Chapter 18
Bonus
As I've worked on this book I have thought of some ideas and others have given me good ideas I'd like to share. Some of these ideas that may have mentioned already but it won't hurt repeating them.
Here's the best way to play the system:
1 – Buy your stock initially when it is at or near its 52-week low
2 – Start looking up the prices of your stocks a few days before it's time to buy or sell
If one or more of your stocks shows strong price changes, then postpone your buy or sell decision and follow the stock closely. I will give you an example: I owned Cray Computer and the day I was about to see if I should buy or sell, Cray went up $2 a share from $8.00 to.$10.00. I waited a day; Cray went from $10.00 to $11.50. I waited another day; it went from $11.50 to $13.00. I waited another day, it went down $.50 a share and I sold based on the system. You can play this game too. If your stock is sharply going up or down, follow it day to day and get the maximum move before you buy or sell.
3 – Here's the key to increased profits (notice I explained earlier that I didn't use it in the seven year averages). Play your stock the regular way until it hits his 52–week high (the high should be at least 150% higher than your original purchase price). If you originally bought your stock at $5 a share, then $12.50 is 150% higher. When the stock hits the 52-week high, sell all the remaining shares and use the money to buy another stock at its 52-week low and repeat the process. You can always buy the same stock back when it's back at its 52-week low.
I envision you should have enough money to buy at least $1,000 words of a new stock with the money you get from selling all remaining shares. Don't worry if you find out you now own $1, 180 worth of your new stock. You can set up your new spreadsheet the same as you have in the past. Cash is now 1/2 of $1,180 or $590, which remember is, also 1/3 of your PORTFOLIO TOTAL, if this is a conservative stock – otherwise use 50% CASH – 50% shares.
4 – Again readjust your cash/stock ratio at least once a year. More often would be better. Check your ratio after you have a large sale. Remember you make your money buying and selling stock, not earning interest on your money market account with your broker. And in the days of 2011, your stockbroker is paying a mighty low percent of interest probably 1% or less.
5 - Keep some of your regular savings money in your money market account. You will make slightly higher interest on your money and you have a little extra cushion in case the system needs a little extra money to make some especially good buys at low prices. We’re playing it close to the vest keeping our cash at 1/3 of our PORTFOLIO TOTAL and run the possibility of running out of cash occasionally just when the system is giving us great buys. Having that extra cash there will give you peace of mind. Now you can lend yourself money and you'll be playing the system the way you should. You'll quickly pay back that loan with your profits.
I hope this bonus section also showed you that you too can figure out some ideas on your own that will increase your profits. If so, please share them with me and I'll add them to a revised version and give you credit. Again good investing and to all the best.
