Stock Market Savings

For this next section to make sense you need to know why you bought the stock.

Was it…

•     a new start-up and/or a new IPO?

•     a bottom fishing stock, i.e. one having a serious dip in price?

•     a rolling stock and you know the roll range (the channel between support and resistance)?

•     purchased for a covered call strategy?

•     a high quality stock added to your portfolio for strength?

If you don’t know why you got involved, it will be difficult to ascertain the best time to sell. Indeed, except for the last pint above, in all the other strategies the “exit” is more important than the “entrance.” Remember, my rock-bottom investment strategy is to build up your cash flow.

This last statement has gotten me into hot water with a lot of traditionalists around the country. There are the investment clubs, the old-time brokerages, and even journalists who can’t bring themselves to try anything new. The Warren Buffett philosophy is rampant. Don’t get me wrong, I love his strat­egy. After you have mastered your own cash flow strategies and have built up your income, start concentrating on building a solid portfolio of “keepers.”

Two points:

1.   If you have a substantial portfolio and seriously want more income, then take a few thousand dollars and try more aggressive strategies. Call it play money. (Note: most of our Wall Street Work­shop attendees with substantial assets have and do make more profits by taking $5,000 of their $100,000 and investing it in rolling stocks, rolling options, option plays on stock splits, slams, peaks, et cetera, than they make on the other $95,000. Sure their $95,000 is safe and growing nicely. Just think, $95,000 at 10% will produce just under $10,000. But, I’ve seen a lot of people (too many to count) take $5,000 and make over $250,000 a year. And not quite so obvious, this is actual cash flow, not just an increase in value. It’ time to head for the Bahamas.)

2. If you only have a few thousand to invest, then you may want to throw caution to the wind and go for the gusto. If that’s where you are in your life and you want to generate income quickly, most mutual funds, stocks, and bonds will not respond fast enough. It’s time to put a formula (system, recipe) to work and quickly “get in and get out.” It’s the formula that works, not a particular stock.