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  Tuesday July 29th, 2014    

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The Alchemist (07/09/2008)
By Al Thomas
Cash is a position

You will never hear that from any broker. Even the discount brokers won't utter it.

Almost every investor I speak with tells me his account has lost value over the past several months. Most say they have lost about 20%. It is going to get worse. Brokers tell investors that mutual funds are "safe".

Safe from what? Certainly not from seeing your money disappear. They never want you to sell. Why?

There are many hidden fees even in no-load mutual funds. Between the fund and the brokerage company they are skimming about 2% of your money every year. There are a few that do have less than ½% expenses, but they are few and far between.

In a brokerage company if a broker had his clients go to cash he would be fired. That piddling 1% skim means a great deal to the office manager. His office is rated on the total amount of funds. If one of his brokers suddenly had his clients transfer several million to a money market account the next day the broker would not have a desk.

Mutual fund managers are paid by the total amount in the fund and NOT by how well or how much they make for shareholders.

When a broker gets his registration he is given two manuals. The first has all the rules and regulations of the Securities and Exchange Commission (SEC). He must not violate any of these or he will lose his license.

The second is a sales manual on how to open new accounts. That is basically every broker's job - bring in new money and lots of it.

There is no third manual. What third manual?

That is how to make money for customers, but more important how to protect a client's money from loss. During the 2000 - 2003 crash that saw the NASDAQ evaporate 78% most brokers were in shock.

They asked their boss what can we do. He either did not know or was not allowed to tell them.

Brokerage companies will sacrifice their customers rather than try to help them preserve their capital.

Seems pretty horrible. That's life on Wall Street. The current credit crisis is all about the greed for money. The little guy in a local office that you know just doesn't know that he doesn't know. He was never taught, It is not going to change.

It is your money. YOU must protect it. There are two choices. Find a fee based broker or financial planner (and most of them don't know how to come in out of the rain) or YOU must have an exit strategy. Check the portfolio of the broker to see what he did in 2000 to 2003. Make him give references.

You may not like what I said. You will wish you did when it comes to retirement time.

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 Wall Street does not want you to know.

GET RICH QUICK TRADING COURSES

I love those full page ads in financial publications telling me how wonderful their class is and how it will make me rich - or my money back. Yeah, and pigs can fly.

Most of the classes will provide a book, various manuals and software. There will probably be real time trading classes taught by an experienced trader. He does know what he is doing as he has been doing it for YEARS. There are nuances to any trade that is made during class that cannot (will not) be explained to the students.

What I have seen of some of these classes is they try to teach everything about how to trade. The options classes are the worst as they teaching highly sophisticated techniques that a novice should not attempt. They don't tell the student who has probably paid several thousand dollars for the course that he should learn only one, two or at the most three techniques and learn them well. They try to teach all about everything. No normal person can absorb it much less apply it in real time by themselves. Of course, you must become a technical analyst also. Usually that is an extra class for additional money.

I have seen new exchange members tapped out in about 6 weeks. They would not have bought the membership unless they thought they knew enough to survive. It is very different when you have your own money invested.

Having survived as an exchange member for 17 years and floor trader there is one thing I know. You are not going to learn how to trade with any piece of software or a few hours in a classroom.

It is going to take time. A trader must devote many hours of study and paper trading until he has found the few techniques that work consistently. A really good method will work about 80% of the time, but not make great sums of money each time. There is no silver bullet. Paper trading is totally different from real time trading when you have your own money on the line. Immediately emotions get in the way.

One other facet is never told to those parting with their money.

You must have a certain type of personality to be able to handle the stress of making and losing money. There are many Type A's, but that doesn't mean you can be successful. It is a mental thing.

There are people who do teach traders to be successful. They change the mind set of the person. You can find books on it (best one is by Van K. Tharp), but I don't know if that can be self taught. Floor traders who were making $50,000 suddenly jumped to six figures when coached by Dr. Tharp, but not everyone.

There is an old saying on how to make a small fortune trading. Start with a large fortune. If the program being sold is so good how do they keep their instructors? Any class, book or software is only a start. It is a long road to successful application.

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 Wall Street does not want you to know.

Copyright 2008 All rights reserved.

 

 

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