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7 Simples Steps to Financial Freedom and Wealth Building - Step 2
Copyright 2005 William Tan
Simple Steps to Financial Freedom and Wealth Building
STEP 2: Achieve Financial Freedom - Choosing Your Escape Vehicle
Do you want to achieve financial freedom? For most people, this is constantly on their mind. If...
Can you afford Not to look After your Personal Finances?
Investing is a subject a lot of people don’t want to think about. And there is good reason for that. Investing seems scary. It either sounds like something only the rich do or something that only a skilled professional can do. But the truth is that...
Forex Trading: Investment Secret Of The Rich And Powerful
If you search on the internet you'll find millions of investment programs such as real estate, stock trading, bond trading, mutual funds, CDs, auction programs and various internet programs.
I have not done many internet income opportunities or...
The Conflict of Interest Game
Disgruntled investors are going after Wall Street once again, this time accusing one of investment bank Morgan-Stanley's high-tech mutual funds of making biased stock picks. Recent lawsuits allege the Morgan Stanley Technology fund was influenced...
The Shadow
The Shadow knows. There used to be a radio program called The Shadow where the hero, Lamont Cranston, the Shadow, would overcome the shadowy forces of doom by clouding the vision of those around him. “Who knows what evil lurks in the hearts of...
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PARACHUTE INVESTING
PARACHUTE INVESTING
by AL THOMAS
Ever jumped out of an airplane? It’s OK if
you have on a parachute. Pretty dumb if you don’t.
Every buy any stocks, mutual funds or Exchange
Traded Funds? It’s OK if you know how much you
are willing to risk. Pretty dumb if you don’t.
Parachute investing is buying an equity
with a parachute so you won’t risk all your money
or, better yet, give back the profit you have made
as the stock or fund went up and then goes down.
If you bought that hummer at $12 per share and
during the past couple of years seen it go up to
$52 you don’t want to give back that nice
profit, do you? With a parachute you can save
most of it. How?
When you invest in any stock of fund you
must know how much you will risk before you buy it
and how much of the profit you are willing to
give back when it turns down. Take that beauty
at $12. Instead of going up it went down. Are
you willing to agonize as it drops to $5? If you
had a parachute you would have jumped out of the
plane before it crashed. If you had an exit
strategy for your stock you would have sold it
before you lost a big chunk of your cash.
The secret of a safe investment is an exit
strategy. When you bought Mr. Twelve Dollars you
shook hands and told him I’d like to be your
friend, but if you change your name to Ten
Dollars I am leaving. Maybe that that is not
very nice, but nice doesn’t cut it in the
investment world.
Mr. Twelve Dollars said I am going up and
I want you for my friend. Please follow me and if
I falter you can leave and we will part friends.
Now that makes sense. You trail along and after
it goes to $52 it does falter. Do you know where
you are going to leave or are you going to ride
it go
back down to $12? In other words do you
have your parachute on?
That parachute is your continuing exit strategy
that is in place every day. In the investment
community it is called an open trailing stop
loss order. Any broker can put this in place for
you. You might be lucky enough to have a broker
who knows where to place stops, but
unfortunately there are not many of them.
The brokerage industry does not teach its
employees (brokers) how to protect customers’
money. If that is the case you might want to use
the old standard 10% rule. Have the broker place
an open stop every Friday at 10% of the closing
price of that day as it closes higher. Never
lower the stop loss. Brokers hate this as it
makes them work, but that is what they are there
for and that is how they earn their commissions.
With your parachute you can always protect
your original cash purchase from a big loss and as
your stock advances you can lock in profit as
the stock advances.
Every investment should have a parachute.
Al Thomas' best selling book, "If It Doesn't
Go Up, Don't Buy It!" has helped thousands
of people make money and keep their profits with
his simple 2-step method. Read the first chapter
and receive his market letter for 3 months at
www.mutualfundmagic.com and discover why he's
the man that Wall Street does not want you to
know. Copyright 2005
About the Author
Al Thomas' best selling book, "If It Doesn't
Go Up, Don't Buy It!" has helped thousands
of people make money and keep their profits with
his simple 2-step method. Read the first chapter
and receive his market letter for 3 months at
www.mutualfundmagic.com and discover why he's
the man that Wall Street does not want you to
know. Copyright 2005
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