VectorVest is pleased to announce the release of VectorVest Australia effective June 1, 2007. VectorVest Australia is similar to VectorVest Canada in that there are many exciting mining and resource stocks in the database, which have been providing tremendous returns to investors. Like Canada, Australia also hosts a broad range of outstanding companies in other areas.

For example, last week's Barron's Magazine headlined an article, "Australia's First $100 Stock." It was about CSL Ltd., a biopharmaceutical company that discovered Gardasil, a break-through product for cervical cancer which is being marketed in the U.S. by Merck. CSL Ltd is also the world's second largest maker of plasma-derived products behind the U.S.'s Baxter International. CSL Ltd closed yesterday at AUD$91.90, having gone up virtually in a straight line from AUD$65.41 on 01/02/07. It is rated a "B."

We are very excited about VectorVest Australia and hope you will be too. You are invited to a 30-Day Free Trial to VectorVest Australia beginning June 1, 2007. The tab for VectorVest AU will appear on the Homepage of VectorVest OnLine users on June 1st. Simply click on the tab and install the product. Users of VectorVest ProGraphics may install the product from our web-site, www.vectorvest.com.

RISK OF RUIN.
Two weeks ago I wrote about a guy who lost $500,000 on a question a fifth grader could answer. I called him a fool because he had no idea what his chances were of winning. Actually, he was an even bigger fool than that.

Tens of thousands of people gamble in Las Vegas every day, knowing full-well that they're probably going to lose. You might call them fools, but they went to Vegas to have fun and a big part of that fun is seeing how long their stake would last before it ran out. So they make relatively small bets, knowing that they could lose time and time again before going broke. If any one of them had $500,000, they wouldn't bet the whole wad on a single roll of the dice or turn of a card.

The first thing a reasonable person would do is estimate the odds of winning and compare the risk to the reward. Even with this information, he or she would still need to decide how much to bet. Let's suppose you had a trading system that went to zero value or doubled your money 50% of the time. How much of your stake would you place on a single trade? If you said 100%, your risk of ruin would be 50% because you have one chance in two of winning. At 20%, you would need to lose five times in a row to go bust and the chances of this happening would be approximately 3 in 100. Could you handle this risk? You might think so, but I wouldn't take the risk. I think a risk of one chance of being ruined in 100 is too high. That's why I would never put all of my liquid assets into stocks. See my essay of 02/07/03.

The simple example shown above assumed you were making only one bet at a time. What would you do if you were placing more than one bet at a time? Of course, you would be forced into allocating your funds among the bets. You would also want the bets to be independent of each other, i.e., diversified among stocks, bonds and cash, and you'd want to use controls such as stop-prices to mitigate the losses on any bet.

There's a whole lot more you could do to reduce risk that goes well beyond the scope of this essay, but I thought you would like to know at least a little about the Risk of Ruin.

P.S. See my essays of 09/01/06 and 08/25/06.