Homer's Hot Tip Volume III, No.10

Homer's Hot Tip
September 18, 2005

Kid: Homer! Wait up!

Homer: HI Kid, what’s the rush, I’ll be back in an hour.

Kid: I couldn’t wait to catch up to tell you I made a bundle on the Spooz Inc. stock SPZI (OTC). Remember, you told me about it when it was 2cents a share and when I bought it was 3cents a share. Well it’s 4cents a share and climbing. I made 50% on my money in a month.

Homer: How much did you buy?

Kid: Well after you talked about it, I had this great gut feeling. I bought a lot.

Homer: Gut huh? How much?

Kid: Yeah, my gut was rumbling and I knew it just had to be good.

Homer: Couldn’t be a bad gut feeling, had to be good? How much?

Kid: Yeah, really Homer, stop kidding around. I mean it. I felt really good about it. I bought 30,000 shares.

Homer: How come you never acted this way before when I suggested something “safer” to you?

Kid: Well Homer, this is exciting. I never heard of this stock, and, compared to all the stuff you always talk about, it sounded really racy. You know, exciting! Risky! Gets the adrenalin flowing. It’s that kind of feeling.

Homer: Oh my! What have I done?

Kid: So I want to know, what else you got? We’re on a roll here Homer. We’re making money!

Homer: Neither one of us are making money Kid.

Kid: What do you mean Homer? Of course we are, I just told you…

Homer: Didja sell it?

Kid: Well, no.

Homer: Then you haven’t made a thing. When you sell it at a profit, then and only then do you jump up and down and brag till the cows come home. Right now you’ve got a paper profit, nothing more. Gotta sell it first Kid, then you can claim it.

Kid: Sometimes you are just a drag Homer.

Homer: What’s your objective?

Kid: What do you mean objective?

Homer: How long do you plan on holding it? In other words, when are you going to sell it?

Kid: Haven’t thought about it.

Homer: So, what you are saying is that if it went down tomorrow or the next day, you would still have it?

Kid: Well, I guess so.

Homer: That’s nuts.

Kid: Excuse me?

Homer: Look Kid, you’re as likely to loose money as make it in the stock just because you don’t have a plan.

Kid: What kind of plan?

Homer: One that says when the stock hits a certain price you will sell all or part of it. Some would sell enough to make back their original investment. That means all the rest is pure profit no matter what the price. Some would buy more and dollar coast average. The price of this stock started out at a buck a share once upon a time. Perhaps that’s a long-term goal one might consider but in the meantime some actions have to be taken to protect the original investment.

Kid: Never thought of it that way, I was too excited.

Homer: Happens.

Kid: What do you suggest?

Homer: Depends on what you want to do and what you want to realize out of it. Also you want to make sure that all your investment does not gravitate to here, otherwise you are overexposing yourself to unnecessary risk.

Kid: Even if I have a chance to make a killing?

Homer: Did you ever wonder why they call a windfall a “killing”? It’s because it could go either way!

Kid: OK Homer, I’ll set a price I want and when I get there I’ll sell and I will set a price I won’t let it go below so if it gets there, I will be out, and with a profit. Hey Homer, where you going, we aren’t through talking…

Homer: Yes we are, catch you later Kid…