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The Alchemist (04/02/2008)
By Al Thomas

Many of the pension and profit sharing plans forecast a 9% profit for the long term. Very few have made it.

Some trading methods advertised claim 20% and more. What is more important is how much they allow the investor to lose before pulling the plug on bad positions.

When speaking with a broker or financial planner all they talk

about are their winning trades and how much they made last year or for the past 3 to 5 years. Always ask to see their model portfolio for the 3 year period of 2000 - 2003. You MUST be able to VERIFY the trades. Not that they would lie, but maybe the memory isn't so good. If they don't have a real time model get up and go as this is a loser and they don't deserve any investor's money.

Financial experts who want investors money will try to mesmerize potential customers with Wall Street jargon. Forget it.

There is only one correct answer. How much profit was made during each year for the past 10 years.

If the investor is making his own financial decisions to buy and sell individual stocks, exchange traded funds or mutual funds there is one lesson that must be learned above all others. And that is selling.

The most important criteria of all is not to lose money. The secret of Wall Street is not BUYING; it is SELLING. That is the 10% solution to a successful portfolio.

Do you own any of these equities?

Google (GOOG) was 700+. Now 438. Off 37%

Citigroup (C) was 52. Now 20. Off 61%

Apple (AAPL) was 200. Now 143. Off 28%

China Index (FXI) was 220. Now 137. Off 40%

S&P500 Spyder (SPY) was 157. Now 131. Off 16%

And many stocks are down 50%.

If an investor is foolish enough to remain with a losing position he has no one to blame but himself. Brokers won't help.

Most financial planners do not understand how to protect a client's money in a bear market. It doesn't even have to be a bear market. Individual stocks go down and should be sold when they don't perform in bull markets.

If Mr. Investor was as smart as the professional trader he would know to set a limit to any loss in a position. When in doubt about how much to risk 10% from the highest closing price is a good number. A decline of 10% means the equity must be sold immediately. Do not wait for a rally to get out.

There is an old saying about bear markets: "The one who loses the least is the winner." Ten percent losses will not hurt your long term portfolio. Until investors learn to sell they will never make money in the stock market.

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 no charge on www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.

Copyright 2008 All rights reserved.



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