Don't Be a Fool

Wow, did you hear stocks are soaring.  All the big players in the market are just putting in millions of dollars.  Bull!  I mean c'mon people.  Who is really making money in this market?  I will tell you who, the people who have the millions to lose before they make any money.  The normal investor puts in $5,000 and makes $200 one day and loses it right back the next.  The risk level is so extreme in these kinds of markets for the little guy it is almost impossible to make any money.  I am going to break it down for you.  What do all those guys on tv say?  They say don't bail out of the market you will miss the up side potential.  Listen that is only with new, fresh money.  Not with the money that has been beaten down since April of 2008.  The Dow Jones Industrial Average was at 12,612 April 7, 2008, it is 7,769 today and may end up lower when trading is done for the day.

The other piece to the puzzle is that these big time investors have the ability to get out when they make money at a lower cost then the small investor.  It is called economy of scale.  They put in $1,000,000 and make $200,000 and get out.  They pay the broker on both ends.  They also may have losses to take against the gains they have.  Oh yeah, did I mention that they have enough resources to play the market on the other side.  Yes that's right, when the market goes down they make money as well.  

So do not be foolish, only invest what you know you can lose without getting hurt financially. Do not, I repeat do not sit around and do nothing if you are in this bad market.  Always adjust your portfolio to your specific current tolerance level of risk.  Just because you heard them say buy and hold is the way to go, that does not mean your risk level has to hold.  If you cannot take the heat get out and wait to get back in.  This is not a recommendation by any means because I do not know everyone's situation and I am not telling anyone what to do.  All I am saying is that what we see on CNBC is not what we see everyday in the normal investment world.