Saturday, July 26, 2014

Casey Free Ride Formula

How To Protect Your Profits Investing

One of the hallmarks of success in investing is to protect your profits and the Casey Free Ride formula and strategy was invented for that very purpose.

Marin Katusa of Casey Research officially instituted what many savvy investors have been doing for a long time.

The Basic Premise of the Casey Free Ride

The whole idea of the Casey Free Ride is to reduce your risk investing. Often the junior resource stocks that become darlings will shoot up quickly. But if they disappoint even just a little they quickly retreat; that doesn’t mean they are down for the count, but it might.

A Casey Free Ride is where you have a stock position at a profit, and you protect your portfolio by selling enough of the stock to get ALL OF YOUR INITIAL INVESTMENT BACK, letting the remainder “ride” for “free” – hence the Casey Free Ride.

If the stock has doubled, you simply sell half, take ALL of your initial money off the table and let the rest ride. If it goes up, you make less than you would have if you had not sold; but more importantly if it crashes, you lose nothing of your original capital.

This is incredibly important when investing in junior resource stocks many of which are simply “burning matches” as Doug Casey likes to say; they are often not “keepers” for the long haul. Or, as Peter Grandich is fond of saying: “failure is the norm” – only 1 in 10 is likely to “make it”.

Why Invest In Volatile Junior Resource Stocks?

Quite simply, for the volatility that can allow you to double your money in a year – as is the goal of Casey’s International Speculator.

But the only way to win in that kind of an investment is to take profits when you have them to protect against the downside volatility that can wipe you out if you are not careful – or possibly SCARE you out right before the big move up.

Novice investors will often hold a loss hoping for a miracle, a definite mistake. But equally disastrous can be failure to take a profit when you have it, letting the money slip right through your fingers.

I cannot recount how many stocks I have seen shoot to the moon only to see them come crashing right back to earth. And the junior resource stock realm is one place where it is all too common.

I have the remains of one such stock in my portfolio today – China Agritech. The stock was a screamer coming back after the 2008 financial crisis, doing a reverse split and heading to $30. But after slowing sinking to $13, allegations arose of accounting improprieties and now the stock is arguably worthless.

Thankfully I took a Casey Free Ride early, scraped my initial investment off the table and continued to sell right up to $30 per share. The stock still in my portfolio is what I was will to let ride with no real risk, but wanted to keep it to participate in the Asian agricultural boom predicted by Jim Rogers.

The Casey Free Ride Formula

So what is the actual Casey Free Ride formula?

I mentioned above that if the stock has doubled you simply sell half, that’s easy enough. But what if you don’t have a double but feel the need to protect your investment?

Here is how you calculate how many shares to sell to get your Casey Free Ride:

casey-free-ride-formula

Taking your initial investment off the table with a Casey Free Ride can not only protect your profits, protect your portfolio, but also help you sleep at night.

Don’t worry about how much more you “would have made” had you not sold any as the stock goes up. The stock going up simply validates your decision NOT TO SELL IT ALL!

Investment Newsletters To Bring You Profits

If you are looking for great investment newsletters to recommend stocks that will put you in a position of profit where you can take a Casey Free Ride then look at:

Casey International Speculator – Higher volatility junior resource stocks that hopefully have a chance to double in a year to 18 months.

Casey Big Gold – Less speculative ways to profit from gold, silver and associated mining stocks, funds and bullion.

Casey Extraordinary Technology – Profit from technology stock investments.

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