I have been reading several forums on stop loss orders and the problems people have with them. Many people abandon stop loss orders in a Bear market after getting kicked out of their stock positions and taking some losses.

Stop Loss orders are easy to understand. One of the rules of investing is don’t invest in anything you do not understand. Another rule is only use strategies to protect your nest egg that you understand. Stop Losses meet that requirement for most people.

If you had purchased stocks at the March lows then you would have had a good run up on the stocks you purchased. It is likely that most of your stops placed at maybe 8% below the stock price are still intact.

With the markets going up 20-30% since March if you timed your entry right you have a profit cushion of 20% or more maybe. So if any stock loses 8% you walk away with a profit from that stock of maybe 12%.

Unless you have a problem giving back some profits this is something you will most likely be able to handle since you did not lose any of your capital.

The problem arises when you don’t time your entry well and the market goes sideways and then down maybe 10% -20%. This is very hard to do at the best of times.

In this case some of your stocks will get stop loss triggers and exit the market for you. You will have a loss on those stocks of around 8% and that will probably be a capital loss too. That hurts.

It is this pain that causes many people to abandon using stop losses. But…. Read the rest of this entry »

Right now many Baby Boomers might well be lamenting a large loss in the retirement fund. Many like Paul Escobar may have done all the right things and saved for their retirement, only to lose much of their nest egg and their job as well.

“As of today, no surprise, he’s lost 45 percent of his balance — and he’s lost his job, too. In hopes of recovering losses, “I’ve definitely been rebalancing my allocations,” says the 42-year-old.” Does America need a new retirement system?

You may have also taken the advice of many financial planners and put a large portion of your retirement funds into risky equities. You believed your financial planners when they said you had to have a large portion of you funds in risky equities or you just would not get the returns on your fund necessary for you to retire comfortably.

Using the standard marketing ploy of the stock market always goes up in the long term they convinced millions of Baby Boomers to set and forget their nest egg.

As we all know a nest egg needs to be nurtured and watched and protected. Just ask a penguin - even they know this. None of this was done and it was left to the vultures of the financial markets to risk all your hard earned money to line their own pockets.

They knew something you didn’t. If they got into financial trouble the government would bail them out even if it meant you lost all your money. So what had they got to lose?

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I am still hearing financial gurus telling everyone that they should take a 5 or 10 year time horizon when investing in stocks. This bears no relationship to what happens in the markets. It’s nonsense.

Taking any sort of fixed period as a basis for investing that takes no account of how that investment will perform over time is gambling, unless backed up with an exit strategy if the investment doesn’t work out.

The gurus will tell you to stick to your plan. I agree with sticking to your plan. But that plan should include  contingencies in case the investments take a nose-dive, like now.

An exit strategy can be part of the plan can’t it?

Take a look at the Dow 10 year chart on the right.

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You may well ask how did Wall Street, Governments and the wealth management industry make your nest egg disappear.

You should know how it happened so you do not repeat the same mistake of trusting people who never had your best interests at heart in the first place.

Your money was your fund managers to risk so they could make themselves rich. Remember when money is passed from hand to hand the emotional attachments between the owner, the money and the Fund Manager does not exist.

That means that to them it is only money they have to invest in order to pay their bonuses, mortgages and life style. The fact the money belongs to you is not in their conscious mind. I’m sure it is not intentional, I believe it just is.

In short order here is what happened courtesy of Fox News, “Saving Our Economy What’$ Next?” and Professor Robert Wright from New York University; Read the rest of this entry »

When Baby Boomers are in retirement their number one goal should be to avoid large losses. In Retirement this is more important that chasing returns.

The reasons for avoiding large losses are;

• You may not have enough income from other sources to replace the losses.
• You do not have time on your side to replace those losses.
• You are drawing down your nest egg by taking a pension, which is in effect increasing the losses you are trying to recover from.
• You have less money left to invest when the good times return to generate returns to maintain your capital. Read the rest of this entry »

There, I’ve admitted it - I’m guilty as charged. As a Baby Boomer I am highly risk averse. The truth is I was risk averse before I was classified as a Baby Boomer too. I’ve always been that way. But there seems to be some stigma attached to it. It is as if I am sub-human because I don’t want to take unnecessary risks with my retirement nest egg.

Making me feel guilty because I don’t want to put a large percentage of my nest egg into risk-based assets and hold on, is one of they ways the wealth management industry tries to get me to do just that.

My wife says I’m too quick to sell. But wasn’t it Rothschild who said when asked how he made his fortune, he always bought too late and sold too early. I’d say that is the trait of a risk averse person like me.

We’ve all read plenty of news copy, written mostly by the wealth management industry, that we need to have anywhere from 30% to 70% of our money in risky equities in retirement, or we won’t have enough money to live on for the next 30 years. How do they know? For 16 years until the 80’s the market went sideways at best and inflation was high but stocks did not compensate for it then. Read the rest of this entry »

Here is my latest bates retirement income strategy model #2. You can check out retirement income strategy model #1 and compare them.

As I learn more from my research I find the picture of what I need to do becomes clearer. So I have decided to revise my model and it is shown below.

This is what I think will work for me. It may not suit all Baby Boomers but I find simple diagrams and pictures give me a better understanding of what I need to achieve.

(A large diagram is displayed later in the Post)

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This is a full copy of an email service I subscribe to from Al Thomas from Mutual Fund Magic. Al is a professional trader and has been a floor trader, a broker and almost everything you can be in the financial markets. His book “If It Doesn’t Go Up, Don’t Buy It!” is a must buy. The book is an education in itself. Also go to his web site and sign up for his newsletter today.

I just wanted you to see an expert professional trader has the same view as I do regarding these markets. I hope it gives my view more credibility. I wanted it included in this post complete so there can be no misunderstanding. Please read on ….. Read the rest of this entry »