There are several key issues to address when an investor chooses to
participate in the Top Stock System. Because
the system cannot determine which stocks will become “home runs” and which
stocks will become a loss for the investor, it is important to fully participate in the
system. Do not pick and choose. If a stock becomes a “Buy
Recommendation”, and it is not already owned, buy it.
If it becomes a “Sell Recommendation”, sell it. Too often investors try to second-guess the
investment, and usually guess wrong. With a
system in place, the human emotion is removed from the situation and the investment is
treated objectively.
The average number of holdings in the system has been around sixteen. Therefore, the dollar amount to be allocated to
the Top Stock System is divided by 13. The
same dollar increment is used for every buy recommendation.
(Example: $65,000 to be invested in Top Stocks divided by 13 equals a $5,000
purchase of each “Buy Recommendation”.) Since
BUY recommendations occur only when a stock is seen as historically attractive, normally,
it takes about three to five months for a new investor to achieve a full portfolio. On an annual basis, adjust your buying increment
of Top Stocks to any changes in your net worth, Top Stock values, or personal investment
strategies.
The System is an active trading approach to investing, generating 35 to
45 trades per year. Although investors
average thirteen holdings in their account, actual holdings can be anywhere from five to
twenty-five stocks at any given time, so be prepared for
wide swings in activity. When stocks become “Sell Recommendations”,
the security will generate short/long term capital gain/losses. Considerations for tax consequences are not
addressed by the system. But again, the key
is to follow the system. Keep in mind the
system is designed to “exit as quickly as possible those companies failing to sustain
a minimum…criteria.” Most likely,
the first several securities an investor sells will be at a loss. The system, for the most part, will tend to
“keep the winners and sell the losers.”
Because of the volatility associated with the system,
Top Stocks should represent only the aggressive growth portion of your
diversified portfolio. Please ask your financial consultant what a
suitable percentage of your portfolio assets should be invested in the Top
Stocks.
