....but you can bet I learned my lesson.......I will at least have a good idea I am investing wisely.
Many people get into horseracing as I got into the market....they don't know a damn thing about what they are doing.....blindly follow some theory, with no research.....and lose.
I guess the bottom line is to be a knowledgable investor in whatever you chose to get into.

[chickenhead]

I worked for one big, heavily hyped start-up from 1999-2001, they threw quite a bit of stock to us at $0.10 a share, and gave us the option to buy a bunch more at $4.00 a share. I don't normally buy vested stock until I'm leaving a company, but with this one we were all so sure we were going to be at $100 share for tax reasons, and the relatively small cost, it was smart to buy at $0.10 now.

Another guy a worked with, a real nice, super conservative (meaning low risk, not NRA) scandinavian gent early 50's, never took any risks of any kind ever, he went to a financial advisor, this guy looked at the company and looked at the market and convinced him to buy as much $4.00 stock as possible, so Frank liquidated his 401K, and emptied about 80% of his retirement money into a huge pile of these stocks at $4.00 a pop. He was miserable from the stress this caused him, and unfortunately for all of us the bubble burst before IPO was ready.

I don't know what the moral to Frank's story is, I took three lessons from it: Don't risk what you can't lose, Don't get greedy, and don't go into a style that doesn't fit your personality. Three pretty good rules, no matter what kind of investing you're looking at. Oh yeah, the fourth rule, that investment professionals can be dead wrong.

The stock is on the market now, so I guess there is still some hope for Frank (and me).

[JustMissed]

Sorry I got on this thread so late.

So.Cal.Fan, Buy all of William O'Neil's books, very inexpensive.

He is the publisher of Investor's Business Daily which is a must if you are investing in the market.

Had you had O'Neil's advice available, you would not have lost a dime.

If you want more info, just do a google search for William O'Neil or Investor's Business Daily.

Good luck,

JM

[so.cal.fan]

Thanks, JM
That is the second recommendation for IBD guy.
I will definately read his book.
I have a friend in St. Louis who buys the IBD everyday.
She has had very good results, but works really hard at it......

http://www.investors.com/ibdstore/

The CDs look interesting.....

[Dick Schmidt]

Hi guys,

Haven't checked in here for a bit. Busy with the stock market and real estate. Since I have successfully made the transition from horses to stocks and commodities, I thought I'd chime in.

Let's put this question in the vernacular of this board. Horse race speak, so the speak.

Question: "I'm a successful stock market investor, and one day I thought I'd go to the track and really clean up. I started by betting the favorites because everyone else thought they were the best. I also hit some big trifectas by playing my social security number. This went on for a while, then I started losing. Rather than make any changes to my betting, I just watched my bankroll shrink. What did I do wrong? I just got a book with a mechanical betting system called the Due Column that says I'll never lose. Is it good? Should I ever go to the track again?"

Post this on any horseracing board and you'll get a LOT of advise. Read the Form. Study some books. Buy some software that gives you insights into the races. Don't play all favorites. Don't trust any mechanical system for playing or betting.

The public perceives the races to be a lottery with legs. To the serious player, it is a puzzle that can be solved often enough to show a nice profit if he invests enough time and effort. The stock market is much the same. It rewards those who put in the effort it takes to figure out some way to consistently show a profit. Here is how I did it:

Stop racing, along with as much of the rest of your life as you can, and read every book on the stock market you can find for at least 6 months. I took a year. My personal favorite author is Larry Williams and I would recommend you read everything he's written. Also, get any books you can find about Japanese Candlestick analysis (Nisson is the best here). Now, you may find other books and authors more helpful, but this is what set me on the path.

Decide how you want to bet. Long term? Short term? Pick six? They are all different at the track and in the market. If you are a long term investor, you are trying to call changes in the economy and the market as a whole. Figure to hold for years at a time and don't sweat the small changes. I figure about 3 or 4 trades a decade is about right. Since 2000, I've gotten out of the market in early 2000, and back in about 18 months later. Rule of thumb: if everyone you know is making money, and the headlines are screaming about how good the market is and how it will go to the moon, sell. When doom and gloom stalk the markets, buy. Check some old posts I made back when everyone was convinced the market would never recover back a couple of years ago.

Short term play is much different. You are in and out in horse or at most a few days. This is what I spend my time and bankroll doing most days. My investments I leave for years. My bets I cover in days. This is much harder to do than long term, but requires much less self discipline.

And for you Pick Six, swing for the fences types? Those who want to buy Yahoo at $1, sell at $200 just in time to get into Qualcom and Amazon? (I know a guy who did this. He doesn't work anymore.) Remember, this happens about once a generation, and it has already happened to ours. Good luck.

Start playing every day on paper. Yes, just like in racing, this will involve spending some money, but it is the only way to get an education. You already know what ignorance costs, so give education a whirl. Figure data costs and real time exchange fees to run two or three hundred a month. Some charting software would be a good thing to use. Prices vary, but figure to spend more than most racing programs cost. The good ones usually have free trials, but you won't have enough time to really understand them. Figure to spend at least a grand. The software I use is $3,000, but I paid for it in about a week.

Read even more books and magazines. Learn as much as you can. Attend some seminars if you can afford them (many are as much as $5,000 a day) given by your favorite authors (I cheerfully pay Larry Williams $3,500 a weekend). Read everything, talk to everyone, believe nothing. Everything is a fraud until you prove it otherwise in your own paper play. Never listen to touts (brokers) If they knew anything, they would be playing, not selling advice. The real gurus don't recommend stocks, they show you how to find your own. There aren't many real gurus.

Remember, you don't make money in the market, you earn it.

Dick

P.S. If you really hate the market, and find it's ups and downs to be deleterious to your health, the only other good long term investment I have found is real estate. I now own 10 houses around the country (all rented) including the "crown jewel", a beachfront condo on Maui. They have gone up an average of 11% a year since I bought them, which is an almost 100% a year ROI (I usually only put about 5% down). It has it's stresses too, but that's a different post.


"No matter where you go, there you are." - Buckaroo Banzai.

[so.cal.fan]

Gosh, now there is a challenge, Dick S. !
I could decide to devote a year to study the markets.
I'm sure you are correct, full time job.
I did invest in a very expensive newsletter back in 99'.....really lost my butt, too. One of their strong buys was Global Crossing!
It seems you have to read and absorb many different ideas then perhaps just intuitively know the right path for you?
I lost so much confidence, because I was such a believe in fiber optics......I was almost like a religious fanatic..........and of course you all know how WRONG that route was.......the only thing I did do right was to NOT INVEST IN ENRON......I feel so bad for the poor people who did.
I was just a sucker.....didn't know a thing about what I was doing, and was investing thousands of dollars! Expensive lesson learned.
I am so conservative on horse bets......I bet to win only and am very cautious making even a hundred dollar bet! This is on something I KNOW and have done well at for 40 years!
I can't believe I was such a FOOL in the stock market! GAK:eek:

[PaceAdvantage]

I would echo much of what Dick said. However, I wouldn't be so keen to go and read too many books. I think many of the books out there will do more harm than good. I think it's best to go into the market with NO PRECONCEIVED notions. It's best to just SIT AND WATCH A PARTICULAR MARKET, whether it be a single stock, index, or whatever, and study THAT MARKET. Get to know its patterns and its personality during different moments.

I read all the books I could get my hands on in the beginning, and I think it did me more harm than good. I wish I had just gotten some charting software, a real time feed, and studied a market or two WITHOUT TRADING ANY REAL $$. THEN after a few months of intense study, slowly start trading real money.

There's a LOT more to it than this, but it's a start.

[Dick Schmidt]

One of the few times I disagree with PA. I always read everything I can about anything I get interested in. The stock market isn't any harder than handicapping (easier in some ways), and the authors don't try to hide "the good stuff." In stocks, everybody wins when a method works, especially the guy who devised the method, as he is usually in early. Why reinvent the proverbial wheel; let someone else break trail for you.

I very seriously doubt that anyone is going to devise something like Japanese Candlesticks just watching the markets for a few months. It took master Japanese traders 400 years. Why not take advantage of what they have learned and use it? I do.

Approach it like you would a serious handicapping project, prove to yourself that you can do it and go for it. Remember to have fun.

Dick

This goal setting stuff can really work. “To crush your enemies, see them driven before you, and hear the lamentations of their women. To have your own State!”

[PaceAdvantage]

Some books are definitely worth it, especially ones that cover the basics, like candlestick charts, etc....

Others, that profess to have the "way and the light" are probably not going to help as much as they might hurt.

And I have to disagree with you about authors hiding the "good stuff." Especially when it comes to short term trading, people with a "good thing" certainly do NOT want everyone to know what they are doing!

If you frequent the big trading message boards, such as elitetrader.com, you will see that if a trader has a good thing, they always keep it to themselves.

If you have something that works, there is no reason to share. In fact, sharing will hurt you in the long run, as the more people looking to get into a stock at the same time, the better the chance that YOU are going to miss the good entry point.

Markets are efficient for the most part. If you have discovered some inefficiency, and you share it with everyone else, eventually, the inefficient will BECOME THE EFFICIENT again, and you will LOSE your edge!

As I said though, this pertains more to ultra-short term compared to more traditional investing.

[WINMANWIN]

best way to beat the mkt every x amount of years when a downturn happens LOAD UP. Over the years this payed off handsomely, unless its the end of the world, you know the mkt will rebound eventually, but who wants to wait for a big mkt downturn :eek: thats like not betting the races :D the mkt can batter our brains just like these ponies but worse. Imagine buying taser 1 year ago. the stock was like 3 bucks, went too
over $120.00 split once or twice I believe, and is around
$40.00 bucks as of friday up over $5.00 bucks for the day.
supposedly stun gun sales are gonna be better, AS law enforcement currently uses them and now, regular folks also will need a stun gun for safety, and can purchase them :o Just one of many stock stories that can make you a very happy person if one knew.Talk about hitting a CARRYOVER PICK 6, IF any of us bought taser lasr year at 3 bucks and rode it till last mth or so to $120.00
thats a SCORE a life change SCORE. Last monday they came out with good earnings news, and naturally I read a article from a renowed stock guru who made a nice case too SHORT THEM, I passed on taser, As I missed the boat earlier, naturally they were up over 12.00 buckos for the week also.........:mad: