Every day I hear from the ?experts? on CNBC-TV and the radio gurus that the way to buy stocks is find value. One man?s Rembrandt is another man?s connect-the-dots and fill in the spaces. Valuation is like beauty. It is in the mind of the beholder.

If valuation is the key to buying stocks then there should be some kind of a formula to determine what is undervalued and over-valued. In every industry there are formulas for standards of performance. For cars we want to know the zero to 60 miles per hour in how many seconds. For soap we want it to be 99 and 44/100 percent pure. For alcoholic beverages it could be how long it has been aged. And on and on.

Yet in the stock market we have no hard and fast set of rules by which to judge a company performance. Ah, and there?s the rub! No matter how good a company performance might be it may have no bearing on the price performance of the stock. You can find good companies that are within a sector that is doing poorly and yet one company can be making huge profits and sales, but the stock price is going nowhere. There need not be any correlation.

When you are in a bull market almost every stock goes up ? even the dogs. When you are in a bear market almost every stock goes down ? even the best ones. We ended an 18 year bull market in 2000 and almost without exception every stock headed for the exit.

Bull and bear markets follow relatively standard patterns of about 16 to 18 years up and 16 to 18 years down and the valuations go right along with them. If you own stocks or especially index funds during the bear periods you will be lucky to have broken even at the end of the 16-year cycle. Cash in your mattress will outperform market returns while the bear is in charge.

During these bear times there will be periods when the market will have a nice advance such as the one we saw start in 2003. These intermediate rises can ultimately bring many investors back into the market only to lose it when the rally is over and true valuation returns.

One valuation measurement for the overall market is the Price/Earnings ratio of the S&P500 Index. The median number for the historic purposes has been around 14. Today it is running about 21 which is considered high. When bear markets end the P/E can be about 6 or 8. There are other factors to be considered when buying any stock or fund, but the one thing that is most important is to have an exit strategy. Without one you will give back your profits.

No one knows exactly where the top or bottom of a market move will be. Knowing conventional valuations is one tool to help your buying and selling decisions.

Al Thomas’ 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 at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

On Monday, November 25, 2000 Investor’s Business Daily listed on page B1 the Top 25 Growth Mutual Funds for the last 36 months along with their performance for the year 2000 to date. Only four showed a profit this year of 21% and the other three had increases of 12%, 5%, and 5%. Fifteen had loss of from 10% to 28% and the other 6 were down slightly.

In the column next to them there is a list of Top 25 Growth Funds for the past 3 months for the year 2000 to date. Only 2 had increases in price for the year 2000, 4 were even and all the rest are showing losses for the year.

Now pay attention and think about this next sentence. Not one mutual fund appears in both lists.

What is the significance of this? It very simply tells you that buy and hold is NOT the way to make money with mutual funds.

I have been preaching for years to buy only no-load mutual funds and hold them only as long as they are going up. When they stop going up you sell them (paying no commission) and find another fund that is going up as the place to have your money. In this current bear market the latter is hard to find so what do you do? Put your money in a money market account and don’t worry about the market going down and dragging your investment with it. Protect your capital!

Don’t throw up your hands and say I can’t do that because my broker says to buy and hold – the market always comes back. It is not his money. It is yours. You must be the one to initiate the action to protect your capital. Brokers are not taught how to do this. I know – I used to own a brokerage company.

Brokers have been smart enough to learn, but taught all the wrong things when it comes to investing money. They claim you can’t time the market. WRONG again. They never encourage you to place stop-loss orders so you won’t lose all your money when you buy a new stock or fund and they never encourage you to use a trailing stop to protect the profits you have made.

I know there are people reading this column who have had stocks that have doubled, tripled, even more and now have that same stock that is now selling for less than they bought it.. Where was your broker when all this was happening? If he is so smart why didn’t he tell you to sell at the top? This also applies to mutual funds.

What I am trying to get across is the simple message that you cannot buy and hold. The secret every knowledgeable investor knows is to protect his capital first and then to protect his profits second.

Al Thomas’ 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 at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

Stock market is an inquisitive place for many. It is because the place has given birth to many millionaires and is also responsible for turning millionaires to locals. Thus the bulls and bears have always been charismatic. Now millions of people invest in the stock market to make good money. The aura of the place is such that it is swarming with people any hour of the day and any season of the year. But only few know that how the stock market came into existence or what actually are its origins.

A short encounter with the past

The oldest stock certificate was issued in favor of a Dutch company in 1606. The purpose of this company was to benefit from the spice trade between India and the Far East. During the 18th and the 19th centuries the trade of spices drifted to England when Napoleon reigned over the place. With the development of United States of America as a colony to British and Alexander Hamilton (the first US secretary of the Treasury) flourished the American Stock Exchange. Hamilton played a crucial role in encouraging the trading in the Wall Street and Broad Street in New York. The New York Stock and Exchange Board now popularly known as the New York Stock Exchange was organized by the traders of New York in 1817 when trade and commerce bloomed there.

A precise survey of the Western stock market

?The Wall Street- a place where the whole of 18th century trade and commerce took place, Wall Street is a recognized place across the globe. The street was termed as Wall Street since it ran alongside a wall that was taken as the northern boundary of New Amsterdam in 17th century.

The Wall Street is known for the J.P. Morgan?s million dollar merger that created US Steel Corporation, the ruinous crisis that resulted in Great Depression and the ?Black Monday? of 1987.

?The NYSE or the New York Stock Exchange is perhaps the foremost and so the oldest stock exchange in United States that is believed to be born in 1792. The significant aspects related to NYSE include the Buttonwood Agreement when 24 stockbrokers and traders of New York signed this accord and established the New York Stock Exchange and Securities Board which is now recognized as the NYSE; the considerable swings that the NYSE saw during the 20th and 21st century; the hitting of the 100 and later even 1000 mark by the Dow around 1971 and the mark of 10,000 that the Dow scaled in 1999.

?NASDAQ is the National Association of Securities Dealers Automated Questions. It is an apparent or virtual stock market where all trading is done through the electronic media. NASDAQ, the global and the largest electronic stock market today was first established in 1971 in United States at the time when computers were not as developed as they are today and it was very difficult to compute. The main exchange of NASDAQ is in United Sates while its branches can be found in Canada and Japan and it is also linked to markets of Hong Kong and Europe. NASDAQ functions by purchasing and selling the over- the- counter or OTC stocks.

?AMEX-was discovered in 1842. The putative father of the institution is Edward Mc Cormick (the commissioner of SEC) who endowed it with its current name. It started its journey as the New York Curb Exchange and its name is factual. The AMEX in contrast to the NYSE operates with the small and more dynamic companies some of which even make it to the NYSE board.

Mansi aggarwal writes about stock market. Learn more at http://www.stockmarketstory.com .

When you start your Penny stocks trading career you first need to decide how much you are willing to invest. You need to remember that this is not a ?sure-fire? income opportunity and that it is possible that you may lose everything, so be sure to not to invest more than you can afford to lose.

That said when you have decided on an monetary amount, whether it is $100 or $10,000 you should avoid the temptation to put all of it into one or more Penny stocks. But why you ask? Surely the whole point of putting the money into your stock broking account in the first place is to invest it.

Well yes and no. . . if you have all of your funds invested at the same time then you lose a lot in flexibility. You have few options when faced with the need to respond to a rapidly rising market. Or to profit form a newly acquired piece of information that one or more penny stocks are about to move upwards.

If you have invested all of you cash and your present portfolio is flat, the only way to buy into rising penny stocks market and get a piece of the action is to either. Use ?your own money?, for example money that is not part of your penny stocks investment fund (and is not money that you can afford to lose) a very bad idea. Or to get on the phone to your broker and see if can sell some of your existing shares so that you can buy into the rising penny stocks.

The first is obviously not really a good thing to do and is more akin to gambling than investment. After all if you couldn?t make a profit with the first group of penny stocks, why do think you could with the second. A more likely scenario is that you are throwing good money after bad, except that this time it is not money that you can afford to lose.

The second, though more sensible than the first, is not really what trading penny stocks is all about. The whole point is to be able to buy quickly if you think that a stock is about to rise. T sell quickly, as well, when the market seems to have to have peaked for your penny stocks, so that you can maximize your profit and sell before the market starts to fall.

If you keep a portion of your assets as liquid in your stock broking account, then you have the flexibility to move quickly as the market conditions dictate. A penny stocks trader without the ability to move quickly is likely to be missing out on many lucrative trades. By keeping around a third of your investment fund as cash allows you to buy into a rising market without having to rush into selling any penny stocks that may be under performing at that time.

That way you get to benefit from the rising penny stocks but can also hold onto the non performing or flat ones until they start to rise or you have decided that you need to cut your loses and get rid of them. Either way the point is that you are not rushed into a decision and can decide based on research and rationality, rather than a need for quick cash to fund your next investment.

The ability to move quickly in response to rapidly rising penny stocks can greatly affect your potential for profits in this most volatile of the financial markets. Keeping a portion of your penny stocks fund liquid will help you to achieve profitability and make the success of your investing venture into the world of penny stocks trading more likely to be a profitable one.

Buzz Scott has 12 years of Penny Stock investing. Big profits can be made in Penny Stocks, but there are also many dangers. Find some insider secrets at: http://www.penny-stock-secrets.com

If you have been dealing with mutual funds for any length of time, you undoubtedly have faced the question of which is better: Load Funds or No Load Funds. If you are new to investing, load simply refers to the commission paid to the broker selling the fund. No load means there is no commission on the purchase or sale.

Most discussions in the past have centered exclusively on performance comparisons. Even rating services like Morningstar have occasionally chimed in with their opinion. However, rather than focusing only on performance, there are some other issues I consider far more important:

Ever have one of those sample boxes of candy? Each little piece is beautifully wrapped in colorful foil or decorated with an interesting design. Taste just one. So good! One more. And another. Before you know it the box is empty. Nothing left.

This upmove in the stock market is very tempting – and could leave you with a tummy ache.

All the market experts are telling you that the bull market is back and to get your buying clothes on. Open your wallet and get in before it is too late. Mr. Schwab says it is dangerous to be out of the market. There are great values out there. These stocks are so low they can’t go any lower. And there is a Santa Claus and an Easter Bunny.

There is one position I do advocate, but most broker and financial planners won’t like it. It is called CASH. No broker believes cash is a position. They say you must always be invested. It seems they have forgotten that investing means making money and another important part of investing means not losing money.

For the last month we have seen the market go up and some of you have seen some of your money come back. Not too much, but some. You want desperately to believe the bull market is back and your winnings will be restored. I sure hope so. Just suppose this is what is called a rally in a bear market and that it will not last. Then what? You don’t want to see your investments slip away again, do you? You don’t know if it is a good idea to sell now or wait. Your broker won’t be any help.

There is a solution. Stay with your stocks and mutual funds as long as they are going up, but sell them if they go down. How? Every Friday after the close you get the settlement prices of your various issues and you then call your broker Monday morning to put in a Good Til Cancelled Stop-Loss Order that is approximately 10% below that closing price. As long as the stock is going up you follow this procedure every week and eventually you will be stopped out. Never move your stop down. You no longer have to guess if this is the highest price that your stock will reach. The stock itself will tell you.

Now you have cash and, if you want to, you can buy a better stock or mutual fund that is going up..

When you pick out a new chocolate (stock) do it carefully and don’t try to eat the whole box at once. Sometimes it is best to put the box (your cash) away so you can come back to it another day.

Al Thomas’ 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 at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005

al@mutualfundstrategy.com; 1-888-345-7870

THERE?S SOMETHING TO BE SAID FOR standing firm in the face of opposition. Interestingly, most of the best stock decisions have come at times when the mainstream is saying precisely the opposite. Predictions like these can be valuable if one is to build an investment strategy around their view of the world.

The appraisal by the minority over the past few years that inflation would return (while most of Wall Street was bemoaning DEflation) has proven to be true. As we?ve pointed out in the past, it can be readily observed in oil prices, real estate, and dozens of other commodities where no source of cheap imports is available.

As Steve Forbes remarks in Forbes Magazine?s May 23rd commentary, ?oil became expensive because the Fed has been printing too much money.? In an earlier article, I mentioned that what we?re really seeing is just the effect of a falling dollar, rather than rising oil prices.

Some might wonder how we think of the dollar as a falling currency, because it certainly seems to have been rising against the Euro in recent months. Still, it may be more accurate to think of the Euro as simply falling faster than the dollar. Indeed, now that both France and the Netherlands have voted to reject the EU Constitution, the entire structure of the EU may be called into question, and while we don?t foresee the collapse of that institution, we do believe it will weigh on the currency for a time. As we have said in the past, the attempt at unification is itself no more than a grand experiment, and the currency that accompanies it can be viewed as no more stable than the underlying structure.

Still, none of this makes us view the dollar as necessarily strong. In a world where the Indian Rupee, Romanian Leu, South African Rand and other historically undependable currencies are rising steadily against the dollar, its silly to think of our currency as anything but weak.

In real estate, many suggested in the past that a real estate bubble may be developing, but also that much of the rise in prices may be coming from inflation as well. Indeed, if any price collapse does occur, it may be some time from now, and some regions may hardly feel it. The gap in price between the large California cities and mainstream America is reportedly wider than ever before. It’s best to use caution in the red-hot markets in Cali, NY, and Mass., but the rest of the country seems fairly priced. One should not be too worried about prices that have risen no faster than the price of oil. While others have predicted (endlessly, it seems) that homebuilders ought to fall apart any day now, a few have continued to recommend some of the best ones and seen sizeable profits result for our readers.

Recently, a few financial managers have decided to take a position on Harley-Davidson stock that differs from most of the investment community. While Harley?s quarterly earnings were indeed below expectations, the minority rejects the investment community?s hysterical suggestion that this is the end for the motorcycle maker. In fact, they firmly believe this will turn out to be a small blip in the longterm upward trend.

It is decisions like these that set these advisors apart from much of the investment world. It seems that many of the writers in ?investment-land? are content to parrot the projections of corporate lackeys and government bureaucrats, without so much as a scintilla of independent analysis. Alas, as the demand for investment advice has grown, it may have outstripped the supply of quality analysts, both in news reporting and in the investment industry itself. This would explain the quantity of drivel coming from multiple sources these days.

We can occasionally find kindred spirits in the media: while it is invariably best to disagree with Business Week, Fortune, and most of the TV business news-trivia reporters, a few ? like Forbes, Barron?s, or TV?s Louis Rukeyser or Paul Kangas ? still provide thoughtful commentary from time to time. Overall, though, the U.S seems to have reached a distressing time in investment reporting.

Most reporters and publications are content to simply repeat what they?ve heard, play on emotions, and call it complete coverage. I suppose it makes sense that eventually coverage of business news would descend to the same level as broader news coverage.

In times like these, it is important to select a few good sources of quality information. It is just as important to wean ourselves from poor information sources. If your newspaper, magazine, or broadcast station has ceased offering thoughtful analysis, stop wasting your valuable time. Utilize your time more productively on the few meaningful sources of information.

In light of so much fluff in the media, it is increasingly important to stand apart from the mainstream. You need information resources that are willing to do so, as well. Contrarians (investors who have bucked the trends) have fared well in the investing quandary. Today, contrarians? biggest advantage is that they are willing to stand out and avoid falling for the latest hype. Mindless followers, in an age of meaningless information, will eventually get slaughtered by following mediocre advice once too often. Don?t tolerate lackluster information resources. Seek out quality.

To send comments or to learn more about Scott Pearson’s Investment Advisor services, visit http://www.valueview.net

Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor’s Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S.

IT?S REMINISCENT OF THE OLD children?s tale about an old Chinese farmer who tells his friends his story, and they enjoin with ?That?s good? or ?That?s bad? on alternating lines:

Farmer: My horse ran away.

Friends: That?s bad.

Farmer: She came back with a majestic stallion by her side.

Friends: That?s good.

Farmer: My son tried to ride the stallion and broke his hip.

Friends: That?s bad.

Farmer: The emperor came through town that week and took every able-bodied young man away to war. My son was spared.

Friends: That?s good, et cetera.

Recent market trends bring this story to mind. On this emotional roller coaster, it?s hard to know whether to laugh or cry. For all practical purposes, the war is over. That?s good. But the battle to win over Iraq has just begun. That?s bad. The markets in the U.S. have been cheered by the quick success. Good. The Japanese market has hit a new 20-year low. Bad. We could go on. It?s been a wild month for news.

Fears of the SARS epidemic have hit economies in East Asia and Canada and further injured an already-weakened airline industry. A bigger question is how devastating the epidemic will become, and will it hinder an already weak recovery, or worse yet become a worldwide epidemic. Embezzlement charges caused a temporary bank run among recent immigrants who weren?t aware of FDIC insurance at Abacus Federal Savings Bank in New York?s Chinatown. Earnings news is rather positive, despite a few negatives. Many big names have provided surprises on the upside, while fewer companies are disappointing analysts, it seems.

Despite the recent uptrend in U.S. markets, most investors aren?t particularly cheered. Most still wonder how long it will take to recover what was lost in the past few years. That focus, however, won?t make the recovery come any sooner. We need to be happy with 10% growth, a substantial positive trend for those who aren?t carrying any baggage. Too, for those who put their money in, instead of following the crowd and taking it out, 10% growth ought to compensate for twice the losses. The real question is whether individual investors will continue to run for the exits, hold their ground, or redouble their efforts to save and invest more.

I?m continually amazed how investors put more money in when markets are topping out, and pull money back when markets are at or near bottoms. Described in that way, virtually no one would do it, but when we add the emotional component, it is really quite easy to understand. Market bottoms come after drops, which often come with reduced portfolio values and emotional turmoil. In addition, drops come when the economy is weak, and many people need to use their money for personal or family needs while income is temporarily reduced. This underlies the primary weakness of the buy-and-hold strategy. This solid strategy is only successful if held to consistently. However, most people cannot or will not follow through on it in difficult times. Thus, it may be less effective than we traditionally imagine. No, the strategy itself is not flawed, but practically speaking, it may not be viable for real life.

Each investor needs to consider his/her own investing patterns. If you are inclined to disinvest during downtimes, a thorough re-evaluation may be in line. Re-evaluate both your strategy choices and your ability to maintain them. If you are unable to keep focused or are likely to have circumstance which prevent you from following your strategy when its most important, you need a different approach. There?s no benefit to having a wonderful game-plan that you can?t follow. Imagine a basketball coach whose plan includes putting in Michael Jordan when the team gets behind, but Michael Jordan isn?t on the team! If you are unable to follow a buy-and-hold strategy, your ability to profit in downtimes is severely restrained. Sadly, this is when the greatest opportunity is available. Thus, a compensating strategy must be developed.

Investors must realize, however, that increasing returns often comes with higher risk. Thus, if one cannot buy and hold when one finds it unpleasant, the other alternatives involve taking on greater risk. No one really wants to hear that, but it is hard truth. High returns require higher risk, and if you are unable to ?weather the storm? in times like this (what I call easy risk), you?ll need to take larger short-term risks (hard risk), or else consign oneself to lower returns.

Easy risk is a long-term safety play. We risk that valuations will fluctuate, but over the long term we have confidence that they will be relatively stable. We give up our ability to observe high valuations, knowing that what we own is still the same.

Hard risk involves taking real, serious, short-term gambles. It is not a strategy that I advise, nor is it the wisest approach to investing, but it is a corner that people sometimes paint themselves into. That?s bad!

We continue to advise our readers to stick with the buy-and-hold strategy. While there is obviously risk of fluctuating prices, these tend to balance themselves out in the long-run. If you have a long-run focus, buy-and hold is still the safest approach. That?s good!

To send comments or to learn more about Scott Pearson’s Investment Advisor Services, visit http://www.valueview.net

Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor’s Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S.

Jack and Jill went up the hill to fetch a bucket of ?money. Money? They are continuing to fill their bucket with stocks without any consideration to the value of these equities. They are not worried at all as they are buying ?safe? mutual funds.

Everyone knows mutual funds are safe. Jack and Jill know they don?t know how to pick good stocks so they leave that to the fund manager. He is an expert.

When you look at the long term record of 99% of the mutual funds you will see that expertise has been sadly lacking. I hate to remind you of the 2000 to 2003 period, but I must. In fact I must tell you it is going to happen again. Now you want to know when?.and so do I.

And that is the problem with almost every fund manager. As long as the market is going up they can?t do much damage to your account, but when it rolls over and heads down they have no idea how to invest when a bear market is in progress. Not a single one of them will acknowledge that cash is a position.

Cash is a position? They are in shock. Of course they are. If brokerage customers put their money in a money market account while the market is falling it means they do not make any commission at all and if they recommend this to their customers the brokerage manager will fire them because he won?t make any money either. ?Keep your customers fully invested or I?ll show you the door? is the manager?s comment.

You must learn when to sell. Any fool can buy, but it is the wise man who knows when to sell. To see the condition of the overall market one of the best indicators is the SP500 Index. Your broker compares everything he does with the SP500 because it is a broad base of 500 stocks that are widely traded.

The finest indicator is the SP500 Index. Draw a 40-week chart of the closing prices. If you don?t know how ask your broker. He will tell you. Write it down and save it. It is very simple. Have him set up a 40-week Simple Moving Average to appear on that chart. Look at 5 years worth of prices. Immediately you will see that if you are in the market while the 40-week MA is going up you are making money and if you are out of all your positions while the index average is going down you will not lose money. It doesn?t get any easier that that.

Jack and Jill can fill their pail as the market is going up and need not spill their accumulation while they walk confidently down the hill holding their bucket full of cash not equities.

Al Thomas’ 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 at http://www.mutualfundmagic.com and discover why he’s the man that Wall Street does not want you to know.

Copyright 2005