The stock market guide to profitable investments haramis

The Stock Market Guide to Profitable InvestmentsIoannis - Evangelos C.. The Decision is Yours"An investment in knowledge pays the best interest!" As you might know, you don't have to be

The Stock Market Guide to Profitable Investments

Ioannis - Evangelos C Haramis

A Simple and Logical Background with Everything You Need

to Always Be Able to Invest Profitably

www.GreekShares.com

Copyright © 1995 - 2014 Ioannis - Evangelos C Haramis

All Rights Reserved

www.GreekShares.com

No part of this e-Book may be reproduced or transmitted in any form or by any means,electronic, mechanical, including photocopying, recording, or by any information storage andretrieval system, except in the case of reviews, without the express written permission of theauthor, except where permitted by law

“… a notable example of the mad and fond curiositie of our nature, amusing it selfe to preoccupate future things, as if it had not enough to doe to digest the present!”

Michel De Montaigne (1533- 1592), Of Prognostications

Workers earn it,

Spendthrifts burn it,

Bankers lend it,

Women spend it,

Forgers fake it,

Taxes take it,

Dying leave it,

Heirs receive it,

Thrifty save it,

Misers crave it,

Robbers seize it,

Rich increase it,

Gamblers lose it,

Stock brokers sometimes (?) multiply it

And WE ALL …

Always can use it!

Paraphrased (!) from Richard Armour (1906-1989)

The Decision is Yours

"An investment in knowledge pays the best interest!"

As you might know, you don't have to be an expert in order to invest profitably.

You don't even have to really love money.

But, you will pay a high price for neglecting your finances!

During my years as a stockbroker I've seen many losers and winners The difference was theability to be able to know the rules of "The Game" and adopting the right strategies to suitindividual circumstances

There are plenty of people ready to give you advice; bank managers, accountants, financialadvisers and etc Listen to them by all means, and read what this book has to offer

But, at the end of the day

The final decision and the money will always be Yours …

And ONLY YOURS!

The Author

Ioannis - Evangelos C Haramis was born in Athens, Greece.

He studied Business Administration, Marketing and Economics in Greece, in the U.S.A and

Special thanks to the many lone voices who have been criticized for sounding the alarmsearly on, and their attempts to "reason" the market deserve more credit that will ever bereceived!

But folks let me be extremely honest now …

My biggest credit goes to the “Greater Fool Theory!”

The theory that makes a fool buy something for no other reason than the belief that he will beable to sell it to some other greater than himself fool for a higher price!

With a staggering number of stocks posting tremendous gains over the last years, it wasbeginning to look extremely easy to be able to make a fortune! Of course, throw in severaldives here and a few really short haircuts there, and the next thing you know

Your convictions are severely shaken

Not stirred!

There are a lot of people these days "playing" the stock markets It can be fun, exhilaratingand sometimes, it's almost intoxicating!

But, it's not a game!

Investigate your investments …

Define your goals and objectives and …

Invest your money instead of just "playing" with it!

The purpose of this book is to provide all the necessary information so that you can acquirenew skills and expand your knowledge, in order to accomplish profitable investments in thestock market

If you were wondering if the good times were over and you missed them …

Think again!

It's time for a serious, profitable perspective that only comes from real knowledge

The intention of this book is not only to provide advice on investments for beginners, butalso aims to offer fresh ideas for experienced investors It includes advice ranging from thebest investments for young people, to how to find an honest stockbroker!

Coupled with such advice, it offers a comprehensive outline of many major terms andimportant phrases that the readers would need to be familiar with upon their embarkation intoinvestment

This book does not claim to give tips on particular investments, but rather aims to provide thereaders with the broad, general advice necessary to be translated into stock market success.The logical and straightforward way in which this book is both written and organized willenable the readers to follow the route of the advice and argument easily

Several techniques are also been employed in this book in order to ensure that attention ismaintained throughout, including the use of catch phrases and rhetorical questions Inaddition, the author combines objective information with personal recollections andrevelations, which would have the effect of the readers being able to relate more effectively

to him, and therefore to the advice that he is offering

This "Year 2014" edition of "The Stock Market Guide to Profitable Investments" is theculmination of twenty years of work that slowly arrived at this present expanded and updatedversion of the original book which was first e-published in English in late 1994 in theInternet (www.GreekShares.com).

"The Stock Market Guide to Profitable Investments" is unique in the method it uses todescribe the details of becoming a stock market investor It uses a time tested and countlesstimes proven, simple and logical approach

The book is divided into ten sections The seven first sections have a very distinct purpose,which combined together with the tenth one that defines the investment terminology and theeighth with its published in various Greek and USA newspapers articles, describes a logicaland complete methodology for absolute investment success

Since the original e-publication back in 1994, investors have begun waking up to theenormity of the new economic era, and starting to learn, using and evaluating the new marketissues that face them today

From the point of view of investors or "suppliers of capital," investment is the commitment

of present funds for the purpose of deriving future income in the form of interest, dividends,etc., or of appreciation in the value of the principal

The process of investing often seeks to sharpen its meaning by contrasting it withspeculation Traditionally, investment involves a reasonable risk with a relatively certainfuture income, whereas speculation involves taking a possibly high risk

The investor asks; what is the security worth?

The speculator asks; how will the price of the security move?

An old saying holds that a good investment is a successful speculation The end resultdetermines the distinction! Such a concept is useful in that it suggests that risk is a matter ofdegree and that some degree of risk is inevitable

On the other hand, this concept is rather dangerous, in that it suggests that planning andresearch may not be worthwhile

But, we do know that the procedures by which investments originate and the operations ofthe markets are important segments of investment knowledge without which the investorcannot act intelligently!

Here in this book, I will define the nature of investment and intelligent planning, byproviding a considerably simple and logical background with everything you need to getstarted investing profitably in the stock market!

This book contains neither recommendations nor solicitations to buy or sell securities and it

is published solely for information and educational purposes and does not form the basis ofany contract or commitment whatsoever

The author and the publisher assume no responsibilities for actions taken by readers, they donot provide investment advice and they do not make any claims, promises, or guarantees thatany suggestions, systems, information, trading strategies and/or etc will result in a profit, orany other desired result

All readers assume all risks, including but not limited to the risk of losses

Stock market investments are risky They do not provide fixed returns and past performances

do not guarantee any future results

All securities investments entail the risk of great and sudden financial losses.

Returns may vary and you may have a loss when you decide to sell your securities.

1 The 10 + 4 Golden Commandments! 22

2 Improve Your Finances 23

3 Develop Your Own Investment Plan 24

4 The Ways to Make Money 26

5 Think Carefully _ 28

6 Buy Low and Sell High 29

7 Deadly Financial Mistakes! _ 31

8 Money Mistakes 33

9 Know Yourself _ 34

10 The Decision is Yours _ 35

11 Investing, Human Nature and the Past 2000 Years _ 36

12 Stock Market and Investing Myths 37

A The Preliminary _ 38

1 Understanding and Controlling Your Finances 39

2 Evaluate Your Financial Situation 41

3 The Seven Steps to Financial Freedom 42

9 Capital Gains 52

10 Saving Versus Investing 53

11 Investment Philosophy _ 54

12 Buy Now Pay Later! _ 55

13 The Best Investment _ 56

14 Pay off Your Debts 57

15 Consumer Debt - Use Cash or Credit? _ 58

16 Banks 60

17 Bank Checks _ 62

18 The Stock Market _ 63

19 The Index _ 64

20 Yield and Investing 65

21 The Age Percentage Formula 67

22 Understand What You Buy 68

23 My Millionaire! 69

24 Money and Ethics _ 70

25 Analysis and Recommendations 71

B The Elementary 73

1 Trust … Who Can You Trust? _ 74

2 Paying For Advice? _ 76

3 Advice on Taking Advice! 77

4 Selecting Your Financial Advisor 78

5 The Odds are in Your Favor! 80

6 The Internet as an Investment Tool _ 81

7 Know Your History _ 83

16 Growth, Yield and Income 97

17 Investing Is a Business Treat it that Way! 98

18 What Should Young People Invest in? 100

19 Women and Investing _ 101

20 Are You Afraid to Start Investing? _ 103

21 Starting Early _ 104

22 Low Capital to Start With? _ 105

23 Seniors and Investments _ 106

24 Taxes and Investments 107

25 What is Stock? 108

26 What About Dividends? _ 109

27 The Stock Market - How it Works _ 110

28 Buying Stocks _ 111

29 How To Buy Stocks 112

30 Tracking Stocks _ 114

31 Blue Chips _ 115

32 Bulls and Bears 116

33 Compound Interest The 8th Wonder! _ 118

34 The Power of Compound Interest 119

35 Psychology of Investing _ 120

36 Well Managed Risks Bring Rewards! 121

37 The Most Difficult Decision! _ 123

38 The Investor Pact! 125

39 How to Find a Stockbroker _ 126

40 Stock Brokers' Commissions _ 128

41 When a Broker Calls You 129

55 The Greater Fool Theory! 152

56 Real Estate Investments _ 153

57 Retirement Investing Portfolio 154

58 Retirement Investing Principles _ 156

59 Rolling Your 401k Account 159

60 The Five Investing Essential Truths 161

C The Intermediary _ 162

1 Pessimistic Vs Optimistic Investing Attitude _ 163

2 If You Can Afford to Lose You Can Afford to Win! 164

3 When Not to Invest! 165

15 The Right to Vote 182

16 The Basics of Accounting 183

17 Book Value _ 185

18 Financial Statements 186

19 Price/Earnings (P/E) Ratio _ 187

20 The Price/Earnings to Growth (PEG) Value Ratio _ 189

21 The EBITDA Indicator 190

22 Stock Ownership by Management _ 191

28 Oversimplification and the Mutual Funds! _ 199

29 Individual Stocks or Mutual Funds? 201

30 No Load Mutual Funds or Exchange Traded Funds (ETFs)? _ 203

31 Penny Stocks 205

32 How to Invest in Bonds _ 207

33 Bonds: Fundamental Investment Strategies 209

34 Initial Public Offering – IPO _ 211

D The Advanced 212

1 Panic 213

2 Never Invest on Tips! _ 215

3 The Greater Fool Theory in Action! 216

4 The Mississippi Bubble _ 217

5 The South Sea Bubble 218

6 The 1926 Florida Real Estate Crash 220

7 The 1920 –1929 “New Era” Economy _ 221

8 The Japanese Zaitech Bubble _ 222

9 The 1987 Stock Market Crash - Black Monday _ 223

10 Speculation _ 224

11 Hedging 226

12 Crash! A Hypothetical (?) Scenario 227

13 The Fear of Regret _ 228

14 Approaches to Investing _ 229

15 What's Your Style? _ 230

16 Liquidity _ 232

17 Fundamental Analysis 233

18 Trading Systems and Technical Analysis Indicators _ 235

19 Assumptions of Technical Analysis 238

20 Portfolio Management 240

21 Investment Portfolio Mistakes 242

22 The Dogs of the Dow _ 243

23 Cost Averaging 244

24 Value Averaging _ 245

25 Asset Allocation _ 246

26 Asset Allocation Is yet Another Way to Diversify _ 247

27 Why Buy and Hold May Not Always Be the Best Strategy? _ 248

28 Focus Your Investments on the Long Term 249

29 Always Take Part of Your Profits! _ 251

30 Never Lose more than 8% on any Stock 252

31 Learn to Lose and Risk Management _ 253

32 Stock Market Losers and Trading _ 254

33 Cut Your Stock Market Losses Early and Let Your Profits Run 256

34 True Top or True Bottom? _ 257

35 Momentum Investing _ 258

36 Scalp Trading _ 260

37 Swing Trading 261

38 Stocks and Stock Market Gaps 262

39 Buy the Dips! _ 264

40 Indexation 265

41 Moving Average _ 266

42 Value Investing 267

43 The Contrarians _ 268

44 Efficient Market Hypothesis 269

45 Borrowing Money to Buy Shares 271

46 The Short Sale of Stock _ 273

47 Investing Analysis and Transaction Forms 275

48 Learning from Your Mistakes! 277

49 Creative Accounting 279

50 Venture Capital Investments and Funds _ 280

51 Stock Fraud _ 281

52 Your Investment Profile and Risk _ 282

E The Post Graduate _ 285

7 Day Trading Strategies 295

8 Discipline and Trading 299

9 The Seven Secrets of the Highly Successful Trader 300

10 The Day Trader’s Aptitude Test! 303

11 Trading Slang and Expressions _ 305

12 Market Manipulation _ 306

13 The Random Walk Theory _ 308

14 The Beta Coefficient 309

15 Stock Market Pivot Points _ 310

16 Trailing Stops _ 311

17 The Breadth of Market Indicators 312

18 Does Market Timing Work? 314

19 My Predictions! _ 315

20 The Size Effect 316

21 The Circle of Competence _ 317

22 Estimates of the Future 318

23 Bubbles 319

24 The Elliott Wave Principle _ 321

25 Futures and Options (Derivatives) _ 323

26 Benefits of Trading Options 324

27 Calls and Puts _ 325

28 The Black-Scholes Option Pricing Formula 328

35 Have some Fun 339

The Articles _ 342

1 Mutual Funds - Again? 343

2 Supply and Demand 344

3 The Market's Up … The Market's Down! _ 345

4 Lacking Vision! _ 346

5 My Predictions! _ 347

6 The Cookie Jar 348

7 Mastering Fear and Greed _ 349

8 Casino Chips? _ 350

9 Irrational Exuberance (?) 351

10 Abandon the Stock Markets? _ 353

11 Good Governance - Equals Healthy Markets _ 355

12 Hard Times for Wall Street Analysts _ 356

13 Turbulent Times! 358

14 Do's and Don’ts for Protecting the Investors! 360

15 Are Institutions Important or Needed? 361

16 Investing Signals _ 362

Epilogue 363

1 My Last Piece of Investing Advice! 364

2 The More they Change 365

2 www.Sites 392

Prologue

The 10 + 4 Golden Commandments!

The stock market can be a great place to turn your savings into wealth!

On the other hand, if you do not keep the fundamental investment rules and do not followcertain simple stock investing basics, you can lose your shirt

I E C Haramis says that IF:

You don't invest You will lose!

You don't manage risks You will lose!

You don't use Cost Averaging You will lose!

You want to play You will lose!

You are greedy You will lose!

You don't understand your finances You will lose!

You panic You will lose!

You want to speculate You will lose!

You follow tips You will lose!

You place all your eggs in the same basket You will lose!

You don't investigate before you invest You will lose!

You don't know when not to invest You will lose!

You can't afford to lose You can't afford to make a profit!

Finally, IF YOU follow what I E C Haramis says in this book

YOU will make a profit!

That’s ALL Folks …

PERIOD!

Improve Your Finances

There are certainly people who invest in things they understand There are also plenty ofpeople who invest blindly! On the other hand, most of the people fall somewhere in themiddle; you may invest in one stock or another, but you may not fully understand them.The "Do-it-Yourself" approach to investing is not for everybody! If you tried it and was notworking, or you are actually afraid to try it at all, or you just don't have the required skills,time or desire, there is nothing wrong with asking for good professional assistance!

If you are serious about becoming a successful investor over the long term, you will need toacquire the knowledge and skills, which successful investors have acquired through years ofeducation, experience and training

Do you want to become a successful investor?

Do you want to improve your finances?

If so, this educational opportunity will change your life forever!

Although many investors learn the art and science of investing through trial and error, thiseducational opportunity will educate, and ultimately train you how to become a betterinvestor

This book is designed to offer the knowledge so that you can accomplish profitableinvestments in the stock market! If you are a novice investor just starting out, or a successfultrader, this book is designed as a reminder for the experienced and a foundation for the lessknowledgeable ones

You can all profit by picking up a few tips!

Investing in the stock market can be the most rewarding possible investment tool there is.With the low interest rates, investors are looking for better gains Although double and/ortriple-digit returns of the past few years are not guaranteed, there is still money to be made inthe stock market

Many of the books written on this subject are quite hard to understand They do not take intoaccount that the majority of the people do not have a Ph.D or an MBA in Business orFinance

This book is mainly written for people that are searching to learn and understand with simpleand easy to understand terms

Although it might seem to get complicated at times, hang in there! The first few parts willexplain the basics and cover many areas that will help you to develop your basic skills Later,other areas that you’ll probably want to check out will expand your knowledge and developmore advanced skills So don't worry about absorbing it all at once!

Please keep in mind that this educational section is a work in constant progress and willcontinually be enhanced to provide more information to educate the investor

Start Reading and Learn …

Start Learning and Invest … Start Investing and Make Money!

Develop Your Own Investment Plan

“It is planning not gambling that produces profit and security.”

Marcus Aurelius (121 – 180), Meditations on Stoic Philosophy

Basic information about investing is one of the most powerful tools you can use to findsuccess in the market Stock Brokers are your link to information in the stock market Theywill recommend whether to buy or sell shares, help you get the necessary information andcheck the performance of your holdings

Always remember the following seven critical facts:

1 If investment success was easy, everyone would be wealthy!

2 Focus on the long term: trying to make a "fast buck" is the fastest way to lose money!

3 Understand and believe that your two major enemies are panic and greed!

4 Realize that, depending on personal attitudes, the market is always either "half-full" or

"half empty!"

5 Never invest on "tips!"

6 Nobody can see the future! And finally,

7 The rich rule over the poor and the borrower is the servant to the lender!

By now, if you think you are ready, make a plan with the help of the following ten morebasic rules, and put it into action!

1 Determine the Kind of Investor You Are:

What are your goals for investing and how do you feel about risk?

2 Decide How You Will Allocate Your Investment Money:

What portion of your money will you invest in stocks? In bonds? In mutual funds? Howmuch do you want to keep in liquid investments? Determine how much you need to invest,and how to make these allocations

3 Select Your Investments:

Choose them cautiously and create a broadly diversified portfolio, so you can minimize andspread your risk over a variety of investments

4 Follow up on Your Investment Plan:

Once you've launched your investment plan and you have your portfolio, make sure itcontinues to reflect your goals and keeps working its hardest for you

5 Monitor the Progress of Your Investments:

Regularly review your portfolio to determine if the value of your investments is increasing.Compare your returns with similar investments and investigate all the facts

6 Review Your Financial Circumstances and Objectives at Least Twice a Year:

By doing this you can verify that your investment plan still meets your needs and pinpointwhere, when and which changes may be necessary

7 Make any Necessary Adjustments to Your Portfolio:

Stay flexible; relocate money among your investments to reflect any changes in yourinvesting approach

And finally, above everything else …

10 Choose a stockbroker you can trust …

A stockbroker with a proven reliability!

The Ways to Make Money

What is money?

It is a medium of exchange.

What does it do?

It ensures the success of exchange by being the one item on offer that is ALWAYS acceptable.

Why is it necessary?

Because human beings must exchange in order to live together in peace, and to prosper.

Most people don't spend much time wondering what money is, their major concern is howmuch they have, and how to get more!

That's all! But without money, the production and exchange of anything but the mostrudimentary goods and services is impossible It is not difficult, or time consuming, orinefficient, it is IMPOSSIBLE!

Animals don't exchange (or trade) amongst one another They are self-sufficient, or they takefrom each other, or they exercise the prerogative of superior strength and/or cunning

There are some human beings who get along in a very similar fashion, but the overwhelmingmajority recognizes the benefits of voluntary exchange Strictly speaking, the use of the word

"voluntary" in this context is redundant The phrase "your money or your life" is not theprecursor to an exchange, whether the person uttering it brandishes a gun or a governmentidentity card!

The first rule of any voluntary exchange is simplicity itself If two people are willing toexchange, each must view the results of the exchange as being beneficial If either of them isnot of that view, the exchange will not take place

The ways to make money in this world are simple:

Marry someone who is already rich,

Have a rich person die and will you his/her money,

Strike oil, discover gold, win the lottery, rob a bank, work for it,

Or have it work for you through investments!

In investing, you don't have to be an expert to take advantage of real opportunities! But, inorder to invest with confidence, profitable success and consistency and be able to takeadvantage of opportunities, first you should assure that all your essential financial needs andresponsibilities are met

Then, start with:

1 Setting aside sufficient liquid funds for cases of emergency.

2 Making sure you are completely and adequately insured.

3 Building a reasonable retirement plan.

4 Getting out of debt … And staying out of it!

5 Determining your time frame, and finally,

6 Starting investing with the aim of becoming financially independent!

As each of us enters different stages of life, our changing family status and objectives,incomes, expenses and living standards shape our investment strategy By having a clear idea

of what you want your investment to accomplish, you'll be able to put your money to workmore productively

Investing is generally defined as the conversion of risk-free assets into risky ones withprospects of greater return

Every investment has a certain amount of risk associated with it You can minimize risk, ifyou are able to understand the different characteristics of the various investments and buildyour portfolio accordingly

Given the existence of risk, why invest at all?

Because historically, the existence of greater risk is commensurate with greater rewards!You are almost certain to pick a bad investment sometime The secret then is to cut your loss

as soon as possible Unfortunately, most people find that this is very difficult to do No onelikes to think that he has made a mistake and there is a big temptation to hold on to it andkeep on wishing for better days to come

But there is almost always a time when an investment starts to turn sour that you can get outwith only a very small loss If you hold on it you could find yourself being on the losing sidefor many years and then lose even more money in the end

Having the courage to admit that you were wrong is an essential technique of successfulinvestment as well as in other aspects of life

A retired banker friend of mine expressed it rather well:

"If you are losing a tug-of-war with a lion, give him the rope right away before he gets your whole arm …

You can always have the chance to buy a brand new rope!"

Think Carefully

Take a look in the mirror and remember that any action you take with your finances is for theface right there in front of you …

And for a variety of financial and emotional reasons you cannot usually act logically and

rationally This person is YOU And you must start taking your acknowledged failings into

account as well as your strengths

We all have different attitudes to money, just as we have to food, clothes, sport, sex, religion

or whatever You may be a “Prudent Prudence” or “Happy-go-lucky Harry” person Mostlikely you are neither of these extremes, although you may well possess a measure of each ofthem For example, you may penny pinch on food but spend a lot on clothes

Accept it and learn to live with it!

Similarly, you may be a fanatic reader of the financial papers or regard the subject as acomplete bore In the latter case you would be foolish to take on an investment strategy,which involves keeping a regular watch on the stock market

Try to curb your excesses but at the same time adopt Shakespeare's (1564 – 1616) maxim:

"To thine own self be true" (Hamlet/Polonius) and never take any action that goes againstyour basic temperament

The rock bottom solid safe investment does not exist!

You cannot avoid some risk and it is important to always keep this on your mind from thevery start Hopefully the following pages will help you to minimize the risks and developways to make your money work for you

You can be sure that if you don't put your money to work someone else will and take theprofit for himself But never think that you can put your money into a so-called risk freeinvestment and forget about it

Some people use high-risk investment options to speculate, or bet, on the success of anunproven business But unless you already have investing knowledge, this isn't a game youshould ever try to play!

If you're tempted to speculate, don't try it without either some years of investing experience

or having successfully weathered a few ups and downs in the market Also, be sure you canafford to lose part of your investment if things don't turn out well Your comfort level withrisk will be an important consideration when selecting investments

One concept that can help minimize your risk is diversifying your investment choices Youshould not "put all your eggs in one basket." It is a poor idea to put all your money into onetype of investment or to invest only in the stock of one company

You should also avoid investing only in stocks within a single sector of industry.Furthermore, use various investing systems and methods and do not concentrate only in onetechnique

Buy Low and Sell High

There is an important financial measure called "opportunity cost." Basically, this means that

if you spend money on something you automatically lose the opportunity to spend it or invest

it on something else Or, as my Grand Dad used to say:

"You can't spend the same money more than once!"

Over time, the stock market has outperformed all other types of investments, includingbonds, bank deposits, government securities and mutual funds

The stock market may not always seem rational, but it's usually right in the long haul

Over the short term, the market moves based on enthusiasm, fear, rumor and news Over thelong term, though, it is mainly earnings and dividends that determine whether a stock's pricewill go up, down or sideways

A good stock may go up even when the market is going down, while a stinker can go downeven when the market is booming

Some days, stock prices make absolute sense Other days, they seem ridiculously expensive

Historically, a well-managed and widely diversified portfolio of correctly selected stocks hasproduced substantial returns with relatively modest risk!

"Buy low and sell high" or, "Buy high and sell higher!"

We all heard these simplistic bits of advice Unfortunately, as market cycles move up anddown, and security prices rise and fall, it's hard to pinpoint the precise time when it's the mostadvantageous for either transaction

One way to weather market cycles more successfully is with disciplined, periodic investing,often termed cost averaging This simply means putting an equal amount of money at regularintervals into one or more securities Periodic investing can be an easy way to build up yourportfolio!

Employ this technique by setting aside a fixed amount of savings every month to invest.When you invest the same amount every time, you buy more shares when the prices are lowand less when the prices rise The result:

You can potentially lower your average cost per share

Investments allowed to grow over time can increase in value surprisingly fast The systematicre-investment of stock dividends can be a painless, automatic way to build up a sizable "nestegg."

The re-investment method creates a really powerful compounding effect on investments This

is reflected in the words of Albert Einstein, who once said that …

"The Eighth wonder of the world is compound interest!”

Deadly Financial Mistakes!

"Intellectuals solve problems Geniuses prevent them!"

Albert Einstein (1879 - 1955)

A few years back, a man lost his entire life savings in less than one month!

The process started one afternoon as this man called for an appointment to see me Severalweeks earlier, he had received a very large amount of money from his late father's will, andhad decided it was now the right time for him to do something with that money

I gave him an appointment on the next day afternoon, but he missed it When I called to findout why, he told me that a stockbroker had called him and then stopped by his office He hadinvested the entire amount of money with this person, a person whom he barely knew

I was stunned! How could anyone make such an impulsive decision with such a large amount

of money? After a pause to collect myself, I told him that since my appointment was free,why didn't he come in first to see me and get a second opinion He replied that he justcouldn't wait and that he had to do something fast!

Unfortunately, the stockbroker put all his money into only one investment In less than amonth the company he invested his money into, experienced severe financial difficulties Helost almost all of his late father's money!

Of course he didn't understand investments, but this was every cent he had! Why would heinvest it suddenly with a person who called him out of the blue? It just didn't make any sense!For weeks afterwards, I wondered how anyone could make such a gigantic mistake I hadseen many investors make a variety of bad judgments, but never one that caused someone tolose such an amount so tragically

I was so obsessed with his mistake that it made me become extraordinarily aware of moneymistakes Eventually, I noticed patterns in these mistakes Many people tended to make acertain type or pattern of mistakes If allowed to go unchecked, they would tend to make thesame type of mistake over and over again

Since the typical family invests only 5% of their income, it seemed more important to concentrate on spending mistakes rather than on investing ones Besides, if you can't avoid spending mistakes, you will not have any money left to make any investment mistakes!

Regardless of the actual number or types of mistakes, the most critical mistake is the very lastone

The one that comes from the final spending decision itself!

It is at this moment that all previous life habits come together to affect the spending decision

If the final spending decision is a mistake, it will always result from any of your pastsubconscious habits

Since most of the people are not consciously aware of their spending mistake patterns, theydon't learn from their mistakes They keep on repeating the same spending mistakes over andover again.

Just becoming aware of their spending mistake patterns can help many people control it Inthis respect, spending personalities are similar to basic personalities Just as a talkative personcan't quietly listen or a shy person can't be more outgoing when the situation warrants it,people can control their "spending personality" by becoming aware of it and consciouslycontrolling it

As the emotions surrounding any given purchase change, spending personalities can change

as well! Let's say that any given person can find buying a new shirt to be a real thrill, butbuying a new car can prove to be a troublesome process In this case, your spendingpersonality might change from Impulsive Buyer (one who buys on a whim) to Passive Buyer(one who procrastinates)

Because the emotions are different in each situation, your spending personality will alwaysprobably be extremely different as well! Spending based on your deeply felt values, ratherthan on every impulsive purchase, can save you a great deal of money over the years

Since only an idiot never learns from his own mistakes and it doesn't take a lot of intelligence

to learn from your own mistakes, therefore, it doesn't also take true genius to learn from otherpeople's mistakes!

Regardless of how much genius it takes, one of the least expensive ways to learn frommistakes is to learn from someone else's!

So my best general mistake avoidance advice would be:

Avoid throwing good money after bad!

Why not resolve that you, too, will “know better” and “do better!”

1 Becoming paralyzed by how much you don't know.

The fact is you can begin investing effectively with only a few basic principles under yourbelt!

2 Putting off financial planning until a crisis occurs.

Deep down, you do know that you've been putting off essential planning Resolve to takeaction now, before any more time goes by Believe it or not, peace of mind feels much betterthan procrastination!

3 Focusing only on the short term.

The amount of time retirees are spending in retirement continues to grow, so the amount ofmoney we'll need to live on continue to increase This knowledge should encourage us towork even harder on investing for the long term

4 Investing only in "safe" choices.

A short-term focus tends to steer us toward such choices as savings accounts, CDs, andmoney market funds, which offer excellent short-term safety but may not keep pace withinflation in the long run Investors should also consider including investments such as stocks

in their portfolio that may offer excellent growth potential

5 Refusing to seek assistance because you're sure you can do it yourself.

Missed investment opportunities can cost you megabucks!

6 Leaving your future financial security up to someone else.

To avoid making this biggest mistake of all, resolve to start every new day by remindingyourself:

"If it's to be, it's up to me!”

On top of this, an investor must also be able to curtail his tendency for over-confidence in awinning streak, as this will put him in a very vulnerable situation to give back what he hadjust made, and, in many cases, even more - all because of the lack of discipline.

Add to this the challenges that come from an investor's social world outside of the markets,and indeed, individual psychology is one aspect of investing that any participant needs tomaster in order to preserve capital and be in the position to beat the markets!

Discipline is not an innate quality

It needs to be, and CAN be cultivated through constant practice!

The Decision is Yours

Investing is a very complicated science, so your success can ultimately come only throughfurther careful study of market principles Try to develop your investing savvy so you don'thave to rely too much on the advice of others …

Who may or may not have your best interests at heart!

You don't have to be an expert in order to invest profitably You don't have to really lovemoney! But, you will pay a high price for neglecting your finances

During my years as a stockbroker I've seen many losers and winners The difference wasknowing the rules of the game and adopting the right strategies to suit individualcircumstances

There are plenty of people ready to give you advice

Bank managers, accountants, financial advisers and etc Listen to them by all means, andread what this book has to offer

But, at the vary end of the day …

The decision and the money will only be yours!

Investing, Human Nature and

the Past 2000 Years

Two thousand years ago the words below were voiced whose truth was kept vivid through thecenturies:

"One generation passeth away, and another generation cometh, but the earth abideth forever Thesun also ariseth, and the sun goeth down, and hasteth to his place where he arose

The wind goeth toward the south, and turneth about unto the north; it whirleth about continually,and the wind returneth again according to his circuits

All the rivers run into the sea; yet the sea is not full; unto the flow from whence the rivers come,thither they return again

The thing that hath been, it is that which shall be; and that which is done is that which shall bedone; and there is new thing under the sun."

The Bible/Ecclesiastes 1:4

For investors, investments and stock markets the meaning of the above is that human nature doesnot change, nor will its pattern ever change

Stock Market and Investing Myths

Stock markets are the most popular markets for speculation, due to their enormous size, liquidityand their tendency to move in strong trends

Presumably, these characteristics would enable investors to have tremendous success However,success sometimes is very limited mainly for the following reasons

Many investors come with false expectations of the profit potential and lack the discipline requiredfor investing and trading

Short term trading is not an amateur's game and is usually not the path for quick riches Becausestocks may seem less familiar, it does not mean that the rules of finance and simple logic aresuspended

One cannot hope to make extraordinary gains without taking extraordinary risks A trading strategythat involves taking a high degree of risk means suffering inconsistent trading performance andoften suffering large losses

Trading in stocks is not easy (if it was, everyone would already be a millionaire), and many traderswith years of experience still incur periodic losses

One must realize that trading takes time to master and there are absolutely no short cuts to this process.

A The Preliminary

Understanding and Controlling Your Finances

Have you ever wondered what it would be like to be able to have complete control over yourfinances?

If you are like most normal people, you have a job

You go to your job every day Every week or two weeks or month you get a paycheck forsome amount

You have taxes

The government, in an effort to make your life easier, lifts something like a third of yourpaycheck without your having to do a thing

You have problems

For example, you get a speeding ticket one-day, and then your insurance goes up Or your carblows a gasket Or you lose your job!

Then you have desires

All humans do and some more than others You might desire new living room furniture, anew TV or stereo, new clothes whatever You may desire all of it all at once andoccasionally you cannot control yourself and one of your desires is filled

Therefore you have debt!

Debt makes up the difference between income and expense For most people day-to-day debtgoes on a credit card and, large items like cars and houses are handled with more formalloans Debt itself is not bad The problem arises when debt accumulates for no apparentreason Problems and desires would push your credit card balance upward each monthbecause there is no other place for the money to come from

Notice what you do not have in the above scenario?

There is no mention of a savings program, nor a retirement plan There is no particular hope

of reaching future financial goals No safety net!

And most importantly …

No peace of mind, no sense of control, no control of your life and your finances.

Let's face it!

Investment planning is not the activity of choice for most individuals If we had our way, thevarious pieces of our financial lives would magically fall into place All of our financialneeds would be met effortlessly without our having to devote even a minute of time toplanning!

Unfortunately, life doesn't work that way Making sense of your finances requires more timeand effort than ever in today's constantly changing economic environment You are likely tohave many different – and sometimes conflicting – financial goals Deciding how to meetthose goals requires careful planning

So, is there a solution to this problem?