Investing - The Basics

[winston]

The Best Advice I Can Possibly Give About Investing By Dr. Steve Sjuggerud

Earlier this month, I was hanging out with one of the greatest guitar players on the planet…

He has been on the cover of most major guitar magazines at some point in the last year… but he doesn't know a lot about investing. So as we were hanging out in his hotel room, just the two of us trading guitars back and forth, he eventually asked me for my investing advice.

He told me he had some savings, and he was looking for "a hot tip" to make "a quick buck." (Those were his words.) He said if I couldn't help him, maybe I could point him in the direction of someone who could.

I winced to myself… and collected my thoughts…

Here I was, hanging out with one of my heroes in music… and I had two options:

• Did I brush off the question and get back to music?
• Or did I give him the REAL answer… one I was sure he didn't want to hear?
I took a deep breath and gave him the REAL answer.

As I think back on it, the advice I gave him is the best advice I can possibly give to anyone starting out. Here's what I said:
• First off, there's no such thing as "a hot tip" or "a quick buck."
• Second, if you don't understand it, then don't buy it. Period.
You will be tempted to go against these two things. Many times.

Don't do it. The quicker you believe me on these two things, the quicker you will stop losing money and start making it.

I didn't stop there. I told this hero of mine:

• Nobody will care more about your finances than you. How many rock stars have gone broke by handing off their money responsibilities? Don't do it! You have to captain your own ship. You can't hand that off to someone else.
• Lastly, don't buy what's popular. Real estate was popular in 2006, for example, and many people got crushed.
I told him how I have been buying property, and how a rental property ticks all the boxes today.

Hopefully, he took my advice to heart and didn't do something stupid. I don't often talk about these four things because they're "basics" to me. But you never want to lose sight of the fundamentals.

Make sure these things are ingrained in your head… Teach them to your spouse… and ultimately to your kids.

These four things will do more for building your net worth than just about any stock recommendation I can give. Commit to them!

Source: Daily Wealth

[winston]

When You’re Prepared, Threats Become Opportunities

By Shah Gilani

Saving Is Better Than Spending: You can’t make money if you don’t have the capital to put to work. Besides, if you defer spending – and save and invest now – you’ll have much, much more to spend… later.

You Have to Be in It to Win It: You can’t make money sitting on the sidelines; you have to be in the markets. Whether you’re long, or you’re short, you can’t profit if you aren’t a player.

The Trend Is Your Friend: If stocks are going up, ride them up. If they are going down, ride them down. It’s the big picture that matters. The major trend is more important than finding a needle in a haystack – like finding the one biotech that develops a cure for cancer… good luck with that. With a bet like that, if you’re right you’re a big winner… if you’re wrong you’re a big loser. That’s just far too risky a game for individual investors to play – there are more greedy losers in the world than smart, patient winners. Play the big trend for solid gains… and you’ll be on the side of the winners.

Don’t Be Afraid to Start: You just can’t be so afraid that you never initiate a trade. Too many people are so worried about incurring a loss that they never invest. Losses are inevitable. But you can keep them small by managing your trades. The name of the game that winners play is “I’ll only take so much hurt.” That means get out quickly if a new trade goes against you. Take very small losses on new trades. Which brings us to our next rule…

Always Cut Your Losses, and Let Your Winners Run: For those of you who fear losses (see Rule No. 4), you won’t believe how easy it is to erase a bunch of little losses with even a single good winner. Imagine, then, what it’s like to string together a bunch or winners. Or to have a portfolio of winners because you cut your losers loose, and used the money to “tee up” new trades that have turned out to be all winners. That’s what I call fun.

Ring the Register: Don’t be greedy and expect every one of your winners to grow into long-term blockbuster hits. Not even the great Warren Buffett has only winners. Be happy with big gains. And don’t let your winners turn into losers. Use stop-loss orders to ring the register if your winners start slipping backward. Get out, ring the register and look to get back in if the stock turns around, or look for another trade to put on – because you have to be in it to win it.

http://www.wallstreetinsightsandindictm ... with-shah/

[behappyalways]

How to invest in shares with a 99.4pc chance of success
http://www.telegraph.co.uk/finance/pers ... ccess.html


The lessons from Quindell, or how investors can save millions and sleep safely
http://www.telegraph.co.uk/finance/mark ... afely.html

[winston]

Don't Let 'The Glidepath Illusion' Ruin Your Retirement By Dan Ferris

The traditional notion of retirement says you should take bigger risks in the stock market when you're young.

You have more time to make up for losses than when you're older. As you age, you should take less and less risk, so you won't lose your retirement money.

This strategy is called "Glidepath investing." And it could ruin your retirement.

Let me explain…

The emotional appeal of Glidepath investing is obvious. Young people feel like they're going to live forever, so it feels better to them to take more risks. Buying more risky stocks and fewer safe bonds feels right.

Older people feel they have more to lose and might not be able to support themselves one day, so they tend to be more risk averse. For them, buying fewer stocks and more bonds feels safer.

There's an army of financial planners and other "helpers" out there selling products designed to get you to retirement with a big, safe nest egg, based on this feel-good notion.

However, research suggests that what feels good isn't necessarily what you should do…

Investor and researcher Rob Arnott of Research Affiliates published a report in September 2012 called, "The Glidepath Illusion." Arnott says Glidepath investing will make you less money because it will lead you to put less money in higher-return investments (stocks).

Arnott studied 141 years of stock and bond returns from 1871 to 2011. From these data, he hypothesized a range of possible outcomes. In general, Arnott found evidence that the range of outcomes from doing the opposite of Glidepath investing was superior to the range of Glidepath-based outcomes.

It's well documented that stocks outperform bonds over the long term. Glidepath investors wind up putting a bigger percentage of their assets in stocks when they're younger and have less to invest. They put a higher percentage into bonds when they're older and have more to invest.

That's the basic error. Investors put fewer dollars into higher-return investments, then interrupt the compounding process to put more dollars into lower-return investments. So they make lower returns than if they had done the opposite of Glidepath investing.

Glidepath investing is a good recipe for feeling good, but a poor one for making as much money as possible in stocks and bonds. Arnott's conclusion is worth quoting and keeping close at hand as a reminder…

Investors who are prepared to save aggressively, spend cautiously, and work a few years longer (because we're living longer), will be fine. Those who do not follow this course are likely to suffer grievous disappointment… No strategy can make up for inadequate savings or premature retirement.

Save aggressively. Spend cautiously. Let your investments compound as long as possible before drawing them down. That's sound advice.

Sadly, it makes perfect sense that the financial services industry is once again doing exactly the wrong thing for clients. Don't trust financial planners and brokers. They're commissioned salespeople. They're incentivized to sell investments, NOT to make you money in stocks and bonds.

For as long as my health holds out, I'll stay productive and hopefully get well compensated for my efforts, saving aggressively and spending cautiously. I recommend you do the same.


Source: Extreme Value

[behappyalways]

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[behappyalways]

"Anyone who thinks investing is easy must be a first-level thinker..."
http://nextinsight.net/index.php/story- ... el-thinker

[winston]

Here are 7 ways to tell a financial adviser from a scam artist

Source: Bloomberg

http://thecrux.com/seven-ways-to-tell-a ... am-artist/

[winston]

"Investing should be more like watching paint dry or watching grass grow.

If you want excitement, take $800 and go to Las Vegas."

- Paul Samuelson

[winston]

Three simple habits for building long-term wealth

by Bill Bonner

Source: Bonner & Partners

http://thecrux.com/three-simple-habits- ... rm-wealth/

[winston]

This valuable shortcut will save you time and boost your returns

by Michael Barrett

Source: Extreme Value

http://thecrux.com/this-valuable-shortc ... r-returns/