Years ago before all the electronic sensors miners would take a canary down into the shaft. He was a very pampered bird as he represented life or death. If he dropped off his perch unconscious the miners ran for the exit as fast as possible. The little guy had detected poison fumes. Yes, they carried the canary out when they left.
There are many pitfalls in life that are not life or death, but it would be nice if we could have a special “canary” to warn us of a calamity. One of those major catastrophes would be the loss of a large portion of retirement funds. There are few investment canaries, but most are complicated or expensive; however, there is one that will warn you and costs less than a canary. In fact it is free.
Most brokers don’t know about it, many don’t want to learn and most brokerage houses will not allow them to use this simple signal. Brokers are in business to get and keep your money “working” (for them). Your cash in a money market account does not fall into that category. They never want you to sell even when your equities are going down and you are losing your shirt, pants and underwear. “Hang in there. The market always comes back. ”
You need a “canary”.
As long as stocks are going up Mr. Mushroom can sit back fat, dumb and happy as he did in the 1990s. Since 2000 the scenario has changed. Hopefully Joe Mushroom did not lose all his money from 2000 to 2003, but many took a big hit. It need not happen again.
The investor needs to know the general direction of the market and especially the direction of his stocks and funds. Most investors who are saving for retirement have jobs and other commitments that do not allow them to be active traders. They need a very, very simple method that can be looked at once a week or even once a month.
Once a week or even once a month you can go on the Internet (and if you don’t have that connection you can do it at the library’s computer). Find www.bigcharts.com. It’s free. Put in the symbol of the mutual fund or stock in which you are interested and click on the red box marked “Interactive”. I like to use a 5 year time period which can be selected.
Scroll down on the left to “indicators” in small print, click and then choose Moving Averages, SMA and to the right put in 200. Click Display Chart and you are done.
As long as that red 200-day line is moving up the investor should hold his position. The canary is singing. When it turns down sell. It doesn’t get any simpler than that. This is an investment canary for the long term investor.
When the canary falls of his perch (the 200 line turns down) run, don’t walk to the nearest exit.
Al Thomas’ best selling book, “If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter to receive his market letter for 3 months at www.mutualfundmagic.com to discover why he's the man that Wall Street does not want you to know.
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