Investing basics are rules and
concepts that work regardless of stock market conditions. Applying
these investing basics to your stock market investment could mean
substantially higher profit potential.
Stock Market Investing
Basics #1: Trailing Stops:
The use of trailing stops in your investing
is probably the most important stock market investing basics. This
technique will avoid any catastrophic loss to your investment in the stock
market.
A trailing stop is a mental
selling price that moves with the current stock price.
Example: 15% trailing stop on stock A
purchased at $10
Scenario 1: If
stock A falls to $8.5, then you sell.
Scenario 2: If stock A moves up to $12, then
your trailing stop is moved up to $10.20.
Actual Scenario: A little while
ago, The Only 3 Proven Investment Strategies ... In Existence subscribers
entered into McLeodUSA, Inc. at $0.56. As its stock price increases, the
trailing stop keeps moving up at 20% lower than the highest price during our
position.
Since the highest closing price for McLeodUSA occurred at $1.76 on July
15th, 2003. Our trailing stop ever since July 15th, 2003 had been $1.41.
When McLeodUSA, Inc. fell and hit $1.41, our stop-loss order triggered and
automatically sold the position at market.
Stock Market Investing Basics #2: Asset Allocation:
This stock market investing basic involves
spreading your investment over many different types of investment
vehicles.
We recommend 25% stock market, 25%
active investment, 25%
bonds, and 25% real estate (preferably your own residence). These
percentages should be adjusted according to your own expertise.
For example, if you are a successful
businessperson, then you might want increase your active investment
portion to be higher than 25%.
