Van Meerten's picks

Twice a year I mentor the Senior Economics Class at my daughter's school, Charlotte Latin in the Stock Market Game. It's a game where the students get a $100K portfolio to invest and they are pitted against several thousand other teams across the country. I teach them how to use BarChart because it's simple and free and let them know that with that tool plus the rest of the internet they really have more information at their disposal than Peter Lynch did in his heyday. Be careful not to get sensory overload! Every session several of the teams always rank in the top ten and almost all of the teams I mentor beat the market. The homework assignment is easy: Watch Mad Money and Fast Money on CNBC with your parents and decide if the shows are really investment knowledge you can use or just entertainment.

I instruct them that BarChart will tell them the 3 things needed for sucessful investing: 1 - Knowing what the Market is doing, 2 - Help you select stocks that are doing the best right now and 3 - how to decide when a stock needs to be eliminated from your portfolio. If you take a disciplined approach using these 3 knowledge sets it's hard not to make money and even harder to lose money.

WHAT IS THE MARKET DOING? - I look at 3 things - the S&P 500, the Value Line Index and BarChart's Market Momentum. I do a simple custom chart of the current price, 20 day Moving Average, 50 day MA and 100 day MA of the S&P 500 and the Value Line Index. The Market Momentum page tells me the number of shares traded up and down in various exchanges and the total number of stock trading above their 20, 50, 100, 150 and 200 day MA. It really gives me the pulse of the overall Market and even the number of stock reaching new highs and new lows.

WHAT STOCKS SHOULD I ADD TO MY PORTFOLIO - Simple - take the new high list go to the 65 day new high column and sort for frequency. If a stock has hit 25 new highs in the last 65 trading sessions I'd probably want to own it. Take the top 10 new highs and look at all the info on BarChart about it. Only own proven winners.

WHAT STOCKS SHOULD BE ELIMINATED FROM MY PORTFOLIO - I've tried all sorts of Technical Analysis indicators and find the 50 day moving average suits me best. When a stock is trading below it's 50 day moving average I seldom find a reason to continue to hold it.

Just 3 simple steps: 1 - Know where the Matket is going now, 2 - Screen for the best stock to add to your portfolio and 3 Weed out the ones you've bought that aren't performing.

Lastly, I tell them the Kenny Roger's Rule of Investing: Know when to hold 'em, know when to fold 'em, know when to walk away, know when to run.

If you evaluate the overall market, select only the best proven stocks to buy and weed out those that have run their course, then it's hard to go wrong. As my German teacher in college summed it up: " If you want to do well in my class and in life as well you must exercise 3 values - DISCIPLINE, DISCIPLINE, DISCIPLINE!" Thank you Professor Schmidt.

Comments: View Comments |  Sunday June 15, 2008