Stock Market Analysis Video
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Recently, someone I follow on Twitter wrote a blog post about mid-year investing resolutions. It got me thinking about how we only vow to do things in January and then often forget these grand plans well before the mid-way point in the year.
I didn't write a traditional new year's investing resolutions Cabot Wealth Advisory this year, but in January, I offered 20 tips to becoming a better investor that I gathered from the wisdom of our Cabot editors. And they are still relevant and important today, especially in the midst of a volatile market.
So instead of waiting until next January to resolve to become a more successful investor, I invite you to read the following investing tips and incorporate them into your system. It's never too late to get on the right path!
1. Cut losses short (definitely rule #1 for growth stock investing).
2. Search for strong sales and earnings growth (especially triple-digit sales growth).
3. Search for revolutionary products with major benefits. First Solar and Crocs filled the bill in 2007 and were Cabot's two biggest winners. Earlier this year our subscribers benefited from Green Mountain Coffee Roasters' revolutionary Keurig single-cup brewer. And the booming Chinese Internet market with Baidu.
4. Heed the message of the overall market--never fight the main trend!
5. Never average down in growth stocks.
6. Be prepared for all contingencies (always have an exit plan ahead of time).
7. Never try to buy at the bottom or sell at the top (if you try, you'll just lose more money).
8. To avoid gut-wrenching volatility, stick with stocks that are liquid (at least 500,000 shares traded per day or more).
9. Only put more money to work after your past purchases are showing you a profit.
10. Be humble--making money in stocks is tough, so don't kill yourself over one or two bad trades. Be thankful when you hit a big winner.
11. Find an investing system that works for you. The best way to deal with stress from the market is to have a game plan ahead of time. If you wait until things are blowing up in your face, it's too late--by then, your emotions are out of control and you're likely to do the exact opposite of what's constructive.
12. "Markets are never wrong; opinions are," is a quote from Jesse L. Livermore, one of the most colorful, flamboyant, and respected market speculators of all time. At Cabot, we agree wholeheartedly with his comment and truly embrace this thinking. And you should, too, if you want to become a successful growth investor.
13. When looking for potential purchase candidates, examine both the company's fundamentals and its stock's technical performance. When analyzing the technicals, focus on the stock's momentum and price chart, along with its volume pattern and 50-day moving average.
14. Find a company that has a big idea ... one that leaves few if any limits on its future growth potential. It's these big ideas that create an atmosphere that can push a growth stock to dizzying heights!
15. Warren Buffett once said there were only two rules to follow with your investments: Rule #1: Don't lose money. Rule #2: Don't forget rule #1.
16. Our goal is to get you heavily invested while the market is trending higher. During those times, when investor perceptions are improving, investors are willing to pay more and more for stocks. This is when you can make big money! But, of course, no market moves in one direction forever. So, when the intermediate-term trend of stocks is down, your best move is to play defense. Easing up on new purchases, while building up cash by selling your weakest stocks, is a good idea.
17. Be an optimist. In our more than three decades of publishing investment advisories, we've seen many ups and downs for both the market and our country. But after every tough event our dynamic country and economy have eventually rebounded. So no matter how bleak the situation, always stay optimistic because our country and stock market will give you some dazzling opportunities!
18. Diversify your portfolio. For our Model Portfolio in Cabot Market Letter, 12 stocks provide plenty of diversification for your growth portfolio. Smaller investors can do well with as few as five stocks, but you should never have all your eggs in one basket.
19. Once you've invested in a stock, be patient. Recognize that time is your friend. Frequently stocks don't go up as fast as you might want them to. But if you can develop a persistent and tolerant attitude coupled with plenty of patience, you'll have a great advantage. We call this STAYING POWER!
20. Buy growth stocks with strong RP lines. Relative performance (RP) studies are a superb way to identify successful companies and to avoid problem companies. You should buy stocks that are consistently outperforming the market. This is a good indication that they are under accumulation, week after week, month after month, and that the companies are succeeding. The best investing tips come from the performance of the stocks themselves. So ignore hot tips!
I hope you benefit from reading these tips and incorporate them into your own investing system. Don't wait until January to resolve to come a better investor; the time to start is now.
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In this week's Stock Market Analysis Video, Cabot China & Emerging Markets Report Editor Paul Goodwin says that it's been a good week in the market, but that it's hard to really say too much positive about it. Paul says it's important to recognize what is going on in the market right now is that there is no visible intermediate trend. Stocks discussed include Dr. Reddy's Labs (RDY), Companhia Brasileira de Distribuicao (CBD) and Bancolombia S.A. (CIB).
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In case you didn't get a chance to read all the issues of Cabot Wealth Advisory this week and want to catch up on any investing and stock tips you might have missed, I have links below to each issue.
Cabot Wealth Advisory 7/6/10 - Don't Worry, Be Happy
On Tuesday, Timothy Lutts wrote about why investors should ignore the news and commentary and let the action of the market be your guide. Tim also discussed why putting worries into perspective could help you make better investment decisions. And he finished by discussing a value stock that's attractive now. Featured stock: Sysco (SYY).
Cabot Wealth Advisory 7/8/10 - Hope and Fear in the Stock Market
On Thursday, Michael Cinolo wrote about the importance of battling your personal weaknesses to become a more successful investor. Mike also discussed why it's important to stay interested in the stock market, even when nothing huge is happening. And Mike finished by discussing an old favorite stock that is regrouping. Featured stock: Green Mountain Coffee Roasters (GMCR).
Until next time,
Editor of Cabot Wealth Advisory