That's the tout.

If you have been reading any of the ‘money’ magazines, reading your junk mail, watching CNBC-TV or any other investment tout source you know they are all trying to get you to buy something.

It is not that easy in today’s stock market and don’t fall for the one that mutual funds are “safe”. They aren’t. Mutual fund managers tell you how well they did in relation to the SP500 index, but don’t mention that in 2000 the S&P dropped 33% and in 2008 went down 40%. YUK!

They say to buy something that won’t go down as much for a little while and hold on to it. That is about as lousy a bit of stock advice as you will ever get. The current bear market (hate to tell you that, but that is where we are) is nowhere near the bottom. They are touting something that they think might be a little wrong, but for how long and how little?

Mutual funds by definition are a mixed bag of stocks, bonds and a little cash. Their price per share is the NAV, Net Asset Value of the total amount of money in the mutual fund divided by the number of shares. They seek to be fully invested at all times. Being fully invested while the market crashes is financial suicide.

If you look at the track record of mutual funds for the past 10 years you will see what a poor investment job the fund managers have done. Would you believe that those in 2000 have a 98% losing record?

Whatever fund or stock investors might hold now or buy at this time they must set a loss limit. I guarantee a mutual fund manager won’t. The investor must know how much he is willing to lose should the equity go down instead of up.

All successful stock traders think this way. Not how much will I make when this baby goes up, but at what price will I sell it if it goes down? That might be 10% of the price paid or any number the investor will be comfortable with. If the stock or fund has increased in price then it could be 10% of the highest closing price.

If the investor’s little hummer has dropped more than that it is time to exit NOW. Today there are thousands of mutual funds that have not been able to come back even to 50% of the price of the highs during 2008. When a chart is scanned it can be seen they are in trouble again. Time for new stop loss orders.

The principle of the stock market is to keep what you have made and not give it back.

This is not a time to heed the “experts” telling investors to buy as it won’t go down very much even if the bear market continues.

YOU can be more RIGHT that their Wrong.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know. Copyright 2010 Williamsburg Investment Co. All rights reserved.