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Joined: 20 Aug 2014
Posts: 1
Location: England

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The reason I wasn't worried (the next day, the market zoomed back up) is that I survived the '87 crash.

I lost a good deal of money in it, yes, but I've made it all back and more. Dozens of dollars more. As a matter of fact, if things keep going this well, I'll be able to retire before I'm 70, 75 at the latest.

I am a long-term investor, not a trader.

All the analysts say that while the market today looks a great deal like the market did in 1987 - it's had the same sort of run-up in recent years - many things are different. Many things.

Hey, would they lie, just because they make their livings selling stocks? There's such a thing as the Wall Street Code of Ethics, you know. It's like Santa Claus; just because no one's ever seen it doesn't mean it isn't there.

Actually, I've developed a pretty foolproof approach to making money in stocks. The average columnist would write a book about it and charge $25 for it, but I'm going to give it to you right here, right now, free. Call it class.

Here are my rules of investment:

* Buy low, sell high.

I can't overemphasize the importance of this strategy. Almost all killings made in the stock market involve some variant of this method. Bernard Baruch, Warren Buffet, Jimmy Buffett, this approach was at the core of their success.

(A word of caution: Do not attempt to reverse this process by buying high and selling low. That can lead to disaster.)

* If a stock is going to go up, don't sell it.

This is a very common mistake made by inexperienced stock owners. They buy a stock, it goes up a few points and they sell it to take the profit. Then they miss the big run-up.

I made this mistake recently when, against the advice of my wife, I sold some IBM stock for a tidy profit. Within three months, it had gone up another 50 percent. My wife has not spoken a sentence to me since, unless you consider ``You stupid jerk!'' a sentence.

Best to wait until a stock is about to go down before you sell it.

* Work with a good stockbroker.

A good stockbroker will make you a lot of money when the market is going up. He or she is a trained professional who knows about price-earnings ratios, debt restructuring, possible mergers, stock splits and whether the moon of Saturn is in the House of Virgo and what he's doing there.

Unfortunately, a good stockbroker will also lose you a lot of money when the market is going down.

It's best not to think about that.

* Consolidate your risk.

Many experts will tell you that the prudent investor should spread his risk by buying a wide variety of stocks or a mutual fund. That's nonsense. Did Bill Gates get rich buying stock in Montgomery Ward?

I believe in the advice of Mark Twain, a famous investor in his own right: ``Put all your eggs in the one basket,'' he said in ``Puddnhead Wilson,'' and ``. . . WATCH THAT BASKET.''

* And if the market is particularly volatile, going up and down all of the time, my advice to you is take a vacation, preferably in Italy.

If the market goes up, you can be happy it's paying for your vacation.

If it goes down, be happy that the loss makes what you're spending in Italy seem trivial.

(The market continues to fluctuate. You know, I may not be cut out for this. If God had intended me to be rich, he'd have made me a Republican.)

Donald Kaul is a syndicated columnist.

Wed Aug 27, 2014 12:04 am View user's profile Send private message Visit poster's website
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