Speculator or Investor?

Talked to your broker or financial contriver lately? Probably. The slowdown in the economic system is causing the stock market to travel down. Of more than than than 5,000 pillory on the Nasdaq over 1,000 have got got lost 90% of their value and more than 200 have lost 99%. The Index is off 58% from its highs. Pretty scary for ‘Buy and Hold’ believers.

When you inquire your broker what to make he usually gives you the criterion Wall Street conventional wisdom, “You are a long term investor. You are in for the long haul. The market always come ups back”. Now inquire yourself, “In my lifetime?” Having traded for more than than 30 old age I volition state you any stock that have dropped 90% will never travel back to its old highs and the Nasdaq Index will travel lower before it travels higher. The most optimistic sentiment I have got got is it will be 10 old age before we see any sort of attack to 5100.

But you don’t have to worry about that because your broker states you are a long-term investor and not a speculator. Folks, there is no difference between an investor and a speculator except the clip period. Yes, you are a speculator, but in order to go successful you must learn some of the basic rules.

Rule One. Never take a large loss. Know how much you are willing to put on the line when you purchase a stock or common fund. Let’s say you bought CatsnDogs at $60/share. You invested $6000. What if it went down instead of up? Are you willing to take a loss of $1,000? Are you willing to sell it immediately to safeguard what is left of your capital or would you prefer to watch it slowly it float down to $12/share with a loss of $4,800 with possibility of it’s going even lower. In a heavily traded issue it could take old age before you ever get back to “even”. What if the stock’s name was Lucent?

Always topographic point an unfastened stop-loss order when you purchase any stock and have got a mental halt for any common fund. Despite what Wall Street states you common finances make travel down. You should never blindly purchase a “good” monetary fund and set it away. Again, cognize how much you are willing to put on the line before you do the purchase.

Rule Two. There is no such as thing as a “good” stock or common monetary fund that you purchase and throw forever. Yes, many pillory and finances travel up, but just as many have got huge terms retracements and you don’t desire to have them while they are going down. Are U.S. Steel a “good” company? If you had bought the stock any clip in the last 5 old age you would have got a loss. Why would anyone desire to maintain it? The physical object of purchasing any stock is to do money not sit down on it like a China egg.

The talking caputs in CNBC-TV all state you to purchase and throw and it is a lie. It states me they don’t understand their trade. They are not people because all the successful professional bargainers I cognize would never make this.

Despite what your broker states you you are a speculator. You are a long-term speculator. If you desire to duplicate your investing tax returns you have got to change your thinking.