Devoted to understanding the basics and fundamentals of investing

Dollar cost averaging is a pretty good strategy for accumulating position.

When it comes to liquidating position, I find no fault in selling out to lock in a profit objective. You'll never go broke taking a profit. They don't ring any bells at the top of the market. Don't be afraid to leave a few points of additional appreciation on the table for the next guy (the one who takes you out at a profit).

When J.D. Rockafeller was asked by a reporter how it was that he had made all of his money in the stock market, he replied, "I sold too soon."

NINE DUMB MISTAKES SMART INVESTORS MAKE:
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1. FOLLOWING TRENDS HYPED BY THE PRESS:
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Sure, serious investors are supposed to know better, since they deal with financial matters daily. But big investors are just as insecure as small ones, and they often give in to the many opinions of the financial press. The problem is that the press and the pundits are wrong just as often as they are right. Don't be distracted by what you read in the papers. Keep yourself focused on your personal financial goals, and don't join every prominent economist and fund manager in second-guessing the economy and companies that momentarily falter.

2. TAKING HIGH-RATE-OF-RETURN RISKS:
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If a broker shows you an investment returning 15% a year when comparable investments are paying 3%, there's a reason for the difference. Be suspicious if an investment seems too good to be true. Even sophisticated folks' greed occasionally overtakes their common sense -- and they wind up losing money.

3. NOT PROTECTING YOUR PRESENT ASSETS:
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This often occurs when you're holding a stock whose price has declined precipitously. Say you bought at $10 a share and it has fallen to $5 a share. A common reaction is to say you'll sell when the price recovers. What you're really saying is that you expect this stock, which has fallen by 50%, to rise by 100%. If you are so convinced that the stock is a good prospect, you should invest more in the stock. When the rationale for holding onto the stock is expressed in these terms, most people back off. The point is, be realistic. When an investment fails, sell it, forget about it, and go on to better things in life.

4. TRYING TO TIME THE MARKET:
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Predicting each upturn and downturn, and constantly shifting from one asset class to another, such as stocks to bonds, growth companies to value companies, and so on is something that even the pros are unable to do consistently. The only person who gets rich with market timing is your broker -- by raking in commissions. Successful investors use time and patience. They set their goals and stick with them -- overrunning temporary market fluctuations.

5. NOT MONITORING YOUR HOLDINGS:
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You may not be doing as well as you think. Once every six months, tally up your net worth -- not counting your house. Over time, that number should be rising. You should set a specific target for how much you expect your assets to grow over the next three years and the next five years. I aim for at least 10% average growth per year. At that rate, your assets will double up every seven years.

6. NEGLECTING YOUR GREATEST ASSET:
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The rate of return on your own labor is far greater than you can get on any other investment. Think of how much income you produced between last January 1st and the end of the year. Regardless of wether you made $25,000 or $250,000, you went from no earnings at all to your total annual salary or business income. Be sure to take good care of yourself! You want to safeguard your most valuable money-making machine: yourself. It's also important to invest in yourself. If your company doesn't provide a car phone, but you know it can help you conduct business, buy one yourself. If your 10-year-old knows more about computers than you do, increase your knowledge by taking a course at night school. Continuously strive for personal excellence. It will pay off financially.

7. BEING AFRAID TO INVADE PRINCIPAL:
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Only the super-wealthy can afford to live on their income alone. Sure, it's great to save for a comfortable retirement, but once you've stopped working, don't forget to use some of the money you've accumulated to improve your quality of life. For example, a woman I know in her late 70s with a substantial portfolio worries about the cost of nursing-home care -- until she's told that, with her current assets, she could afford to hire a staff of 50 for 24-hour care for the rest of her life. If you are worried about outliving your principal, make sure your portfolio is not 100% fixed-income investments. Historically, they have had a low rate of return. Better: Fashion a diversified portfolio of stocks and bonds, which will produce a higher rate of return. That way, you can systematically withdraw some of the "growth" by selling stocks. Your real goal should be to accumulate enough money to support you and your life partner for the rest of your lives, not to make your kids wealthy after you die.

8. BEING EMBARRASSED TO INVEST SMALL:
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What's important is to establish the habit of savings, even if you're investing only $5 or $10 a month. There are several mutual-fund families that have a low-minimum, initial-investment requirement, and no minimum requirements after that. They know that people who get hooked on the savings habit tend to be very loyal customers. So don't be embarrassed to earmark modest sums for your portfolio. And when larger sums become available -- because of a tax refund or a bonus at work, for example -- siphon off at least some of that money for investments.

9. BEING TOO BUSY MAKING $ TO SUCCEED:
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Regardless of whether you make $50,000 or $100,000 or $250,000, it's important to keep track of your spending. There's no doubt that spending all you make can give you the sensation of being wealthy. Yet it's not how much you spend but how much you save that matters. The old adage, "Pay yourself first" works only if you adopt a good method for paying yourself. Solution: Once a month, when you write a check for your rent or mortgage, get in the habit of writing another check -- say, for $50 or $100 or $250 -- for your investments. Once you get in the savings habit, you won't even notice a dent in your spendable income.

WHEN TO SELL STOCKS:
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Short-term interest rates have been rising, although overall the general level of interest rates continues to remain low, and there's still plenty of cash around that could potentially flow into stocks. Even so, the market is probably overvalued by most historic measures. And, particularly in the late stages of a bull market, fewer stocks participate in rallies. Undeniably, current market risk is substantial. Is it now time to cash in all of your chips? Probably not. Avoiding stocks altogether isn't the answer; their long-term record is just too good. For instance, you may hold a stake in one or more companies with superb long-term growth potential, and you may not need that cash any time soon. Or you may own some stocks that pay high dividend yields ( based on your purchase price), with additional payout hikes likely in the future. Overall though, the best time to prune your portfolio is when the market is at a high point, not a low one. If you're concerned about protecting your capital, you should have some firm guidelines for when to sell a stock.

IRONCLAD RULE #1: Cut losses and let profits run. It's a cliche. But avoiding big losses is essential if you want to build wealth at moderate risk. Note that capital losses generated are tax dedductible; they can be used to offset current or future gains or other income.

IRONCLAD RULE #2: Forget about trying to sell at the top. It's better to get out early than to run the risk of staying "married" to a tumbling stock, telling yourself that it will come back. Don't fall in love with your stocks. A stock may go higher after you sell it. So what? You're not a money manager whose livelihood may depend upon beating the averages, so there's no point in taking on unnecessary risk. Some successful investors do not sell stocks, regardless of price, so long as everything is going well. And excessive trading is costly in terms of both taxes and brokerage commissions. But there are situations in which to consider selling all or part of a holding:

IF A STOCK HAS MOVED UP SHARPLY AND STEADILY. For instance, consider selling at least half your position if a stock has had two or more years of strong price appreciation. Sell and don't look back if a stock has shot up 50%-100% in a few months, especially if "everybody" is talking about it.

WHEN THE STOCK REACHES YOUR TARGET PRICE. Set a goal at which you will sell. Re-examine the company's prospects at that level, asking yourself whether you would still buy the shares. If not, say good-bye.

WHEN THE COMPANY'S PROSPECTS HAVE DETERIORATED SIGNIFICANTLY. Watch out for shrinking market share, unit growth, profit margins or sales/earnings growth rate. Also a sale candidate is a stock of a company whose profits start to fall short of analysts' projections; such surprises tend to repeat themselves.

WHEN IT WILL HELP YOU KEEP YOUR LOSSES DOWN. Set a stop-loss point -- a specific price at which your shares will be sold. Even though you may miss a rebound, it's safer to accept a small loss than to take the risk it will mount into a big loss. The stop price to set -- 15%-20% below the current price, depends on the stock's volatility, market conditions, and what loss you can accept. Move up the stop as the stock rises.

WHEN OTHER UNFAVORABLE ACTION IN THE STOCK OCCURS. One warning is when the stock lags others in its industry group, or the group itself falters. Another is if the stock falls below a major support level -- one at which past declines have ended or a long-term moving average has been breeched. Such stocks often tumble much lower. Moving averages of stock prices help you stay attuned to the long-term trend and to spot reversals. When a stock drops below a key moving average -- such as a 39-week or 200-day average -- it often enters a significant decline, especially if the moving average itself turns down.

WHE A STOCK'S PRICE/EARNINGS RATIO SEEMS EXCESSIVE. This is relative because many P/E's are high now, and it should be considered only together with the company's prospects. By itself, a high P/E ratio doesn't mean much. Find out the average P/E ratio of the stock and its industry over the long term relative to the average for the S&P 500. Suppose the stock historically has sold at a P/E 20% higher than the S&P average. With the S&P 500 now trading at a P/E of 25, you might sell when your shares' P/E reaches 30. Another way to look at it: The stock's P/E relative to its expected growth rate. Stocks with P/E's of more than 1.5 times projected growth (23 times current earnings, with a 15% growth rate, say) may be vulnerable.

IF YOU'VE FOUND A BETTER PLACE TO PUT YOUR MONEY. Also replace high-flying stocks with other assets that promise higher annual returns over the next three to five years. By investing in a stock that seems undervalued, you may boost your profit potential while cutting your risk. But don't put off selling just because you don't know where to reinvest yet. Example: Weeding out laggards with lesser prospects becomes particularly important in a weak market. Here, a money market fund is more attractive.

IF YOUR INVESTMENT NEEDS HAVE CHANGED. An ivestment may carry more risk than is advisable or necessary now. Or you may need to boost current income by selling stocks paying no or low dividends.

IF YOU'RE OVERINVESTED IN ONE STOCK. It may have done so well that it dominates your portfolio. In such cases, it's wise to cut back so the stock accounts for no more than 10%-20% of your net worth.

IF THERE ARE COMPELLING TAX CONSIDERATIONS. As a rule, your tax situation shouldn't dominate investment decisions. Inevitably though, taxes come into play. Still, capital gains are unavoidable for successful investors. Just ask yourself how far a stock is likely to drop in the next bear market. You may be able to buy back your entire position with money left after you've paid the tax on your current profit. Suppose you bought XYZ shares several years ago at $10 each. Now they trade at $50. At a 28% long-term capital gains rate, you'll pay $11.20 per share in taxes ($40 per-share profit times 28%), leaving you with $38.80 a share. Ask yourself: Is XYZ likely to trade that low during the next couple of years? Answer: Absolutely, if a bear market develops. What if a stock has been owned for many years and the capital gain would be enormous? You might be reluctant to sell. But consider IBM. Anybody who sold long-term holdings of IBM as recently as 1991, despite a potentially huge capital gain, fared very well indeed in light of the stock's subsequent collapse. Besides, NOBODY ever went broke paying capital gains taxes!