70 Crash Profits: Make Money When Stocks SinkandSoar
set it up on your screen and you’re logged in, all you have to do is click on the “refresh” button in MS Internet Explorer. You know—
the box with the two little arrows pointing in different directions.”
“Huh?”
“Look. Right here. See? This one between the little “home” and the “stop” icons? Just click it. Then glance at it. Right away you can see that either the market is in rally mode or it’s not. But remem- ber, this is entirely arbitrary. Not guaranteed to work; just there to lend you a helping hand.”
“Is that it?”
“Yes . . . ah . . . no, wait a minute. One more thing. There are no small-cap or very thinly traded stocks in your grandfather’s portfo- lio, are there?”
“I don’t think so.”
“Good, because those can be harder to sell. You’ll need to work with your broker to . . .”
“Broker? I don’t really have a broker anymore. Remember? I fired him a long time ago. Now I do everything online.”
“It’s fine to trade online, but in times like these, you do need a broker to help you execute trades, especially in panicky markets and especially with thinly traded stocks. With a lot of securities, you will probably need to set a price limit, a minimum you’ll accept for the shares you’re selling. That’s where the real live brokers can help you. Just don’t let them talk you out of selling . . . or talk you into setting a price that’s so high, you never get out.”
When Linda went home and related the gist of the meeting to her husband, he was apparently pleased. He said that he never
Sell These Stocks Now! 71
1. Two lines above the chart, look for the words “Range: 1d 5d 3m . . .” etc. Click on “3m.”
2. You will see a new chart displaying just the last three months of the S&P 500 Index. On the line immediately above the chart, look for text that begins with “Moving Avg: 5 | 10 | 20 |” and click on “20.”
3. Displayed on the screen will be the same graph, but this time with an additional line—a black line representing the 20-day moving average of the S&P 500 index. Ask your- self which is higher on the graph—the blue line (the S&P itself) or the black line (the 20-day moving average)?
■ If the black line is higher, it’s a sign that no, the market is not in rally mode. Call your broker and say, “Sell half my shares at the market. Park the proceeds in your money market fund for now.”
■ If the black line is lower, it’s a sign that yes, the market is currently in a rally mode. Call your broker and say,
“Sell all my shares at the market. Park the proceeds in your money market fund for now.”
Note:Give your broker a chance to provide input regarding an appropriate sell limit price for inactively traded stocks or stocks that are currently suffering erratic trading conditions.
(A sell limit is the minimum price you will accept for your shares.) Depending upon the situation, your broker may rec- ommend a somewhat higher or lower limit price. Provided the recommended limit price does not vary by more than, say, 5 percent from the price of the most recent transaction, it is probably within reason. However, make it clear to your broker that although you are flexible regarding the timing and level of the sale, you will not be swayed from your basic goal of selling as soon as possible or as soon as market con- ditions allow.
For future convenience, add this Web page to your favorites.
72 Crash Profits: Make Money When Stocks SinkandSoar
trusted her broker to begin with. His parents and grandparents had told him never to trust brokers, bankers, or any financial-sales peo- ple. He felt better about this new guy, but Linda was still in shock.
“I can’t believe Dubois lied to us!” she moaned.
His reply was not exactly comforting. “Who else is lying to us, and what are they lying about?”
TE AM FL Y
Team-Fly®
“
Y
ou told us to sell, but you didn’t tell us where to put the money,” Linda Dedini said at the next consultation with her adviser, this time with her husband Gabriel by her side. “So I just parked the money in the money fund at the brokerage firm.”“I heard about money funds,” said Gabriel. “But I have two problems. First of all, I don’t understand what the heck they are.
Remember, Linda comes from a family of investment and business people. She grew up with this stuff. I just teach Romance languages.
To me, ‘money’ and ‘fund’ are the same thing.”
Linda didn’t want to waste the adviser’s time, let alone the hourly fee. She wasn’t sure if she should shush her husband or butt in and explain it to him in 10 seconds or less. She decided to do neither.
“Forgive me,” the adviser said, turning to Linda. “I neglected to show you it was right there in my instruction sheet I gave you—to temporarily park the proceeds in a money fund. But all’s well that ends well. You did the right thing.”
Then, turning to Gabriel, he added, “It’s a mutual fund—in this case, run by a subsidiary of your brokerage firm. But instead of buying stocks for you, they put your money strictly into bank CDs or short-term IOUs called ‘commercial paper,’ issued by big
73