The Alchemist: Time Out

Posted in Money Matters on September 4, 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, “Time Out.”

The Alchemist: Time Out

by Al Thomas


Are you paying any attention to your retirement savings? Do
you have it in cash or an account with a broker? Maybe you have a
professional manager who is investing your money as you add to it every
month.

Is your account increasing in value every year? If it
isn’t why are you letting anyone else invest for you? There is no point
having a loser in charge of your money. You must take the time to direct
what and where your money is invested. Too many people tell me they
don’t know what to do, but if your account has been going down every
year you would not do any worse then the “expert”.

I love those professional money managers who tell you about
diversification. You know that one. Put some in stocks, some in bonds,
some in annuities, and some in a money market account. Did it ever occur
to you that the reason they want you to spread it around is because they
don’t know where the best place really is and hope that some part will
make some money? Did your broker or financial planner brag that he
beat the S&P index last year, but you still lost money because it was
down 22%? You are better off to have it in the mattress at zero percent
than watch it disappear in those monthly statements.

Brokers are not taught to make money or even how to protect your
capital. The average broker has 300 accounts and unless you have a very
large sum or are an active trader he doesn’t even know who you are.
When was the last time you spoke with him? Ask him what his investment
strategy is.

In the past 3 years we have seen the general market
(S&P500) lose one third of its value as of this date. And the NASDAQ has
lost more than 60%. Recently the bond market has collapsed and wiped out
all the profits of the previous 4 years. So much for diversification.
The mattress looks better all the time.


The single most important thing about investing is not to
lose money. I’m not joking. It is the basic rule of all professional
traders (and I was one when I was a floor trader on the exchange) not to
take big losses. You must make that a rule for yourself. Each week or at
least once each month you must review what is happening in your account
and weed out any and all weak stocks and mutual funds.


You can be sure your broker will not call you to sell out
of a weak position. It is your money and no one has more interest in it
than you. You have to take the time out to do it yourself. Take a time
out now and make that call.


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.