Saving and investing money is essential for financial independence in later years. Employer funded/matched 401K’s are rapidly disappearing along with defined benefit plans. Counting upon others for your retirement is futile.
The financial media puts forth a huge amount of verbiage, most of which is biased spin, (BS). Making investment decisions based on news releases will surely get you in trouble. Trying to gauge fundamental soundness of a company is daunting due to accounting complexity and trickery.
One of the better ways to filter out BS is to monitor what company executives are doing with regard to their stock; are they buying or selling? As insiders, they must report their actions to the S.E.C., where it becomes public record. You can find this information at http://www.sec.gov/edgar.shtml
Depending upon a company’s size, it may not be apparent when viewing it’s stock chart that insiders are buying. Only when the company’s good prospects are more widely known does the stock chart show an uptrend. We can use chart analysis tools to recognize a trend change, and then decide to either buy or sell.
As you may have guessed, buying individual stocks can be very risky. Company executives almost always release BS statements. When bad news finally must be confessed, they do it after the market has closed. Next morning’s opening is delayed due to a huge sell order imbalance. Even stop-loss orders will not protect you from this situation.
Exchange Traded Funds (ETF’s) offer more safety because they hold 50 or more stocks, dampening the effect of a single stock. On the other hand, ETF’s don’t hold so many stocks, like mutual funds, that they are sluggards. ETF’s can be a good balance between risk and reward.
Reducing risk is key to long-term success. By using ETF’s, stop-loss orders, trend analysis, and proper position sizing we can reduce risk to tolerable levels.
Increasing reward is had by spreading assets over a number of ETF sectors that have confirmed beginning uptrends. Stop-loss orders protect against reversals, eventually taking us out of a position without emotion.
Making investment decisions yourself requires some time and dedication. So get started! Read all sections of the site until you get a feel for invest-ing. The tools presented on this site will enable you to be successful, out-performing over 90% of the professionals long term.