Thomas Edison gave his definition of insanity: “Endless repeating of the same process, hoping for a different result.”

We are now seeing the same stock market head down again as it did in 2000. Brokers, mutual fund managers and financial planners hopefully will not be repeating their same errors that cost investors seven (7) trillion (with a T) dollars.

Unfortunately they will be working with the same deficient knowledge as before.

The financial brethren have been taught to invest by the Wall Street tribe that has proven to allow huge losses for the small investor. Small is considered less than a 7-figure account. Any customer with less than $100,000 does not show on the radar screen.

The old saw that brokers tell their clients that they will watch their account is pure horse hockey. The average broker has 300 accounts and only those in the seven figure range get their attention. Wall Street tells brokers to buy and hold. This obvious prevarication has been told so many times that is has become conventional wisdom. Just about every broker and financial planner believes it.

If you are to make money in the stock market you must learn a new way to invest. Tom said you can’t keep doing the same thing. And I’m sure you don’t want to go thru those terrible declines that happened five years ago.

Did you have a stock or mutual fund that dropped from its high 40, 50, 60% or more? I hope not. The top 50 mutual funds crashed 42%. Each $10,000 in your portfolio became worth $5,800. You could have saved most of the $4,200 if your broker had recommended a trailing stop loss order.

When you bought your stock or fund did you have an exit strategy? Most folks don’t. Edison was always trying different approaches and when they did not work he quit them and tried something new. That is what you must do when investing in the stock market. If your equity goes down it is not working for you so you sell it to find one that does work for you.

There are times when nothing is going up and that is when you will have sold everything and stand aside with your funds in a money market account. It may not make much, but at least you won’t let the market steal your equity.

You don’t need to be as brilliant as Tom Edison to find a good stock during a bull market, but during a bear market it takes a super genius.

During a bear market even the best stocks go down and many do not recover, Bernard Baruch, one of the greatest traders of all times, said the secret to his success was that he got out too soon. That may seem very simple, but he had the greatest gift of all traders. He had an exit strategy.

Don’t join the other inmates in the Wall Street sanatorium by continuing to hold your equities as the market goes down. Learn to do something different to protect your investments.

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