Wednesday, August 03, 2005


I recently learned that some folks who have purchased stocks written about on this blog have not done very well. This is pretty amazing since the track record of our SOW (stock of the week) has been excellent and since the folks who generally allow me to "manage" their accounts have done extremely well.

It think managing a stock portfolio is similar to driving an 18 wheel tractor trailer. Give most of us a map and the keys and we could probably get the 18 wheeler from point A to point B without a serious mishap. However, a professional driver would do a better job. He would get the load there faster and he would know how to handle a detour. His route might not be the most direct by car but it would be the best route for the 18 wheeler.

One of the things I recently learned is that some folks still have "weeds in their garden". Stocks that I gave a try but sold quickly when they went down in value are still in the portfolios of some of my readers. Please do not take me wrong; we all make mistakes and I make more than my share. The key is to cut the mistakes short and to let the winners run.

NT was a stock that I purchased at $.85 per share and rode all the way to the $7 or $8 range and then rode it back down to the $2 to $3 range. I should have sold above $7 but I sold at around $2.70. It was certainly not a bad gain; 300+ percent in 30 months. It was still a poorly executed trade. I got greedy! A reader was miffed to learn that I sold the stock without telling him; I'm sorry but I do not and will not post every trade to a free blog site. I am here to help folks but not to let them blindly follow my trades.

I hope my many readers have clear goals; information, education, or just an idea to research. If you are the type of person who repairs your car, paints your house and landscapes your own yard, then you may want to manage the details of your investment portfolio. However, remember that managing an account is at least as difficult as driving an 18 wheeler across country. Don't be afraid to ask for help. Know enough to avoid the very high fees that are paid by many. Today, few have the knowledge or the diagnostic equipment necessary to repair their car engine. We protect ourselves by finding a mechanic we can trust, still occasionally verifying the price we pay is decent.

One of the ironies in my life goes back to the time when I bought long term treasury bonds while most brokers were buying real estate partnerships. The irony is that I used my profits from the bonds to buy real estate. The part that amazed me was when the customers who did very well on the bonds then refused to buy real estate.

The story is that bonds were very much out of favor when I bought bonds and I had to work very hard to find those folks who had a mind set that allowed them to buy bonds. To get the same people to understand that the situation had changed and they should buy real estate was nearly impossible. They were negatively biased against real estate from the start or they would have joined the "crowd" in buying the real estate partnerships in 1984.

One of the lessons to learn is that managing money requires flexibility. Many folks own bonds because they have always owned bonds. It does not matter if they are selling at 50 year highs.