How To Buy and Sell

By Al Thomas

If you have any interest in investing you have been taught to do research on any company stock, mutual fund, bond or exchange traded fund.

Your broker has provided you with reams of information showing corporate sales, Price/Earnings ratios, sales projections, sector analysis, management capabilities, profit structure and on and on. You are expected to make head and tail of this mess, and decide if this is a good company and decide if the stock will go up after you buy it. Good luck.

A “good” (?) broker will have done all that work for you and will carefully explain what his company thinks of this corporation as a long term investment. Basically, he will say, “This is a good company” or something to that effect. When it comes right down to it he doesn’t know anymore about this puppy than you do.

One of the greatest mistakes brokers make is espousing the merits of some equity because it is currently popular on Wall Street and everybody else is buying it. YUK! He will put you in with the pack of lemmings and hope they are not headed for the nearest cliff.

Mr. Broker (and the same goes for 99% of financial planners) has fallen into his own trap. He believes the hype his brokerage firm is telling its clients. Psychologically the more a person knows about a company the more he believes it and the more apt he is willing to hold a position even when it goes against him. Investors of all types, even the pros, will stick too long with a losing position.

Brokers and financial planners are supposed to know better, but they don’t.

Is there any way an investor can protect himself from the fundamental and psychological trap? Yes, there is.

First he must realize that all that “information” he was given is old. Everyone in the world knows it. All the facts are currently represented in the last price of the equity. Throw all that stuff away. What the investor wants to know is one thing. If he buys it will it go up? That’s all. I guarantee the broker doesn’t know.

The absolute simplest way to know is to look at current price performance. Is the stock current going up? Get a picture of a daily or weekly price chart and look at it. A simple 50-day or 200-day moving average will smooth out the bumpy price action. If the line is going up, buy. If it is flat, WAIT. If it is going down, look for another stock or sell if you own it. That simple.

Wall Street wants to confuse you with “information”. Nonsense. Go back and look at any equity you may have had, apply this simple method and you will see it works. That’s all that counts.

You are now smarter than 99% of brokers because YOU know how and when to buy and sell.