Unless your first name is “Warren” and your last name is “Buffet” …

If you’re reading this, there’s a good chance your first name isn’t “Warren” and your last name ain’t “Buffet.”

So why in the world are you so intent on trying to ride the coattails of the big dogs?

That’s the last thing you should want to do.

If a stock was trading at $10 and Warren Buffet or some other major investor decided to swoop in and buy a big piece of it — there’s a good chance it’s now trading at $13 and up.

So let’s say you jumped in and bought it at $13, thinking “Gee, if it’s good enough for Warren, it’s good enough for me.”

Except, Warren likely didn’t buy at the $10 price, he probably either bought it using options (though he claims to detest them) or he bought it at a better price than market — for the sake of argument, we’ll say $8/share.

But thanks to all the idiots riding his coattails, the price drove up to $13.

Well, if I just bought a major piece of something at $8 and it suddenly jumped to $13 — you can bet I’d be unloading a major share to cash-in on those profits — and odds are any major investor would be doing the same thing, too.

Of course, unloading a huge piece of the pie can only mean one thing for a stock — it plummets in price when it’s unloaded in large volumes.

So there you’ll sit with your $13 stock that a day or two later is now worth $10.

Granted, Warren may not have been the best example to use here, as he is known for taking some long positions — but, hopefully, you get the idea.

I repeat this lesson, because whenever I disappear for a while to tend to my site on EAM, I inevitably come back to a slew of emails (actually, they’re just a bunch of messages people try to post that are blocked as don’t allow responses here) from people either panicking what they should do when the market is moving up or down.

Listen up — go back and read my previous columns about doing your due diligence and cost leveraging into a position.

It’s the only way to trade this market — or any market.

Homework really does pay-off.

Just remember the usual disclaimer: Don’t base any of your investment decisions on anything you read here. Do your own due diligence, or at least enough research to pick the right professional to handle it for you.


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