The Alchemist: Lights

Posted in Central Oklahoma Mensa on June 14, 2003

The following is the 6/2/03 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, “Lights.”

The Alchemist: Lights

by Al Thomas

There are red lights, green lights, blue lights and spot
lights. There are orange lights, pink light and flash lights. There are
search lights and micro lights. And the one you must obey is the stop
light.


If you don’t stop when the light is red you could easily
have an accident and lose everything you have, even your life. These
different types of lights alert us to possibilities and dangers. Is
there a light that goes on that tells us whether the stock market is
going up or down; one that is green to invest or red to sell? They
aren’t very obvious, but they are out there. You only need to become
aware and learn when the signal flashes.


It doesn’t take long to learn to drive an automobile, but
it does require much more skill to handle an 18-wheeler. The
professional driver has taken to time to learn his profession. He knows
what all the lights mean. Not only the red and green, but the yellow and
blue as well. There are also many light signals inside the cab that he
must be aware of all the time if he is to have a safe passage.


Stock market signals may not be red or green or any color
at all, but they are there and are obvious to one who wants to learn.
The one who wants to learn is the investor who wants to protect his
capital from loss and to make enough money to retire in a comfortable
life style.


The most obvious signal is the 200-day moving average. You
can find one of the best market signals printed every day in the
Investor’s Business Daily Mutual Fund Index. When the index is above the
200MA line you are in the green and should to be invested. When it is
below the 200MA line you the red light is on and you want to be in a
money market fund. When those signals flash and you learn to act you
will become very wealthy over the next 10 to 20 years. You will not lose
your money when the market is going down.


It you take the time to go back in history, say 20 years
and treat the S&P500 Index as a dollar value you will quickly see that
buying and selling on this simple method would have made you a ton of
money. No, there is not very much trading involved. You will only be
buying or selling about once each year. It will not take much of your
time and you will sleep better, especially when the market is crashing
and your money is safely tucked away.


Currently the green signal is on to be invested according
to the IBD Mutual Fund Index. The red signal will come on that tells you
it is time to sell when the index plunges below the 200MA line. Pay
attention to the signals. You don’t want to lose everything.


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.