Buying a stock or mutual fund is like a driver who is going down the road at high speed, but is using looking in the rearview mirror as a guide. He can see fine out the back, but has no idea what is ahead. Sound familiar?

Your broker is going to help you with driving; I mean picking stocks and mutual funds, so your car (investment) will stay in the road and not crash. He is going to send you all kinds of information. You know - green sheets, pink sheets, blue sheets, full color slick pages, brochures, booklets and more: turn right, turn left, put on the brake, speed up, slow down. He might even get you in on an interview on the Internet with the CEO of some company. Wow!

Or you can buy special reports from Morningstar. They are not too expensive. The dedicated investor might want to visit the company headquarters especially if it is a new public offering. Of course, the investor might want to check out the background of the company officers by inquiring at the NASD (National Association of Securities Dealers) and the SEC (Securities and Exchange Commission) in Washington.

Have any of the corporate officers been involved in other companies that have failed? You can ask these questions and more.

What does all this information mean? Isn’t this looking in the rearview mirror? Some of what you have found is ancient history and some is not quite ancient, maybe a little mildewed. It is supposed to help the investor get an idea if the company is financially sound and is expanding so he can expect his investment to grow.

Are these guides any good?

Everything is past performance. The required imprint according to regulations on every piece of sales literature is, “Past performance is no guarantee of future performance”. Basically all the information you have is worthless; you are looking in the mirror.

If you invest you should determine before you put any money on the line how much you are willing to lose. Will you stick with this hummer if it goes to zero or have you determined what percentage you are willing to part with if it declines? Do you have an exit strategy for both loss and when to take profit? Most investors have neither.

Every professional investor I know has an exit plan. He knows how many dollars he will give back if he if wrong and if his stock selection is positive he has some idea of a price objective or having the price performance tell him where to sell.

The great secret of the market is not buying. It is selling. Until the investor learns how to sell he will never make money in the market.

Looking at past performance (the rearview mirror) may make the investor feel better, but it is not the way to keep your investments on the road to success.

Al Thomas

Albert W. Thomas has spent most of his life in the field of finance. In 1965 he founded an insurance holding company, Security Dynamics Investment Corporation, after having been an agent and General Agent for several life insurance companies. In 1970 he became cofounder and president of Real Life Estate, Inc., that marketed a unique real estate and life insurance package.

After he became interested in commodities he bought a seat for his personal trading on the Chicago Open Board of Trade, which is now known as the MidAmerica Commodity Exchange. Later he became a full time trader and also acted as a commodity broker for a few select clients. By fellow floor traders Al is considered to be an excellent technical analyst much of which is outlined in his book IF IT DOESN'T GO UP, DON'T BUY IT! It became a best seller on Amazon.

In 1981 he sold his membership on the Exchange and with his wife, Carolyn, lived full time aboard their 41' ketch, the Aumakua (which means guardian angel in Hawaiian). They sailed in Florida and the Bahamas for two years.

He founded World Trading Group in 1984 that grew to the seventh largest introducing commodity brokerage firm in the U.S. with 35 offices from coast to coast, Alaska and Canada. It was sold in 1992.

Al is a graduate of Northwestern University with a B.S. degree in Commerce and is a member of MENSA. He is now president of Williamsburg Investment Company that syndicates his weekly financial column since 1999 to more than 300 newspapers and writes a financial market letter called Over My Shoulder that is quoted in Barron’s and many other publications. A 3-month trial subscription is available on his web site. He is a regular guest on several financial radio talk shows.

His favorite pastime is fishing.

Mr. Thomas is available for speaking engagements. Please call 321-453-5300 for more information.