"Quite often the old bloke who puts a stock with potential in...

"Quite often the old bloke who puts a stock with potential in the bottom draw will come out in front in future years."

Gee, Leroybrown43 that quote makes me cringe!

Most individual people who do their own investing in the stock market lose money overall! There are a great range of people who invest in shares; traders, blue chip holders, spec stock investors, family trusts, huge investment funds, etc.

You could have made this more accurate by stating, "the old bloke or woman, who puts a high profile blue chip stock in the bottom draw will quite often come out in front in future years!"

Woolworths, National Australia Bank, Commonwealth Bank are just some examples of high profile blue chip stocks that have a 95%+ chance of being long term winners for share holders and they pay dividends. They are able to ride out the dips in the ASX and power on when the ASX begins to rise again.

To "put a stock with potential in the bottom draw" is crazy. Unless it is a high profile blue chip stock, investors need to watch their portfolio like hawks, and get out of stocks which are in decline!

As Vendor quite rightly states, and I've seen it myself so many times, investors will stick with a sinking ship stock to the very end, in the hope that it will resurrect itself! 90% of the time these stocks won't! Often these investors will lose up to 90% or even 100% of their money invested in that stock. That is why a conservative approach to stock investing is to buy a range of stocks and reduce the degree of risk to your working capital.

Why is it so hard for most investors to push the sell button on a stock in rapid decline? It is the hardest thing for the average investor to do, take a small loss and advert a total disaster!

The fall of KGL, only 2 weeks ago, now on the verge of bankruptcy oblivion, is a classic case. Have a read of some of posters there, some still buying right up to the trading halt, as the company fell from $1.65 to 23c! They were buying totally in hope! (Unfortunately I lost money in this company too, but got out in the nick of time!)

On this board and on the KGL board I have read many comments from posters stating that they have only recently begun investing in shares or that KGL or ABU are their first investment stocks, and that they read the comments from posters here with veracity! And I cringe also!

Everyone buys shares to make money over a time frame, short term or long term. Most individuals are very unsuccessful at it! Even most stock brokers give poor advice at times, and for some stock brokers their advice can be poor more often than not!

It is often written that traders are happy with a 70% success rate in their purchases. Making mistakes on the stock market can be very costly, learning from those mistakes can take a lot of time.

Now I am no expert in stock investing and I've had the chances to become a millionaire in the stock market several times, and I haven't taken them. But I'm still in there!

Successful traders and investors have their own set of non negotiable rules that they follow in their investment strategies. Whether they are using T/A or F/A or whatever, they have very definite rules.

Those who are novices to the share market or have just made their first stock purchase, should also adopt stringent investing rules, unless they are putting high profile blue chip stocks away for the long term.

These are rules usually quoted by successful traders:
Rule 1. Never lose more than 80% of your working capital in a stock. Set stop/loss marks and stick to them!
Rule 2. Never lose more than 80% of your working capital in a stock. Set stop/losses marks and stick to them!
Rule 3. Never become sentimental in a stock. "Oh I just love stock x, they are great for the environment, the CEO is handsome, I trust all that they say, we'll all be rich one day etc." Wrong, wrong, wrong, as a trader you need to be a ruthless, bull shit sifter, and be concerned solely on keeping your capital in tact and making profits!
Rule 4. Never hang onto a stock too long trying to buy at the stock's very lowest point or sell at its very highest point! It doesn't hurt to leave some profits for others to make. Over the longer term you'll be better off to buy and sell whenever your signals are triggered.

ABU ticks my investment boxes for a spec stock!:
It is an excellent company, is well managed and run and is carefully managing its cash position. It has a good amount of cash in the bank, trial mining will be beginning soon and in 2014 the prospects of having a cash flow of $50m to $90 are high. With more gold deposits to be discovered, the future looks bright to me. My target share prices for ABU are in the 8c to 12c range over the 9 months.

(Note that ABU going from its sp of 3c currently, to 6c at some stage in the next 12 months, is a 100% profit rate. It could take 15 to 20 years to achieve that profit by investing in a bank! The question is, will ABU break through 6c again? (it has been there at least twice before) Well,... I've got my next new Surtees fishing boat riding on it!!!

GO ABU!

Those new to investing should seek professional advice. It is sad to see many investors sitting on massive losses in KGL and TAM, when stringent exit strategies would have seen them maintain most of their working capital. (And of course smart investors wouldn't have gotten into them in the first place! It's this risk versus reward, greed versus sense, that lures investors into these types of risky spec stocks!)

Good luck to all investors, most of us need it!

(My other favoured spec stock is Central Petroleum, CTP currently 11.5c, which has a huge oil and gas discovery in Central Australia, the full extent of which has not been ascertained or disclosed. It also has a huge land holding there. I am not recommending it as a buy, but as a stock that some might consider to do some research on!)