The Direction of the Market
by Dr. Invest

If you can learn any thing, learn that water doesn't flow up-hill. Really, this is an important first lesson in investing in stocks.  When the financial market is declining (lower lows), you will be hard pressed to make a profit on your stocks.

Yes, I do understand about shorting stocks and buying options. Which means you can make money, even when the market is going down. But this blog is not addressed to such sophisticated traders as yourself, rather; I have chosen to help the simple "swing trader" make straight forward investments that will bring maximized returns with the least risk.

The market only moves three ways, UP, DOWN, SIDEWAYS. You need to observe the signs and identify the movement of the market.

When the over-all market is moving lower, over-all stock prices will move lower. When the over-all market is movinging higher, over-all stock prices will also move higher. The saying are: "The TREND is your FRIEND" and "Don't fight the TREND".  You don't have to be in the market all the time, you can and should, get out!  This is especially true when the trend of the market is downward.

Some investments, such as CD ladders (Certificate of Deposit) or carefully selected bonds are not affected by the ups and downs of the market, and you need this kind of diversification. But by following a few rules of investing, you can see your STOCK PORTFOLIO safely grow 12+% per year.

How? Well that is what this blog is about. Here is the simple formula: DON'T SPECULATE, BUY QUALITY STOCKS, BUY WHEN MOST FAVORABLE FOR THE STOCK TO GROW, SELL WHEN MOST LIKELY THAT THE STOCK WILL DECLINE. The result is a predictable return.

The DOW Jones has averaged about 8.6% return over the years, before taxes, financial advisor fees, and the CPI (inflation). Remember, this covers ALL THE STOCKS in the DowJones Index, both good and poor performers. Selecting SOLID PERFORMERS out of a stock index and learning their characteristics and behavor is critical to consistent returns. (Look at my blog on Narrowing the Odds)

You need to know the over-all direction of the stock index you choose HISTORICALLY and what that index is doing in REAL TIME. Likewise, you need to know the historical behavior of the STOCK you have chosen and be aware of what it is doing in REAL TIME.

Don't trust a friend's advice on a stock, or what you heard on T.V., or what you read in Money Magazine. By the time you have learned about the "HOT STOCK", so has everybody else. So when you buy the "Hot Stock", it will be over-priced because everyone else has been buying it. Then, without warning, the more experienced traders will sell and you will belatedly be rushing for the door to sell your stock to assess your losses. This is not a good idea and is a poor way to trade.

(Note: The information contained herein is not for investment purposes but soley for entertainment)