are different from traders by a function of the time frame in whichthey conduct their business. The good news about this approach is that it proceeds slowly and steadily—and that’salso the bad news. By this, I mean that it will take a longtime before Larry and Ellen can build a reasonably large
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nest egg. And in the interim, their immediate financialcrisis will not ease up at all. What they need is immediaterelief—quick action and quicker results.The situation I have just described is not unique. There aremillions of individuals and families who struggle daily to makeends meet. The paradox of this situation is that there are moreopportunities to acquire wealth today than ever before. Marketsand business opportunities exist throughout the world and areoften as close as your computer. The sad news is that the studentwho graduates college with a bachelor’s degree will rarely makeenough money to support an apartment, a car, car insurance,and a little money for entertainment and travel, let alone longterm investing or trading.
MANY INVESTORS HAVE BEEN LOSERSIf you’re like most investors, you’re either losing moneyor you’re not making nearly as much as you should or couldbe making. Why? Because you’re probably using the wrongmethods, talking to the wrong people, listening to the wrong advice, or making the wrong decisions. The sad truth is that investors lose money not because they are ignorant but becausethey lack a plan and self-discipline. Here are some of their shortcomings. Do any of these sound familiar? Are they part of yourbehavior?
Too little capital and too big goals. Most investors begin with toolittle capital and goals that are too ambitious. We have beentold to aim high in order to achieve lofty goals, and this isindeed true. However, aiming high without the proper“ammunition” is an invitation for failure. Being realistic is
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a virtue when it comes to making your money grow. Thereis nothing wrong with a good sense of optimism, but it mustbe realistically tempered optimism. By the time you aredone with this book, you will understand exactly what Imean by these comments.
Failure to accept losses. Ego is a powerful force that can workfor or against individuals. Too many investors fail to taketheir losses when they have made a bad investment. Theyride their losses for many months or even years. Theyoften get out of their losing investments or trades whenthe market is bottoming, but only after sustaining lossesfor far too long.

Buying stocks because they are “cheap.” This is yet another ofthe many blunders investors make. They incorrectly reason that buying a stock is not much different than buyingreal estate or a quality automobile. If a good home wasselling for $300,000 last year and that same home is sellingat $200,000 this year, and if there is nothing structurally orenvironmentally wrong with the home, odds are that it isindeed a good bargain. But there could be other problemsthat are not known to the buyer. There may be a new highway or airport construction project that will take over thearea. Or there may be a street gang operating close by. Insuch cases, the investor might back away from what appearsto be a bargain. The same holds true for stocks. If the stockof a major computer manufacturer had been trading at$65 per share and is now at $14 per share, there is a goodreason for it. The mere fact that a stock was “worth” $100a share three years ago does not mean that at $5 per sharetoday it is worth anything. Remember that stocks are ultimately only worth the paper they are printed on. Moreabout this in Chapters 8, 9, and 10.
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Adding to a loss. Many investors not only buy and hold stocks,even though they decline persistently, but they also compound the problem by adding to their losing investments.They reason that if the stock is a good buy at $40 per share,then it must be an even better bargain at $30 per shareand a fantastic bargain at $10 per share. This approach iscalled dollar cost averaging (DCA). It will be discussed later.In and of itself, DCA is not a bad strategy, if you follow certain rules and if you have a large amount of money to invest. But for the new investor or trader, this is NOT a goodstrategy. One of the worst mistakes that investors make isto ride losses. Riding losses is a psychological problem thatafflicts all investors and traders at one time or another.That’s the bad news. The good news is that this, and otherproblems, can be overcome. My next point covers thisproblem in greater detail.

Emotional reactions are yet another problem. The fact is that investors make decisions based on emotion and not on facts.Sadly, many investors want to sell when conditions appearto be the worst and buy when things appear to be the best.This happens because they are victims of their own insecurities. But what’s worse is that they become victims ofthe news, the television business reports, brokerage houseopinions, and world events. Joe Granville, the legendarystock market advisor, wisely stated that if something in themarkets is obvious, then “it must obviously be wrong.”Many times what may be apparent in the markets is notreal. This problem alone is one of the most serious transgressions that the average investor commits. Yet, this difficulty is also surmountable.

Buying on tips and rumors. Still another blunder that manyinvestors make is to trade based on tips and rumors as
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opposed to solid strategies. They assume that if they got agreat stock tip from their brother-in-law who has a clientthat knows someone who knows the president of a biotechnology firm that is going to come out with a new drugfor treating cancer, that there must be money to be madein that stock. This is perhaps one of the most serious blunders that an investor can commit. And yet it happens everyday to thousands if not millions of investors. No matterhow disciplined you may be, there is always the temptation that a big winning investment will “fall in your laps.”And though it may true that you are immune from suchrash decisions most of the time, the one or two times thatyou fall victim to such panderings will cost you dearly. Andthis brings me to my next point: greed.
Greed. Greed is another terrible emotion that causes investors to lose money. All too often, they believe that the stocksthey own will become the biggest winners of the decade.When they are making money in a stock, they tend to believe that the gravy train will never end. They lose sight ofreality, and then, when the stock begins to go down, theyhold on in the belief that it will go back up again.

The need to hit home runs. Many investors are in love withthe fantasy that the stocks they buy will produce immenseprofits. The simple truth about investing and short-termtrading is that you can achieve greater success hitting basehits and doubles than if you attempt to make a home runevery time. Success is more a question of consistency thanit is a question of infrequent, large moves. Some of themost successful investors have not made their big “killing”on one stock, but rather they have been consistent in theirperformance, making small but steady profits with a highlevel of accuracy. You will be far better off with small prof-
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its and high accuracy than with large profits and lowaccuracy.
Trying to do too much. You are far better off being a specialist in certain stocks or in certain types of investing thanyou are in attempting to be an expert at everything. Let’sface it, there are hundreds of possibilities in the financialmarkets. You don’t have the time or the expertise to dothem all. Nor do you have the money to do it all! A simple, but highly recommended, rule of thumb is to findwhat works best for you and do it consistently. That’s oneof the keys to success! I advise you to focus on your investments rather than try to do too many things at onetime. If you split your energies and your money into toomany sectors, you will become a jack-of-all-trades but master of none.

Lack of organization. Sadly, too many investors are disorganized. They fail to keep their market homework up-todate, forget about or avoid tracking their investments,forget to put orders in when required to do so, and keepterrible records. Although none of these may seem especially important in and of themselves, when several suchblunders are combined, the net result can be costly. Disorganization can cause investors to miss opportunities andturn winning trades into losers. Clearly, this does not contribute to the goal of making money. Many tools are available to avoid the problems that disorganization can create,but be sure to use them to your advantage. There are fewthings that will cause you as much distress as losing moneydue to disorganization or errors of oversight.
These are some of the reasons that investors tend to losemoney in the stock market. Can losing behavior be reversed?
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Can the average person learn how to invest and make money inthe stock market? The answer is an emphatic “YES”! This bookwill teach you some of the strategies you’ll need to know, butmore than that, it will acquaint you with other strategies andprofit-making opportunities to help you no matter what yourage or how much money you have to invest.
VICTIMS OF THE SYSTEMLet’s face it, we’re all victims of the financial monopoly. Thebig-shot money managers, real estate moguls, franchise marketers,bankers, and brokerage firms have been shaping and moldingour minds for years. They’ve filled our heads with the information they want us to believe. They groom us and fatten us up forthe kill, like cattle in a feedlot. There’s no conspiracy here, justthe old boys’ network in the world of investing. Never has thisbeen as evident as it is today in the early 2000s. Brokerage houses,financial analysts, and investment advisors have been implicatedin all sorts of tricks and schemes designed to separate the trading public from its money. A number of brokerage houses andsome of their top analysts have knowingly touted worthless stocks,given certain clients favorable treatment, maintained high ratingson stocks that they knew were essentially worthless, and generally misled the public. It’s no wonder that investors have lostconfidence in the system.Rest assured that such tricks are not unique to the stock andfutures markets. No matter what the area of financial focus maybe, there is an insiders’ network that benefits from the best deals.In order for you, the average individual, to make money in thestock market, real estate market, franchise market, futures market, or any other area, you need to learn how to think for yourself, act on your own, and avoid depending on anyone else.
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If you have the patience and the time, this book will show youhow to work outside the old boys’ club to make good profits without becoming a victim of their schemes and games. The rulesyou will learn beginning in this chapter will be highly valuableto you no matter which areas you decide to focus on.
A FEW GENERAL RULES TO GET YOU STARTEDClearly, you have many choices at your disposal. As I notedin the preceding pages, you can spend your time and money onmany different schemes. In the long run, you will likely find thatmost of these will be either out-and-out scams, difficult if notimpossible to apply, or just plain useless. You will have wastedtime, effort, and money. And to make things worse, you’ll probably feel like you’ve been taken advantage of—and you verylikely have been. Adding insult to injury, you may be contactedagain by these marketing firms and may fall victim to yet anotherscheme designed to separate you from your money. Finally, you’llbe added to the sucker list, and before you know it, you’ll be getting all types of solicitations in the mail, e-mail, and telephone.If you are truly interested in learning a skill that will serveyou well, not only in your financial life and future but also in yourpersonal life, then pay attention to what I have to say. In the finalanalysis, even after having learned the tools in this book, yoursuccess will depend on three skills you will need to possess if youtruly want to make big bucks. These skills are:1. Persistence. Although I will expound on this at length later,suffice it to say that you will need to come back and tryagain after every failure. The methods I will teach you arenot perfect; they do not work 100 percent of the time.But after a few successive failures, the next attempt will
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likely work. If you give up after a few defeats, you won’t bearound for the sweet victory and the money that comeswith it. Computer testing and experience with investmentresults clearly indicate that even the most effective investment approaches lose money at least 30 percent of thetime. In fact, some methods that are highly successful inthe long run frequently have even lower levels of accuracy. Finally, some of the most effective investment strategies are incorrect as many as seven times in a row. Whatdoes that tell us? Simply, we need to be patient, persistent, and willing to accept a series of losses if we are goingto be successful in the long run.2. Self-discipline. The ability to persist is a variation on thetheme of self-discipline. I have stated, perhaps even overstated, the importance of discipline on many occasionsthroughout this book. Even if you only have one hour aweek to spend on your financial future (because you’reworking so hard at other jobs to pay the bills), you’ll haveto spend that one hour religiously, with self-discipline,in order to get the results you want. In addition, you’llneed courage, strength, and guts to take the necessaryactions at the required times. The best-planned strategyis totally useless unless you have the courage and selfdiscipline to put it into action and follow it through to itsconclusion.3. Self-control. Self-control is, in actuality, a form of selfdiscipline. Self-control will be your greatest ally on theroad to profitable investing. Without the ability to controlyour emotions and avoid being a victim of the media, thenews, your friends’ opinions, or your own insecurity, youwill need to develop and put into action your self-control.At times, you will have to ignore what may appear to be
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obvious and take affirmative action in a financially riskyplan. Some of your best money will likely be made whenyou feel the most fear and pessimism. Some of your worstlosses will occur when you are confident, self-assured, andconvinced that your strategy cannot fail.Armed with these three skills (which you will need to developas fully as possible), you will be more certain of success in yourventures and adventures. In addition to the above, here is a preliminary list of things to do in order to facilitate your journey onthe road to success. Although it is certainly possible to make bigmoney without following these rules, the odds will be greatly inyour favor if you take the actions I have listed below. You mightfind it helpful to make a copy of this list and check off those thatyou already do and those that you need to put into action.One last thing before I give you the list: Some of what I suggest will not be palatable to you, your family, or your friends. Youmay find that people are not pleased with your new attitude andyour new way of doing things. If that’s the case, be polite and tellthem you’ve turned over a new leaf. There is no need to flauntyour new wisdom and methods; that will only alienate them andmake them insecure. Remember above all that they aren’t theone who will pay your bills, put your children through college,or buy you that big house, fast car, or fancy boat you’ve beencraving. The game of making money is often a solitary adventure. You will also find that when success comes to you, it will bemuch easier to discern friend and foe. Don’t be too surprised ifpeople that you thought were your friends turn on you becauseof their jealousies. And don’t be too surprised if people who appeared to be either casual acquaintances or seemingly disinterested suddenly take an interest in you. When you develop theskills I am about to teach you, your personal life and many ofyour attitudes may change.
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Here is my list of suggestions. Take your time, study them,and then put them into action. You may not agree with all of mysuggestions but, at the very minimum, give them the attentionand consideration they deserve. They are based on my more than30 years of experience, during which I have had my successesand my failures. I’ve learned more from my failures than I havefrom my successes. If you pay attention to me, you will decreaseyour learning time significantly. Finally, remember that if youdon’t “get” all of this the first time, I’ll be expanding on theseideas throughout the course of this book.Throw out those worthless stock reports. When it comes toquality investment advice, you often get what you pay for. Someof the best advice from top-notch analysts with superb performance records is either unavailable to the average investor of limited funds or too expensive to justify a small investment portfolio.On the other hand, literally hundreds of investment newslettersoffer free advice with the promise (and at times what appears tobe a guarantee) that you will make money following their advice.In addition, if you have managed to get your name on Internet mailing lists or fax lists (which includes most of us thesedays), you will likely be bombarded daily with e-mail. Many toutstock services and even individual stocks. If you fall victim tothese promotions, you will likely lose money in the long run. Thesimple fact is that most of this advice is totally worthless.If you’re already a stock market investor, then do yourself abig favor and trash those worthless stock reports. If you’re a newinvestor, don’t even open those seductive e-mails. Generally, theywill be wrong as often as they are right. The ultimate goal of suchreports is to generate a commission, support a stock in which thewriter or writers have a vested interest, or promote a stock as partof a paid public relations campaign. Typically, such reports willnot tell you when to buy or sell; they merely tell you to buy. They
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also don’t assist you with timing. Timing is a key element in the equation for success. Once you have decided what to buy or sell, youwill need to know when to buy or sell. This book will teach youhow to time your investments. So, do yourself a big favor anddon’t even look at those reports or you may get tempted intowhat will more often than not turn out to be a costly blunder.If you are not already an investor, don’t make the mistake ofreading these reports. The reports I’m referring to, of course, areany of the free opinions and recommendations offered by brokerage houses, Web sites, or e-mail that flows endlessly into yourmailbox.Ignore analyst opinions. Analysts are employed by brokerage houses. Their job is to analyze stocks and advise brokeragehouse clients and/or the public whether given stocks are worthbuying, selling, or holding. Although many analysts are competent, honest, and care about investors, the sad truth is that ahandful of dishonest analysts have placed the entire professionand procedure of analyst recommendations in a bad light. Thecontinued buy recommendations in worthless stocks by analystsfrom the late 1990s until early 2002, as these stocks literallycrashed, is a glaring example of what can happen if investorsallow themselves to be manipulated by those who purport to beprofessionals in their areas of expertise. Although most brokerage houses have taken steps to separate their research departments from brokerage commission and sales departments, thetruth is that any analyst on the payroll of a brokerage firm has avested interest and can therefore be influenced by the desiresand directions of the firm. I do not believe that any measuresshort of complete independence of market analysts will servethe purpose of creating the needed credibility.I suggest that unless an analyst is totally independent and hasa lengthy track record of successful stock picks and honesty, you
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ignore his or her opinions. Be especially suspicious of guest experts who give their opinions on business television. Most ofthese individuals are employees of, directors of, shareholders in,or otherwise associated with firms that stand to benefit in oneway or another from their recommendations and/or televisionappearances. The popular CNBC cable television business station and many others have instituted a policy of asking guestswhether they own any of the stocks they are recommending ordiscussing and whether their firm owns any of the stocks. Suchquestions may give a false sense of security to the public, because they do not sufficiently address the basic issues:
Are they being paid to tout the stocks?

Does anyone in their families stand to benefit from theirrecommendations?

Do they intend to buy or sell the stocks they have discussed?

Do they have a reciprocal arrangement with other firmsor individuals to recommend stocks in which they have avested interest?
These are more specific and useful questions, ones that youwill not see asked or answered on any of the business televisionshows. Regardless of disclosures, it is unlikely you will be able tofully trust most of the opinions you get on television from eitheranalysts or advisors. The sad fact is that the vast majority of themhave poor track records. Their opinions are usually worthless.Recently, commentators on many business television programs have become market experts. Several have written investment books and regularly tout them on the air to a ready-madeaudience. Sadly, at least one of these books has been roundly critiqued as generally worthless and even inaccurate. The investingpublic seems to believe that just because someone on television
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is giving advice it is worthwhile. Don’t get me wrong. Some of theguests and even some of the commentators on CNBC, Bloomberg, and CNN are quite accomplished and competent. However,as a new investor, you will not know this and may take seriouslyinvestment advice from those who are not skilled or sufficientlyexperienced.Don’t bother with the ultimate franchise opportunity. I indicated earlier that although you can make money in venturesother than the stock market, odds are you’ll need considerableworking capital to take advantage of the good ones, and you’llneed to put a great deal of effort into the program. Unless youalready have a good nest egg to begin with, you won’t be able to get intothe good franchise opportunities. If you’re looking for a franchiseopportunity, it would be best to take your time, accumulatemoney from your other investments, and then diversify into apotentially profitable franchise.Forget about making a killing in special-events T-shirts. Thiswarning is just another way of saying what I’ve said before: Anyof the “get rich quick on a shoestring budget” schemes has a lowprobability of success. I am not saying that you won’t do wellwith a novel business idea, but the problem with such ideas isthat they take time and money to develop and many more failthan succeed. Furthermore, if you’ve developed a clever idea, theodds are high that the idea will be copied or stolen from you unless it is capable of being fully protected by copyright or patent.Stop listening to Uncle Joe. Uncle Joe is my symbol for thewell-intentioned tipster who thinks he or she is doing you a favorby telling you what stocks to buy. My advice is to tune out all thetips, no matter who has given them to you. In all probability, thetips you get will come from people who know less about stocks
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than you do. They are laboring under the misconception thatmaking money in the stock market is the result of tips and insideinformation. If they indeed knew anything about the markets,they wouldn’t be passing on tips or rumors, and they certainlywouldn’t be telling other people their supposedly valuable information. Be especially suspicious of family members who tellyou that they “know someone who knows someone else who isthe cousin of a friend’s wife who is closely connected to the president of a company that has a new product that is top secret.”Those kinds of tips are invitations to losing money and rarelywork out. Yet, it is human nature to give and take stock tips. Youmay need to learn a few costly lessons before you believe me.Rely only on yourself and the resources you have identified ascredible. Best of all, these fantastic resources won’t cost you apenny! The best way for you to make money in the stock marketis to rely on your own good efforts and the application of thetools you will learn in this book. The concept is a simple oneindeed: If you depend on yourself, then you will have no one tothank for your successes and no one to blame for your failure(s)other than yourself. The whole idea behind this book is to teachyou a skill that will work for you, independent of what anyoneelse can sell you, tell you, or give you.Set aside a certain amount of time to this project. Unless youare willing to set aside a certain amount of time to learning whatis in this book, you might as well not begin. You will be wastingyour time if you go into this venture without a commitment, alack of time, or a lack of motivation. You can change your financial future for the better, but only with effort and persistence.Even if you can only give your plan 15 minutes a week, do it consistently, without distractions and without interruptions. I suggest that you schedule the time and stick to your schedule
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diligently. Give the concepts in this book a fighting chance. Itwill only cost you a little time and a little money to see if this isthe right approach for you.Once you have learned the basics, go on to the more advancedapplications. You will see as you progress through this book thatI have provided a number of ways and numerous suggestions thatcan help you make money. Some of the more advanced methods require more starting capital and cannot be applied untilyou have achieved some degree of success with the preliminaryapproaches. Therefore, it is not really necessary for you to learnthem immediately. However, as soon as you realize that successis on its way, read the chapters that pertain to longer-term financial growth, stability, and retirement planning. If you are ayoung person, you have a distinct advantage over those who areconsiderably older than you but who are only now beginning tomake their fortunes. The younger you are when you begin, themore money you can make and the better your odds of success.Try not to read the business newspapers or business magazines. Clearly this information is contrary to what you will reador may have read elsewhere. I am certain that my suggestion willarouse the ire of many who do not feel as I do about investing.Consider that we have been brainwashed to believe that the moreinformation we have about stocks, the more likely will be ourchances of success. Unfortunately, recent history has proven thateven the most credible and thorough information can be incorrect or tainted. Companies have been practicing tricky or outright misleading reporting practices with their earnings reportsfor years. Recently, the use of pro forma earnings projectionsand reports has fooled many an investor, because these reportsignore or fail to contain vital information about the debts of acompany.
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We have all been told time and again that in order to makemoney we need information. We have been led to believe that ifwe have more information, then we will do well. I respectfully submit that this is not the case. Too much information can be confusing and can lead you astray.
THE “BORING” PART OF SETTINGFINANCIAL GOALSSetting goals can often be boring and tedious. Few of us wantto think 30 years into the future. In fact, many of us can’t visualize what we’ll be doing 30 years from now or where we’ll be doingit. One thing is for certain—no matter where we’ll be, what we’llbe doing, or how we’ll be doing it, we’ll need money to do it.And the more of it we have, the better off we’ll be.Don’t get me wrong. It isn’t entirely about money! It’s alsoabout enjoying the limited amount of time we have been givenon earth. But what about the next life? What about reincarnation? What about the spiritual you? Seeking financial freedomhas nothing to do with these! There’s nothing mutually exclusive here. You can choose to be a Buddhist like Richard Gere andstill have big bucks. You can become a scientologist like JohnTravolta and still have a ton of money.Remember that our goal is to lay the groundwork for financial success. As such, we will deal with finances, perhaps at timesin mercenary ways. But don’t let my approach lead you to believe that I am an unfeeling person who is interested in moneyalone. Nor should you assume that being entirely focused onmoney and success to the exclusion of feelings are prerequisitesto profit. They are not. You need to develop your spiritual andfeeling sides as well. Money in the absence of friends, family, andeffective relationships is totally useless. Please remember that!
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Be your own financial planner. Do you really need an expert?What does a financial planner do? Simply stated, a financial planner examines your assets, liabilities, needs, skills, earning power,and goals, within the framework of available investment tools.The planner then develops a program or method for you that issupposed to help you achieve your goals within the time frameyou have set for yourself. In short, a financial planner gives youdirection within the limits of what you can do currently. Certainly,as you grow older and develop new skills, it will be necessary foryou to update your financial plan. Yet, if you are just beginningyour venture into the world of profits and investing, then it isunlikely that a financial planner can help you at all. You’ll probably be told to come back when you have some money. So whatcan you do? Here are a few ideas for you:
If you’re just getting started, don’t even bother with a financial planner. Make your own plans by following mysuggestions in this chapter.

If you’ve already made some money from your investments and you’re saving money, you will want to make aplan on your own, again, following the guidelines providedin this chapter.

Take advantage of the Internet. There are many Web sitesthat offer quality advice and recommendations on financialplanning. In fact, several—such as <http://financialplan.about.com/>—offer financial planning courses so youcan be your own financial planner.

Remember that you won’t have to be too concerned aboutfinancial planning until you have made some money fromyour investments.
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Finally, bear in mind that a solid financial plan must alsoinclude tax planning, so that you can keep more for yourself and pay less in taxes (as long as the strategies you useare legal).
In addition to the Web site listed above, note the followingInternet locations where you can find considerable informationand assistance on financial planning—in most cases, free of charge:
http://financialplan.about.com/

www.kiplinger.com/

www.ihatefinancialplanning.com/homepage.jsp

http://learningforlife.fsu.edu/course/fp101/index.html

www.efmoody.com/planning/planningoverview.html

www.e-analytics.com/fpdir1.htm

http://moneycentral.msn.com/planning/home.asp

http://directory.google.com/Top/Home/Personal_Finance/
Determine your goals in 15 minutes or less. You can easily determine your financial goals quickly and without too much deliberation. In order to make your efforts worthwhile, you shouldattempt to make at least 25 percent profit on your money peryear. If you can safely do so year after year, then you will be wayahead of the game after ten years. More realistically, however,there will be years in which you will make less and, in fact, yearsin which you will actually lose money. Here is a realistic roadmap for you to follow if you’re just getting started:
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1. First year—expect to break even. This will be your year to learn,to make mistakes, and to break old losing habits. While itmay take you a year to achieve this goal, it could take lessor more time depending on your discipline and commitment to the program.2. Second year—you should have learned enough the first year tomake at least 15 percent on your money. As a rule of thumb,you should be able to generate at least twice as much as youcan earn in the bank. When the economy is in an inflationary trend, you should do especially well, beating therate of inflation hand