Page 864 - How to Make Money in Stocks Trilogy

126 HOW TO MAKE MONEY IN STOCKS SUCCESS STORIES

may increase, or why its product or services may be in demand, the more
likely you are to get shaken out of it. Conviction is definitely key to holding
onto a big winner. You have to ask yourself, ‘Why is this company likely to be
successful in the future? Does it have a remarkable product or service that
is revolutionary in its industry?’”
Another important factor that Ed looks for is liquidity. He wants a stock
that big funds would buy, and more thinly traded stocks don’t capture the
attention of the big institutional investor.
By 2006, Ed had made enough money with CAN SLIM Investing that he
decided to follow his new passion, the stock market. He had always dreamed
of owning his own business and was further motivated by reading about all
the successful entrepreneurs in the Leaders and Success column in IBD.

Freedom to Follow His Passion
Although he had virtually no clients and no experience managing profes-
sional money, he felt that if he followed his passion, continued to work hard,
and stayed true to the principles of CAN SLIM Investing, he could make it
a full-time career.
At the end of 2007, Ed said good-bye to the law firm where he had begun
his career and launched his own money management firm. He slowly built
his client base, and when the market crashed in 2008, he had his clients’
money safely in cash. Although he didn’t know how severe the crash would
be, he recognized the breakdown of leading stocks and the large amount of
selling in the financial stocks. That made him realize cash was the safest
place to be.
A new bull market began in March 2009, and during that year, Ed’s firm
did so well that he decided to launch a hedge fund in January 2010. The
fund did well in 2010, but in 2011, Ed faced a more difficult period. For the
first time since he started managing money, he wasn’t performing up to
peak. After he went back and analyzed the entire year, he realized that port-
folio concentration was the problem, and he needed a new set of manage-
ment rules for choppy, difficult markets.
He made a “threshold rule”: if the market issued a follow-through day, he
would go in no more than 20% invested, unless the stocks in his portfolio
made a gain of 2%, then he could go in a little deeper. Even if he was
tempted to buy more than he should, having portfolio management rules
would keep him out of a choppy market.