Frequently Asked Questions

Over time, we have heard a number of good questions from our subscribers. Here are the most frequently asked ones:

How do you pick your stocks?

Stocks are selected by being filtered through a number of statistical models. The exact formulas and methodologies are proprietary. Stock picks for the two model portfolios currently being published are generated using Technical Analysis. For those of you not familiar with this term, it is broadly used to describe stock selection methodologies based on the price and volume actions of a stock (or commodity). Most analysts on Wall Street use Fundamental Analysis to drive their stock recommendations, which is the use of financial numbers (derived from balance sheets, income statements, etc..) to pick stocks. I believe both methods have their merits, and someday I hope to combine the two methods into an even better system than the one's I currently publish.

What software do you use to pick your stocks?

Both model portfolios were developed with Metastock, a technical analysis software program sold by Equis International. Each month, we run our custom models and formulas through Metastock's explorer program, and come up with the stocks that are published in our email newsletter, and on our web site.

What's the difference between the Rapid Growth System and the Aggressive Growth System?

The Rapid Growth System was developed in 1997, and was part of an effort to come up with a profitable mechanical options trading system. The options trading system didn't work to our satisfaction, but the stock picking algorithms that came out of that research worked very well. The Aggressive Growth System was developed in mid 1998, started being published in late 1998, and represented the next evolutionary step from the Rapid Growth System. The Aggressive Growth System is more volatile than the Rapid Growth System, but it has also generated greater returns in simulated trading tests, as well as in real world trading conducted over the past five years.

Is there a stop-loss strategy associated with the Growthstock Advantage portfolios?

Starting in April, 1999, a stop-loss strategy was implemented to lock in profits. Stop order advisories are sent to all subscribers via email on stocks that meet our strategy's criteria. It is important to mention here that, due to circumstances beyond our control, we cannot guarantee the delivery or timeliness, of email to any subscriber. Email is pretty reliable, but email servers at ISP's go down from time to time. Also, we have noticed that it sometimes takes certain service providers an inordinately long time to deliver email - we have documented a case where we emailed a stop order alert to our subscribers over nine hours before the market opened, and AOL didn't deliver it to their customers until after the market closed the next day! Stop losses are also posted on the web site, so you can check there if your email is not working.

What are the tax consequences of the Growthstock Advantage trading models?

I do not include income taxes in the generation of the returns associated with the model portfolios. There are many reasons for this, here are a couple, in no particular order:

No other newsletter (that we are aware of) includes taxes in their return calculations
Income tax rates vary from person to person, state to state, and country to country. Someone using the Growthstock Advantage to invest part of their Roth IRA portfolio will pay no income taxes on their gains, while a high income individual, living in a state like California, could easily pay 50% tax on their profits. The point of all this is I would have to apply an arbitrary tax rate, and I would rather leave it up to individuals who are concerned about tax impacts to calculate results based on their individual tax rates.
All gains associated with The Growthstock Advantage stock picks, up to this point, have been from short term capital gains (i.e. we have not held a stock for a year or more). This applies to both stock picking systems.

Why is $5,000 the minimum trading account size you recommend?

The way we came up with $5,000 was by trying to limit round trip market order trading commissions to no more than 2% of your trading capital. A round trip commission is the sum of both the commission you are charged to buy a stock, and the commission you are charged to sell a stock. A market order is an order to buy or sell a stock at the prevailing price of that stock, when the order is received by a stock exchange. If your round trip market order trading commission is $10 (brokerage commissions at Brown & Co. are $5 for market orders), and you follow one of the model portfolios, which buy and sell ten stocks per month, then your monthly round trip trading commissions will add up to about $100. $100 in commissions divided by $5,000 in your trading account equals 2%. Naturally, if you trade with a broker that has higher trading commissions, then your minimum account size would have to be higher. A good rule of thumb to use is to take the market order trading commission charged by your broker, and multiply it by 1000, to see what the minimum account size should be for you to trade one of the model portfolios. Keep in mind that brokerage commissions change from time to time, so the above statements may not indicate the exact commissions charged by any specific broker.

How much money is appropriate to invest in The Growthstock Advantage stock picks?

The answer to this question really depends on you, your goals, and your personal risk tolerance. Some investment models suggest that you should divide your investment assets among different asset classes - some low risk, some medium risk, and some high risk. Since the Growthstock Advantage model portfolios are volatile, relative to market indexes like the S&P 500, these model portfolios definitely fit into the category of high risk. If you are thinking about following one, or more, of the model portfolios in your own trading portfolio, it is strongly recommended that you consult with a qualified investment advisor first.

How long has The Growthstock Advantage been published -or- How long have you been investing money in the model portfolios?

The Growthstock Advantage started publication in December, 1997, and that is also when we started investing money in the Rapid Growth model portfolio, by trading it's recommendations on the open market. In November, 1998, we started publishing, and investing money in, the Aggressive Growth model portfolio. Due to the fact that we thought we would terminate the Rapid Growth model portfolio at some point after we introduced the Aggressive Growth model portfolio, starting in November, 1998, we actually recorded System 1 trades using real time simulation techniques - basing the price recorded on a real time quote during the opening minutes of the stock market. We went back to trading the System 1 portfolio on the open market in June, 1999. This was due to the fact that we asked our subscribers, and many were happy with System 1, and didn't want to be forced to change to System 2. As you can see by the results of System 1 since we started trading it with real money again, the market has rewarded us very nicely...

How do I contact you?

The Growthstock Advantage is published by Growthstock.com, Inc. You can contact us here:

Formerly published as Accelerated Asset Appreciation Advisory

¹Past performance does not guarantee or predict future results. The Growthstock Advantage investment newsletter is not suitable for people seeking low to moderate risk investments. Consult your financial advisor before investing in any investment methodology or newsletter service.