The Issue of Safety -- By: Bill Kraft
Copyright 2009, Makin' Hay, Inc., All Rights Reserved
Bill Kraft
Editor |
Last weekend I wrote a little about what I consider to be the
importance of establishing streams of income. I included the
statement: "I believe that creation of diverse streams of income can
be a critical element in assuring financial comfort." One anonymous
blogger apparently mentally added the word "safe" to my statement when
he (or she?) wrote: "Safe income streams that should be part of every
ones portfolio has now become a myth exactly like the buy and hold
strategy. That strategy has really been a myth for as long as I can
remember. Not even the safest of all investments, Money Market funds,
are immune to loss."
No one, least of all I, suggested that any specific income
stream was completely safe. In fact, as far as I can tell, nothing in
this world is safe. Breathing can be dangerous depending upon what is
in the air we breathe; looking both ways when we cross the street
doesn't absolutely insure that we won't get run over; putting helmets
on our kids when they are engaging in activities may reduce the
likelihood, but it doesn't prevent head injuries. Risk is everywhere
and it is certainly present in trading and investing. I wrote "Trade Your Way to Wealth" , in part, at least to show readers where the risk
is and ways to reduce or manage risk in their investments.
In my new book, "Smart Investors Money Machine" , I demonstrate a
wide variety of ways we can create streams of income, but I also try
to discuss risks associated with each strategy. In my view, one of
the important ingredients in successful investing is knowledge of and
management of risk. If the anonymous blogger was under the impression
that I think simple diversification makes for safety, I failed to make
myself clear. Diverse streams of income, like the helmet on a child,
may reduce risk, but they do not remove it. Nothing removes all risk.
Recently a neighbor asked for some coaching as he was
re-entering the investment world. He told me he wanted something safe
with a very high income flow. I said I thought that is probably what
everyone wants, but the combination is very difficult, if not
impossible, to find. As a generality, the higher the potential reward
the higher the potential risk and vice versa. Only by gaining
knowledge can we make decisions and implement plans that help us
manage the risk no matter what we are doing.
Good Trading!
Bill Kraft
Success Trading Group -- by the Success Trading Group Team
Our Success Trading service delivers quality trading ideas for the elite investor that has the financial wherewithal and market nimbleness to profit on small moves in a stock's price. Become a member and you will be provided with email and/or PDA alerts intended to provide you with the opportunity to make many, many profitable trades.
Here is a play from the Success Trading Group:
General Mills Inc. (GIS)
Our Success Trading Group members scored 2 more winning trades this week
with winning trades on General Mills, Inc. (Ticker: GIS) and Wal-Mart
(Ticker: WMT). With the current volatility we are watching our "regular
favorites" for new opportunities for additional short term trades.
Have a great weekend and we'll trade next week.
Success Trading Group Team
Trade Quality
Stocks Over and Over Again
Over 320 winning trades and only 9 losses!
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Option Trader -- by Bill Kraft
Our Option Trading Service is for conservative traders that understand leverage principles and enjoy the challenge of options trading. We focus on powerful option trading strategies that place volatility and momentum in your favor. And we pride ourselves on always minimizing our losses!
The Option Trader service utilizes standard trading in Puts and Calls as well as strategies using Leaps, Straddles, Credit Spreads, Calendar Spreads, and Naked Puts. But no matter how sophisticated a strategy may be, we ALWAYS know our downside potential on every trade.
Here's a look at a trade Bill is currently working on:
DryShips, Inc. (DRYS)
Sometimes cheaper stocks also offer option plays with
seemingly high potential. DRYS, as an example, as been trending upward
since early March but still remains quite depressed compared to highs
seen as recently as January. Currently, the stock is pushing against
a resistance around $6 and if it could break through, I am considering
selling some Apr 6 naked puts currently trading around 85 cents a
share. Even if the stock fell back a bit, I might not mind owning it
for $6 less the premium the market is willing to pay for those puts.
If I sold the puts and the stock was above $6 at expiration I would
likely not be assigned the shares and would be able to keep the whole
premium.
Good Trading!
Bill Kraft
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Trend Trader -- by Bill Kraft
Trend trading as we try to practice it is a form of momentum trading. We prefer to try to capture profit out of the middle of the trend rather than try to catch reversal at bottoms and tops.
Here's a look at a trade Bill is currently working on:
Capital One Financial Corp. (COF)
COF, after coming off a double bottom trended up to
resistance near the $15 level. If the market is, indeed, gaining
strength and financials are coming back, a break above $15 could
signal perhaps as much as a $10 a share move to a next target level.
Good Trading!
Bill Kraft
Try our Trend Trader Real-Time Alert Service
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$10 Trader -- by Bill Kraft
We really enjoy trading stocks that are $10 and under. Often they provide the chance to enjoy high percentage gains and, of course, at worst, the risk is limited to what we paid for the stock.
Here's a look at a trade Bill is currently working on:
RadioShack Corp. (RSH)
This past week $10 Trader closed two winning trades. One
of them, RSH showed a 10.8% gain before commissions in just 12 days.
The stock has now retraced a bit but still looks like it could offer a
good move to close the still large gap on an upturn.
Good Trading!
Bill Kraft
Try our Under $10 Trader Real-Time Alert Service!
Dividend Investor -- by the Dividend Investor Team
Our Dividend Investor service focuses solely on the "best of the best" dividend paying stocks. We attempt to buy these stocks for their powerful dividend producing income; and we will also buy these with a purpose to make capital gains as the stock increases in value. Our Dividend Investor service is a perfect fit for an IRA account.
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