Empowering Ladies in the Stock Market

Hi Ladies! Hope you are doing well. As usual, the market is up and down. My watch list has a lot of companies with opportunities to make money right now. Yours can too! There are always opportunities to make money in the stock market.

The Stock Market Dust Will Settle: How Do You Stay Alive Among the Casualties?

My friend Craig works at a brokerage firm. When we spoke over the weekend, he was tired from all the calls he received on Friday by clients wanting to close out their brokerage accounts. And after the gargantuan drops in the market both Monday and again Wednesday, I’m sure the cancelation calls kept coming. As the saying goes, “the bull (buying) goes up the stairs, the bear (selling) goes out the window.” The dominant motivation for selling (emotional fear and panic) is much more intense than the dominant motivation for buying (emotional happiness and jubilation). They are among the casualties. Sad but true, if they knew a few basic concepts, they would still be alive.

Risk management keeps you from becoming one of the casualties. It keeps you ALIVE in both the short and long runs. It is the key to both being profitable in the market and sleeping peacefully at night no matter what the market is doing. “Risk management” means different things to different people. Here is the reality: if you invest in the stock market, you will have at least one losing trade. Despite what your significant other says, no one is right all of the time. This is why it’s called “Risk Management,” not “Risk Elimination.”

Most sports fans have heard the following: “Offense wins games; defense wins championships.” Risk management is your defense. If you don’t believe championships are more important, just ask anyone on the losing team of the Super Bowl. Does the New England Patriots / New York Giants game ring a bell?

Know how much you are willing to risk before you enter the investment, not afterwards. Timing is critical. If you wait until you are in the investment to make this decision, your emotions will dictate your actions. And that is a huge mistake. If you want to make money in the market, make decisions objectively based on a proven systematic approach, not based on emotion. 

Looking at my own experience over the past thirteen years, I have made hundreds of trades. Out of ten trades, seven of them will be profitable, two will lose money, and one will break even. Like I said, no one is right all of the time. The key is knowing when to let the losing trades go. I am not willing to lose (risk) more than 20% before I exit a losing trade. I make this decision BEFORE I enter the investment. This is part of my systematic approach, and what enables me to minimize my emotions. I make a decision beforehand, and I stick to it. That is why so many people wind up losing money in the long run because they stay in a particular investment for too long. It is better to exit a trade and preserve the remainder of your investment capital by letting it sit in cash, than to ride a train into the mountain. For me, a 20% drop from my initial cost basis indicates “mountain.” So, I get off. It’s that simple. In the seven trades that are profitable, I let my profits run, and I am not willing to lose more than 20% before I exit a losing trade. This is how I have been profitable in the stock market in the long run. I am not special. Others can do this too.

That being said, there are ways to make money not only when the stock goes up, but also when it goes down, or stays in a horizontal channel. I have done all three. And I am not talking about shorting stock either. I will save that topic for next time…

 I’m ALIVE! I hope you are too! Stay ALIVE on your journey!

 

Aneshia

True/False - Common Myths About the Stock Market - Myth #1

 

In the past 12 years of investing and trading in the stock market, I have learned a lot from my conversations with other women. For one, I have discovered many misconceptions about the stock market. In the interest of personal growth, I am open to learning new things. So, once I’ve discovered that what I used to think about a particular topic is based on insufficient information, I find myself opening up to a new perspective.

So, how do some women allow their mind to take them out of the financial game? Well, while our mind can be extremely powerful, its desire for security and resistance to change can also keep us from stepping out of the box to accomplish our goals and dreams.

Stock Market Myth #1
Trading or investing in the stock market is like gambling.

Some ladies believe that trading in the stock market is like gambling. Truth be told, trading in the stock market is only like gambling when you don’t use a systematic approach. So for many women, I am sad to say, it is not merely “like” gambling…it IS gambling. Only this time, your retirement or family’s future is at risk, not just the cab fare to take you from the casino back to your hotel in Vegas.

This used to be the case for me when I had very little knowledge about the stock market and all I had was my 401k. My investment decisions were based on my emotions or even worse, someone else’s expertise without understanding their methods for selecting stocks. It can be difficult to understand someone else’s methods especially when they don’t use any. You’re better off opening up the financial section of a newspaper, closing your eyes, and pointing your finger at the page.

Now that I trade and invest based on a systematic approach, the odds are definitely in my favor that I will be profitable and continue to be into the future. And for those of you who don’t want to trade, but still want to be able to monitor the funds you select in your 401k or IRA investments, then there is a systematic approach that can work for you too.

Managing Your Emotions – The Key to Your Stock Market Success

Do you want to know the biggest difference between the average investor and the profitable investor? As you can tell by the question, they are not one and the same. The profitable investor knows how to manage their emotions. Please note: I did not say that they eliminate them. The emotions are still there. However, when you use a systematic approach and practice risk management, your decisions in the stock market become objective and logical. This is the critical key to being profitable in the long run. There are three critical questions that a systematic approach will answer.

 

1)    What stock to buy?

2)    When to buy the stock?

3)    When to sell the stock?

 

The average investor answers these questions based on __________. Yes, you fill in the blank, because their answer is completely subjective to what someone else says, how they feel, or any number of reasons.

 

In fact, this is one of the reasons why Cramer on CNBC has such a following. In the absence of judgment, he is an emotional guy in how he delivers information. Why? Well, as I mentioned before, the average investor trades based on emotion. So, he is merely matching the temperament of his target audience, the AVERAGE investor. And people tend to follow a person when they can identify with them.

 

The PROFITABLE investor uses resources and a system in their investing. I have been using a system for over 7 years now, and it has made a tremendous impact on the profitability of my investments in the stock market. I do not take anything I hear from anybody at face value. I check their recommendations based on my systematic approach.

 

So, the choice is yours. Do you want to be “average” or “profitable?”

 

All the best to you on your journey!

 

Aneshia

Building Your Financial House – Does Your Foundation Have Cracks or Craters?

In 1995, the year I graduated from Texas A&M University and entered the workforce in my chosen career path, I started building my financial house. I set financial goals. I wanted to make $100K a year. I wanted to buy my first house. I wanted to buy my first car. And even though my goals were material, they still tied back to financial because I needed money to achieve these goals.

 

Well, once I reached these goals, I set higher goals. Now, my goals were tied strictly to numbers. I didn’t want a bigger house, I didn’t want a newer car; I wanted to make more money so that I could help more people. I always designate 10% of my income to giving, because I understand how important it is to support something that is greater than your self. Leaving a legacy for others who follow is very important to me. My financial goals now are significantly higher than they used to be. But what I have learned is that if you build your financial house, and the foundation has cracks or even worse, craters, it could all come tumbling down and you may have to re-build.

 

My financial house is a skyscraper. The $100K a year is one of the floors. Each numeric goal represents a floor ($250K, $1 million, etc.). As my goals increase, so does the number of floors.

 

A crack here or there in your financial foundation is not a problem. But, a crater can be catastrophic. And the challenge is you may not realize you have a crater until you start to add another floor. As you add that floor, signs of a shaky foundation show up as a financial loss. You lose money in a particular investment. Or you lose money in your business or job through lowered sales, a pay cut, or unemployment. Sometimes the loss means that those things are no longer serving you and it is time to let it go, as in the case of a bad investment or unemployment. I had some real estate investments that I had to let go because they were no longer serving me. I have also lost a job before I became self-employed and a business owner. Sometimes the loss is preparing you to soar to that next level of financial success by forcing you to step back so that you can get a running start. But other times, it is a reflection of a shaky foundation, because that foundation can no longer stand the weight of your impending success. The good news is you’re about to become more successful than you could have ever imagined. The bad news is you need to fix the craters, or it will ALL come tumbling down.

 

The craters I discovered in my own foundation were tied to self-worth. I thought I was worthy, and in many ways I felt worthy, but it turns out it was only to a certain degree. And that certain degree of self-worth has taken me to a point financially. There are certain things that we all internalize about money beginning in our childhood. I have actually cleaned out much of this, but I did not realize until this past week, that even I still have stuff that has to be purged. Stuff that I had absolutely no idea was there until now, when I started to add another floor to the skyscraper. With all that I know about finances and growing money in the stock market, I am still on a journey, same as you. And I still have my challenges, my ups and downs.

 

So, what resources have worked for me?

 

T. Harv Eker – founder of Peak Potentials and The Millionaire Mind Intensive

www.peakpotentials.com

 

 

Dr. Michael Craig – author of The Logical Soul

www.logicalsoul.com

http://www.meetup.com/logicalsoulatlanta/

 

 

All the best to you on your journey!

 

Aneshia

How Can Using Technical Analysis Lead to Consistent Profits in the Stock Market Even in a Down Market?

The two most essential concepts to being profitable in the stock market are using a systematic approach and practicing risk management. Using technical analysis is crucial to choosing the right systematic approach. A down market does not mean that every company is performing poorly. It just means that there are fewer companies that are performing well. A systematic approach will help you, the investor, locate these stocks.

 

A systematic approach will help the investor answer the following questions:

 

1)    What stock to buy?

2)    When to buy the stock?

3)    When to sell the stock?

 

While fundamental analysis helps answer the first question, at the heart of this systematic approach lays technical analysis, in layman’s terms, charts. Technical analysis helps answer the second and third questions. Timing is critical to being profitable in the stock market. Just because a stock has great fundamentals does not mean that the optimal time to buy the stock is today. If you plan to be invested in the company for decades, then fundamental analysis may be enough. Investors who have a long term strategy of being in a stock for several years will likely have a year where the stock is essentially stagnant. If, however, you want to make profits on a stock that is stagnant over a period of time, regardless of whether it pays dividends, you need technical analysis, because it is essential to maximizing your profit in both the short and long terms.

 

Many stocks have chart patterns, which can lead to consistent profits once you understand how to interpret these patterns. In time, with dedicated practice, you will develop the eye to see profit opportunities where everyone else sees stagnation. When everyone else is complaining that their stock barely moved in the past year, you will be beaming knowing that your approach to this stagnant stock resulted in double-digit profits. How?

 

Combine the Channel Price Roll template using technical analysis with the Writing Covered Calls strategy.

 

The Channel Price Roll template involves drawing two trend lines. The first trend line identifies support. Support is established when the stock price drops to a bottom level and then begins to rise off of that level. Support is like the floor. The second trend line identifies resistance. Resistance is established when the stock price rises to a high level and then begins to drop from that level. Resistance is like the ceiling. These two trend lines create a channel. If the stock is stagnant, then the channel is horizontal.

 

The Writing Covered Calls strategy involves two steps.

 

1)    Buy at least 100 shares of a stock. The stock must be optionable. If you are unsure, check the Chicago Board Options Exchange (www.cboe.com). The optimal timing involves buying the stock once the stock price has bounced off of the support trend line (Channel Price Roll).

 

2)    Sell a call option on the stock that you now own. Options are sold in contracts. One contract allows you to control 100 shares of stock. That is why you must own at least 100 shares of the stock on which you want to sell the call option. The optimal timing involves selling the call option once the stock price has approached the resistance trend line (Channel Price Roll).

 

 

The profit is made once you have sold the call option on the stock that you already own. When you sell the call option, the buyer of the call option pays you a premium, which you will see in your account the following day. Unlike stocks, options have expiration dates. When I use this strategy, I typically sell a call option with an expiration date of less than 30 days out. For example, on December 22, 2010 I sold a January 2011 call option. Because options expire on the 3^rd Friday of their expiration month, this call option expired on January 21, 2011, right at 30 days.

 

So, I locked in 6% profit in 30 days. Banks do not pay that kind of interest in a year, let alone one month.

 

The next critical day is the expiration date on the option. In my case, on January 21, 2011, one of the two following scenarios occurred:

 

1)    The call option expired worthless.

 

2)    The buyer of the call option chose to exercise the option.

 

The good news is that I was profitable with either scenario. I have already locked in 6% profit in 30 days. Regardless of what happens on the expiration date, I still keep my 6% profit.

 

For a stagnant stock in a horizontal channel, the first scenario is most likely because of the timing of when I sold the call option (stock price at the resistance trend line). This is a great scenario to have, because I still own the stock. So now, I can turn around and sell another call option that expires the following month, locking in another profit in less than 30 days.

 

This technique is one of many ways how you can use technical analysis to profit consistently in the stock market, even in a down market.

 

True/False – Common Myths About The Stock Market – Myth #6

Stock Market Myth #6

You have to be debt-free before you can begin investing.

 

As a stock market coach for women, one of the most common questions women ask me is “How do I start investing in the stock market when I don’t have any money to start with?” My answer is always the same: A balanced money management plan is essential to financial prosperity.

 

As part of a balanced money management plan, set aside 10% of the income from your employment (job or business) into a financial freedom fund. This money will be used to invest in the stock market or your chosen investment that will produce passive income. Passive income, income you make without having to trade your time for money, is essential to financial freedom. For many women, money is not what they are after. It is the time that is freed up to be able to do the things they want to do that is the ultimate goal. Generating enough passive income to pay your expenses is the key to freeing up your time to spend with your family, traveling, or doing whatever activity you love.

 

Many women are struggling with debt, especially with the challenging economy. The conditioning has been that you must pay off all of your debt before you begin investing. This is one of the biggest myths that can delay you from reaching your financial goals. As a part of a balanced money management plan, in addition to the 10% that has already been set aside for your financial freedom fund, also set aside another 10% or more for paying off your debt. This is not an either/or scenario. Do them both at the same time.

 

Consider the following scenario: If you decide to pay off your debt first, depending on your personal situation, in 5 to 10 years from now, you are debt free. Well, if you have not begun growing your financial freedom fund, it is still at zero. It is much harder to start from zero, because you do not have momentum on your side. In the case of the stock market, you have also lost out on profits from not having that money growing in the stock market. And…

 

If you have not modified the behavior that initially got you into debt, you will attract a financial challenge that will send you right back into debt.

 

All the while, your financial freedom fund sits at zero. Use momentum to your advantage and do both at the same time.

 

Part of the stock market training that I teach women involves virtual trading, or paper trading. As I mentioned in a previous post, virtual trading involves investing or trading in the real stock market without using your real money. This is necessary in order for you to prove to yourself that the systematic approach I have been using over the last 7 years works for you. Then, when you are comfortable, start investing with your real money. For women who don’t have any money to start investing, I recommend using the money management plan of setting aside 10% of the income from your employment (job or business) into a financial freedom fund. So, they are growing their financial freedom fund while virtual trading and learning the stock market training all at the SAME time.

 

I was not debt-free when I began investing in the stock market over twelve years ago. I am less than a couple of years away from being financially free, and I will actually be financially free two years before I am debt free because of what I know about the stock market, and the profits I have been able to achieve over and over again, month after month. Remember the definition of financial freedom: when you are generating enough passive income to pay your expenses, you are financially free. Debt is an expense, no more, no less. And because I do not attach any judgment to it, as long as I am generating the passive income to pay the expense, then who cares? Pay it down or off while you are investing and growing your passive income nest egg.

 

All the best to you!

Aneshia

True/False – Common Myths About The Stock Market – Myth #5

Stock Market Myth #5

You must be tied to a mobile device.

 

Ladies, for those who believe that you have to sit in front of your computer or mobile device constantly watching your investments day in and day out, I have some great news for you! 

You do not have to be a day trader in order to make significant profits in the stock market.  And you do not have to spend all day watching the market.  I manage my investments in the evenings after the market has closed. The only time that I look at the live market is when I am entering into a trade. And this is a great thing. Why? Because making your decisions when the stock market is closed will help you tame your emotions. When the stock market is open, the tendency is to feel rushed to make a decision. The biggest difference between the average investor and the profitable investor is the average investor makes their financial decisions based on emotions. The profitable investor makes their financial decisions based on a systematic approach.

 

I mentioned that the only time I look at the live market is when I am entering into a trade. Even when I am exiting a trade, I do this when the stock market is closed. I do this using limit orders. The stock market does not have to be open in order for you to place a trade.

I manage my risk and collect my profits by automating my trading so that I can spend my time doing other things and living my life. This is the way to generate passive income, income that flows to you without having to be physically present.

 

All the best to you!

Tax Deductible – What Does It Really Mean?

Ladies, how many of you believe in spending money because it is tax deductible? 

For those of you who like to spend money solely because the expense is tax deductible, then I have a deal for you.   How about you give me a dollar, and I will give you 30 cents back.   Sound like a good deal for you?  I didn’t think so. Yet, this is exactly what happens when you spend money for the sole purpose of getting a tax refund. In fact, I have overheard conversations between people, where they use spending additional money on a home mortgage versus what they are currently spending for rent because they can write off the interest.  Now, don’t get me wrong, as there is nothing wrong with buying a house to help build wealth by increasing your net worth.  But, frankly, most folks have got it backwards.  The financially free and literate do not spend money for the sole purpose of getting a tax refund.  Instead, they learn ways to deduct expenses that they already have anyway through a legitimate business. 

 

I started my first business seven years ago. In essence, I was able to reduce my yearly tax bill by employing a simple financial model used by business owners.  Basically, it goes like this: Business owners take in income, incur business expenses, which they deduct, and pay taxes on the rest.  Employees on the other hand use another financial model.  They take in income, pay taxes, and use the rest to pay for their expenses. 

 

However, I want to re-iterate the statement I made earlier. The key here is not to spend more money in order to deduct the expenses from your taxable income.  That would be like spending $1.00 in order to get $0.30 back.  But, if you already have existing expenses, which can be legitimately claimed as business expenses, this is where owning a business can pay serious dividends. 

 

And, here is a scenario to illustrate this principle:

 

Say you have a business owner and an employee who each make $100,000 per year.  Assume they are both taxed at the same rate of 30%.  The business owner spends $40,000 in business expenses.  What is the result?  Well, the tax bill of the business owner would be substantially different.  Why?  Remember the financial model.

 

The business owner makes $100,000, but s/he gets to subtract the $40,000 from the original $100,000 and pay taxes on the rest.  So, the resulting taxable income is $100,000 minus $40,000 equaling $60,000.  30% of $60,000 is $18,000. The business owner pays $18,000 in taxes.

 

Now on the flip side, the employee makes $100,000 and is immediately taxed.  30% of $100,000 is $30,000. The employee pays $30,000 in taxes.

 

Ladies, this is a $12,000 advantage that the business owner has.  That is $1000 per month.  As the saying goes, “a penny saved is a penny earned.”  So in this case, a $1000 saved is $1000 earned.  What would you do with an extra $1000 per month?  If you are wondering where to get the extra money to start building wealth, this could be it. You have probably already got it, and it is in the form of your existing tax bill.  Find a way to reduce your taxes.

True/False – Common Myths About The Stock Market – Myth #4

In the past 12 years of investing and trading in the stock market, I have learned a lot from my conversations with other women. For one, I have discovered many misconceptions about the stock market. In the interest of personal growth, I am open to learning new things.  So, once I’ve discovered that what I used to think about a particular topic is based on insufficient information, I find myself opening up to a new perspective.

So, how do some women allow their mind to take them out of the financial game? Well, while our mind can be extremely powerful, its desire for security and resistance to change can also keep us from stepping out of the box to accomplish our goals and dreams.

 

Stock Market Myth #4

You have to be good at math to make money in the stock market

The key to trading and investing successfully in the stock market is using a proven system. This is the system that I have been coaching other women on for the last 7 years. Yes, reviewing stocks using this system involves looking at charts, but the calculations are minimal, and I will show you how to do all of this. In fact, I will even provide you with a spreadsheet that does most of these calculations for you. And I will show you how to use the spreadsheet.

The trading system consists of a template, which answers the necessary questions with clearly defined steps. The template will show you how to determine what company’s stock to trade as well as your entry and exit points of the trade. Calculations are used during the risk management process. When looking at risk, you want to determine two critically important things BEFORE you enter the investment.

1)    What is your profit goal?

2)    What is the most you are willing to risk losing?

 

Let’s talk about my own personal experiences as an example.

Profit Goal

If I am investing in a stock, my profit goal may be 25%. So, if I buy a stock that is priced at $50 per share, my cost basis is $50. My cost basis is what I paid for the stock. It is critical to record this information, regardless of how many days, months, or even years you have been in an investment. I put this number into my spreadsheet. 25% of $50 is $12.50. If I add $12.50 to $50 (my cost basis), I get $62.50. So, when the stock price rises from $50 to $62.50, I have hit my profit goal of 25%. At that point, using my systematic approach to investing, I use a technique to lock in my profit.

Max Loss

On the flip side, if I am investing in a stock, the most I am willing to risk (lose) is 20%. So, once again, I have bought the stock at $50 per share. 20% of $50 is $10. If I subtract $10 from $50 (my cost basis), I get $40. So, when the stock price drops down to $40, I have hit my max loss of 20%. At that point, using my systematic approach to investing, I use a technique that will automatically sell my stock.

Risk management is critical in protecting your investment capital. Why? Because there is no system that delivers profitable trades 100% of the time. No system is right all of the time. You need to have a system that tells you when to exit a trade, so that you are not making decisions based on your emotions.