Super Rules, OK?

Do you rule your superannuation or does it rule you?

It’s easy to fall for some myths about your super unless you do some clear thinking about who is in charge. Virtually all Australian employees now have a superannuation account, many have several, even more than they know about. We all hope to use this money to fund our retirement, but unless you look after your super then you are in danger of losing some of your money along the way.

Myth number 1. Someone else can look after my super. Only partly right. It is possible go through your working life letting your super run on autopilot, but you may be in for an unpleasant surprise if you don’t keep an eye on your super. Make sure your employer is paying the correct amount, and that if your employer goes broke your super is still available.

If you change jobs you need to decide if you wish to ‘roll over’ the money into another fund. This is especially important if you change jobs frequently. You can find that you have relatively small amounts scattered over several funds, and in each you will be paying a management fee before you earn any distribution or interest. In the long term inflation will eat away at the value of your principle, even though the dollar amount stays the same. Many super companies provide a free service to consolidate small accounts for you. Use them.

Myth number 2. It’s not my money until I retire. Dead wrong. It’s your money, just like the rest of the money in your pay packet. Super funds are providing a service of managing your money until you can legally access it when you retire. You have control of it. After July 2005 you will have even more say about your money. If you are not happy with the service you should tell the service provider. If they can’t fix your problem, then you can sack them and put your money elsewhere.

Myth number 3. I don’t need to worry about it until I am at least fifty-something. Not really. Australians are enjoying longer lives and better health. You will need more money if you want to have more options in retirement. You will probably need to top up your super to achieve financial independence in your golden years. The sooner you start the better.

The Australian Government is generously giving away our money to help lower and middle income earners top up their super. It’s called the superannuation co-contribution scheme. If you, or your spouse, are eligible you should make sure you get your share.

Fact number 1.Our superannuation is our money. To look after your super you need to learn about your rights and options. It’s a long term task. You need to get information and advice. Don’t rush, but start soon.

Straddle Strategies in Option Trading

The straddle strategy is an option strategy that’s based on buying both a call and put of a stock. Note that there are various forms of straddles, but we will only be covering the basic straddle strategy. To initiate a Straddle, we would buy a Call and Put of a stock with the same expiration date and strike price. For example, we would initiate a Straddle for company ABC by buying a June $20 Call as well as a June $20 Put.

Now why would we want to buy both a Call and a Put? Calls are for when you expect the stock to go up, and Puts are for when you expect the stock to go down, right?

In an ideal world, we would like to be able to clearly predict the direction of a stock. However, in the real world, it’s quite difficult. On the other hand, it’s relatively easier to predict whether a stock is going to move (without knowing whether the move is up or down). One method of predicting volatility is by using the Technical Indicator called Bollinger Bands.

For example, you know that ABC’s annual report is coming out this week, but do not know whether they will exceed expectations or not. You could assume that the stock price will be quite volatile, but since you don’t know the news in the annual report, you wouldn’t have a clue which direction the stock will move. In cases like this, a Straddle strategy would be good to adopt.

If the price of the stock shoots up, your Call will be way In-The-Money, and your Put will be worthless. If the price plummets, your Put will be way In-The-Money, and your Call will be worthless. This is safer than buying either just a Call or just a Put. If you just bought a one-sided option, and the price goes the wrong way, you’re looking at possibly losing your entire premium investment. In the case of Straddles, you will be safe either way, though you are spending more initially since you have to pay the premiums of both the Call and the Put.

Let’s look at a numerical example:

For stock XYZ, let’s imagine the share price is now sitting at $63. There is news that a legal suit against XYZ will conclude tomorrow. No matter the result of the suit, you know that there will be volatility. If they win, the price will jump. If they lose, the price will plummet.

So we decide to initiate a Straddle strategy on the XYZ stock. We decide to buy a $65 Call and a $65 Put on XYZ, $65 being the closest strike price to the current stock price of $63. The premium for the Call (which is $2 Out-Of-The-Money) is $0.75, and the premium for the Put (which is $2 In-The-Money) is $3.00. So our total initial investment is the sum of both premiums, which is $3.75.

Fast forward 2 days. XYZ won the legal battle! Investors are more confident of the stock and the price jumps to $72. The $65 Call is now $7 In-The-Money and its premium is now $8.00. The $65 Put is now Way-Out-Of-The-Money and its premium is now $0.25. If we close out both positions and sell both options, we would cash in $8.00 + $0.25 = $8.25. That’s a profit of $4.50 on our initial $3.75 investment!

Of course, we could have just bought a basic Call option and earned a greater profit. But we didn’t know which direction the stock price would go. If XYZ lost the legal battle, the price could have dropped $10, making our Call worthless and causing us to lose our entire investment. A Straddle strategy is more conservative and will profit whether the stock goes up or down.

If Straddles are so good, why doesn’t everybody use them for every investment?

It fails when the stock price doesn’t move. If the price of the stock hovers around the initial price, both the Call and the Put will not be that much In-The-Money. Furthermore, the closer it is to the expiration date, the cheaper premiums are. Option premiums have a Time Value associated with them. So an option expiring this month will have a cheaper premium than an option with the same strike price expiring next year.

So in the case where the stock price doesn’t move, the premiums of both the Call and Put will slowly decay, and we could end up losing a large percentage of our investment. The bottom line is: for a Straddle strategy to be profitable, there has to be volatility, and a marked movement in the stock price.

A more advanced investor can tweak Straddles to create many variations. They can buy different amounts of Calls and Puts with different Strike Prices or Expiration Dates, modifying the Straddles to suit their individual strategies and risk tolerance.

Stocks: Reduce Risk Yet Maximize Profits

It is important to note that every smart investor wants to minimize risk while maximizing profit potential. Yet conventional investment theory tells us that in order to increase returns, you have to increase risk.

You may be surprised to find that this conventional wisdom is not always true.

When I was a professional stock trader, I made most of my profits from appreciation in my portfolio, not in short term trading. In other words, I was a position trader. Any losses in my stock positions were taken out of my paycheck at the end of the month – in fact, I had to pay back any loss. If you are in this position, you desperately want to learn all the techniques to make large profits without risking much. I became an expert out of necessity. So while my trading account had virtually no losing months, my gains were as much as 300% per year.

In my stock picking, I first looked for stocks that were so cheap they could not go down. If they did go down, I was happy to buy more because at those prices, you could buy the whole company and sell off the assets for a profit.

From this group of “safe” stocks, you select the ones most likely to have large appreciation.

A stock is cheap in my book if it sells below the liquidation value of its assets, and most cheap if it sells anywhere near the net amount of cash it has on hand. So the first two measures of value I looked for were book value per share and cash per share.

Book value is the value of the shareholders equity carried on the books of the company. Generally, since you are buying a share of stock, you will want to know the book value per share.

The one caveat to looking at book value is that companies often have intangible assets on the books, goodwill and the like. You have to take these intangible assets with a grain of salt. The safest thing is to look for “tangible book value.”

Book value per share is often calculated for you in the various Internet financial stock search programs available.

The next indicator to look for is cash per share or working capital per share. Working capital is current assets minus current liabilities. These assets are near to cash or will generally be turned over in one year: receivables, inventory and the like.

To measure the health of working capital, divide current assets by current liabilities to get the “current ratio.” A current ratio of two to one or better usually indicates a solid company. As long as the company does not have any long term debt, or at least none coming due in the near future, the company is solvent and should be around for a while – little or no bankruptcy risk.

Next, we look for low price-earnings (P/E) ratios. In my opinion, buying high P/E stocks to chase growth companies is inviting real risk. If the company disappoints in earnings, not only will the stock drop from lower earnings, the P/E ratio will deflate as well, giving you a double hit.

OK, so you have found a company that is selling at or below book value with a current ratio better than 2:1, and a low, low P/E. It may be that the stock will not go down, but will that stock go up?

Picking growing industries and growth companies is more than I can tell you here, but there are two simple things you can look for first: (1) Is the company buying its own stock, or has it bought its own stock at about this price, and (2) are the insiders making hefty purchases of their stock?

Next, you can look at the ratio of revenues or sales to market values or the dollar amount of sales per share. Generally speaking, the company with a relatively high amount of sales per market value or sales will have more action on the upside. That company has more revenues to make profits from.

After you have narrowed the field using the above techniques, there will be no substitute for intense homework about company prospects to find which of those cheap stocks that truly give you superior returns, what I call my “Home Run Stocks.”

Stock Market Retirement Investment Plan

For a successful retirement investment plan to work in the stock market, some ‘reasonably sure’ assumptions would have to be made:

The retirement investment plan must take into consideration the one prevailing constant in any stock market security – risk and uncertainty. Understanding that risk and uncertainty are the key factors that propels the return on investment in the stock market far beyond the returns of Passbook Savings Accounts, CD’s or Bonds are a start. The plan’s key factor would be to use the risk and uncertainty of a stock market security to its advantage.

The retirement investment plan should be founded on the belief that no one can successfully retire without financial freedom. Therefore, the retirement investment plan’s main role would be to supply you with income during your retirement years, while also taking into consideration the risk of inflation. This should be accomplished without having to touch the principle.

The retirement investment plan would require discipline to accomplish its goal. The goal should be clear and specific, and the discipline necessary to accomplish the goal, just as clear and specific. Also, the retirement plan should not be financially out-of-reach, allowing as little as 100 dollars to begin, with as little as 10 dollars a quarter to continue.

The retirement investment plan’s return on investment should be aimed toward providing income, and the income from the holdings in the plan should accelerate every week of the year, until retirement. This should be the case, no matter what the price of the security at any given time in the market place.

The retirement investment plan should be proven to you. Once proven, you must have the confidence in yourself to carry the plan forward. This do-it-yourself confidence means that the retirement plan’s ROI benefits only you and your family and no one else. A no-fee plan enhances the return on investment, allowing every cent put into the plan to work for you.

Companies owned in the retirement investment plan should have a historical record of raising their dividend every year. Therefore, a future dividend increase for the 10th or the 35th consecutive year in a row can be ‘reasonably sure.’ The guide for the selection of each security is its historical performance of rising dividends every year.

To receive the best return in the retirement investment plan, all companies in the plan would be purchased commission-free. All dividends from the companies would purchase more shares of each company commission-free. Therefore, every cent earned in ever-increasing cash dividends every quarter and any extra cash put into the retirement plan would work toward increasing the cash dividend.

Why bother beginning a retirement plan is best expressed, in my opinion, by a quote by Charles Kettering:

“I expect to spend the rest of my life in the future, so I want to be reasonably sure of what kind of future it’s going to be. That is my reason for planning.”

Stock Market Leaders and Laggards

Leaders are stocks that breakout immediately when the market confirms a new rally. In the first several weeks, strong stocks with leadership ability will breakout on volume above their 50-day average. Some of these stocks will breakout on the largest volume ever. Typically, newer stocks that have come public in the past few years will have the most strength for sizable gains.

As multiple stocks breakout from similar industry groups within larger sectors, a confirmation of broad leadership is established. “Sister Stocks” will usually move in crowds and lead the way in similar fashion. Their charts will show some resemblance and their action with be closely related. When one leader goes up, so will the others in the group. It’s not an exact science but almost anyone could chart the progression of leaders during the beginning stages of a rally.

Laggards are stocks that don’t breakout immediately when the market confirms a new rally. They become laggards if they wait a few months to finally breakout while dozens of other stocks have already gone on to excellent runs. Investors must be on the lookout for a healthy correction after several strong months of advancement within a specific industry group or broad sector. As the correction materializes, the original leaders will be poised to continue their run so long as the ‘M’ in CANSLIM is still positive. ‘M’ stands for market health.

Investors must be on the lookout for stocks that only start their advancement on the overall correction. These stocks tend to be weaker and are more prone to failure. The original leaders will have more institutional support and are more likely to advance further. Laggards will often sport a nice breakout during the correction phase, only to disappoint the investor with a reversal.

Let’s use a hypothetical example: XYZ breakouts out in October and runs up 50% in 3 months and then pulls back to correct. ABC breakouts out 3 months later in January while the correction is taking place (from the same industry group) but has been stagnant the past 3 months as many other stocks in the industry groups have made nice gains (like XYZ).

Laggards stay stagnant during the beginning stages of bull markets. This doesn’t mean that they can’t have a nice run, it just means that the chances for failure are higher because “dumb money” may be bidding up the cheaper stock in that particular group.

The “smart money”, otherwise know as institutions may have ran up stock ‘XYZ’ for 3 months and will most likely allow weak holders to sell before they resume the advance. In the mean time, those weak holders may be the investors running up stock ‘ABC’ because it looks cheap. They may reason that it should be moving up because ‘XYZ’ moved up in the prior 3 months.

Finally, be careful and analyze each specific stock and situation before you make a commitment. This is a general rule to help you select a leader within a strong industry group. The market never works perfectly every time so make sure you are prepared for anything.

Forex Signal, Forex Signals Advise

There are lot’s of Forex signals providers out there. New Forex traders might be thinking of looking for a reliable Forex signals provider. Is there any reliable Forex signals providers available?

Personally, I will say do not pay for Forex signals. Think about it – if a Forex signals provider sells Forex signals for living, you can doubt their Forex trading skills? Or else if they are pretty good in Forex trading and making lot’s of profit, I am wondering why do they still bother to sell Forex signals for money. Thus, what would be the value of such Forex signals providers? The answer is ZERO.

There are Forex traders who have been relying on Forex signals arguing those Forex signals providers really help them making money in Forex trading. These Forex traders can even show their Forex trading logs as evidence. After some though, I came out with the assumption that assuming I am the owner of a Forex signals provider, in order for my business to be in black, obviously I need some satisfying customers. If I have 100 new customers this month, I send out buy signal for the 50 of my new customers while the another half with sell signal. At the end, I will able to have “some satisfying customers”. Finally, free advertising and testimonial will be made available.

If you are really new into Forex trading, it’s better for you to sign up a demo Forex trading account from any Forex brokers and try some practice trades for a few months. This will give you insight into how the forex market behaves. Then only deposit a small amount of money to get a real feel. There are great differences between demo trading and real trading due to personal trading psychology.

Final words, if you really wish to buy Forex signals from a Forex signal provider, make sure they have got an audited results and do provide a free trial over a substantial period.

FOREX 101: Make Money with Currency Trading

For those unfamiliar with the term, FOREX (FOReign EXchange market), refers to an international exchange market where currencies are bought and sold. The Foreign Exchange Market that we see today began in the 1970’s, when free exchange rates and floating currencies were introduced. In such an environment only participants in the market determine the price of one currency against another, based upon supply and demand for that currency.

FOREX is a somewhat unique market for a number of reasons. Firstly, it is one of the few markets in which it can be said with very few qualifications that it is free of external controls and that it cannot be manipulated. It is also the largest liquid financial market, with trade reaching between 1 and 1.5 trillion US dollars a day. With this much money moving this fast, it is clear why a single investor would find it near impossible to significantly affect the price of a major currency. Furthermore, the liquidity of the market means that unlike some rarely traded stock, traders are able to open and close positions within a few seconds as there are always willing buyers and sellers.

Another somewhat unique characteristic of the FOREX money market is the variance of its participants. Investors find a number of reasons for entering the market, some as longer term hedge investors, while others utilize massive credit lines to seek large short term gains. Interestingly, unlike blue-chip stocks, which are usually most attractive only to the long term investor, the combination of rather constant but small daily fluctuations in currency prices, create an environment which attracts investors with a broad range of strategies.

How FOREX Works

Transactions in foreign currencies are not centralized on an exchange, unlike say the NYSE, and thus take place all over the world via telecommunications. Trade is open 24 hours a day from Sunday afternoon until Friday afternoon (00:00 GMT on Monday to 10:00 pm GMT on Friday). In almost every time zone around the world, there are dealers who will quote all major currencies. After deciding what currency the investor would like to purchase, he or she does so via one of these dealers (some of which can be found online). It is quite common practice for investors to speculate on currency prices by getting a credit line (which are available to those with capital as small as $500), and vastly increase their potential gains and losses. This is called marginal trading.

Marginal Trading

Marginal trading is simply the term used for trading with borrowed capital. It is appealing because of the fact that in FOREX investments can be made without a real money supply. This allows investors to invest much more money with fewer money transfer costs, and open bigger positions with a much smaller amount of actual capital. Thus, one can conduct relatively large transactions, very quickly and cheaply, with a small amount of initial capital. Marginal trading in an exchange market is quantified in lots. The term “lot” refers to approximately $100,000, an amount which can be obtained by putting up as little as 0.5% or $500.

EXAMPLE: You believe that signals in the market are indicating that the British Pound will go up against the US Dollar. You open 1 lot for buying the Pound with a 1% margin at the price of 1.49889 and wait for the exchange rate to climb. At some point in the future, your predictions come true and you decide to sell. You close the position at 1.5050 and earn 61 pips or about $405. Thus, on an initial capital investment of $1,000, you have made over 40% in profits. (Just as an example of how exchange rates change in the course of a day, an average daily change of the Euro (in Dollars) is about 70 to 100 pips.)

When you decide to close a position, the deposit sum that you originally made is returned to you and a calculation of your profits or losses is done. This profit or loss is then credited to your account.

Investment Strategies: Technical Analysis and Fundamental Analysis

The two fundamental strategies in investing in FOREX are Technical Analysis or Fundamental Analysis. Most small and medium sized investors in financial markets use Technical Analysis. This technique stems from the assumption that all information about the market and a particular currency’s future fluctuations is found in the price chain. That is to say, that all factors which have an effect on the price have already been considered by the market and are thus reflected in the price. Essentially then, what this type of investor does is base his/her investments upon three fundamental suppositions. These are: that the movement of the market considers all factors, that the movement of prices is purposeful and directly tied to these events, and that history repeats itself. Someone utilizing technical analysis looks at the highest and lowest prices of a currency, the prices of opening and closing, and the volume of transactions. This investor does not try to outsmart the market, or even predict major long term trends, but simply looks at what has happened to that currency in the recent past, and predicts that the small fluctuations will generally continue just as they have before.

A Fundamental Analysis is one which analyzes the current situations in the country of the currency, including such things as its economy, its political situation, and other related rumors. By the numbers, a country’s economy depends on a number of quantifiable measurements such as its Central Bank’s interest rate, the national unemployment level, tax policy and the rate of inflation. An investor can also anticipate that less quantifiable occurrences, such as political unrest or transition will also have an effect on the market. Before basing all predictions on the factors alone, however, it is important to remember that investors must also keep in mind the expectations and anticipations of market participants. For just as in any stock market, the value of a currency is also based in large part on perceptions of and anticipations about that currency, not solely on its reality.

Make Money with Currency Trading on FOREX

FOREX investing is one of the most potentially rewarding types of investments available. While certainly the risk is great, the ability to conduct marginal trading on FOREX means that potential profits are enormous relative to initial capital investments. Another benefit of FOREX is that its size prevents almost all attempts by others to influence the market for their own gain. So that when investing in foreign currency markets one can feel quite confident that the investment he or she is making has the same opportunity for profit as other investors throughout the world. While investing in FOREX short term requires a certain degree of diligence, investors who utilize a technical analysis can feel relatively confident that their own ability to read the daily fluctuations of the currency market are sufficiently adequate to give them the knowledge necessary to make informed investments.

Forex2u Forex Strategy On Successful Forex Trading

The essence of the FX2u Forex strategy is that it does not have any Forex trading system but could forecast the market trend accurately.

Every set of Forex trading system available has its disadvantages. The market trend could not be forecasted. If the market could be forecasted, by depending on the RSI, PAR, MOM analysis techniques and some other theories, Forex traders could easily make a fortune.

Many Forex traders could not obtain the anticipated outcome by using these analysis tools, and suffer huge losses. The main reason is relying on some imperfect tools to forecast the unpredictable market trend is just a waste of effort. Therefore the FX2u Forex strategy spirit is to abolish the entire subjective analysis tool.

To survive in the market is to follow the market trend, following the market trend is the essence of the FX2u Forex strategy. By using the opposite theory to enter the market, will only lead to lost. The reason is that if the market rises, it may continue to rise. If the market drops, it may continue to drop. No one is able to forecast when the market trend will stop.

By following the market trend, the market risk could be reduce to the lowest, the FX2u Forex strategy will advance the following the ten principles:

fully understand the how market function and the market trend, else don’t trade

After entering the market, the Forex trader MUST immediately put a market stop.

If the stop order has been hit it MUST be executed immediately, NEVER make changes by lowering the stop order price.

If the forecast is wrong, Forex traders should leave the market immediately, then analyze again.

If the forecast is wrong, Forex traders should stop loss and should not increase trading.

Forex traders should admit mistakes, do not continuously make mistakes.

All analysis tools are imperfect, mistakes could always occur.

If the market rises Forex traders should buy, if the market drops Forex traders should sell, always follow the market trend.

Forex traders should not forecast the market price because such forecast will not be as easy as forecasting the market trend.

If the forecast is wrong, once the loss reach 10%, Forex traders must stop loss imm

Five Sure Fire Way to Secure Your Financial Future

“You can be poor when you’re young, but you can’t be poor when you’re old.” That was the tag line used some years ago in a financial services television commercial.

Truer words were never spoken.

I was relatively poor when I was young. Just about everybody I knew was and it was kind of fun. We lived an almost communal lifestyle, sharing money, accommodation, food, beer, cigarettes and other essentials of post-pubescent life. Would it be as much fun if I had to do it again today? Could I do it again? Not on your life!

Now I’m anything but a financial genius but there are five basic principles that I’ve learned and used to secure our financial future. And while far from wealthy, I have every confidence that I will not have to live in a refrigerator box whenever I quit working and that my wife will be able to comfortably carry on in the event of my premature demise. (You should know I’m at an age where I think eighty-five is a premature death!)

Is building a secure financial future akin to rocket surgery? Absolutely not— you need to do five key things to get started:

1. Determine your short and long-term financial goals. Start by taking a comprehensive snapshot of your current situation—your assets, net income, debts and living expenses. Once you’ve done this you can start setting long and short-term financial goals. Decide what lifestyle you want to enjoy between now and when you retire; what retirement lifestyle do you expect to have and what sort of education do you expect to provide for your children.

2. After you’ve assessed where you are now and where you want to be in the future take steps to protect your ability to get there–and stay there once you’ve arrived. A major part of your family’s financial program is to insure against major financial loss. There are simply no guarantees against serious illness, accidents or untimely death. So take the steps necessary to insure against loss of life, loss of income and loss of physical assets.

3. Pay yourself first. Save at least 10% of pre-tax income – more if possible. Pay down your mortgage as quickly as possible, especially in times of low interest. In the short term, you’ll be better off reducing a mortgage that costs you 6% than earning around a taxable 1.5% (or less) in a savings account.

Maximize your RSP/401K contribution every year and make the contribution at the beginning rather than at the end of the year. Simply doing that will substantially increase the size of your retirement nest egg when you’re ready to cash out.

4. Avoid credit traps. If you use credit cards, always pay any money owing before interest is due. Consider paying off your credit card immediately if you have money in a savings account—as with the mortgage, the interest earned on the savings is certain to be lower than what’s charged by the credit card company. Avoid using credit cards for cash advances. Usually the interest charges are higher for these and the charges begin immediately. If you do carry a balance on your cards try to negotiate a lower rate with the credit card company. If you need money urgently, it’s usually cheaper to negotiate a personal loan with your bank or credit union.

5. Finally, protect your family in the event of your death. Make a Will. If you die without leaving a Will in all likelihood the only thing you’ll really leave your loved ones is a bloody mess—one that could take many years and a whole bunch of money to sort out.

Without a Will, the court/government will decide how your property and possessions will be divided. I would expect there are two chances of them acting in a way consistent with what your wishes might have been—slim and none!

Making a Will doesn’t mean the Grim Reaper is about to pay you a visit. It simply means that your affairs will be sorted out in the ways you want and, as a result, you can go about your life with a peaceful mind because your loved ones are protected.

These five principles are only a starting point—a few suggestions that any financial management professional can improve and expand on. If I have one regret about how I’ve handled my financial affairs over time it is not enlisting enough professional help. When we were starting, the financial management business was neither as big nor as sophisticated as it is today. Who knows, with better help, I might be writing this from some warm Caribbean tax haven rather a cold Calgary office!

“Don’t try this alone—use a trained professional,” is absolutely the best advice I’m really qualified to give.

Find a Methodology and Minimize Investment Madness

There are many reasons to be investing these days, and too much opportunity to not have your money working for you.

However, I believe the majority of people dread having to deal with investment matters, and tend to jump into purchases and then hold their breath hoping for the best. After a long day at work and taking care of the family, it’s hard to get excited about reading up on your 401(k) options, Morningstar ratings and fund performances.

If this sounds like you, there are basically 3 choices.

You can have your investments professionally managed, you can continue as you have in the past & keep your fingers crossed, or you can find a methodology that objectifies the investing process (that’s buying and selling investments) and helps you maximize your long-term results.

To determine if you need help managing your investments(and this doesn’t necessarily mean having to pay for advice) you might want to ask yourself these questions:

=> Do I really have the time and interest to follow the market closely on a daily basis?

=> Have I done well in the past managing my own investments?

=> Do I really want to add another layer of work and responsibility onto an already busy schedule?

If you’re like most people, you would answer yes to some and no to others, so how do you decide? If you think you could have or should have done better with your investments, then you need some help. Don’t feel bad. Having counseled hundreds of people over the past 15 years I can honestly say that everybody needs some help, whether they are aware of it or not.

Why? This could come as a surprise, but, in fact, your financial life is a lot shorter than your physical life?

Most people who end up investing don’t really start working and making money until they are about 25 years old. Considering the average retirement age of 65, this gives you only 40 years to save and invest wisely.

If you make a poor investment decision, such as trying to stay fully invested during a bear market, you could lose big both in terms of diminished dollars and wasted time.

To drive home this important point, let me give you an actual example involving my own portfolio. For ease of illustration I have adjusted the beginning portfolio balance to $10,000.

During the period from 1/25/91 to 10/13/00 my $10,000 investment grew to $37,840, which is a 14.67% compounded annual return.

On 10/13/00, based on a methodology I was following, I liquidated all of my domestic mutual fund positions and moved 100% to the safety of my money market account. Thanks to this move, my portfolio retained 100% of its value on that date.

As we now know with hindsight, most people held on to their investment positions and have so far lost on average 50% to 60% of the value of their portfolios. For this example let us use 50%.

If I had held onto my position, my portfolio would be down to $18,920. Last time I hit that level on the way up was in 1995.

In other words, not only would I have lost 50% of my portfolio I would have lost even more by having used up 20% (8 years) of my total financial life.

How can you avoid mistakes like that in the future? Spend a little of your valuable research time looking for investment methodologies that allow you to side-step bear markets and let you move back in during bull markets. In other words, invest your time looking at methodologies instead of investments themselves. This will lay the foundation for more effective use of your money and time.

If you find a methodology that you like, and it matches your investment philosophy, stick with it for the long term. It should have the aspect of telling you when to get out of, as well as when to get into, an investment.

I suggest you follow these broad guidelines:

  • Don’t be afraid to take a small loss to avoid bigger disasters.
  • Stay away from commissioned sales people (because they have incentives other than your best interests), and if you use an advisor, be sure he or she is fee based.
  • Above all, don’t get overwhelmed by news, rumors and predictions that are irrelevant to your strategy.

If you take this advice, I guarantee that pretty soon sleepless nights will be a thing of the past and you’ll be on your way to more confidently and successfully (that means profitably) managing your investments.