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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: Karin who wrote (22017)7/8/2005 5:26:41 PM
From: Tim Bagwell  Read Replies (1) of 42834
 
Nobody should ever sink large amounts of money into an individual stock on anyones recommendation, unless
they are prepared to loose a big portion of it.

Of course, this is the reason for the 4% rule. However, Brinker's QQQ call was not for an individual stock. QQQ is a diversified ETF, albeit, a volatile high-tech one. Nonetheless, I don't think that Brinker's call on the QQQ was limited to tech stocks. It was a market counter-trend rally that he was trying to call and you could have opted to diversify further and use SPY instead of QQQ. Brinker was throwing caution to the wind by using the QQQ because he wanted some big leverage. Of course, the leverage ultimately worked against him and soon it was so far gone that he just gave up on it.

My point is, I think it can be ok to swing a big line when you are using ETF's. Because you have that diversification to help control risk. Then, you are really talking about how good is your timing and your ability to read movements in the market. It is possible to do some short term timing.

But as you wisely point out, managing risk is critical to success in the stock market. It really is the single most important thing that investors and speculators need to learn.
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