was that theywere thinking in terms of price and not in terms of time. If thetime was right to exit gold and silver, then what did it matterif the price was right? Hundreds, if not thousands, of investorsthought if United Airlines had declined from over $100 per sharein 1997 to $20 per share in 2002, that it was dirt cheap. At $10per share it was absurdly cheap. At $5 per share it was a steal. Atunder $3 per share, the company was forced to declare bankruptcy. Price was unimportant—time was the critical factor. Wasthe time right for investing in United Airlines? Clearly it was not!Those who acted on price alone lost money. Those who refusedto buy the stock because the TIME to buy was not right werespared considerable grief and losses.I learned that if my TIMING is right in starting a business,buying a stock, selling a stock, or staying out of a given business,
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then the PRICE was right no matter what it was. What may lookexpensive one day may be seen as very cheap a few days later, ifthe timing of a move is correct. Perhaps the most important lesson you will learn from me is NOT to think in terms of price butrather to think in terms of time and timing. If the time to takea given form of action is right, then the price must be right, nomatter what it may be!
Most Investors Lose Most of the TimeIt’s a simple but powerful fact. It’s a sad but true fact. It’s afact of investment life. The odds are that if you don’t invest yourmoney with a solid plan, you are likely to lose. The odds are thatif you don’t start a new business with a solid plan and a firm direction, you will lose. The odds are that if you try to manageyour own money without knowledge, you will likely lose. It’s thatsimple, and it’s that universal.
To Be Successful You Must Anticipate Thingsbefore They HappenIt’s called planning, insight, foresight, forward-thinking, andgood business. In the stock market, you will need to think aheadand make plans based on your EXPECTATIONS. In business,you will need to do the same. Success in real estate also functions on this simple but powerful rule. Success involves a formula that is based on anticipation of change, preparing for thatchange, and then moving on to the next opportunity once yourexpectations have become realities. A specific model for doingthis will be presented later on.
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Contrary Opinion Is One of theMost Important Tools to SuccessThe contemporary way of saying this is “Think outside thebox.” In other words, you will want to go contrary to the crowdmost of the time. This won’t make you feel too good, and itwon’t rest well with some of your friends, family, or associates. By“contrary opinion,” I mean simply that you must assess the prevailing majority opinion, and you must be willing to think andDO the opposite. When most people are afraid to buy stocks orto begin a certain type of business, then you must seriously consider buying stocks or starting a business.When most people are convinced that things are good, andthat the good times will never end, you must take actions thatwill serve you well when the good times do end. When most people are panicking, you must be calm and collected, taking logicalsteps instead of reacting irrationally. When most people are pessimistic, you want to be an optimist. There are literally hundredsof examples in business where contrary opinion paid big dividends. The most recent example was the much-vaunted, muchfeared “Y2K bug,” which was supposed to bring with it financialchaos, the collapse of the power grid, anarchy, mass confusion,and worse. Some of the most well-known analysts, politicians, andscientists staked their reputations on the belief that cataclysmicevents—socially, politically, economically, and technologically—would happen when the new millennium started. And nothinghappened.We were warned by the prophets of gloom and doom thatbanks might close down, that we might not have electricity, thatwe might not be able to have medical prescriptions filled, andthat food distribution would stop or be curtailed. The Y2K bugwas one of the most obvious examples of how panic can be
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infectious. If you’d like more examples, read McKay’s Extraordinary Popular Delusions and the Madness of Crowds (Xlibris Corp.,30 November 2000).I’ll make it very simple and straightforward for you: Whatmost people think is wrong and when most people are thinkingone way, odds are that events will develop the opposite way. Yes,it will be very difficult for you to be a contrary thinker, but it canyield great rewards.
You Have to Think for YourselfThis seems very obvious, doesn’t it? We all want to believethat we think for ourselves. In truth, we are brainwashed daily bythe media, by newspapers, and by friends, family, and those welove. Does this mean that you should not read newspapers, watchtelevision, or listen to the radio? Should you also disrespect thoseyou love? Not at all! The answer is simple: Develop your ideas independently, evaluating all other ideas and statements withinthe framework of what you believe yourself. It’s easy to be influenced by other people, especially if you love and respect them.The sophisticated, intelligent-looking, smooth-talking anchorperson on business television or the nightly news may appear toknow what he or she is talking about. The odds are that theyknow nothing more than what they’re reading. Their script hasbeen prepared for them; they’re merely reading the words thatother people have written for them. Who are these other people? Do they have hidden agendas? Do they know what they’retalking about? Are they merely reflecting the opinions of others? You’ll find that most of the time their thinking is very standard, very average, and very wrong. So, remember to think foryourself!
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The More Complicated Your Methodology,the Less Likely It Is to WorkDuring my more than 30 years in the investment field, I haveseen literally hundreds, if not thousands, of trading strategies,investment schemes, programs, multilevel marketing programs,Internet sales programs, computer trading programs, real estatemethods, and more. Most of them don’t work. And the onesthat are the most complicated seem to be the least successful. Although it has likely been grossly overused, the “Keep It Simple,Stupid,” or KISS, rule is still one of the best rules you can learn.You don’t need a degree in economics or business to make moneyas an investor. All you need is a plan, some rules, motivation, somemoney, discipline, and consistency.These, then, are the universal truths I discovered during mylengthy search for methods that would make me financially independent. I will elaborate on them throughout the course ofthis book. Rest assured that if you learn them and apply them toany business, investment plan, or trading program, they willserve you well. Ignore them, and you will be destined to learnthe same lessons over and over until you finally get them right!
Many Roads Lead to SuccessThis book is not just about the stock market; it will give youa general formula for making money in any market, whether realestate, rare coins, options, futures, single stock futures, bonds,mutual funds, or other moneymaking ventures. The way I willachieve this goal is by providing you with concepts, structure, examples, and a general model you can follow. The model will serveyou well as long as you use it. It will not serve you, if you try to
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sidestep it or change it. I will also give you specific examples ofhow to put your plan for financial freedom into action.As we move forward and explore the various avenues andmethods by which you can achieve your goals and realize yourdreams, know that the journey ahead will not be an easy one.Success will not “fall out of a magazine.” It will take work and effort, but vast rewards await you. In fact, you may even enjoy thechallenge. Remember that attaining and maintaining success require a diversified approach. Keep the big picture in mind asyou specialize in one area or in one type of investment, becausethere are other aspects of investing and financial planning thatwill need your attention as well. All too often, individuals focuson a single aspect of investing and make good money, but fail toplan ahead. The result is that they lose money either to taxesand inflation or in other investments they should not have ventured into without full information and knowledge. In short,you have to learn how to make money, how to keep it, how tomake it grow, how to protect it, and how to spend it wisely.
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C H A P T E R
T W O
BEGINNINGS, DANGERS,AND DIRECTIONS
No matter how you look at it, investing always involves somedegree of risk or danger. You can’t get ahead unless you’re willing to take some risk. There are many forms of risk, however.You can risk your money or your time. You can risk your physical and mental health. You can risk your relationships. Althoughmany people may believe that the only risk in investing ismoney, I can tell you from many years of experience that theyare wrong. Investing carries many risks. These risks increase as afunction of who you are, how you invest, how you view your investments, and how you handle your life in general. It is not possible to separate the investment from the investor. Two investorscan have the same ideas about the same investments, and theycan achieve distinctly different results depending on how theyput their plans into action. Two people looking at the same information will not necessarily reach the same conclusions. That’s whythere are buyers and sellers in any market. A piece of property19
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that may seem expensive to one person may be an amazing bargain to another. Where opportunities abound for some people,only risk of loss exists for others.The first thing you must know about making your moneygrow and becoming financially independent is that there is andwill always be some degree of risk. Yes, you can lose money. Butwhat will it cost you to not take some risk? Will stress force youto take losses in another way? Are you willing to accept the physical stress of working several jobs and long hours to make endsmeet? Are you willing to accept the stress that long hours willexact on your family relationships? Are you willing to accept theemotional stress, anxiety, and pressure that occur when youcan’t pay the rent on time? All of these are forms of losses. Youcan either accept these losses, or you can take the risk of a financial loss as a means of avoiding other types of losses. The decision is yours. Either you take one type of risk to avoid another,or you accept the losses that may occur as a result of having insufficient money to support yourself and your family.
OF COURSE YOU WANT TO TAKEIMMEDIATE ACTION!Perhaps I struck a chord in your thinking, and you spentsome time considering your situation. After consideration, haveyou decided that there is some merit to my view? Have you decided that you want to become financially independent? MaybeI convinced you that you can indeed do it yourself, that youdon’t need an education in finance or a broker to advise you. Inshort, are you willing to take the chance?If you have decided to take action, then stop for a momentand think. Some people want to act immediately; in fact, they
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want to act too quickly. Learning how to make your money growis not like learning to play a game of Monopoly. Learning howto make your money grow cannot be achieved by sitting in aone-hour class or seminar on investing. It’s not as simple as following the advice in a newsletter or taking a stock tip from afriend or relative. But it is not nearly as complicated as youmight think. One thing you will need to remember: Take yourtime. Don’t rush into investing simply because you feel financialpressure. I have observed that many people do more researchwhen buying a television than they do making an investment.Moving too quickly can cause mistakes, and investment mistakeswill cost you money.
THE DANGERS OF MOVINGTOO SLOWLYThere is also danger in taking too much time. After all, booklearning can only take you so far; you’ll have to get your feet wetsooner or later. Sooner or later you will have to invest some realmoney, even if it’s only a few hundred dollars. You will have toput your knowledge to work eventually. Unfortunately, manywould-be investors freeze up when it comes time to make thefateful decision. They believe that they need more information,that they have not learned enough. They hide behind their feelings of ignorance in order to avoid taking the leap. The fact isthat they are afraid to lose money, and they believe the best wayto avoid losing money is to be absolutely certain of their decision. Although it’s a good idea to take your time, it’s a bad ideato take too much time. Don’t rush into an investment, but don’tbecome an eternal student, either.
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DO IT ALONE OR GET A PARTNER?Now you must make yet another decision before you begin toinvest your money. You must decide whether you will learn thebusiness of investing on your own or with a partner. There are goodpoints and bad points about each of these avenues. I will examinethese more fully in Chapter 9, but for now consider these points:
Working with a partner allows you to share in your enthusiasm.

A partner can help you remain motivated.

Working with a partner can be beneficial, because you canpool your financial resources.

Your decisions can be double-checked if you have a partner.

A partner can provide meaningful input about things youmay not have seen.

A partner can help you maintain discipline.
On the other hand, there can be a downside to working witha partner. Consider these potential limitations of working with apartner:
You may have a personality conflict or clash with a partner.

Your own good judgment could be adversely affected byworking with a partner.

You may end up quarreling with your partner about profits and/or losses.

Sometimes, opinions can become infectious, particularlyif your partner is highly persuasive. If his or her ideas or
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23
analyses of the facts are wrong, you may get fooled intogoing along with him or her and lose money as well.Your partner need not be a business associate or a friend.You can embark on your investment plan with a spouse or evena close friend. Remember, however, that sometimes being tooinvolved with your partner outside your investment relationshipcan lead to problems. Some of these are discussed in Chapter 3.
A CHECKLIST FOR SUCCESSFUL PREPARATIONI have spent considerable time in this chapter discussing theimportance of effective and thorough preparation. I have givenyou some ideas about directions to take, as well as which assetsand possible liabilities of the numerous alternatives are availableto you as an investor. Here is a ten-item checklist that may helpyou in the planning stages. I suggest that you consider thesepoints carefully within the framework of who you are and whatyou want to accomplish as an investor.
1. Are You Willing to Make the Commitment?This is the single most important point on my list. If youcan’t make the commitment to begin your plan and, most important, to stay with it for at least several years, then you may aswell take your money and gamble with it. Odds are that youwon’t be successful as an investor other than by pure luck. Youwill need to make money the “good old-fashioned way.” You’llhave to earn it. The good news is threefold: if you make thecommitment and keep it, you won’t have to work hard, the workwill be enjoyable, and your odds of success will be significant.
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2. Is the Money You Plan to Invest Risk Capital orVital to Your Financial Survival?You can’t succeed if you’re playing with “scared money”; thatis, money you are afraid to lose or may need to make a car payment or pay the rent. Although your goal as an investor is tomake your money grow as strongly and as quickly as possible,there will always be the risk of loss. Unless you can accept thisfact, your probability of success will be low indeed. Simply stated:The money you have allocated to investing is not to be used forany other purpose, until you have achieved a reasonable degreeof success. If you can’t afford to play the game, you owe it to yourself to avoid becoming involved in the venture! Even if you canonly afford $25 per month, you can become an investor. Yourprogress will be slower than if you start with more money, butthe important thing is just to begin.
3. Determine Where You Stand in Terms ofYour Individual Needs and GoalsThe right investments for a retired automobile worker maynot be the right investments for a 35-year-old surgeon. The rightinvestments for a college student who has a part-time job maynot be the right investments for a middle-aged housewife whoruns a small business part-time out of her home. The right investments for someone who earns over $500,000 per year maynot be the right investments for an individual whose income isin the $100,000-per-year range. Because everyone has differentexperiences, risk tolerance, available investment capital, familysituations, tax considerations, obligations, and temperaments,what constitutes an appropriate investment plan will vary considerably from one individual to the next. No one book, course,
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25
or seminar can give you everything you need. However, if youstudy the general models and techniques presented here, you willlikely fare well no matter what specific investments you makewithin the limits and needs of your situation. Knowing whereyou stand, what you need, and how you plan to get there is ofprimary importance. This book provides numerous suggestionsand directions for accomplishing this goal.
4. Do You Have the Time to Follow Throughon Your Commitment?People are so busy these days. They rush to work and rushhome. They run to catch the train, eat lunch quickly—often attheir desk while working—and rush from the office or the assembly line to the gym. They hurry to the supermarket and thenhome to throw something together for dinner. They carpool forthe kids and take them to after-school activities, overnights withtheir friends, Boy Scouts, Girl Scouts, school choir, karate, andeven Sunday school. We argue—rightfully—that we need moretime to enjoy life, to enjoy the fruits of our labors, to go fishingor skiing, or to take a long cruise. When we add having to spendtime investing our money, it just doesn’t seem fair or right. Afterall, we work so hard to get ahead. We give so much to our children and our jobs and families.Why should we have to add yet another significant responsibility to our list of chores? The simple answer to this reasonableand perennial question is: There is time, and everyone can affordto set aside several hours a week to plan for his or her future.Time must be budgeted, and priorities need to be established. Iam a firm believer in the fact that children, as much as we maylove them, cannot take all of our time. I have seen too many people give too much and then become bitter about not having
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enough time for themselves. I have been guilty of doing so myself. Remember that without proper planning and investing,you may be limiting the ability of your children to attend thecollege or professional school of their choice. When you planand implement your investments, you’re doing so not only foryour retirement but also for your children’s future.If you are single and don’t have children, then you may needto cut back a bit on your social life if you want to ensure a financially secure future for yourself. No matter what your situationor position in life, you can find the time to plan your investments. As in the case of having sufficient investment capital,having the time can be adjusted to your needs. You say you don’thave two hours a week—no problem. How about one hour aweek? Or 30 minutes? If you can’t spend a few hours a week,then go more slowly and spend 30 minutes a week. If you can’tfind 15 minutes a week to do your homework on investing, thendon’t even bother reading the rest of this book. That’s the reality of the situation!
5. Be Consistent, Organized, and Thoroughin All You DoPerhaps you are a disorganized person, as I am. Perhaps yourdesk is piled high with papers, notes, books, and mail. Maybeyou have not mastered the skills of organization and followthrough. If you believe, as I do, that disorganization will limit oreven prevent you from being successful, then you will have theincentive to make changes. Note that I am not suggesting a complete change in your life. You can continue to be a disorganized,messy person in all else you do, but when it comes to investing,you will need to change. And you’ll need to change soonerrather than later.
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If there is any one aspect of investing that can be facilitatedwith the assistance of a partner, it is the area of organization. Ifyou don’t have what it takes to be consistent and organized, thenI urge you to find a partner who possesses these skills. As youcontinue to read this book and become more experienced as aninvestor, you will appreciate more fully the benefits of being organized. If you decide to work with a partner, then make certainthat you choose your partner carefully and with forethought.Don’t be afraid to interview potential partners and set specificground rules before you get started, in order to make certainthat he or she possesses the skills that will complement yours.
6. Out with the Old and in with the NewTo a given extent, most of us are victims of the traditional approach to investing. In other words, we have been indoctrinatedto view investing in a particular way. The usual approach to investing is perpetuated by economics courses in high school andcollege, by popular books, and by financial advisors and stockbrokers. We have been told that we need to follow the timetested principles of investing. Many of these principles are—inmy view—outdated ideas are no longer applicable or effective intoday’s investment environment. For example, investors havebeen brainwashed to believe that in order to make money instocks, they need to know what a company does.You need to know the market for its products, its management, its financial history and stability, its earnings, its projectedearnings, and much more. You need to know the economicoutlook, the probable direction of interest rates, the potentialeffect of domestic and international politics, the degree of professional buying or selling in the stocks you want to buy, andmuch more. In short, we have been led to believe that the only
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way to make money in stocks—or for that matter, in real estate—is by becoming a financial expert.This myth has, I believe, been perpetuated by a financial community that seeks to make investors dependent on the advice oftheir brokers. Whether in the real estate market, stocks, mutualfunds, futures, or options, we have been led to believe that weneed a good broker in order to make money. I suggest that thisis a false assumption and that, in fact, depending on a broker foradvice can, in many cases, lead you to losses rather than profits.The fact is that there are very few brokers in any field whoseselections and recommendations have a lengthy and profitabletrack record. And these individuals are so good at what they dothat they accept only the largest clients who can make their efforts worthwhile financially. In fact, some of the most successfulinvestors do not depend on brokers for advice. They have become their own experts. Before you accept the traditional ideas,ask yourself the following questions:
Why do so many people still lose money following the adviceof brokers who are touted as being “good” at what they do?

Why do mutual funds that are managed by individual experts or teams of experts still decline in value when thestock market goes down? Isn’t it fair to ask why these expertscannot minimize declines and still beat the overall market?

Why have so many “top” analysts lost their jobs or falleninto disrepute for taking money to recommend stocksthat they knew were likely to go bankrupt?

Why have various agencies of the U.S. government finedmajor brokerage houses for having a conflict of interestwherein they recommended worthless stocks in order tosell them to unsuspecting investors?
BEGINNINGS, DANGERS, AND DIRECTIONS
29
These are only some of the limitations to consider about thetraditional view and methods of investing. The methods you willlearn in this book will help you become an independent investor, which will help you avoid dependence on brokers, analysts,and advisors.
7. Be Prepared to Play Your Own GameAll too often your plans to become an independent investorand increase your wealth will be thwarted by those around you.I am speaking specifically of family and “friends.” People tend toget jealous, even over the smallest things. The fact that you areforging ahead, taking charge, and controlling your financial future will cause some of your friends and family to be envious.They may try to discourage you from investing. They may attemptto dissuade you by saying that your efforts will amount to nothing but losses. Don’t listen to them! In fact, I urge you to makeyour investment plans without telling friends or family (otherthan your spouse), because odds are that few people will be supportive. It is best to play your own game and decide what typesof investing you want to do. Gather the knowledge you will needand then begin your venture (adventure) without announcing,discussing, or asking permission of friends or family.
8. Don’t Fool Yourself into Thinking You NeedExpensive Computers or ProgramsIf you allow yourself to believe that an expensive computerand the latest programs are needed in order to succeed as an investor, then you are dead wrong! Here is yet another example ofhow the average investor has been tricked into believing what
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the professional community wants to sell to investors. The simple facts are as follows:
A considerable amount of quality investment informationis available via the Internet free of charge. Yes, you will needa computer to access the Internet information, but youcan do that with the most basic of computers or an Internet café.

An expensive computer, or for that matter, any type ofcomputer, will not necessarily help you make money if youcannot use it properly, and if you don’t have the right programs. Even if you do have the right computer and theright programs, there is no guarantee you will do betterthan if you did all of your work manually without tradingor investing software.

You don’t need a broker to get stock prices. You don’t needa broker in order to find real estate. And you don’t evenneed a broker to invest in stock programs called dividendreinvestment programs, or DRIPs. You can buy shares ina company directly from the company itself, bypassingthe broker entirely without paying a penny in brokeragecommissions.
9. Don’t Feel Pressured at Any Time, for Any ReasonIf you allow yourself to be pressured into buying or sellingstocks, options, futures, real estate, coins, or any other type ofinvestment, then you are likely making the wrong decision. Youneed to act slowly, diligently with focus and with purpose. If youfeel a significant urgency to make an investment, then you arelikely being influenced by someone else, either a friend or a bro-
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31
ker, or by something you have heard on the radio, read in thenewspaper, or seen on television. There are thousands of stocks,millions of properties, and tens of thousands of business opportunities, none of which will work for you if you don’t take the timeto study, analyze, and act. Such decisions cannot be made quicklyuntil you have experience and understanding. If you feel pressure to invest, even after reading this book, then you are likelyheaded for disaster. My warning holds true for any investment,at any time, even after you have had significant experience.
10. Be Prepared to DiversifyAlthough you can seek to become an expert in one very narrow area of investing, you are better off if you seek to diversifyyour knowledge and investments into several different areas.Putting all your eggs into one basket will serve you well as longas that one area is performing well. However, if this one area begins to falter, then you will be left out in the cold without a fallback position. Diversification of investments and assets will bediscussed in Chapters 5, 9, and 10.
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C H A P T E R
T H R E E
MARRIAGE, MONEY,AND FAMILY
By now, you’re hopefully chomping at the bit to learn some ofthe investment techniques to which I alluded in Chapters 1 and 2.I ask you to be patient, so that we can take care of first things first.If you’re a single person, you can skip this chapter for now, unless you have imminent marriage plans. If you’re married, thenI suggest you read this chapter before you begin your investmentplans or, at the very minimum, make your investment plans withthis chapter in mind.
INVESTING AND MARRIAGE ISSUESCan marriage hurt or help your financial situation? Thischapter will give you some straight talk about the pitfalls of poorplanning and preparation prior to marriage, as well as some details on how to improve your finances once you’re married. This33
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chapter will tell you how to approach the financial and legal sidesof marriage from a practical and profit-oriented perspective. Ifyou fail to adequately prepare yourself for the challenges andopportunities that marriage can provide, you may well fall victim to its limitations on your success. The power of a two-incomefamily can be harnessed to produce very large financial gains, orit can be a drag on your path to success and wealth as well asearly retirement. There are actions you must take either beforeyou make those wedding vows or shortly afterward. If you’re already married, then fear not—it’s not too late!
HARNESSING THE SYNERGISMOF A TWO-INCOME FAMILYThere is no doubt that the two-income family clearly is anadvantage, if you learn to use it properly when you make yourinvestments. I strongly suggest you consider one of the incomesfor purposes of paying bills, rent, food, and other expenses, andthe other income for investing. Naturally, if the two incomes arenecessary in order to take care of bills and living expenses, thenconsider a portion of the second income for investment purposes. As a rule of thumb, I would suggest approximately 25 percent as a minimum for investing. Realistically, this may not bepossible for you. If not, you will need to begin on a much smallerscale. See Chapter 9 for details. Clearly, the more you can investfrom a second income, the faster you will be able to achieve financial independence. Naturally, if you are a “DINK” (dual income no kids), you will have more investment capital. I cannotstress too strongly the importance of beginning your investmentprogram before you get married and no later than the first yearof your marriage, when you may have two incomes and no children. You may even want to consider delaying parenthood until
M A R R I A G E , M O N E Y, A N D FA M I LY
35
you have built a solid investment foundation with the assistanceof a dual income.
LIFE INSURANCE ON BOTH PARTNERS:Term, Convertible Term, or OtherThe issue of life insurance is a touchy but necessary one.There are those who claim that life insurance is not necessary ifyou’re a good investor. Of course, there are arguments both infavor of and opposed to this view. There are a number of different types of insurance that cover the spectrum from investmentgrade insurance, or whole life insurance, to term insurance onthe other extreme. The investment type of whole life insuranceworks on a simple concept. You pay premiums either monthly orquarterly, and if you die your spouse collects, or vice versa. Theamount of the premium is a function of your age, health, andthe size of the policy you buy. There are various formulas bywhich you can compute how much ins