As always, I seem to learn a lesson by losing money. In this case, I was prepared for a trend to break downward. What I wasn’t looking for was a trend to break upward. My new rule, once a trend is broken, UP or DOWN, sell.
JOEZ was set nicely for a good upward trend. I was excited about the chart and the upward movement it was making. I bought it at just the right time (at the bottom of it’s trending cycle). It did everything I expected. Then one day, bang, it jumped 15%. 15%! Yes, what I should have done was sell it. The trend was broken. Unfortunately, I was only tracking a trend that broke it’s trend downward. The next day, bang, 15% loss. I went from a $200 profit to a $6 loss. Of course, my trailing stop loss kicked in and sold.
Moral of the story:
When a trend is broken (up or down), it’s time to sell.
I’ve had a few days with my iPad and I can honestly say this has potential to be a big technology changer for everyone. This also includes investors. The new mobile society has become even more capable with this device.
What does the iPad have in store for Lunch Break Investors? Here are a few of my thoughts on how this will change it all:
1. Full web browser. No more squinting at the mobile version of our favorite financial site. I was able to log into my Scottrade account and view charts, financial data and news. Just like on my laptop. The only drawback I’ve had so far is that I can’t use the drawing tool on the stock chart. So, I’m still not at the point that I can completely know if a stock is trending.
2. The every growing awesome apps. The Apple app store has enough financial apps that should suit anyone’s strategy. I’ll start reviewing those over the next few days.
3. Numbers is the Apple version of Excel. This is an amazing application. I’m in the process of converting my stock tracking spreadsheet to it (I currently use Google Docs). Again, there is one draw back to the app, it will import Excel documents, but not export them.
4. iBooks, Knook (Barnes & Noble) and Kindle (Amazon). These are the three big boys of the ebook reader market (sorry Sony). Barnes & Noble and Kindle both run on the iPad. What does that mean for Lunch Break Investors? No more heavy books! You can now buy all your favorite books on your preferred format and read away.
5. The video player is much better on the iPad than on the iPhone/iPod touch. Now those videos from podcasts and iTunes U are much easier on the eyes. Time to upgrade your financial knowledge.
Those are my thoughts, do you have any to share. Post a comment below, I would love to hear from you!
There isn’t a strategy that will make you rich quickly in the stock market. I’ve seen the ads for making millions investing in penny stocks and the ads for how to make millions in the stock market. It just doesn’t happen.
Let’s do the math:
To make a million dollars in one week:
1. Invest enough money in stock that can be sold for a million dollar profit.
• Let’s say you have a stock that will go up 10% in one week.
• You’ll need to invest $10,000,000 to make your profit. If you have that much money, why do you need to get rich quick?
2. Invest $1,000 that grows to a million in one week.
• You would need to find that wonder stock that will grow 1,000%. To my knowledge, that doesn’t happen.
Sorry to burst the “get rich quick” bubble.
But, there is a way…
What you can do is grow your wealth using the stock market. Investing is more like growing a garden than winning the lottery (I’ll do that comparison later). Like a garden, you need to sow good seeds or in this case buy good stocks. You also need to weed out the bad stocks that bring down your portfolio.
Some ways to do this are:
1. Value investing
2. Large Cap Stocks
3. Small Cap Stocks
4. Trending
I won’t include day trading, because this is too risky. Besides, I’m a lunch break investor. I don’t have time to sit around watching the stock market. Any strategy should be easy to follow and not take up to much of your time.
I’m sitting at my favorite coffee cafe having a tea and using their free WiFi. I try to be as careful as I can when I use free Wifi. How do I know that one of the employees don’t have some high tech way of tracking my log ins and passwords? I know this sounds paranoid, but it is possible to do this.
This is why I list mobile broadband on my what you need list. If you are not using a connection you can trust, DO NOT enter user names and passwords to sensitive web sites. Someone could steal your information. You can imagine how scary it would be to log into your brokerage account only to find all your money gone.
I use Scottrade and thought at first how dumb it was that I could not make a withdrawal from their web site. I had to either call and have them snail mail me a check or sign up for the ATM/Checks. Still it seemed odd, until I started looking at how to be more secure. Now I’m thankful that if someone could break into my account that couldn’t steal all my money. What they could do is sell my stocks or buy bad stocks that will definitely lose my money. This option is no better than having my money stolen. Would someone do something that horrible. Yes, they would!
Tell me your thoughts in the comments section on what you think about security. Have a good tip? Share it!
I’ve been reading the “80/20 Principle” by Richard Koch and it has me thinking about my portfolio. Does it have a large distribution of winners versus losers?
After looking over my notes, I’ve decided that yes it does. There is a smaller portion of my portfolio that makes the most money versus the number of stocks I’ve bought/sold.
This makes for some interesting pondering. I invest in more stocks that lose money than make money. Yet, the ones that make money make up the difference plus add profits. So, this just proves that it’s not how many winners versus losers that you have, but how well the real winners do.
To wrap up this odd post. Cut your losses early, don’t buy into stocks that are losing money and invest more into the winners while they are winning.
Do you use the 80/20 Principle when you invest? Let me know in the comments.
Is your portfolio stressing you out? I know mine has. It wasn’t until recently that I realized how much stress it was causing me. Automation has helped reduce my stock portfolio stress greatly.
Automating my portfolio probably won’t make me as much money as an overly watched portfolio would. Let’s be honest, I’m giving up money when I set the trailing stop loss.
At the end of the day, if I’m making money or at least limiting my loss, then I’m ok. The extra bit of money is not worth the enormous stress I felt when I tried to micromanage my portfolio.
How much stress is your portfolio causing you? Share your stress with us in the comments below!
The stock watch list is you’re shopping list of stocks. This is an important list. When the market has a correction or when the stocks you want move into the range you want to buy them in, this list is your short cut. Think of this as your stock cheat sheet.
In an accessible place (handy dandy paper notebook, digital file or a whiteboard*) list the name of the stock, stock symbol, buy price range and the reason why. Why list the reason why? You’ll want to recheck your reasoning in case it changed. If you are buying on a trend, list that. You’ll want to check on the trend before buying. News is another good reason, make sure the news you were looking for happened.
The best way to create a list
Buy it. Seriously, buy it. I used to waste so much of my free time combing through the news and web sites trying to find the next big stock to buy. Why waste your time? Buy a list, there are plenty of services that can offer good selections. You can even buy a list on what type of investing you want like small cap, large cap, value investing and swing trading.
Here are a few services that sell lists:
Investor Business Daily:
Top rated stocks under $10
IBD 100
IBD 20
The 100 and 20 lists are published in the ever awesome Investor Business Daily. I’ll admit I’m a fan boy for this newspaper. I subscribe to it and the “Top rated stocks under $10”. I’ve made money from both.
Fools:
Hidden Gems – Small Caps
Global Gains – International Stocks
Inside Value – Value Stocks
Rule Breakers – High Growth Stocks
Income Investor – High Yield & Growth Stocks
I have not personally used these lists, but I’m a huge fan of their books and web site.
The Street:
Cramer’s Action Alert Plus – Jim Cramer sends out his buy and sell decisions.
Breakout Stocks
Market Movers
And many more….
The Street offers a wide variety of lists including Jim Cramer’s personal portfolio. Love him or hate him, he’s entertaining. I don’t personally use The Street’s services or web site. I was a fan of Jim Cramer’s show before I decided to cancel my evil satellite service.
Good luck and happy trading!
* I remember blackboards, but my kids have informed me that they are whiteboards now. It’s unfortunate that they will miss the fun of cleaning the chalk from the erasers (yuck).
There are a few things you will need to use the Lunch Break Investing strategy. If you are reading this, chances are you have most of them.
1. Computer Access (I know, duh!)
If you do not have easy internet access then a laptop or netbook will be useful. For security reasons I would recommend mobile broad band. This is the most important item on the list.
2. Stock Watch List
This is your master cheat sheet. Put it somewhere you can easily access it. List the stock symbol and buy price. When the stock is close to your buy point, buy!
3. Written Strategy
It must be written and accessible. Following your written rules will eliminate some emotion and will protect your capital. Never guess on your rules. Write them down and follow them!
4. Cell Phone
Not really a must, but can be very useful. A smartphone, like an iPhone, is not a replacement for a good laptop/netbook, but it can give you quick easy access. I have bought stocks sitting in my car waiting on my kids to leave school. Getting text message alerts on stocks is also useful.
Post your list of necessities in the comments. I would love to see how everyone is using technology and gadgets to do better investing.
Trailing loss limit is a great option for people who can’t watch their stocks. The problem I have run into is which to choose, percent or a base dollar amount. I love percents when it come to profit, but is it really the best option for a loss?
Example:
You buy a stock at $10 with a trailing loss limit of 10%. The loss limit would be $1.
Let’s say the stock makes a move:
$12 – loss limit of $1.2 or $10.80 : Profit of $.80.
$15 – loss limit of $1.5 or $13.50 : Profit of $3.50.
Now let’s look at the dollar limit:
$10 with a trailing loss of $1.
$12 – loss limit of $1 or $11.00 : Profit of $1.
$15 – loss limit of $1 or $14.0 : Profit of $4.
The numbers are convincing. I can speak from experience that the percent can bite into your profits quicker than the dollar amount. The biggest drawback of the percent is that it gets bigger as your profits grow.
Good automation should never limit or sacrifice your capital and profits.
A trailing stop loss allows an investor to set a loss limit (dollar or percent) on their stock. As the stock trends upwards the limit follows. Example: If you set a $1 trailing stop loss on a $5 stock and the stock drops to $4, it auto sells. If the stock moves to $6, the limit is $5. This a nifty option that protects your capital without constant monitoring.
This is handy for you lunch break investors. Say you go to lunch and have a nice burrito. You find the dream stock that is going to make you millions. You buy! Just in case, you set a stop loss at 8%. Now this awesome stock grows and grows. Then one day, bang! It’s not a hot stock any more. Your trailing stop loss kicks in and sells at 8% under the last “up” closing price. Now you made millions without trying. Or in some cases stopped your loses before you lost a bug chunk of change.
Use trailing stop loss to protect your capital and profits.
