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The Alchemist (12/05/2007)
By Al Thomas

BUY A GOOD STOCK AND PUT IT AWAY - NOT

During market downturns you might call your broker and ask him, "What is happening to my account? It is losing so much money." The standard Wall Street answer is, "Don't worry, the market always comes back."

It looks like we are in the beginning of a major bear market and no one knows how far down it will go or how long it will take to come back. This may not be any 1929 crash, but that one took 25 years to recover. Do you have that long?

In any bull market everyone is happy as their stocks and mutual

funds are making profits. That's how people retire. During the bear phases (and they come at least twice during any 10 year period) the market takes away all or most of the profits.

Both technical and fundamental indicators are bearish. The credit crunch is not going away. Oil is closing in on $100/barrel, the U.S. dollar is sinking, consumers are slowing purchases, inflation Is higher than government statistics indicate and the Fed seems confused about what to do. None of those are bullish.

Brokers have been saying since time began to ‘Buy a good stock and put it away'. What is a good stock? That's easy - it's one that goes up and does not go down.

The grandmother of all stocks is American Telephone and Telegraph, AT&T. In 1985 it was $5/share and rose to $58 in 2000. A great move. Then it took away huge amounts of profits with a fall to $20 in 2004 and has since doubled to $40. Where will it go from here - $58 or $20?

There are literally thousands of stocks like this that have made great profits for investors and then taken back most of those gains. Unless there is an exit strategy in place the poor investor (pun intended) will remain that - poor.

Buy a good stock and put it away. Take a look at the price fluctuation for the past 10 years of General Electric (GE), 60 to 20, now 40. General Motors (GM), 90 to 20, now 30. Coca Cola (KO), 87 to 40, no 60. And many more. These are considered "good" stocks. This also applies to all index funds.

Some of these may make new highs, but if we are in a true long term bear market they will decline further. If you or your broker or financial planner does not have an exit strategy to protect your money you could lose 40% to 60% of what you have saved.

The only "good" stock or mutual fund is one that does not go down. Is it one you own?

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 at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

Copyright 2007 All rights reserved.

 

 

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