The Investment U E-Letter
Tuesday, August 12, 2003
* * * * * * * Pop Quiz!
By Dr. Steve Sjuggerud
President, Investment U
Today it's time again to take a step back and find out how much we're learning as investors. It's important every now and then to measure our progress… and find out what lessons we're taking to heart. So take this quick Pop Quiz and find out how much you really know… (The answers and explanations are at the bottom.)
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Pop Quiz Question #1: Insider Action - How To Use It For Profit (from E-Letter #258) Approximately how long after a major insider sell-off will a company's stock reflect the sell-off by dropping significantly? A. One week.
B. One month.
C. One year.
D. Never. ---------
Pop Quiz Question #2: Never Miss The Mega-Trend Again (from E-Letter #252) When a stock goes below its 40-week moving average, it's time to: A. Sell it.
B. Load up on it.
C. Sell options on the stock.
D. Consider the stock in the "danger zone" - and buy it in conservative amounts. ---------
Pop Quiz Question #3: Mega Gains from Micro Stocks (from E-Letter #257) What qualifies a stock as a "micro-cap" stock? A. Its market capitalization is valued at less than $10 million.
B. Its market capitalization is at $100 million or below.
C. It's wearing a very small hat.
D. Its market capitalization is less than $500 million. ---------
Pop Quiz Question #4: Getting Out With A Profit (from E-Letter #250) What is our trailing stop percentage (i.e. the percentage of decline in a stock from its high to the point at which we sell it to prevent a catastrophic loss)? A. 25%
B. 10%
C. 40%
D. 50% ---------
Pop Quiz Question #5: The Best Place to Put Your Real Estate Dollars Today (from E-Letter #256) Well… What is the best place to put your real estate dollars today? A. A second house.
B. A retail building such as a small store or motel.
C. Into a different investment, because real estate's in a bubble.
D. Real estate stocks and homebuilder stocks.
OK, then… let's see how you did. On to the answers!
Answer #1: C - One year. Generally speaking, a stock's price will fall markedly about one year after a major wave of insider selling. However, with insider-sales reporting available more quickly than it has been in previous years, that time frame can be even less. From E-Letter #258. ---------
Answer #2: A - Sell it. When a stock goes below its 40-week moving average, this is a good time to sell. Conversely, it's a good time to own a stock when it is above its 40-week moving average. From E-Letter #252. ---------
Answer #3: D - Its market capitalization is $100 million or less. Stocks of this size can be affected significantly by recommendations from investment advisors and publications. However, such volatility can mean greater profits, too. From E-Letter #257. ---------
Answer #4: A - 25%. We use a 25% trailing stop because it's an easy number for us to remember. Otherwise, it's a rather arbitrary number, but very effective in limiting our losses in any one investment. From E-Letter #250. ---------
Answer #5: D - Real estate stocks and homebuilder stocks. Investing in real estate has officially reached the level of cocktail-party talk-the death knell for any investment angle (remember all the chattering about tech stocks back in the late 1990s?). However, investing in Real Estate Investment Trusts (REITs) and homebuilders is a sound way to spread risk and avoid the hassles of being a landlord, while still having a stake in investment real estate. From E-Letter #256. --------- So… how did you do? I hope that today's Pop Quiz shows you how much ground we've covered just in the last few E-Letters. Please take a moment to visit the Investment U Message Board, and share your results with your fellow IU'ers. And be sure to let us know what you might like to learn about in future issues of the Investment U E-Letter. Today's IU Cribsheet - Everything we've covered in today's Pop Quiz is fully explained in the IU E-Letter Archives, which are easily accessible by clicking here.
Good Investing,
Steve | 
