5 Simple Rules to Evolve Past the Hot Stock List

By Andrey Dashkov

If you’re a typical small time investor, chances are you prefer to let a team of analysts fuss about such irksome things as correlation and beta. Maybe you’ve bought a stock because your brother in law gave you a hot tip, maybe you heard something about it on a financial news show, or maybe you just loved the company’s product.


Friends often ask me for “hot stock tips”—which is like walking up to someone at the craps table and asking what number to bet on. An accomplished craps player will have position limits, stop losses, income targets, and an overall strategy that does not hinge on one roll of the dice. You need an overall strategy long before you put money down.

So, what do I tell those friends asking for hot stock tips? Well, that they can retire rich with a 50-20-30 portfolio:

• Stocks. 50% in solid, diversified stocks providing healthy dividends and appreciation.
• High Yield. 20% in high yield, dividend paying investments coupled with appropriate safety measures. These holdings are bought for yield; any appreciation is a nice bonus.
• Stable Income. 30% in conservative, stable income vehicles.

Unless you’re starting entirely from scratch, you should review your current portfolio allocations, identify where you’re over or underallocated, and then look for investments to fill those holes. In our portfolio here at Miller's Money Forever, we separate our recommendations into Stocks, High Yield, and Stable Income to help you do just that.

The Art of the Pick

 

By the time an investment lands in our portfolio, we’ve already run it through our Five Point Balancing Test. When your boasting brother in law tempts you with a “can’t-miss opportunity” or some pundit touts a hot tech company on television, you can come back to these five points, again and again.

1. Is it a solid company or investment vehicle? Investing your retirement money safely is a must. How do you know if a company is solid? Take the time to validate essential company information, particularly when the recommendation comes from a source with questionable motivation.
2. Does it provide good income? A good stock combines a robust dividend and appreciation potential.
3. Is there a good chance for appreciation? There are two types of appreciating stocks: those that rise because of general market conditions and those that rise further because of the way management runs the business. We want both.
4. Does it protect against inflation? High inflation is one of the biggest enemies of a retirement portfolio.
5. Is it easily reversible? Ask yourself, “Can I quickly and easily reverse this investment if something unexpected occurs?” The ability to liquidate inexpensively is critical to correcting errors.

Marking the Bull’s Eye So You Can Hit It

 

It’s worthwhile to write down your goal—including an income target and the price at which you’ll sell if things head south—with every investment. After all, if you can’t see the bull’s eye, how will you know if you’ve hit it? Buying any investment because a trusted adviser, newsletter, or pundit recommended it is not a good enough reason. Buying because your portfolio has a hole, you understand the company, the investment vehicle, the risks, and the potential is.

Remember, retiring rich means having enough money to enjoy your lifestyle without money worries. Do your homework on every investment and you’ll make that pleasant thought your life’s reality. Every week, the Miller’s Money team provides no nonsense, practical advice about the best ways to invest for your retirement in  Miller’s Money Weekly Sign up here to receive it every Thursday.

The article 5 Simple Rules to Evolve Past the Hot-Stock List was originally published at Millers Money

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How to Momentum Trade Gold & Silver Stocks

Back on April 9th I posted a short tutorial on how to momentum trade gold along with my short term gold forecast.

Today I wanted to do a follow up video for my gold market traders for three reasons:

1. I had lots of great feedback from traders taking advantage of what I showed to profit in the past week.
2. To show you how and why this strategy works better with gold stocks and silver stocks.
3. To provide my short term gold forecast so you are on the right side of the market for next week.
4. Also you should see my major long term Gold Forecast

 

Get my gold forecast and gold trade alerts at The Gold & Oil Guy

See you in the markets!
Chris Vermeulen


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Why Gold Is Falling and a Gold Forecast You May Not Like

The bitter truth about what may happen to gold is not all that exciting and likely don’t want to know, but you need to understand what is unfolding as we speak…..

Long story short, the prices of bonds look as though they are about to rally once again. Mounting fears of a stock market correction has money flowing into bonds which in turn will drive interest yields lower yet gain.

But the BIG PICTURE of what he FED said the other week about how they plan to raise rates in 2015 and cut QE down to $55 billion per month hurts the long term outlook for gold.

This news may not sound that important, it actually is and undermines the price of miners, silver and gold in a big way. Find out why gold is falling and the threat that could trigger a much larger meltdown in the long run with my gold forecast video.



Chris Vermeulen
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Stocks Preparing for Pullback, Buy Bad News, Sell the Good

The SP500 remains in a strong uptrend, but the index has posted a sizable gains for 2013 thus far so it’s only logical that a pullback within this bull market takes place sooner than later.

With May now upon us and historically prices fall more times than not we feel a 3-4 weeks correction is on the verge of starting. This Friday we just had very strong economic numbers confirming the economy is recovering. This news has sent stocks sharply higher as shorts cover their positions and investors who are not yet long get into position to profit from higher prices. But the herd psychology and their trades are typically incorrect as they invest based on fear and greed. The old saying is buy on negative news and sell on positive news will typically get you on the correct side of the market more times than not if used with price, volume and cycles.

The Technical Traders – SP500 Index Weekly Chart

If we look at the price of the SP500 we need it to breakdown below the recent pivot low before we become bearish. Volume which is not shown on this chart is below average as price moves higher and this is a bearish sign also.

Looking at a basic cycle using the stochastics indicator we can see that the current cycle is starting to turn down. Cycles tend to lead price during an uptrend so we could still have stocks move higher for another week or so but be aware that when price starts to drop its likely a market top. But until then you must respect the uptrend. Stocks can remain overbought and toppy looking for months… so done be gambling and trying to pick a top until we see breakdown start.



SP500 Stocks Trading Above 200 Moving Average – The Technical Traders View

Stocks trading above the 200 day moving average is a great indicator for helping spot broad market underlying strength/weakness. It does lag the market but is still very powerful. The chart below shows this info and my thinking of what is likely to unfold sooner than later though price may still rise for several days yet.

We also use a similar chart for timing swing trades and market tops which are based on stocks trading above the 20 day moving average. This chart is not shown here but is now trading at a level which generally triggers selling/market top.



Stock Market and SP500 Trading and Investing Conclusion:

In short, we are still bullish on the market as we focus on trading with the trend. We do not pick market tops and we do not pick market bottoms. Knowing that stocks make their biggest moves at the end of their uptrend and at the end of a down trend it’s only common sense that risk is extremely high if you are betting against the current trend.

The best thing to do is wait for a technical breakdown and reversal which puts the odds more in your favor with much less risk and typically a clear line in the sand to exit the position if you are incorrect.

The last major stock market top which formed in September of last year had a series of strong news and strong price action persuading the herd to buy stocks. Instead it was the last impulse wave up just before a strong correction took place. That is much like what we see now with the economic news.

Join our free newsletter and stay on right side of the market while reducing your trading/investing stress. My simple yet effective analysis walks you through the market each week without bias. Remember Price and Volume is what makes you money trading NOT news or forecasts.

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