Stock Ideas 
Stock Ideas Investors Daily Edge Ya Gotta Love Bonds
Stock Ideas Investors Daily Edge Ya Gotta Love Bonds 
Market Watch
|
Russia Oil Production and New Discoveries OPEC hogs the headlines, but Russia is truly the wild card in oil prices these days. As you can see in the chart, this wild card is set to push oil prices even higher in the future. |
|
| More... |
Most Popular
Login Form
| Ya Gotta Love Bonds |
| Wednesday, 12 November 2008 | |||||||||
|
Bonds are boring. No one ever brags at cocktail parties about their most recent killing in the bond market. But, they make money no matter what the stock market is doing. That's why I am so popular right now. Some days, being a bond guy is very lonely. There are days when it's like selling ice cubes to Eskimos. And then there are markets like this one. Suddenly everyone is my best friend. Here's a comment from Bond Trader subscriber John C., he wrote: I don't have to watch the market or the ticker anymore. In fact, I just sit back and wait for the next recommendation. I have made money on every recommendation. Most bond investors were stock investors first. After several really good poundings in a market like we are in now, most people either give up or accept that you cannot have all your money in the stock market. Then they move to a balanced portfolio that includes bonds. It's just smart. It makes life much nicer. Here's another comment from reader Pete G. It took me a while to stop worrying about earnings reports and wind shifts that used to crush my stock holdings. I never realized how tied to the whims of the market I was when I had too much exposure to stocks. Making the shift to a reduced risk portfolio is something that requires a certain degree of what I call “Market Maturity.” As with all maturity, it comes at a cost. There is a transition in the investing lives of most people that involves a kind of money puberty. It's a period where we think we understand money and the stock market, and how it behaves, but we are really just kids. Not surprisingly, this is the same period when we make most of our real costly errors. As with all of life's experiences, some learn and prosper from their mistakes, some just keep repeating the same mistakes. Here's one of my favorite stories of a classic investing mistake.
Sometime around 1995 or 1996, I had a client who wanted to buy a stock in a tech company because he knew someone who did business with them. It turned out it was a receptionist who thought it was a good buy. She'd know? Anyone who has ever worked as a broker knows this is instant death, for two reasons. One, 99.999% of these types of ideas lose money, a lot of money. Two, the client then blames the broker for the loss. But, you have to buy it for them or they get upset and take their business somewhere else. Never tell a client he's wrong. So I bought a small amount for him around 15. As luck would have it, it went up, a lot. So, at his insistence, I bought more at about 20. Bang, up another 5 points in just days. This was back when tech stocks ran like crazy. Now the client is all over me. He insists on putting a large portion of his portfolio in this stock. He would not listen to reason. So, we really loaded up, to the tune of about $100,000 total at an average cost of about 25. Over the next two months, the stock ran to 92. You do the math. Boy, did I look stupid. The only redeeming feature for me in this scenario was to do my job and convince him to take his profit and lock in the gain. Also, get him to diversify his gains. Here's where the lack of market maturity really kicks in. Not only would he not sell a single share of the stock, he read me the riot act and transferred his account to another broker. In less than a month, the stock fell to nine. That's 9.0. The client rode it all the way down to a loss. Three major errors attributable to a lack of market maturity; buying an investment on bad advice, putting too much in one place and believing an investment only goes up. Oh, one other problem, he had no bonds to cushion the fall. He lost almost everything he had. This is just one of hundreds of crazy stories any broker has about his clients who haven't made it through money puberty. The names and dates change, but not the outcome. Keep a sense of balance and be realistic about your actual level of risk tolerance. Steve P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
This investment news is brought to you by Investor's Daily Edge. Investor's Daily Edge is a free daily investment newsletter that is delivered by email before the market opens. It's published by Fourth Avenue Financial, a subsidiary of Early To Rise (an affiliate company of Agora Publishing). In each weekday issue you'll receive practical strategies for protecting your portfolio and multiplying your money. You'll also learn about undiscovered opportunities in emerging sectors and markets, deeply discounted stocks, recommendations for bonds, cash, commodity and real estate investing, and top ETFs. To view archives or subscribe, visit Investor's Daily Edge .
|
|||||||||
Reviews (1)
| < Prev | Next > |
|---|