Russ J. Alan
"Don't let an [economic] crisis go to waste"- -BUY STOCKS!
By Russ J. Alan
Up until a couple of years ago, I was enthusiastic about investing. I listened to Bob Brinker on Money Talk deny for years of the existence of a "bear market." I had a 401K and an IRA, both originally consisting of mutual funds. My mutual funds went up and up. The Dow was over 14000. Everyone wondered how high it could go while many analysts predicted a coming "correction."
I preached mutual funds. I envisioned a huge warehouse-sized room full of long tables with stock traders sitting elbow to elbow, day trading from nine to five, making money and preventing losses for their "fund manager," each in competition against each other to make the highest gains. The most successful traders would be awarded with bonuses, and the least successful would be on the road to unemployment. If the traders made money, the fund manager made money. If the fund manager made money, the investment company and I made money.
Just like everyone else's, my retirement funds started to slide. I listened to the experts, bought some foreign funds which went up temporarily, but they too began to slide. I sent angry emails to the fund managers of my mutual funds, based on my aforementioned belief system.
I now hold the opposite view: Mutual funds are not the way to go, there is no talent in the trading rooms, and I am convinced I can do just as good of job managing my own portfolio of stocks. I did as most other investors and sold my mutual funds, converting to cash positions.
There were two years worth of sliding. News of the bursting "housing bubble," AIG, Lehman Brothers, General Motors, Chrysler, Ford, Wachovia, global warming, cap and trade, Barack Obama and lots of other stuff left us all sure that doomsday was upon us. My favorite conservative talk show host, Glenn Beck, tells us every day that we should get out of the stock market because [doomsday] is coming and to "BUY GOLD" because the US dollar is falling and it's not going to be worth a plug nickel and China, Europe and Treasury Secretary Timothy Geithner wants a different currency on which to base the world's economy, so "you don't want to be stuck with a bunch of dollars, so BUY GOLD!"
Why is it that the gold companies tell us the worthless US dollar is about to crash, and we need to have all the gold we can get our hands on, and then they gladly take our worthless dollars and hand us over their gold? Why don't they just HANG ON TO THEIR GOLD? RIGHT?
Here is my opinion: We free-market conservatives, believers in capitalism, need to invest in businesses — companies — STOCKS. There are a lot of good buys right now that are incredibly under-valued, just because the stock market went down because Obama was elected. The market will go up, and it has been doing just that, and will make the worst president we have ever had look like the best president we have ever had (just like when the stock market went up when Clinton was president. It is bound to happen, it's our luck as conservatives. We might as well profit off of it.
For those of you who are not stock traders but want to be and are not sure how to get started, here is the method I prescribe:
1. OPEN AN ONLINE BROKERAGE ACCOUNT. My favorite is Fidelity Investments www.fidelity.com . (I am not affiliated with Fidelity, I am only a customer). Incidentally, you can trade stocks within a Fidelity IRA account just like in a regular brokerage account, and the IRS lets you deduct $5000 per year in IRA contributions and you also won't be taxed for capital gains on your profits!
[My favorite brokerage site]'s trades are $20 until you have 36 trades in a year AND $25,000 in account values, then it drops to $9 per trade. Yes there are cheaper online brokerage companies, but I have looked at all of them and I believe [my favorite brokerage site]'s website is the easiest to use, and you cannot find a better website with easier to use features including everything you will need to succeed. Just take my word for it, go with [my favorite brokerage site], and you will thank me later I promise (DON'T WORRY ABOUT THE COST OF TRADES. IT'S A NON-ISSUE).
2. Put in buy orders at night or on the weekend, to be filled on the next business day. Don't day trade. Day trading or the practice of buying and selling the same stock on the same day, will run you crazy. You want to day trade? Go to a casino.
3. Do #2 above, only when there was a LOSS on the Dow Jones Industrials that day. DO NOT place buy orders the night of or weekend after a GAIN on the Dow. Place buy orders for the next business day for stocks that have GAINED on days when the Dow has had a loss. (Reasoning: If a stock gains when the stock market is down, it has a better chance of gaining when the market is up (though not always). Lists of companies, their ticker symbols and real-time stock price are located on The New York Stock Exchange www.nyse.com and CNN Money website http://money.cnn.com/data/gainers/nasdaq/? .
4. YOU WANT LOTS OF SHARES OF LOTS OF STOCKS. I buy 100–300 share lots of stocks with a price below $3 per share. This is a numbers game. The more shares you have, the more your profit will be after any gain on each share. For example: If you have $350 worth of Apple (AAPL), you have 3 shares. If it goes up 10 cents, you have made a whapping 30 cents; on the other hand if you have $350 worth of Sealy Mattresses (ZZ), you have 131 shares. If it goes up 10 cents, you have made $13 that day. If Apple goes up $1, you made $30; Sealy goes up $1, you have made $131 dollars.
5. DO YOUR DUE DILIGENCE. See #4. Take the ticker symbol of the gainer on the Dow Down Day (DDD), and if you have taken my advice and went with [my favorite brokerage site], put the ticker symbol in the box next to "QUOTES." When that window appears, you have six tabs: Snapshot, Quote/Chart, News, Analyst Opinions, Fundaments, Tech Analysis. You have a wealth of information at your fingertips that gives you everything you need to form an opinion on whether you should buy that stock.
6. On [my favorite brokerage site], you can go to "accounts and trade>portfolio>positions" and see a list of your stocks, the number of shares, the real-time price, total value and gain or loss (if you follow my directions you won't have many losses). (You must have an account with [my favorite brokerage site] in order to view these screens.) There s a "COST" tab which will show you how much you have gained or lost to date in real-time since you bought each lot, which includes the commission you paid to buy it. See #7.
7. STOP LOSS: YOUR SAFETY NET. See #6 above. Place STOP LOSS sell orders. Once you have made enough profit on any position to cover the cost of a SELL order, take the total real-time value of that position plus the cost to sell ($20 or $9) plus any profit margin if you have it, and take that total and divide it by the number of shares you have of that position, and the result will be a price per share you can use for a STOP LOSS SELL ORDER. It is easy to input with [my favorite brokerage site], that will give you a price per share to use for a STOP LOSS sell order with the stipulation "GOOD TIL CANCELLED." With [my favorite brokerage site], this stop loss sell order will be good for 120 days, and if the price falls to the price you have selected, the sell order will automatically be filled as close to that stop loss price as reasonably possible, meaning you may experience a small loss if you haven't built in enough cushion, otherwise, you won't have a loss on that position. If the share price on that position continues to stay the same or increase, you will continue to own that stock.
Let's not let an "[economic] crisis" "go to waste" (Whitehouse Chief of Staff, Rahm Emanuel). Let's get back into supporting capitalism. Maybe we can get rich. Won't you join me?
© Russ J. Alan
April 9, 2009
Up until a couple of years ago, I was enthusiastic about investing. I listened to Bob Brinker on Money Talk deny for years of the existence of a "bear market." I had a 401K and an IRA, both originally consisting of mutual funds. My mutual funds went up and up. The Dow was over 14000. Everyone wondered how high it could go while many analysts predicted a coming "correction."
I preached mutual funds. I envisioned a huge warehouse-sized room full of long tables with stock traders sitting elbow to elbow, day trading from nine to five, making money and preventing losses for their "fund manager," each in competition against each other to make the highest gains. The most successful traders would be awarded with bonuses, and the least successful would be on the road to unemployment. If the traders made money, the fund manager made money. If the fund manager made money, the investment company and I made money.
Just like everyone else's, my retirement funds started to slide. I listened to the experts, bought some foreign funds which went up temporarily, but they too began to slide. I sent angry emails to the fund managers of my mutual funds, based on my aforementioned belief system.
I now hold the opposite view: Mutual funds are not the way to go, there is no talent in the trading rooms, and I am convinced I can do just as good of job managing my own portfolio of stocks. I did as most other investors and sold my mutual funds, converting to cash positions.
There were two years worth of sliding. News of the bursting "housing bubble," AIG, Lehman Brothers, General Motors, Chrysler, Ford, Wachovia, global warming, cap and trade, Barack Obama and lots of other stuff left us all sure that doomsday was upon us. My favorite conservative talk show host, Glenn Beck, tells us every day that we should get out of the stock market because [doomsday] is coming and to "BUY GOLD" because the US dollar is falling and it's not going to be worth a plug nickel and China, Europe and Treasury Secretary Timothy Geithner wants a different currency on which to base the world's economy, so "you don't want to be stuck with a bunch of dollars, so BUY GOLD!"
Why is it that the gold companies tell us the worthless US dollar is about to crash, and we need to have all the gold we can get our hands on, and then they gladly take our worthless dollars and hand us over their gold? Why don't they just HANG ON TO THEIR GOLD? RIGHT?
Here is my opinion: We free-market conservatives, believers in capitalism, need to invest in businesses — companies — STOCKS. There are a lot of good buys right now that are incredibly under-valued, just because the stock market went down because Obama was elected. The market will go up, and it has been doing just that, and will make the worst president we have ever had look like the best president we have ever had (just like when the stock market went up when Clinton was president. It is bound to happen, it's our luck as conservatives. We might as well profit off of it.
For those of you who are not stock traders but want to be and are not sure how to get started, here is the method I prescribe:
1. OPEN AN ONLINE BROKERAGE ACCOUNT. My favorite is Fidelity Investments www.fidelity.com . (I am not affiliated with Fidelity, I am only a customer). Incidentally, you can trade stocks within a Fidelity IRA account just like in a regular brokerage account, and the IRS lets you deduct $5000 per year in IRA contributions and you also won't be taxed for capital gains on your profits!
[My favorite brokerage site]'s trades are $20 until you have 36 trades in a year AND $25,000 in account values, then it drops to $9 per trade. Yes there are cheaper online brokerage companies, but I have looked at all of them and I believe [my favorite brokerage site]'s website is the easiest to use, and you cannot find a better website with easier to use features including everything you will need to succeed. Just take my word for it, go with [my favorite brokerage site], and you will thank me later I promise (DON'T WORRY ABOUT THE COST OF TRADES. IT'S A NON-ISSUE).
2. Put in buy orders at night or on the weekend, to be filled on the next business day. Don't day trade. Day trading or the practice of buying and selling the same stock on the same day, will run you crazy. You want to day trade? Go to a casino.
3. Do #2 above, only when there was a LOSS on the Dow Jones Industrials that day. DO NOT place buy orders the night of or weekend after a GAIN on the Dow. Place buy orders for the next business day for stocks that have GAINED on days when the Dow has had a loss. (Reasoning: If a stock gains when the stock market is down, it has a better chance of gaining when the market is up (though not always). Lists of companies, their ticker symbols and real-time stock price are located on The New York Stock Exchange www.nyse.com and CNN Money website http://money.cnn.com/data/gainers/nasdaq/? .
4. YOU WANT LOTS OF SHARES OF LOTS OF STOCKS. I buy 100–300 share lots of stocks with a price below $3 per share. This is a numbers game. The more shares you have, the more your profit will be after any gain on each share. For example: If you have $350 worth of Apple (AAPL), you have 3 shares. If it goes up 10 cents, you have made a whapping 30 cents; on the other hand if you have $350 worth of Sealy Mattresses (ZZ), you have 131 shares. If it goes up 10 cents, you have made $13 that day. If Apple goes up $1, you made $30; Sealy goes up $1, you have made $131 dollars.
5. DO YOUR DUE DILIGENCE. See #4. Take the ticker symbol of the gainer on the Dow Down Day (DDD), and if you have taken my advice and went with [my favorite brokerage site], put the ticker symbol in the box next to "QUOTES." When that window appears, you have six tabs: Snapshot, Quote/Chart, News, Analyst Opinions, Fundaments, Tech Analysis. You have a wealth of information at your fingertips that gives you everything you need to form an opinion on whether you should buy that stock.
6. On [my favorite brokerage site], you can go to "accounts and trade>portfolio>positions" and see a list of your stocks, the number of shares, the real-time price, total value and gain or loss (if you follow my directions you won't have many losses). (You must have an account with [my favorite brokerage site] in order to view these screens.) There s a "COST" tab which will show you how much you have gained or lost to date in real-time since you bought each lot, which includes the commission you paid to buy it. See #7.
7. STOP LOSS: YOUR SAFETY NET. See #6 above. Place STOP LOSS sell orders. Once you have made enough profit on any position to cover the cost of a SELL order, take the total real-time value of that position plus the cost to sell ($20 or $9) plus any profit margin if you have it, and take that total and divide it by the number of shares you have of that position, and the result will be a price per share you can use for a STOP LOSS SELL ORDER. It is easy to input with [my favorite brokerage site], that will give you a price per share to use for a STOP LOSS sell order with the stipulation "GOOD TIL CANCELLED." With [my favorite brokerage site], this stop loss sell order will be good for 120 days, and if the price falls to the price you have selected, the sell order will automatically be filled as close to that stop loss price as reasonably possible, meaning you may experience a small loss if you haven't built in enough cushion, otherwise, you won't have a loss on that position. If the share price on that position continues to stay the same or increase, you will continue to own that stock.
Let's not let an "[economic] crisis" "go to waste" (Whitehouse Chief of Staff, Rahm Emanuel). Let's get back into supporting capitalism. Maybe we can get rich. Won't you join me?
© Russ J. Alan
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