Stock Market Investment Advice:
"The Two Most Profitable Secrets of the World's Greatest Investors"

Investing today is not for the faint of heart.

Finding the right stock has never been harder, much less getting truly helpful stock market investment advice. Yet investors keep plunking money down like there's no tomorrow. Why?

For one thing, the ease of trading is like a siren's call. No longer is investing a mysterious financial play made by only those in the know. Today, the image of the investor is that of the day trader, an average Joe attempting to amass a fortune from the comfort of his own computer. But ease of investing is only a part of the story...

The real reason we keep pouring money into the markets is that we've seen lightning strike before. We were either in on it, and loved the thrill; missed out on it entirely and can't let that happen again; or even worse, latched onto a tech rocket, rode it to the top, then held on until it crashed back down in a blaze of worthless paper.

Lightning Can Strike Twice... And We Want In

Like you, we know there are winners out there still–but they're increasingly hard to find. So when we do find a profit rocket, we want to be able to grab on to it with both hands and ride it to the stars. Then, just as importantly, we want to know when to get out–so our profits don't burn up on re-entry.

In this white paper, you will learn about two of the investing secrets shared by more than 99% of the world's most successful investors–the key to letting you squeeze every cent of profit from your winners and to getting out with your profits intact. And you'll learn about a technique used by the world's greatest investors to take your winning investment and ratchet up the profits.

Advice from the Good Doctor

Oxford Club Investment Advisory Panel member Dr. Van K. Tharp is "coach" to the world's greatest investors and traders. These superstars come to Dr. Tharp (he has a three-month waiting list according to USA Today) for stock market investment advice that will lift their profits to even higher levels. He was profiled in Jack Schwager's best-selling book, Market Wizards: Interviews with Top Traders–in fact, Dr. Tharp was the only trading coach included!

During the past 20 years, Dr. Tharp has accumulated psychological profiles on over 4,000 investors from all around the globe. To maintain current profile data, he has conducted many follow-up interviews with them. In addition, he has conducted extensive, in-person interviews with many of the world's best investors and traders.

The goal of all this work was to find the elements of investing success these superstars had in common. What were the things they all did that helped them pull in far more money than ordinary investors?

If he could isolate those techniques that were shared by the world's greatest investors, Dr. Tharp believed he could unlock the very essence of investment success.

Remarkably, Dr. Tharp discovered that these great money makers had hardly anything in common. They invested in different kinds of stocks, some liked commodities, others favored precious metals, many dabbled in currencies–and almost all had their unique systems for investing.

And of course this made the two things they did have in common all the more precious...

Dr. Tharp found that out of all the techniques, strategies, and systems these great investors used, only two had strong appeal across the board–but these two were used by a full 99% of these investors. In other words, they disagreed on almost everything else–but a full 99% believed that these two techniques were essential to their success.

And these are the techniques we'll be looking at today. Once you've learned these strategies and start applying them to your investments, you will be in the fortunate position of being able to greatly multiply the returns you've been accustomed to pulling in from your investments.

Now–let's start ratcheting up your profits with stock market investment advice and secrets from the world's most successful investors.
Secret #1: Never—Ever—Lose Big Money in the Stock Market

Buying stocks is easy. Anybody can do that. The hard part is knowing when to sell. And very few people know how to do that. We've all made expensive mistakes–either missing the full upside by selling too soon, or taking a huge loss by holding a falling stock too long.

Let's face it. Most people don't know when to sell a falling stock. So they're frozen into inactivity, saying, "Should I just keep holding and hoping, or should I cut my losses now?" And there's no reliable crystal ball to tell anyone when a rising stock has peaked.

The problem that causes both these mistakes to happen is simple: Ordinary investors are ruled by emotions. And the only way you're ever going to join the highest echelon of the world's best investors is to strip all emotions out of your decisions.

Greed... fear... worry... nervousness–all these feelings have to go.

Here's our advice on how to do it...

While you'll never be able to sell at the peak each and every time you invest, or ensure that you never buy a stock that subsequently falls dramatically, there is a secret weapon that is proven to get you the lion's share of any move.

When you buy a stock, you buy it with the intention to sell it for a profit some time in the future.

In order to do so successfully, you should put as much thought into planning your exit strategy as you put into the research that motivates you to buy the investment in the first place.

At The Oxford Club, we call this our "Trailing Stop Strategy."

All great traders and investors consistently cut losses short and let their profits run, and Dr. Tharp has found that trailing stops are one of the easiest and most effective ways of doing that. In this White Paper you'll see many examples from our own files of actual recommen-dations, ones selected specifically because they show how well this technique works.

You'll also see how bad things can be if you don't use it.

You, the Successful Investor

In business and in the stock market, you've got to have a plan, and you've got to have an exit strategy. At The Oxford Club, we know in advance exactly when we're going to buy and sell. Our strategy allows us to ride our winners all the way up, while minimizing the damage our losers can do. Before I get into our specific strategy, consider this business example.

Let's say you're in the T-shirt business. You've made a ton of money on your T-shirt business in the states, and you're now in The Bahamas looking for new opportunities. You size up the market, and you figure you can make money in two places: in golf shirts, geared at the businessman, and in "muscle-tees," geared toward the vacationing beach-goers. These are two products clearly aimed at two different markets.

You invest $100,000 in each of these businesses. At the end of the first year, your golf shirts are already showing a profit of $20,000. But the muscle-tees haven't caught on yet, and you've got a loss of $20,000. There are numerous reasons why this is possible, so you make some changes in your designs and marketing and continue for another year.

But in the second year the same thing happens–you make another $20,000 on your golf shirts, and you lose another $20,000 on your muscle-tees.

Now let's say you're ready to invest another $100,000 in one of these businesses. Which one business do you put your money into?

The answer is obvious. You, as a business owner, put more money toward your successful businesses. But as you'll see, this is the opposite of what 99% of individual investors in America do.

You, the Successful Stock Market Picker

What does "owning shares of stock" actually mean? This isn't a trick question–as you know, it means you're a partial owner of the company, just like you're the owner of the t-shirt company in the example. Owning your own business isn't any different than owning a share of a business through stock.

Let's say the shares of your two shirt companies trade on the stock exchange. They both start trading at $10 a share. At the end of the first year, the profitable golf-shirt company is trading for $12 a share, and the unprofitable muscle-shirt company is trading for $8 a share. At the end of the second year, the golf shirt company is trading at $14 while the muscle-shirt company is trading at $6 a share. Which shares would you rather own?

Even though you know you should buy the winning concept in this business example, most investors don't do so in their stock investments. They keep throwing good money after bad hoping for a turnaround. They buy the "cheap" stock–the loser.

The Trailing Stop Strategy

In the stock market, you must have a strategy that makes you methodically cut your losses and let your winners ride. If you follow this rule, you have the best chance of outperforming the markets. If you don't, your retirement is in trouble.

Our plan is to ride our stocks as high as we can, but if they head for a crash, we have our exit strategy in place to protect us from damage. Though we have many levels of defense and many reasons we could sell a stock, if our reasons don't appear before the crash, the Trailing Stop Strategy is our last-ditch measure to save our hard-earned dollars. And, as you'll see, it works well.

The main element to The Oxford Club's trailing stop strategy is a 25% rule. We will sell positions at 25% off their highs. For example, if we buy a stock at $50, and it rises to $100, when do we sell it? When it falls back to $75, or 25% off our high.

So with our Trailing Stop Strategy, when would we have gotten out of the muscle-shirt business? You already know the answer. Remember the shares started at $10 and fell immediately. Instead of waiting around until they fell to $6 as the business faltered, using your 25% trailing stop, you would have sold out at $7.50. And think of it this way–if the shares fall to $8, you're only asking for a 25% gain to get back to where they started. But if the shares fell to $5, you're asking for a dog of a stock to rise 100%. This only happens once in a blue moon–not good odds!

Advice on When to Buy Stock

Have you ever seen Coke or Microsoft selling at a single-digit P/E ratio? Me neither. And these aren't isolated cases. The fact is, by hoping to buy super-cheap, you would have missed out on many of the greatest investment opportunities of our time. To make the big bucks in the best investments you'll have to forget "buy low, sell high." The new Oxford Club investment rule is "buy momentum, sell higher."

We like to buy companies on the way up. It usually means the company is doing something right. It's equivalent to your golf- shirt business in The Bahamas. Let me explain.

Let's say that you and I believe in the idea of a three- wheeled car, and the price of the stock in the company that manufacturers them is at $30... but falling. When do we invest? At $30? $20? $10? $5? We don't know how far this thing will fall. We want to buy when there's some inkling of a market confirmation of our idea.

There is no price that's the right price. Take $10 for example. I'd be a buyer at $10 if our three-wheeled car had fallen to $5 first, and then the stock started to take off because Ford was going to take it over. But I'm not a buyer at $10 if it's one stop on the way down–the last stop on that elevator could be the basement. The bottom line is this: I don't want to buy dreams alone–I want to buy dreams that are turning the corner to reality.

We've got a complete buy and sell strategy for all–every single one–of our stock positions.

Here's How Our Trailing Stop Strategy Works

(See Part 2 and 3 of this white paper by searching this web site by Author's Name for ‘Steve Sjuggerud.’)

About the Author

Dr. Steve Sjuggerud is editor of the Investment U newsletter and serves as Chairman of Investment U and the Oxford Club's Investment University. He helps people become better investors with actionable stock market investment advice they can put to use to build their portfolios.