Research in Motion, Amazon: Going to Cash Until the Market Improves

I sold the only two holdings in my new Glam 5 Index today, one session after launching it. I sold because I was wrong. However, I'm not worried at all. My index only lost 0.2%, and that's a reasonable amount risked on those two trades.

Research in Motion (RIMM) and Amazon.com (AMZN) are two of the best stocks in the market right now, but the market is weak, much weaker than I had presumed. They may move higher still, but the shares are fighting a strong headwind.

Controlling draw down is of paramount importance for the success of any portfolio. Many successful money managers stress this because:

• A 10% loss in a portfolio will require a 11.11% profit to break even.
• A 20% loss in a portfolio will require a 25% profit to break even.
• A 50% loss in a portfolio will require a 100% profit to break even.

More important than stock selection is the ability to control draw down. I set stop-losses, but if things look bad, I have no problems with selling my position before they are hit. Wednesday's high volume sell off in the NASDAQ and S&P500 does not agree with my picture of a healthy market.

RIMM and AMZN are excellent stocks but I will keep the portfolio in cash until general conditions improve.

Disclosure:none