Making Money Alert
Their Own Worst Enemy
01/25/2007
If you've been an Alert reader for even a short period of time you probably already know my stance on protecting your assets from the destructive powers of a market downturn. But something as absolutely essential as the need to safeguard your wealth never suffers from reiteration, so I present to you two prime examples of why you must always be vigilant toward the very real possibility that any investment can turn against you.
First, let me say that I think complacency in all of its forms can be an investor's own worst enemy. Why do I say this? Well, I've been in this business too long and seen too many people embrace the notion that things will continue to go up, up, up ad infinitum. Hey, does anyone still remember the tech wreck of the 2000-2002 period? I should hope so, since the big market drop took place just a few short years ago. Unfortunately, when it comes to the markets, many investors suffer from a form of financial forgetfulness. Take a look at the following two charts:
Both of these stocks -- Apple (AAPL) and Google (GOOG) -- have enjoyed a tremendous move higher since the midway point of 2006. And, each of these tech bellwethers has seen particularly strong upside momentum since late-October 2006. But as the song says, what goes up must come down, and that is what we are beginning to see in both of these NASDAQ leaders. When you start to see the bull bellwethers break down, watch out for more stocks to follow.
Look at the blue line in these precedingcharts. This line is a technical indicator known as the 50-day moving average. I love this short-term measure of a stock's price movement because it gives investors a good sense of the near-term trends in place. As you can see, both Apple and Google now have fallen below their respective 50-day moving averages.
What often happens with stocks that have been on a sizeable run is that they will retreat below their 50-day moving average. This retreat often is the prelude to more significant selling in the stock. The next benchmark to keep an eye on is the 200-day moving average. AAPL and GOOG each still are firmly above their longer-term moving average. But as we've seen in the past, these high-flying tech bellwethers are capable of very rapid descents.
Whenever I see a stock or a sector break below its 50-day moving average, I take that signal as a yellow caution flag telling me that there's a potential hazard ahead. I know that if I hold that investment, I might have to slow down to a safe speed up ahead. Slowing down to a safe speed with your investments means not committing any more money to weak positions and it also means that you need to start thinking about when you might sell that position.
If you currently hold Apple, Google or any other security that is falling below its 50-day moving average, you had better know it. You also always should have a stop-loss in place, i.e., a preset point in which you will sell that security. Set the stop-loss before you even enter that position. If you don't currently have a stop-loss in place, I implore you to revisit your holdings and to determine for yourself how much you are willing to lose if that investment turns against you.
Setting a stop-loss on all of your holdings may seem like a common sense principal, but the reality is that most investors simple do not employ this pain-saving strategy. Don't suffer from financial forgetfulness. Do yourself a favor and protect yourself against the very real possibility of a sharp market downturn. I guarantee your money will reward you if you do so.
SECRETS TO VARIABLE ANNUITY SUCCESS 10
When it comes to variable annuities (VAs), I have what could be described as a classic love-hate relationship. I love VAs because they are a great tool to help you enhance your retirement nest egg and they offer unlimited contributions -- a great feature for those who receive some type of windfall such as an inheritance, a life insurance payout or a big settlement. I hate VAs because, so often, they are used by unscrupulous brokers who charge outrageous commissions to gullible investors who may be unaware of what exactly they are buying.
So, how do you put the love on your side and how do you minimize the hate when it comes to VAs? Well, that's exactly what I cover in my online seminar, The Secrets to Variable Annuity Success. If you want to find out more about these great retirement investing tools, I encourage you to check out my seminar by clicking here.
HIRING A NEW COACH
The NFL season is just about over, except for the Super Bowl, and this time of year brings a rash of head coaching changes to the teams not fortunate enough to have made it to the big game. Reading about all of the changes that have taken place in the NFL coaching ranks during the past few days got me thinking about how investors also should be looking at their advisors this time of year to determine if they are on a path to their own financial Super Bowl.
If you aren't happy with the current game plan in your portfolio or if you don't have a Safety Net on your serious money, we can help.
I invite you to participate in the Fabian Financial Coaching Program. This service is available to individuals who have $250,000 or more and who are concerned about the safety of their retirement nest egg. In this session, you'll get details about the "safety first" philosophy that I present in my radio show, live events and educational materials.
If you're not using ETFs, are unsure about when to sell your stocks or funds, or don't know how to generate the income you need… there's nothing like a good coach to get you motivated and prepared to win the big game. At Fabian Financial, it's always Super Bowl week. This session is risk free and there is no obligation to become a managed client.
For more information on how you can get your own personal coaching session, please contact us at 866.432.2426, or go to our website.
NEW SPECIAL REPORT AVAILABLE NOW! 7
Worried about managing risk in this uncertain political and economic climate? If you aren't worried, you should be. The risks we all face right now require sound financial stewardship. These days, you just have to know how to protect yourself.
That's why I want you all to go here for your FREE Special Report titled, "The Successful Investor's Guide To Managing Risk."
WHAT'S WORKING NOW?
One of the questions that I am most often asked at my seminars and live events is: What's working now? Of course, the answer to this question changes frequently and in some cases almost daily. I know this answer isn't quite what my questioners are looking for, so in an effort to properly answer this oft-asked question I'm going to tell you briefly about three areas where I think there is a lot more room to grow.
1) Oil and Energy
It may seem like a contradiction, considering oil prices and energy stocks have slid precipitously in recent weeks. But I think that the risk premiums in the energy space now have largely evaporated. This situation means that astute investors can get beaten-down energy investments at very attractive prices.
2) Gold
Whenever you have geopolitical turmoil, economic slowing and general market uncertainty, you have a recipe for higher gold prices. Right now, the price of gold and gold mining stocks are heading higher, coming off of their mid-January lows. This recent trend toward higher gold prices is one I think we'll continue to see in the near future.
3) Large Cap Dominance
Large cap stocks, as measured by the Dow and S&P 500, are trading near 52-week highs. While I suspect this trend will come to a halt sometime in 2007, we could be in store for a bit more upside in these large capitalization stocks in the short term. If you currently are holding these stocks, you've likely done well. Just remember to protect yourself with a stop-loss so that you don't see your hard-fought gains evaporate into the ether.
Want to know how to profit by answering the question of what's working now? In my ETF Trader service, that's exactly what we aim to do. We just recently added the aforementioned energy and gold to the ETF Trader portfolio, and we constantly are rotating in and out of various market sectors in an effort to maximize short-term gains.
This service is not for everyone, since our goal of grasping short-term profits isn't designed for all investors. However, those who have some money to invest for quick gains will find this service to their liking.
I invite you to investigate my ETF Trader service and see if it's the right fit for your portfolio.
Click here to learn more about ETF Trader
MARTIAL WISDOM
"When there is freedom from mechanical conditioning, there is simplicity. The classical man is just a bundle of routine, ideas and tradition. If you follow the classical pattern, you are understanding the routine, the tradition, the shadow -- you are not understanding yourself."
—Bruce Lee, Tao of Jeet Kune Do
I think it is important for all of us to periodically challenge what the great innovator and martial arts genius Bruce Lee called "mechanical conditioning." Sometimes our ideas and routines can mask our understanding of self, and that lack of understanding can impede our decision-making processes. One area of our lives that requires complete understanding of self is how we deal with the byproducts of our labor, i.e., our money. Don't blindly follow classical patterns. A full awareness of self is much more important to your own financial success than anyone's pre-packaged notions.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you'd like me to share with your fellow Alert readers, send it to me, along with any comments, questions and suggestions you have about my radio show, newsletters, seminars, or anything else.