There Is No Such Thing As A “Good” Stock

By Al Thomas

How many brokers (yours included) have called to tell you a story about a “good” stock? One that does well during bad times and always pays a dividend.
Before you plunk down cash on this puppy (soon to become a dog) it would be smart idea to see a price history. Have that financial planner (or whatever he calls himself) show you a 10-year historical chart of the price action.

A chart will tell you more at a glance than all the analysis that can be piled in your lap. Of course if this is a relatively new issue the story will be marvelous. Don’t buy it – the story, and look at the chart. About 90% of IPOs lose money over time.

Years ago the widows and orphans knew one of the great stocks of all times was AT&T. Millions of shares were purchased between $45 and $60/share. Now it trades at $25.

Another stock that every broker recommended to the little old ladies with blue hair was US Steel. Just gotta have this one. Went from $20 to $190. Did you buy and hold this one as it crashed to $33 today?

One more recent Buy N Holders is Microsoft. Went from almost nothing too almost $60 and now trades in the twenties.

There isn’t a stock that has not seen this type of action. The wise old man from Omaha, Warren Buffett, has seen his shares drop 50%. It happens to the best of them.

If there is one in all my years of trading and investing I have not seen a stock that pays a nice dividend and goes up every year. It may be there, but the chance of the average investor ever finding it is some place between slim and none.

As a many decade trader I have come to the opinion that it is best to trade the indexes and to long-term time the market. Your broker or financial planner will tell you it can’t be done. That is because they have not learned their profession.

Momentum trading with the 200-day Moving Average is so simple and effective anyone over the age of 5 (maybe less) can do it.

There is no secret. You can do it. Watch the direction of the 200-day moving average. When it turns up it is a buy signal for the Market Index you follow. When it turns down sell and go to cash or bear funds. Do not pay attention to the penetration of the Moving Average, only the direction.

There is a basic truth about all stocks and indexes: they all go up and they all go down. Up is good; down is bad. YOU can learn the difference and be in cash when the down occurs.

Original article here.