The Bull Hunters Guide

We’ve covered a lot of investment tips in this blog so far, and the majority of them have dealt with the idea that you shouldn’t be motivated into making sweeping changes to your portfolio or overall investment strategy as the result of panic. In other words, we’ve stressed weathering the storm, because this is one of the most important lessons that a beginning investor can learn to set his or herself apart from the total amateurs. Today, however, we’re going to shift gears a little bit and start dealing with that part of the stock market that tends to get everyone excited: the fast-paced fluctuation.

Buy and hold forever?

We’re going to bust a piece of conventional wisdom right now. It used to be the case that there were certain stocks out there that one could buy and hold forever. So called blue chip investments that would continue to grow and grow throughout the life of the investor, providing a constant return and a continuous source of reliable growth. However, those were simpler times.

Changes to the marketplace

Nowadays, industries are much more competitive and there are many more fish in the sea. The internet represents a whole new arena upon which corporations do battle, and it has so far proven to be one that can change the face of the entire market in both positive and negative ways. It’s a different world, and it’s one that’s in constant shift. New technologies come and go (or come and stay) with a much greater frequency than they used to, and the old adages just simply don’t hold. Even the best investment can wither over time, and even if it doesn’t totally turn over and start producing losses for you, it could very well be the case that your money would easily be producing better results elsewhere.

Watch your investments

As such, always watch all your investments. Don’t take some for granted and just assume they’re doing well because they’re your “safe” ones. Actually look and analyze, all the time. Staying on top of the game and know how each stock you own is moving at any given time is the line that separates the uncertain, hesitant investor from the confident, successful one.

See you next week for part 7 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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We’ve talked a little bit in the past about avoiding panic and not succumbing to the urge to totally change your investment strategy due to a forecasted bottoming out in a typically sound industry or other similarly baseless projections. However, this of course does not mean that you should stick in there and weather every storm that comes along. Of course there will be a time when you actually should sell some of your interests and move on to greener pastures.

Adjusting or abandoning your strategy

The real trick is knowing the difference between adjusting your strategy and abandoning it altogether. Say for instance that much of your portfolio is occupied by investments in sound technological industries, like telecommunications or other technologies that have been around a long time and have become an integral part of human life. Huge surges and catastrophic losses are effects that tend to plague the life of new industries. The longer a stock has been around, the more it tends to equalize. Over time, the chances of a massive gain or loss will tend to stabilize and an investment can be considered to be lower-risk. Therefore, don’t panic in the case of these investments, even if they look shaky. You are very unlikely to “lose the farm” due to a single stock bottoming out, especially if the stock is in an area with a long history.

Selling stocks in your portfolio

However, like we mentioned, there will of course be times that you should adjust your strategy. Selling one or two of the particular stocks in your portfolio is a far cry from selling everything and starting over and should be considered a normal part of trading. The general rule of thumb to be followed is to look at each stock individually. If you have net losses in any stock, ask yourself whether or not you would buy shares in it today, as a new investment. If the answer is no, go ahead and sell it off. Chances are that waiting to break even on a stock like that will just frustrate, and in the meantime, you could be putting that money into a stock that will perform better.

Making a calculated move to greener pastures is what a smart investor does. This is adjusting your strategy, and is the technique to shoot for.

See you next week for part 6 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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The stock market has dropped 2 years worth of gain in the last few months.  One would be tempted to call it a large correction in a Bull Market or the start of a Bear Market.  Either way there are ways to make money in both markets.  I have personally not felt the drop since I’m 100% insured at the level I got in at and have locked away profits along the way.

Trust Me - Said The Smiling Bank Manager

The market has people worried!  It’s dropping and suddenly the “Fed” (Federal Reserve Bank of New York), a non-US Government controlled corporation that makes a living from lending money to it’s biggest customer: The US Government, decides to “issue”  Billions of dollars to “prop” up the economy…  Well, that money never existed in the first place.  Seriously, how is that going to help?  We all know it does, short term, but the long term effect is this:

• 150 Billion Dollars issued to the US economy (or was it 200? Does it really matter?)
• The money isn’t backed by squat! It’s simply issued. It is only regulated.
• Inflation devalues the existing currency in circulation, which will possibly increase interest rates. Oops! Who collects interest rates?
• The US now pays annual interest on that money, presumably from taxes as it surely doesn’t have many other sources of income. But the US Government doesn’t issue money, so how will it ever repay the debt?
• The US National Debt increases (by over 1 Billion Dollars per day). Remember, the money isn’t issued by the government.
• The downward spiral is fueled even more.

Money Is An Illusion

If money can just be issued without any backing (i.e. gold), then what controls the supply and demand?  Who controls whether we have another recession or depression?  Who stands to benefit from a major stock market crash and / or a depression?  Only really the people that issue and charge interest on money.  True value is running out over time, a bit like an option, melting away, like sands through an hour glass.

Are The Bears Here To Stay?

First of all, this doesn’t matter if you are financially educated.  You know what to do, right? I’ve already mentioned how I protect my investments.  There are many things to think about for the future direction of markets. I’ll mention one major one…

The current (42nd) US president has added more national debt to the US than the previous 41 between them.  Last I looked, the deficit was growing by USD700 Billion per year. China and Japan, between them, hold enough US treassury bonds and US cash to crash the US economy back to the stone age.  All military equipment (and the soldiers) around the world would need to be dumped in the sea, WWII style, because there would be no money to ship them home…

Another reason…

US hard assets are being sold off to former enemies (and future wanted enemies), such as Russia, Japan, India and China. Meanwhile US money is largely being invested in soft assets such as technology that ages (and depreciates) very fast, especially during war (or a stock market crash).  Hard assets, such as factories, can still produce product, regardless of the assets value.

Don’t get to carried away when you see the markets take a massive leap upwards next time. It will likely take the opposite direction the next day. Great for options traders! It’s volatile and will move in big jumps, reacting to almost artificial signs. Like the Fed pumping in 150 Billion Dollars of money it doesn’t even have to print. It’s like the Milk Man telling you that you need 4 litres of milk instead of 1 litre that you normally use. Why? No reason… just that you’ll need to pay him more for the extra 3 litres of milk.

Oh dear…

See you in a few days for part 5 of the “Basic Investment Strategies”

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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In the last couple of installments, we’ve talked about things like acknowledging that slumps and temporary downs are a normal part of the stock market, as well as the fact that analysis of past performance is not in any way a reliable indicator of future performance. Today, we’re going to put those two principles together to understand a little bit about how to deal with situations that look truly bleak; how to handle them without resorting to panic.

Panic is the enemy of your finances

Panic is the enemy in any situation regarding finances. Financial matters are extremely important to all of us because they represent more than our bank account or our portfolio, but also our livelihood and the quality of life that we are able to lead. As such, every financial decision is one that warrants a lot of sound deliberation and consideration before committing to it. It’s unfortunate, then, that the fast pace of the stock market sometimes encourages people to make rash decisions, especially when they think they see dark clouds looming on the horizon.

The downward trend of panic

Say that you have money invested in several different stocks, and you’re beginning to notice an overall downward trend. For whatever reason, this leads to a panic. You start to picture how it would be to lose every cent that you’ve invested and be reduced to nothing. You sell off every stock you own and adopt a totally new strategy, investing in a number of totally new stocks across the board, whose performance seems more likely to live up to your standards. However, in doing so, you miss out on a unpredicted surge in the stocks you just sold.

Adjust your investment strategy

If you had taken just a little more time to think about things, you might have realized that your stocks were in a sound industry, one that had been around for years. As such, the risk of a total bottoming out is virtually nil. You could have adjusted your strategy and maybe invested in some other stocks without totally selling off your current interests. However, panic robbed you of that potential.

Panic is the enemy. Let rational, sound judgment be the basis of your financial life, not it.

See you next week for part 5 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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The tip we’re going to cover this time deals with fads and trends and what effect they really have on particular stocks and the market as a whole. You often hear of people “analyzing” stocks by looking at their past performance and trends, in hopes of gleaning some bit of insight into how the stock will perform in the future. Despite the conventional wisdom, this is by and large a waste of time.

The Gamblers Folly

Ever hear of the Gambler’s Folly? Imagine a guy watching a Roulette wheel in Las Vegas. He sees it come up black an astonishing ten times in a row. He might say to himself, “That’s it. Statistically speaking, red is bound to come up next, the odds favor it!” and put all his money down on red, certain that it’s time had come. However, imagine as well that a different man who had not been watching the wheel just now walked up for the first time. Would it be more reasonable for him to bet on red as well? Of course not.

The reality is that each time the wheel is spun, there is a perfectly equal chance of whether it will come up red or black, and what colors have come up on the previous ten spins have absolutely nothing to do with influencing that outcome. The stock market, of course, isn’t just a game of chance, but the point still stands: past performance is a very unreliable indicator of future performance. There are just way too many variables involved in the market at any given time to think of things that way.

The Next Big Thing In The Market

Nevertheless, you’ll always hear people talking. They might go on and on about some great new technology or service that has been seeing astonishing gains recently. It’s “the next big thing“, they’ll say, and people tend to buy into it in droves.

However, the cold fact is that once people are talking about a stock, it’s probably already too late for you to get in on it. The reason they’re talking about it is the good past performance it’s had, and as we’ve just seen, that’s no way to judge a stock. Therefore, resist the temptation to look at past performance and follow fads in investing. You’ll never get ahead that way.

Instead, take the time to learn about the factors that really do influence the market and study them. It’s the only way to formulate a predictive strategy that can be called anything close to accurate.

See you next week for part 4 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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