Page 401 - How to Make Money in Stocks Trilogy

276 BE SMART FROM THE START

Should You Invest for the Long Haul?

If you do decide to concentrate, should you invest for the long haul or trade
more frequently? The answer is that the holding period (long or short) is not
the main issue. What’s critical is buying the right stock—the very best
stock—at precisely the right time, then selling it whenever the market or
your various sell rules tell you it’s time to sell. The time between your buy
and your sell could be either short or long. Let your rules and the market
decide which one it is. If you do this, some of your winners will be held for
three months, some for six months, and a few for one, two, or three years or
more. Most of your losers will be held for much shorter periods, normally
between a few weeks and three months. No well-run portfolio should ever,
ever have losses carried for six months or more. Keep your portfolio clean
and in sync with the market. Remember, good gardeners always weed the
flower patch and prune weak stems.

Lessons for Buy-and-Hold Investors Who Don’t Use Charts
I’ve marked up the weekly charts of WorldCom in 1999, Enron in 2001, and
AIG, Citigroup, and General Motors in 2007. They show 10 to 15 specific
signs that these investments should clearly have been sold at that time.

Why you must always use charts…see what happens next.

WorldCom Price
Weekly Chart
1 2 3 4 8 12 80
14 reasons to sellreasons to selllsons t 5 9 13 70
14
7 10
60
50
6
11 40
Wedging up dging
along g g 34
along lowslowsg low
30
26
Laggingg g
14 22
RS
RS lineli
19
Huge red volumered volumed volug e 16
Huge
and closes belowses bel w 14
10-week linekw
7 12
4 6 9 12 13 10
1 2 3 5 8 10 3/2
Volume
80,000,000
40,000,000 © 2009 Investor’s Business Daily, Inc.
20,000,000
Dec 1998 Mar 1999 Jun 1999 Sep 1999 Dec 1999 Mar 2000 Jun 2000