How Not to Lose a Million Dollars in Stocks

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Melvin Hirsch. How Not to Lose a Million Dollars in Stocks

Wrong, Wrong, Wrong!

Greed and Fear

Invest in the Best

IBM

Microsoft

AT&T

Invest for the Long Term

Look at a 10 year picture of the Dow Jones:

How to Lose ….

Can Prices be Forecast?

Let’s look at IBM

Inertia

Let’s examine a chart of Apple:

Now examine a chart where there is an overhead trading range - Microsoft

Up or Down?

There is another pattern that can be helpful – it is the triangle formation. Look at the chart of Disney:

How High is Up?

Examine the chart of the S&P 500 during 2007:

Consider McDonalds;

Bottom Fishing

Let’s examine IBM:

Getting Technical

Let’s look at Apple:

Let’s look at McDonalds

Portfolio Management

Place Your Order

Gaps and Spikes

3m Company

Let’s look at IBM

Look at another example of a GAP UP - Disney

Short Selling

Look at the S&P 500 during this 20 year period:

Let’s examine Microsoft:

Strategy

Insurance

Summary

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Many books have been written about how to make a million dollars in the stock market. Unfortunately, I do not know anyone who succeeded in this, but I do know a lot of people that lost money in the stock market. This book is dedicated to them. Hopefully I can shed some insight into the stock market to avoid such disasters and maybe give you some ideas that may result in making money in the market.

First, I want to give you an entire new perspective of the stock market. As with most sports it is easier to teach someone who has never played a game than someone who has played and developed bad habits. If it were possible to hit the erase button in that part of your brain that has any information concerning the stock market, push the button.

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P/E Ratio – This is the price divided by earnings, one of the foremost indicators used by analysts to determine stock value. Surely this is an indicator of where the stock price is going. Wrong, maybe it is an indicator of where it has been. How about all those P/E tables that may show one company in the same business has a lower P/E ratio than the others? A good buy, probably not. The lower P/E ratio indicates investors outlook of that company’s future prospects are poorer than the other companies in the table. Understand, the market is a huge pool of very astute analysts, investors, and financial institutions. Most likely they know more about the company and it’s future prospects than you. So the current P/E ratio is a reflection of their opinion of what the stock is worth and unless you have some special knowledge, the valuation they place on the company is going to better than yours.

At a racetrack gambling odds reflect the future prospect of a horse winning. The experts have studied the horse’s track record and taken into account all the factors including the condition of the track and the weather. I suggest that the probability of projected future prices of stock based on future projected P/E ratios is about the same as gambling at the horse races, maybe you will hit a winner but the odds are against you.

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