Stock Insurance
You have a lock on your house. You have a lock on your car. You have a lock on your tool shed. Do you have a lock to protect your stock market investments?
Maybe you have a safe at home for your valuables such as jewelry, rare coins, special documents and even stock certificates. Wait a minute. Is that stock certificate protected just because it is surrounded with 3 inches of steel? Not really. The problem is that its value does fluctuate every day. It is OK so long as it is increasing because that is why you bought it. The broker told you to put it away and forget about it.
I hate to tell you this, but in the last 3 years that stock you own whether in your safe deposit box or in your account at the brokerage house might be worth a lot less. Wouldn't it be nice if there were some way you could protect that investment from a big loss? You can, but you will have to pay a premium, but you can set the amount of the premium yourself.
Some stocks you don't have to worry about. Isn't that true? You know, it's good ole AT&T. Mom bought that years ago and gave it to me when it was $55 per share. She said not to worry as it will go up and be there for retirement. Huh? You just looked and it is $14.00. Can't be, but it is. Now don't you wish you had bought some of that stock investment insurance? I bet your broker didn't tell you about it. They never do because you might end up with cash and take it out of your account and he wouldn't be able to make some nice commissions.
Most folks never heard of stock insurance. It has been there for years and years. Here is how it works. Call you your broker and tell him to enter an order for this stock with a loss protection and you are willing to pay a premium of 10% (you can set the percentage amount for more or less) and you want it to stay there until you cancel it. No, you don't have to send him a check. He might be a little puzzled at first until he realizes you are talking about on Open Stop Loss Order. He can enter that for you. If you had put that in place when AT&T was selling at $55 you would have sold out at $49.50 and today you would be about $3,500 richer for each 100 shares. (P.S. Brokers don't like to do this and will try to talk you out of it.)
You can do this with any listed stock to protect from loss of your investments. When you consider that the overall market is down about 40% in the last 3 years that 10% premium looks darn good.
A stop-loss order should never be lowered and should always be raised to follow a stock price up as it increases. It is not too late to do it. Call your broker today.
(c) 2005
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 to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.
More Resources
Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exitingMore Stocks & Mutual Funds Information:
Related Articles
Emotional Trading
The single most expensive stock market trades are those made with emotions, but, of course, you are not an emotional trader are you?Before you bought that stock, mutual fund or Exchange Traded Fund (ETF) you did your research to be sure that what you were buying would return a good profit over the long haul. You bought it and over time you look at it less and less.
Defining a Long-Term Investment in the Stock Market
For some "long term" would mean holding a stock position over the weekend. For others, it may mean holding a security for at least 1 year for the purpose of declaring a long-term capital gain, thus saving on taxes.
Mutual Fund Honor Roll - Buy High, Sell Low by Chasing Performance
Buy high and sell low -- It's not a typo.Millions of investors guarantee their failure by selecting mutual funds and stocks based on quarterly or annual performance records.
Stock Trading Diversification
This is the continuing story of our two imaginary traders, Peter and Paul.Peter is a professional trader, Paul is not.
Its A Duck
If it walks like a duck, quacks like a duck and looks like a duck it must be a duck.In the stock market if there are more buyers than sellers, more stocks are going up than down and the trend of the general market is higher it must be a bull.
Stock Market Volatility
In my opinion, due to the volatility of stock market prices (the rise and fall of stock prices), an investment plan should incorporate both the traits of stick-to-itiveness and common sense, and must have an advantageous, predetermined approach for maximizing each investment in the stock market.Stick-to-itiveness and common sense - oh, what powerful weapons they are when used for a long-term investment plan in the stock market! They mean making the common sense and advantages decision to:? Purchase only those companies that have long-term histories of raising their dividend every year.
The Right Mutual Funds For Baby Boomers
If you are a baby boomer, time is not on your side. Many baby boomers see retirement age fast approaching with little to nothing in the way of retirement assets that will allow them to actually retire and live a comfortable lifestyle.
Intervention
Intervention. Now don't let that big word scare you.
Its Better
Question: How does it get better when it gets worse?Last week we had a jobs report from Washington that there were fewer jobs created than they had anticipated, but the stock market took that as good news and the DOW had a strong rally. WOW! The bad news somehow turned into good news because the unemployment rate dropped one tenth of one percent.
Momentum
One of the basic laws of physics states that a body in motion will continue in motion in the direction it is going until interrupted by another force.That basic physics law also applies to stocks and mutual funds.
One Way Street
Ever turn down a street, get half way and suddenly realize it is one way and you are going the wrong way? Is that the way you feel when you look at your stock brokerage statement?In either case don't panic. You can get out of that one way street by carefully backing out.
Ignore Stock Market Talking Heads
You should ignore analysts on TV, the radio, the newspaper and all other TALKING HEADS when it comes to investing! What stocks do they talk about? - The same old group, every day of every year - Why? Because they don't know any better, they are sheep like the general public, repeating what every economic textbook says and every other economist tells them to say. Everyday, the same companies are highlighted on the evening news -WHY?They aren't going anywhere.
DIY Portfolio Management
Exchange Traded Funds (ETFs) are growing. Investors are choosing low annual expense and market return over high annual expense and promised performance.
Mousetrap
The spring-loaded rat catcher is the ultimate low-tech device invented more than 100 years ago and remains the best demouser in the world. It is so simple anyone can master it and best of all you can keep on using it year in and year out.
Again With the Bubbles?
A few years back - it seems like an eternity today - the U.S.
How Eating Bitumen Made Me a Better Trader
Trading is a fascinating activity.There are so many layers to it.
Why Stock Is More Risky Than Options!
You probably have been told that options are risky. Even worse, that you can lose your shirt trading them!Well, what is the truth?Let's take a look at stock ownership.
Stock Insurance
You have a lock on your house. You have a lock on your car.
Analysts - Do They Really Know The Stock Market?
When you become interested in a stock or mutual fund you can call your broker and he will send you reports on how the company is doing, what their management is like and what might be the projected earnings for the company and how the industry is doing. Great information.
The Bottom?
Every day I hear someone on CNBC proclaim that "this is the bottom" and you should get in there and buy all those "bargains". "The valuations of the DOW stocks are a steal.