The Alchemist: Tyranosaurus Rex

Posted in Money Matters on April 21, 2003

The following is this week’s installment of The Alchemist, a column by Mensan Al Thomas, author of If It Doesn’t Go Up, Don’t Buy It. Click ‘Read More’ below for this week’s article, “Tyranosaurus Rex.”

The Alchemist: Tyranosaurus Rex

by Al Thomas


Everyone knows T Rex was the most fearsome of all
dinosaurs. He could and did kill everything in his path for food or
maybe stupid meanness. His brain was very small and he did not survive.

There is a T-Rex among us today and it is disguised, but it
is killing us in another way. This T-Rex Bear is killing and eating our
retirement portfolios. You may have noticed your stock account has lost
some of its value during the past 3 years. Something or someone is
nibbling away at it. It has gotten so bad that many people don’t even
want to look at their statements every month. Is there a way to keep the
beast, whatever its name, from completely eating everything? Yes, there is.

Currently there is an advance in the stock market and you
have been told by the talking heads on CNBC-TV that the bull market has
resumed and it is best to put whatever cash you might have into the
market. Don’t lose this opportunity to make back what you have lost.

This is a very sneaky T-Rex. It is out in the bushes and it
may not have seen you yet. If you still currently own any equities you
want to protect them from the beast. If this is a new bull market you
may want to participate. OK, buy something, but you must know where to
run to hide should the T-Rex come out. How?

Now, I said now, you must decide how much you are willing
to risk from here, not where you were 3 years ago. Don’t try to get
“even,” you can’t. As this market rises you should be following every
stock you own with a stop-loss order. It could be 8%, 10%, 15%. Whatever
you feel comfortable with. Do not try to outsmart the beast. Listen for
his return and have your protection in place so it will automatically be
triggered if T-Rex returns.

None of us knows how long you will be able to graze in the
green pastures. It may only be days, but could be months or longer. If
you are cautious the monster will not get you. The market itself will
tell you when to run for shelter. No guessing. That is the wisdom of a
stop-loss protection.

Take a few moments to review your stock and mutual fund
holdings of 2000. Look up the price for each issue. If you had placed
loss protection on each one how much would you have saved?

In a bear market the best offense is a good defense. Don’t
let T-Rex get you.


Copyright Albert W. Thomas. All rights reserved. Author of “If It Doesn’t Go Up, Don’t Buy It!” www.mutualfundmagic.com. Comments to al@mutualfundmagic.com.