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Buy Low and Sell High is Easy for You to Say

Are you frustrated with the market downturn we’ve seen in the past few weeks? If so, you might need to make some adjustments to your portfolio, i.e. 401(k), 403(b), etc. William Bernstein, author of The Intelligent Asset Allocator said, “The essence of effective portfolio construction is the use of a large number of poorly correlated assets.”

What does he mean by “poorly correlated?” I’ll get to that in a minute. First, I want to quote another master of investment strategy. Roger G. Ibbotson is emeritus professor of the practice of finance at Yale School of Management. He said, “On average, 94 percent of the variability of returns and 100 percent of the absolute level of return is explained by asset allocation.”

Now let’s summarize these two statements. A viable portfolio that is poised to make decent returns has two characteristics: 1. It is diversified 2. The assets don’t behave identically. In other words, asset A doesn’t move in the same direction as asset B when the stock market goes up and down.

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Secrets of Investing for Beginners Part III

Secret Three: Investing is not for daycare candidates

The children from Mizzou college in Missouri are trying to start a trend of so-called “safe zones,” where feelings are protected from hateful speech. If you are that prickly, you might want to get rich by striking oil, since the market can be a brutal place for the emotionally delicate. Emotions, namely fear and greed, will be your two worst enemies that stand between you and profits. Countless investors have failed to reach their financial goals because of these twin sisters of failure. The ability to remain invested in volatile markets takes both a long-term investment philosophy (Secret Two), and an understanding of the cyclical nature of the markets. Case in point: from 1987 to 2006, the S&P 500 averaged annual returns of 11.8%. Over that same period the average investor gained only 4.3%. Why? Fear and greed. Neither will help you make a dime.

What you need is a coach-minded advisor, not a salesman. I have seen two terrible recessions in my years as an investment consultant. I have seen people destroy their nest egg with emotions, and I have seen people stay the course, and reap the financial benefits. While I can’t say 100%, I can say that many of those who failed, tried to invest on their own, while the majority of those who succeeded, had an experienced advisor keeping them calm.

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Secrets of Investing for Beginners Part II

In stock market the most important element in Investing for Beginners is time. If anyone wants to start investing money in the stock market he or she must have to take time.

Secret Two: It’s time in the market, not timing the market

If I were to build a house for you, the first thing I would do is pour a solid, durable foundation. Everything, and I mean everything that I build for you from that point relies on that foundation. If you try to cut costs here you will pay handsomely for it. The 2011 Joplin tornado was a catastrophic EF5 multiple-vortex tornado that struck Joplin, Missouri, late in the afternoon of Sunday, May 22. It caused $2.8 billion in damages. It left a swath of destruction almost a mile wide. The massive EF5 twister destroyed many homes, yet in spite of its massive power, it was unable to demolish even one foundation.

A necessary ingredient to making money in the stock market is time. It is the foundation on which your portfolio grows. Before you put any money into a company via their stock or bond, you should have a long-term plan for staying there. There is only one way I know to get rich quick-TAKE YOUR TIME, because the swift outcome is usually the evaporation of your money.

 

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Secrets of Investing for Beginners Part I

Three Secrets of Investing for Beginners

So you want to start investing in the stock market, but, as a beginner, you are afraid of losing your money.Undoubtedly you’ve heard of people winning big, and others losing it all, in the same stock market, like the DOW Jones or the S&P 500. How do such polar opposite outcomes occur within the same market?  Do the successful have some spectacular insight that helps them choose winners over losers? Hardly. Could it be they have discovered the secrets that Wall Street doesn’t want you to know? Possibly. Would you like to know what they are? Here we go.

Secret One: Wall Street needs you, not the other way around

Make no mistake; you are the absolute life-blood of every brokerage firm and maker of every investment security which is both flattering and dangerous. As yet you do not fully appreciate the enormity of your worth in the eyes of the Hungry, nor do you yet comprehend the pitfalls of being so. Without you…there is no Wall Street; without Wall Street…you remain. When you understand this epiphany, things start to change. Most of what you consume regarding successful investing is pure noise. Larry Swedroe, author of, “What Wall Street Doesn’t Want You to Know” calls much of what you hear about making money in stocks, “investment pornography.” That is the hard blue-steel kind of language that you need to hear, and investment consultants need to speak. When you choose someone to help you with this, make sure they speak this kind of dialect.