Wednesday, October 30, 1996
How To Lose Your Money
In Five Easy Ways
or
One Down On Wall Street
by MF Runkle

There must be a gadjillion books, articles, and various publications on how to make money in the stock market. Here I am, a lowly engineer trying to write about investing and other junk every week; how am I to compete? Well, I'm going to write something different this time. I am going to tell you how to lose money in the stock market. We'll go from sure fire ways to other methods that don't always take your money, but properly applied can suck the money out of your brokerage account faster than you can say "VSE."

For you beginners, the easiest way to lose your money is in penny stocks. I know I've beaten this horse to death, but so what? I'll whack the thing a few more times. Penny stocks are low-priced issues (often less than a dollar) in very undercapitalized companies. They fail to meet the listing requirements for the national exchanges, so they're usually found on the NASDAQ Bulletin Board domestically, or the Canadian Vancouver (VSE) and Alberta Stock Exchanges. They often are outright fraudulent companies, poorly thought out ventures, or extremely risky mining or natural resources companies. They are so thinly traded and have so few shares in circulation the price can be manipulated easily. So not only can you lose money, but you can help make a white collar criminal rich.

Moving on from penny stocks, we'll go to some more exotic ways to lose money. How? Easy, invest your money in things you don't understand. Buy some pork belly futures (especially if you don't really know what a pork belly is). Don't know the difference between a Put and a Call? Good, buy some. Heck, institutions have invested in derivatives that only a mathematician can understand, so why should they be the only ones privileged to lose money this way? Not only will you lose money, but think how impressive you'll sound at cocktail parties, or on the golf course.

Well, on the theme of getting into things you don't understand, buy some stocks in businesses you know nothing about. Flunked high school biology? Biotech might be the area for you. Sell cars for a living? Good, buy some stock in aerospace companies. While this method isn't a sure-fire way to lose money, it does show promising results. You stand a good chance of buying a company that is a lousy competitor in its industry, and has completely fooled the analysts covering it. I've done this, and I have to admit, I doubled my money on a stock in physicians' insurance. As ashamed of that as I am, let me brag about the LAN software company I'd never heard of. Lost half my money on it, which was more than I made on the insurance company. So, this method does have its advantages.

Speaking about losing money in a stock that drops, the best way is to ride the stock all the way down. Don't sell at a 20% or 30% loss, hold that sucker. I did with Morrison Knudson right through bankruptcy, and pardon my bragging, I lost all of my money there. Top that! You can help increase your losses by "averaging down" as your stock falls into the cellar. To do this, you buy more stock in the company as it tanks. Stock brokers may tell you that this lowers your cost basis, and increases your profits when the stock goes up. Hogwash! Don't let them scare you; chances are your stock is dropping for a reason, and it may take a long time (or never) to come back. Meanwhile, you've lost your money. Congratulations!

One good way to lessen you portfolio is to buy what I call "the stock of the week." This is the stock that everybody seems to be talking about in the chat rooms, usually late at night when you should be in bed, or watching old movies on TV. While some of these might be "hot stocks" (mistakes happen), you can feel assured most of these are overvalued from the hype. Not only that, you can look cool in the chat rooms tossing around the stock symbols of these companies while their share prices drift lower and lower.

There are so many ways to lose money in the market I can write about them weekly for years. That's cool, let the others make money. Losing money is easier, and much more fun! You don't have to bore people with your Dow Dividend approach, or buy and hold. No need to argue the merits of Technical vs. Fundamental Analysis. You can throw around all kinds of acronyms, and feel superior to everybody while you run yourself into the poorhouse. All with virtually no work whatsoever. So what are you waiting for? Go buy some penny stocks today!

Transmitted: 10/30/96