25 Rules to Grow Rich By

Although some of these rules are common knowledge to most of us, and some rules you may not necessarily agree with but I think it is worthwhile to look into.

1. For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.

2. It’s worth refinancing your mortgage when you can cut your interest rate by at least one point.

3. Spend no more than 2 1/2 times your income on a home. For a down payment, it’s best to come up with at least 20%.

4. Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.

5. Never hire a roofer, driveway paver or chimney sweep who is going door to door.

6. All else being equal, the best place to invest is a 401(k). Once you’ve earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.

7. To figure out what percentage of your money should be in stocks, subtract your age from 120.

8. Invest no more than 10% of your portfolio in your company stock - or any single company’s stock, for that matter.

9. The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.

10. Aim to build a retirement nest egg that is 25 times the annual investment income you need.

11. If you don’t understand how an investment works, don’t buy it.

12. If you’re not saving 10% of your salary, you aren’t saving enough.

13. Keep three months’ worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months’.

14. Aim to accumulate enough money to pay for a third of your kids’ college costs. You can borrow the rest or use some of your income to help out when your child is in college.

15. You need enough life insurance to replace at least five years of your salary. As much as 10 years if you have several young children or significant debts.

16. When you buy insurance, choose the highest deductible you can afford. It’s the easiest way to lower your premium.

17. The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high-interest rates will wipe out the benefits.

18. The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.

19. Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit card account is a scam artist.

20. The best way to save money on a car is to buy a late-model used car and drive it until it’s junk. A car loses 30% of its value in the first year.

21. Lease a new car or truck only if you plan to replace it within two or three years.

22. Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.

23. Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.

24. Don’t redeem frequent flier miles unless you can get more than a dollar’s worth of air fare or other stuff for every 100 miles you spend.

25. When you shop for electronics, don’t pay for an extended warranty. One exception: It’s a laptop and the warranty is from the manufacturer.

For full lists with detail explanations, goto Money.com.

Dreadful Stocks to Avoid

Below are a couple of things you should be aware before you invest your hard earned money.

Warren Buffett's first rule of investing is "Never lose money." To this, he often adds rule No. 2: "Never forget rule No. 1." Of course, following these rules is easier said than done. But Buffett's done pretty well for himself, so it seems unwise to simply dismiss his advice as the semi-coherent ramblings of a man who's read way too many 10-Ks.

I take those rules to heart in my investment strategy. I try to focus my investment dollars on sustainable, undervalued businesses that I can easily understand. Buffett has made more than $40 billion for himself using that strategy, and he's made even more for his partners and shareholders over the years. Do you really need to assume a lot of risk to make more than $40 billion? My answer, and the answer of my colleagues at Motley FoolInsideValue, is "Heck, no!" If I make only $40 billion, I'll be perfectly satisfied.

People spend a lot of time discussing the companies Buffett buys. But in the spirit of not losing money, it's equally worthwhile to understand the types of businesses that Buffett does not buy in order to steer clear of potential duds. I see five main categories:

Businesses that bet the farm

In some industries, companies periodically have to make critically important decisions. If the company makes the wrong choice, it will be dealt a crippling blow. This is terrible for a shareholder, because even if the company makes the right decision one month, it might fail to do so the next. There is no “three strikes and you’re out” policy. One strike, and it’s game over — your money’s gone.

Businesses dependent on research

It’s quite reasonable to believe that research can be a competitive advantage for certain companies. In fact, one reason Medtronic (NYSE: MDT) has been so successful is that it has been able to continually develop new medical technology. Nevertheless, there is a downside to research. Often, innovative companies are required to do research simply to maintain their competitive position. And if the research dries up, the company suffers.

Debt-burdened companies

In general, Buffett avoids companies with a lot of debt. This makes sense. During the best of times, large amounts of debt mean that cash that could be put toward growing the business or rewarding shareholders is instead servicing the debt. In a crisis, debt greatly limits a company’s options and can sometimes lead to bankruptcy.

A more subtle point is that great businesses throw off piles of cash. Great businesses generally don’t need to use huge amounts of debt leverage to achieve an acceptable return for shareholders. So if a company needs debt to achieve reasonable returns, it’s less likely to be a great business.

Companies with questionable management

Management has incredible power. If executives want to enrich themselves at the expense of shareholders, either directly or by misrepresenting the company’s prospects, individual shareholders have almost no hope of preventing them. I strongly recommend avoiding companies where there’s even a hint that management lacks integrity. Some clues to look for here include excessively optimistic press releases, overly generous compensation or options grants, or frequently blaming external circumstances for operational shortcomings. WorldCom and Enron may have gone up for years, but at the end of the day, shareholders received almost nothing. That’s why I think questionable management is the worst flaw a company can have.

Companies that require continued capital investment

Over the long term, shareholders make spectacular returns by buying businesses that are able to achieve extraordinary returns on capital. This leads to excess capital that the company can use to repurchase shares, pay a dividend to shareholders, or reinvest in further growth. Companies that constantly need to make additional capital investment to keep the business going are the antithesis of this ideal — the main beneficiaries will be employees, management, suppliers, and government. In other words, everyone except shareholders.

The full story along with explanations can be found at Fool.com.

The Emotions and the Roles They Play

The “PRICE” of a stock at any given time is due to the buyer and seller of this particular stock reaching a mutual agreement with regard to its current value.

When the price goes up it is because the seller thinks it is worth more or there is a short supply of stock available.

The opposite happens when there is an excess of stock available, this effectively pushes the price downwards. So the current share price is an accurate gauge of the market value of the stock at this point in time.

PRICE is involved when you buy the stock, your potential exit price to limit losses [stop loss] and potential exit price to make your profits.

- GREED will push the price up. FEAR will push the price down.

- A low priced speculative stock is often priced as it is because it has not attracted the interest of a wide section of the market. Price is effected by as much by Inaction as well as by Action.

- The closing price is a reflection that shows how traders are relating to that stock. It is a reading of whether there is “excitement” or “rejection of that stock.

- When you are buying a “stock” you have four options open to you.

1. You can stay with your original price and wait for the share price to come down to you.

2. You can chase the price and collect the shares you have decided on.

3. Still chase the price but keep the same dollar value but get fewer shares.

4. Buy your stock at the asking price.

Remember our decision to buy does not happen if there is no one wants to sell at that price.
We are also powerless if someone is bidding a higher price for the stock than we are.

They will get the stock unless you put in a higher bid. (This is dependent on how much stock is available at the time.)

THE TWO MOST COMMON EMOTIONS ENCOUNTERED.

The most common is” FEAR and “GREED.”

And what effect do they have?

Here is a “Classis” example of what is happening on the stock market every day World wide.

Firstly Greed pushes the stock price upwards and Fear has the opposite effect by pushing the share price downwards.

Greedy traders start rushing in to get the stock at any price so they won’t miss out.

Then finding the share price suddenly reversing as “Smart traders are taking their profits” which then has the effect of causing the stock to commence sliding backwards as excess stock is now available.

This is the time when Fear sets in. The traders start to panic and start selling so as not to take too big a loss.

This puts more stock into the market, which accentuates the price slide downwards.

The smart traders who sold out at the “high” are now buying back the same stock at reduced prices.

As I have said before. How often does this happen? Every day somewhere in the Market this is occurring.

How do I know? I have been caught myself when I began trading and no doubt I shall get caught again. But now I am more aware of these “EMOTIONS.”and the part they play.

About the Author:

Christopher Strudwick is a keen amateur share trader on the Australian Stock Market Visit his weblog for more free articles and useful information at http://www.asxnewbie.com

Stocks You Can't Afford to Miss

As my Fool colleague Rick Munarriz recently pointed out, China is on a roll. The country's middle class is growing faster than O.J.'s rap sheet, yielding hundreds of millions of people with extra spending money.

"Show me the Renminbi!"
Where will all of that cash be spent? Big businesses and investors are already jumping in to make a few suggestions:

• General Motors (NYSE: GM) just signed a deal to ship $800 million worth of Buick Enclave SUVs and auto parts to China over the next four years.
• Saudi Prince Alwaleed bin Talal Alsaud set aside an eye-popping $1 billion this summer to invest in the Chinese hotel industry.
• Computer giant Dell (Nasdaq: DELL) recently announced that it will start selling its computers through Gome, China's largest electronics chain.
• Even Delta Airlines (NYSE: DAL) put some cards on the table. The company just won rights to launch nonstop service between Atlanta and -- you guessed it -- China!

And the country's growth doesn't seem to be slowing down. According to a recent survey done on behalf of global asset manager Schroders, a majority of American investors believe that China will eclipse the United States as a global economic leader in the next 10 years. That's music to the ears of long-term investors.

Of course, you need to own some Chinese stocks to feel the full giddy effect. But while you're looking for the right ones, you should know that China isn't the only Asian country that holds a mine of rich investment opportunities.

Next stop ... the whole continent?
Er, well, maybe not the whole thing. But other countries in Asia are experiencing explosive economic growth similar to China's. Fool analyst Bill Mann recently wrote that "the continent is blessed with every kind of wealth imaginable, and much of its potential is just now being tapped.... This is the Asia century."

He's not alone in recognizing Asia's growing clout. Mark Mobius, managing director of Templeton Asset Management (and a guy who's been following emerging markets for more than a quarter-century) is also noticing. He recently told The Korea Times that "Asia is the largest emerging markets region in the world and home to some of the fastest-growing economies globally. In fact, more than 50% of the world's population lives in Asia, providing the region with a huge consumer base."

Yup, that's "more than 50%"! While it's horrifying to think about what that would look like on Black Friday, it sure makes for some amazing consumer spending. Behemoths like Nike (NYSE: NKE), Yum! Brands (NYSE: YUM), and Merrill Lynch (NYSE: MER) have already caught on, investing heavily in select regions of Asia.

But the local businesses may be even more intriguing -- Asian companies with established local brands and immediate access to these swelling masses of consumers. These companies stand to thrive tremendously over the next few years amid all these economic changes.

Riding Asia's growth wave
All that said, not every company in Asia is destined for profits, nor is every stock there a winner. Furthermore, buying into a foreign business requires extra homework: You need to know a thing or two about the country's economy, its culture, and the laws that determine how financial information is reported there, among other factors.

But that added effort is no reason to pass up substantial returns. If you don't have time to figure it all out yourself, you can still reap the rewards: Fool co-founder David Gardner and a team of top-notch analysts have handpicked five stocks in Asia that are poised to profit.

You'll find them all in a new report titled Asia Rising: 5 Pacific Rim Stocks You Can't Afford to Miss. Click here for all of the details.

Cindy Embleton was selling candlesticks at a yard sale when she suddenly ran into Colonel Mustard. She does not own shares of any company mentioned in this article. Dell is a Motley Fool Stock Advisor and Motley Fool Inside Value recommendation. Cindy suspects that Miss Peach shot the Fool's disclosure policy in the library.

Sources:

Secrets of the Millionaire Mind !

THIS TRUE STORY WILL CHANGE FOREVER the way you look at millionaires, making money and success!

Meet Andy, a low level manager at a super-market. During his free time, Andy is busy chasing some new business venture all the time. Every time you talk to him, he has started a new business "opportunity". He tried to make money online. He bought and tried several of those programs to work at home and make money at home. He tried to sell using his own website. He even bought and tried some of those great programs to make money in real estate and investing in the stock market and commodities. And a few more he can't even remember right now. He is always starting a new business venture! When you ask him what happened to the previous venture, he will tell you that it was not the right one for him and that this new venture is a 'sure' winner. This time he will make it real big!

A short time ago, Andy had the opportunity to go to his twenty-year high school reunion.

From the moment he arrived to his class reunion, he mesmerized his former classmates with big stories about all the business ventures he was involved with. As usual, he managed to keep from them the fact that all his ventures failed! Andy was the center of the party. All his former classmates were feeling jealous of Andy's phenomenal success! Even though he lacked a college education, he was very good at telling big lies and have people believe them!

After a while he decided to go into the garden and get some fresh air. He felt real ashamed because he was always telling lies in order to cover up for his failures and his many shortcomings.

As Andy was struggling with his feelings of shame, he heard footsteps. It was his former classmate, John. Without even a warning, John asked point blank "Andy, why are you such a liar? It looks like you fooled everybody in the party. But you didn't fool me at all"

Andy didn't know what to say. His silence was answer enough.

John asked "Andy, why do you have to lie like that? And what's that obsession of yours with having so much money in the bank?"

Andy started sobbing as he replied "Because I am tired of living from paycheck to paycheck and ashamed of it. In my family we could never afford all the good 'stuff'. I remember all our past Christmases. My father would come home tired from working like a slave to put food on the table, pay for the rent and buy us some cheap clothes because he could not afford anything better. Poor dad. I really felt sorry for him. He was working like a slave at a job he disliked and was making his bosses rich and all my poor dad was getting was a lousy paycheck. He looked like all life was sucked out of him. He rarely laughed. You could only see despair and hopelessness in his eyes. He was old beyond his time"

John said "Those were very unhappy days which left for you bitter memories, right?"

Andy replied in a very somber tone "I try not to think about those days. All I can remember is listening to my parents say over and over again 'we cannot afford it', 'we are not rich, you know', 'we will never be rich', 'all the rich people are crooks'. We never had the wonderful Christmas gifts other kids were getting. Man, life was real hard during those days. And I don't want to have to die like my father, poor, broke and disillusioned from life"

Taking a deep breath, Andy continued "I guess I don't have the education and I think I am as not smart as the people making the big bucks. Just like my father, it is just hard for me to make money. Life is just hard, real hard! My parents were right when they told me I would never get rich. I never get any breaks. I will never be able to afford all the things I want. I just see no hope. To tell you the truth, I feel like a total loser. When I see people like Bill Gates or Donald Trump, I think it is just my fate to be poor, broke and struggle all my life"

John asked "And what do you think is the solution to your problems?"

Andy replied "I will have to just keep trying harder until I get something that works for me"

John said, "Haven't you tried hard enough? Andy, you got it all wrong. You don't realize you are the only one to blame"

Andy replied "What? I am killing myself trying to succeed and you tell me I am the only one to blame? You're crazy"

John said "Let's see. I will repeat to you some of the things you said to me. Feel free to correct me if I am wrong. Here we go. You said life is real hard, especially for you, right? You believe you are not smart enough or have enough education to make the big bucks, correct? You also believe that it is real hard and difficult to make money, isn't it? You believe all the rich people are crooks, which implies you'd rather be honest than rich, correct? You further believe you will never be rich, that you have to work real hard for your money, that in order to succeed financially it will take a lot of hard work, sweat, suffering and struggles. correct? And we're not finished yet because you also believe you never get any breaks and that maybe this is your fate in life, isn't it? Did I miss anything?"

In a sad tone of voice, Andy replied "You covered just about everything"

John laughed and said, "Congratulations, Andy. With all those beliefs, you are not attracting money to you. You are not a money magnet, you are a MONEY REPELLENT!"

Andy almost screamed and said "Me, a money repellent? John, how can you say that?"

John replied, "Andy, you are repelling money because of your Self-Image"

Andy said "My what? What is that mumbo jumbo?"

John said "Andy, I want you to listen very carefully because what I am going to say will change your life forever".

John continued "The sum total of what you believe to be absolutely true about yourself, money, people, the world and the universe makes up what is known as your Self-Image. Your Self-Image sets the limits to what you can or cannot be, to what you can or cannot do, what you can or cannot achieve, what you can or cannot have . . . Andy, did you ever notice that your physical reality and your lousy financial situation seem to MYSTERIOUSLY coincide EXACTLY with what you believe and think all day long, a faithful 'picture' of your Self-Image?"

Andy replied "Hummm. I never really noticed that. You mean to tell me that my constant negative beliefs and thoughts are creating all these miserable circumstances in my life? Tell me more about this"

John continued, "In this physical reality, no belief goes un-rewarded, every single belief has its consequence. The Law of Life is the Law of Belief, also known as the universal LAW OF ATTRACTION. “Whatever you deeply believe, you will materialize in your life”. Your 'outside' world, your physical reality, is nothing more and nothing less than the 'out-picturing', the 'materialization' of your Self-Image. In other words, Andy, YOU and ONLY YOU CREATE YOUR OWN REALITY through your Self-Image"

Andy's eyes opened wide as he exclaimed "But what is the connection to me getting rich?"

John said "Andy, think of life as a river, an unlimited river flowing all the time. This river of life carries with it all the wealth, riches, money, abundance, health, love, success, happiness, joy you could ever imagine. You have to be careful, though, because this same river also carries with it all the diseases, troubles, problems, limitations poverty and misery in the world"

John continued, "You select the good 'stuff' by carefully choosing your beliefs and the thoughts you think all day long. Then, by the universal Law of Attraction, you beliefs and thoughts will attract to you only the good 'stuff' from the river of life. Unfortunately, most people, because of their negative beliefs and thoughts, are attracting all the bad 'stuff' most of the time. They got no one else to blame but themselves"

Andy anxiously asked "I want to make money, lots of money. How do millionaires, multimillionaires and billionaires tap into this river of unlimited abundance?"

John replied, "They do it with their Self-Images. They KNOW their Self-Image is their most valuable possession. That's why the super rich are constantly working on improving their Self-Images. Using very simple but extremely powerful TECHNIQUES that YOU can EASILY learn and apply, believe it or not, the super rich FIRST erase and eliminate from their minds all those limiting beliefs, notions and ideas in conflict with their goals. SECOND, they train themselves to FOCUS only on their goals, on success, on winning. They keep working inside their minds until they completely convince themselves that success is absolutely inevitable.And THIRD, they fully activate the powers of their Subconscious minds, the magic Genie inside their heads, to GUIDE them effortlessly to succeed in everything they do!"

As Andy listened carefully, John continued, " The super rich ALWAYS see themselves as WINNERS in the inside of their heads. They live all the time in a state of 'Think and Grow Rich' mentality, a state of mind where there is no room for failure, only success. Their Self-Images make them MAGNETS to money, wealth, riches"

Andy interrupted John by asking "But how can anyone FOCUS on success, prosperity, abundance when you see all the misery and problems of the world?"

John replied, "The super rich also face this challenge, just like any other human on this planet. The difference is that the super rich KNOW some simple but powerful techniques they use to train their minds and FOCUS only on success and winning"

Andy was shaking his head as John said "Andy, correct me if I am mistaken, I bet you are constantly rehearsing in your mind all the bad things that could happen to you in the future, including lack of money. It didn't happen yet, but you are already imagining future lack and failure in your mind, isn't it?"

Andy said, "But, isn't that normal? Doesn't everybody worry about the bad things that could happen to them some day?"

John replied, "Not the super rich. They know that if they imagine any future disaster with enough intensity and persistence, like most people do, they will most certainly attract that disaster to themselves, sooner or later. Instead, by focusing on what they want to achieve, they attract those desired outcomes to themselves! And their positive, winning Self-Image, is constantly attracting to these super-rich fellows all the right business opportunities, the right people, the right connections, the right conditions and circumstances to continue winning. Everything becomes EASY and even FUN for them"

So, Andy said "Let me get this straight. You are telling me that until I change what I believe about myself and about money and I get rid of all those dark, negative, failure thoughts I think all day long, I will never succeed, right?"

John replied "Right. Andy, think about this very carefully . . . What do you need to believe and what do you need to think all day long in order to have the financial success you desire?"

Andy replied "Well, I need to believe in myself, that I am a winner, that I will succeed, that I am a money magnet, that I am good at making money, that things are going to be EASY for me ... Wait a minute... Wait just a minute here ... Isn't that what these super-rich people believe?"

John said "Yes!"

Andy continued "So, if I could believe what these super rich people believe and think the same way they do, I will achieve similar successful results and everything will be EASIER and more FUN for me, right? If I did that, I couldn't possibly fail and I would be able to achieve all my financial goals a lot easier, right?"

John replied "You are absolutely right"

Andy was almost jumping up and down as he said to me "That means I was an IDIOT all these years, that I wasted lots money, time and energy with all those programs I bought to make money, right?"

John answered "No, You simply did things backward. FIRST, you should have made the necessary changes to your inadequate Self-Image BEFORE doing anything else. Then, you should have activated the awesome powers of your Subconscious mind to GUIDE you to succeed. AFTER doing that, you can buy, study and use those business programs. Starting a new business with an inadequate Self-Image is your best formula for failure. Starting a new business with the 'RIGHT', winning Self-Image will guarantee your success, no matter what type of business you choose"

Andy uttered, "I never heard that before"

With excitement in his voice, Andy asked "What do I have to do to start believing and thinking like the super rich people? That looks like mission impossible!"

John said "Not really. All you need to do is use these super rich as your 'role models'. And that can be achieved rather EASILY when you DOWNLOAD into your mind the winning Self-Image of the millionaires, multimillionaires and billionaires"

Andy said "Yes, but isn't that very hard?"

Very patiently, John continued, "Look, Andy, it is real simple. It is only as difficult and boring or as easy and fun as you believe it will be"

"How does John know all that?, YOU, the reader, may be asking by now.

Andy finally spoke "John, you are a multimillionaire, you are the most successful guy in our class, you are super rich, you have million of dollars in the bank, gorgeous houses all over the country, your own personal jet . . . you are literally drowning in money . . . Tell me, honestly, is those 'secrets' you are talking about the reason for your phenomenal success?"

John thought very carefully and then said "Yes, Andy, I owe everything to those 'secrets' and to the old gentleman who taught me how to use those 'secrets' many years ago when I was at the lowest point in my life, when I was totally lost and in a lot worse shape than you are right now"

As Andy opened his mouth in total shock, John said "I KNOW my Self-Image is my most valuable possession. Therefore, I never start any new projects or set new goals without checking my Self-Image FIRST. I always work on my Self-Image BEFORE I start on any new project or set a new goal. I keep constantly asking myself 'What is my current Self-Image in relation to my new goal?' If I find my current Self-Image to be inadequate, I get busy changing it"

John continued, "Then, using techniques that anyone can EASILY learn, I do what all super rich people do . . . 'deliberately' direct my Subconscious mind to GUIDE me to 'automatically' think the thoughts and do all the things necessary for me to achieve all my goals, quickly, easily and having FUN".

Then, John said, "It's like I have this magic Genie who guides me in everything. That's the RIGHT sequence and those are the FIRST things you MUST learn in order to be truly successful"

All excited Andy said, "So, John, it's all about beliefs, right?"

John replied,"Not entirely, Andy. Some will tell you it is all about beliefs. I am telling you, it is all about 'beliefs' AND being able to IMPRINT into your BRAIN CELLS the so called Millionaire Mind of the super rich, all the beliefs, values, rules, attitudes and behaviors of the super wealthy individuals. And for that you must learn the right TECHNIQUES. With the wrong techniques, you will go nowhere. You must learn the 'right' techniques"

Now that he got Andy's full attention, John proceeded to introduce him to the closely guarded "secrets' of the millionaires, multimillionaires and billionaires, the REAL 'secrets' of John's extraordinary success, the exact same 'secrets' ' that YOU can also easily learn to have all the money, wealth, riches and success you always wanted but did not know HOW TO achieve!

Will Andy do something with what he learned? If he is like most people, he will put it under the rug and keep blaming his childhood, his parents, the universe, other people or his bad karma. And he will continue believing the same old limiting beliefs, which will make him have the same old attitudes and behaviors, which will keep him getting the same useless, results.

Are you going to learn and use the 'Secrets' of the millionaires, multimillionaires and billionaires ... or find more EXCUSES to justify you are a loser?

Leo F,

http://www.makemoneyfastgetrichbeamillionaire.com

= = = = = = = = = = = = = = = = = = = = = = = = = = = = =

Leo Foster believes being a Millionaire should be EASY and FUN Contact him at --

http://www.makemoneyfastgetrichbeamillionaire.com

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Investment Quotes from Jim Cramer

- Picking the right stocks is one of the hardest parts of investing, and every night on Mad Money, I try to take some of that burden off your shoulders.

- Every once in a while, the market does something so stupid it takes your breath away.

- As long as you enjoy investing, you'll be willing to do the homework and stay in the game. That's why I try to make the show so entertaining, because if you aren't interested, you'll either miss the opportunity to make money in the market or not pay enough attention and end up losing your shirt.

How To Prepare for a Crash ?

Not everyone cares to prepare for a financial environment that will be different from the current bullish one. Just as surely, most people don't want to think about an economic recession. But recent follies in the credit and debt markets have turned some people's minds to the strong possibility of a recession in the United States. For instance, here's the lead from a recent story in the Financial Times, "The R-word Surfaces on Wall Street":

The R-word is usually avoided by Wall Street's economists. It tends to be a conversation-stopper when investment bank clients are told to prepare for the worst.

"It is like looking a client in the eye and telling them that their child is ugly," says David Rosenberg, chief economist at Merrill Lynch. "It is not what people want to hear." [Financial Times, Sept. 10, 2007]

If this is what people think about using the word, "recession," just think how unwilling they are to talk about a depression. Well, Bob Prechter isn't afraid to talk about a depression. In fact, he's written a whole book about how to prepare for a deflationary depression, and now – while the stock market's sun is shining, and people are making financial hay – now might be just the right time to read about how to prepare for a deflationary depression.

* * *

Excerpted from Conquer the Crash, You Can Survive and Prosper in a Deflationary Depression by Robert R. Prechter, Jr.

The ultimate effect of deflation is to reduce the supply of money and credit. Your goal is to make sure that it doesn’t reduce the supply of your money and credit. The ultimate effect of depression is financial ruin. Your goal is to make sure that it doesn't ruin you.

Many investment advisors speak as if making money by investing is easy. It's not. What's easy is losing money, which is exactly what most investors do. They might make money for a while, but they lose eventually. Just keeping what you have over a lifetime of investing can be an achievement. That's what this book is designed to help you do, in perhaps the single most difficult financial environment that exists.

Protecting your liquid wealth against a deflationary crash and depression is pretty easy once you know what to do. Protecting your other assets and ensuring your livelihood can be serious challenges. Knowing how to proceed used to be the most difficult part of your task, because almost no one writes about the issue. This book remedies that situation.

Preparing To Take the Right Actions

In a crash and depression, we will see stocks going down 90 percent and more, mutual funds collapsing, massive layoffs, high unemployment, corporate and municipal bankruptcies, bank and insurance company failures and ultimately financial and political crises. The average person, who has no inkling of the risks in the financial system, will be shocked that such things could happen, despite the fact that they have happened repeatedly throughout history.

Being unprepared will leave you vulnerable to a major disruption in your life. Being prepared will allow you to make exceptional profits both in the crash and in the ensuing recovery. For now, you should focus on making sure that you do not become a zombie-eyed victim of the depression.

The best news of all is that this depression should be relatively brief, though it will seem like an eternity while it is in force. The longest depression on record in the United States lasted three years and five months, from September 1929 to February 1933. The longest sustained stock market decline in U.S. history lasted seven years, from 1835 to 1842, and featured two depressions in close proximity. As the expected trend change is of one larger degree than those, it should be a commensurately large setback, but it should still be brief relative to the duration of the preceding advance.

---

Source: elliotwave

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Risk of Buying/Holding Stocks with High P/E Ratios

P/E ratio is one of the financial ratio used to evaluate of a company's current share price compared to its per share earnings.

The calculation is formulated as:




For example, if a company is currently trading at market value of $10 a share and earnings over the last one year were $0.20 per share, the P/E ratio for the stock would be 50 ($10/$0.20).

So, what does it means to the novice investors? Briefly, if a company were currently trading at a multiple (P/E) of 50, the basic interpretation is that an investor is willing to pay $10 for $0.20 of current company earnings. So, it appears the investors are buying/holding stocks at a high premium.

So, why there are still many investors willing to go for high P/E stocks knowing there are an upside risk? Mainly, Stocks with "high" P/E ratios share a common trait: their performance shows there's plenty of bullishness about the company's future sales growth prospects and outstanding earnings. This usually further 'boost' the company's share especially when market is in the bull run since most investors are optimistic about the market at that time. Nothing wrong for being optimistic but one have to be realistic to the stock market world, stock markets are full of uncertainties ahead. How many of us foreseen the sub-prime problems when market 'seems to be doing fine'?

Past experience has shown us that those who held high P/E stocks usually got their fingers 'burnt' badly when the unexpected got them. The situation get even worse when investors bought high P/E penny stocks or stocks without strong fundamental.

Unless investors can stomach the pains of these 'sudden turn', otherwise, I think it is important to focus on stocks with low P/E ratio with good fundamental. Although P/E ratio is only one of the factors that investors should consider when buying shares, it usually has also less downside risk when market is heading south or running against you. So generally speaking, it's better to be safe than sorry.

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Buying Cheap or Penny Stocks?

Cheap doesn't mean good. The old saying "Paying a peanut, you got a monkey". Cheap stocks are cheap for a reason. Stocks sell for what they’re worth.

So, which one is better? Buying 1 million shares of a $0.01 share or buying 1000 shares of a $10 stock? I think most people would agree the former because it seems like a good bargain, with more opportunity for big increases from owning more shares. Although this might be true when market is in the bull run but the money you make in a stock isn't based on how many shares you own. It's based on the amount of money invested. The more money you invested, the more you make or loss depends on the market situation.

Many novice investors have a love affair with cheap or penny stocks, but low-priced stocks are generally missing a key ingredient of past stock market winners: institutional sponsorship.

A stock can't make big gains without the buying power of mutual funds, banks, insurance companies and other deep-pocketed investors fueling their price moves. It's not this cheap shares that cause a stock to surge higher in price, it's big institutional block share trades of 100,000, 200,000 or more that cause these great jumps in price when they buy -- as well as great price drops when they sell.

Fund Managers or Institutional Investors account easily for majority of the trading volume each day on the stock exchanges, so it's a good idea to fish in the same pond as they do. Stocks priced at below $1 a share are probably not on the radar screens of fund managers or institutional investors, not to mention shares are less than 10 cents a share. Many of these stocks are thinly traded so it's hard for mutual funds to buy and sell big volume shares.

Beware: Cheap doesn't mean good. Cheap stocks are cheap for a reason. Stocks sell for what they’re worth.

In many cases, investors that try to grab stocks on the cheap don’t realize that they're buying a company mired in problems with no institutional sponsorship, slowing earnings and sales growth and shrinking market share. These are bad traits for a stock to have. Institutions have market research teams that seek out great opportunities, and because they buy in huge quantities over time, consider piggybacking their choices if you find these fund managers have better-than-average performance.

The reality is that your prospect of doubling your money in a cheap or penny stock sure sounds good especially during the bull run, but bear in mind that penny shares are usually suffer the most when market crashes. Unfortunately, novice investor are usually the one get caught when market crashes or situation turn against them because penny stocks usually fall the hardest when market crashes.

So, since this is your hard earned money, please do your home work. Invest wisely. Focus on institutional blue chips or quality stocks. Buying penny shares without looking into the fundamental is just like buying lottery or lotto and hope for the best. Buying share is not like buying lottery, it's about future investment of your money. Don't regret for not knowing the danger or pitfall of buying cheap or penny shares. Beware!

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How Not To Get Burned With Hot Penny Stocks ?

If you could identify hot penny stocks while they are just beginning to warm up, you would have the penny stock trading game licked. Hot penny stocks are those which are poised to appreciate significantly in value in a very short time, and the best way to spot them is to study all the things which influence the way the market values a stock from day to day.

Penny stock trading is for speculators. It is not for long-term investors, so if you do not have the time to pay attention to your stock portfolio and be ready to buy or sell on a moment’s notice, stay away from penny stocks. Bu if you have the time, learning to spot hot penny stocks can pay off big time.

The trick to succeeding with penny stocks is to get out when everyone else wants in, and get in when everyone else has beaten a path to the exits. If you can time your entry into penny stocks so that they become hot penny stocks in a shot time, you will be making a good investment. But how can you do that?

Strategies For Finding Hot Penny Stocks

The first thing you must do, as with any investment, is to establish a budget and stick to it. If the hot penny stocks you come across are selling for dollars instead of pennies, step back and decide if they are an appropriate risk for you. If they have already had a significant run-up in a short period, you could be getting in at the tail end of a burying spree and end up holding the bag when other buyers dry up.

If there’s no one to sell to, your hot penny stocks will lose their value as quickly as they gained it. So don’t throw all you penny stock funds at a single stock, no matter how good it looks.

Look at the past trading patterns of hot penny stocks to determine how often they have had sudden upswings in price. All the information you need will be in their past performance charts, so learn to read the charts, and then look at any news which may have accounted for the ups and downs. Make sure all significant price changes had appropriate underlying volume.

Look At The Big Picture

Look at the management and products or services of the company, and at the industry in which it operates. Check out the competition, and learn if the industry is being influence positively or negatively by outside factors like economic conditions or new legislation. If a particular industry is hot, the chances are good that it will produce several hot penny stocks.

Making a good profit, or even a fortune, in hot penny stocks is not impossible; the penny stock market is high risk and high reward. Just make sure you never invest more than you can afford to lose, and that you lock in your profits with sell stops.

You can also find more info on Best Penny Stocks and Buy Penny Stocks. Pick-pennystocks.com is a comprehensive resource to get information about Penny Stocks.

Article Source: http://EzineArticles.com/?expert=Wade_Robins

Investing Technique: Cut-loss Triggers

Has your share lost 20% of its value since you acquired it? Has your unit trust investment been steadily falling since the day you bought it?

Selling a losing position and reinvesting the money in a more profitable security is probably the most logical tactic to apply in order to enhance the overall value of your portfolio.

This technique can be one of the most difficult to execute. You have to ask yourself if you had made a mistake with your investment in the first place and you must also decide whether to sell or hold on to the depreciating asset. When you can easily find recommendations on what to buy, it's harder to get advice on when to cut your losses.

To minimize the odds of ending up with worthless share certificates or depreciating unit trusts, you should establish a sell strategy. This is when you can think most clearly about why and when to sell. You could be too upset to think rationally if you start to analyze your investment when its value drops to a level that you can't tolerate.

So, a sell strategy helps you to avoid an emotional decision making that usually leads to costly mistakes, like the knee-jerk reaction of getting out fast when the stock market drops.

A well-defined sell strategy has cut-loss triggers to prompt certain actions, which must include an evaluation of the condition of your investment and its future potential, before you sell your losing investment.

Cut-loss triggers act like an insurance policy, which is protecting your portfolio against catastrophic losses as they remind you to assess your investment or to sell it. These triggers are used to make sure that mistakes are not more costly than they could be.

Some investors have different investing profiles and strategies, thus determine your cut-loss triggers based on your personal risk tolerance and investing time frame. To do so, first, consider the risk level that you're able to tolerate when selecting the asset. Say, for instance, you decided to tolerate a loss of 15% to 20%. Then, from here, you can determine your selling point. If your investment falls in this range, hold on to it.

However, investors with a short investment period may prefer a smaller percentage decline of perhaps 3%, because it avoids big losses. On the other hand, investors with a three to five year time frame can tolerate a higher percentage decline as a losing investment has time to recover its position.

Action triggers are also part of a sell strategy. For instance, you decide to sell your investment if it drops 8% below your purchase price. Set a warning point at 5% to prompt you to take action by looking for information that can be used to evaluate the future potential of your investment. You should also consider the next asset to invest in before your existing investment continues to depreciate to its cut-loss level.

Some investors convert these triggers to stop-loss orders, which are instructions to the brokers to sell their shares at a predetermined price. These instructions are useful when you're unable to monitor your stocks and evaluate your investments over a period of time.

Michael Russell Your Independent guide to Investing Article Source: http://EzineArticles.com/?expert=Michael_Russell

The Stock Market Investor’s Worst Enemy

Every stock market investor faces one primal enemy. An enemy so perverse, it will drive thousands of investors from the stock market through its ability to defeat even the most practiced investment strategy. Who is this enemy you ask? Your arch nemesis, in this case, goes by the name E. Motions?don’t ask me what the "E" stands for.

Emotions are the driving force behind every stock market cycle. Quite simply, if they weren’t present in the stock market, investors could be reaping rewards based solely on the expanding or receding economy, and professional traders wouldn’t have any juicy profits from those emotional mistakes to grab.

Here is an example scenario:

Let’s say that you’ve done your homework, read the books, traded on paper, and now you’re making your fondest dream come true by investing in the market and making money!

You maturely approach losses as part of the learning curve. You’ve experienced your share of them but your wins are still in the lead, thanks to the commitment you made of not deviating from your chosen strategy. Euphoria sits on your shoulder.

One day, after 3 frustrating hours in traffic, you get home to find changes. You know that you should follow your strategy, but Stress and Greed are in charge. You’re buying and selling outside your strategy, but are confident that it will be ok - just this once.

Now prices are dropping and Fear enters the room.

Fear attacks every investor’s self-confidence with a voracious need for control. You spend sleepless nights listening to his mantra - you don’t know what you’re doing.

Fear and Greed are now dictating the strategy. Self-confidence is on the critical list. Reason and Caution are under attack and are losing.

You ignore the primary investment rule of buying low, selling high because you’ve lost too much and have to recoup. You close your eyes and dive in to recover your losses. "It will work," says Greed on your right. "It has to work!" responds Fear on your left.

Your partner has now entered the fray and is hounding you about the lost money. Your capital is almost gone. You erred grievously and invested money that you need now. Margin calls are being made. You’re out of control.

While the components of the above scenario will change, the catalyst of this nightmare remains the same - emotions. You’ll survive the nightmare, but the experience will forever change you. Fear will shade every future stock market decision and severely limit your ability to objectively evaluate any investment opportunity out of fear that you’ll lose again. But, it doesn’t have to be that way.

Developing a strategy to deal with emotions can give you a winning edge.

Here’s how:

• Don’t go into the stock market to feel good about yourself.

• Always look outside of the stock market for self-gratification and affirmation.

• Make a commitment to stick to your chosen action plan or strategy. Don’t deviate.

• When a loss occurs, examine it and learn from it. Don’t try to get even.

• Think before you leap into anything

• If you are stressed out, vulnerable, or overly emotional (high or low), do not trade. It’s not worth the financial risk.

Remember, the key isn’t denying or curbing your emotions, but instead understanding how they impact your investment decisions and developing a strategy to work with them.

About The Author

Jeff Fairchild is the publisher of http://www.best-stock-trading-systems.com The site includes tips, techniques, strategies, and systems designed around improving your stock trading profits. Investors and traders! Are you overwhelmed by all of the online stock information on the net? One of these pages may be of help:

http://www.best-stock-trading-systems.com/internet_stock_investing.html

http://www.best-stock-trading-systems.com/trading_stocks_online.html

How Stops Help You To Make Money In The Stock Market

by: David Jenyns

To make money in the stock market, setting stops is an imprecise science and involves a lot of trial and error, but it is an integral part of being a successful trader. A good analogy is to compare stops to buying insurance for your business. Should you avoid insurance altogether just because you�re not sure exactly how much you need, or because it will cost you a little money? No. Instead, you estimate and do the best you can, and in the end it will be well worth the effort.

Where insurance limits risk of loss through disasters, stops limit your risk of loss on bad trades. Stops make it possible to take small losses and get out when a stock goes against you, protecting your capital. Yet, some traders find that they are unwilling to take a loss on any stock. They don�t want to admit that they made a mistake.

Another key to make money in the stock market, what often separates a good trader from a bad one is the ability to take small losses. Your goal, as a successful trader, is to take small losses and make big gains. If you do this, you�ll be profitable. But, you ask, what if you stop out of a stock you still want to trade? Well, you can always buy it back later, and likely at a better price, if the trade still has potential.

Besides limiting risk and helping you take small losses, stops are valuable because they protect profits on winning trades. As I discussed in a previous article, you must lock in your profit when you trade, or you can lose it. You can ensure that you keep your profits by using trailing stops. A trailing stop is a stop order you place below the current price of a long position, progressively moving it up as the price of the position increases so that the stop follows the position up. For a short position, to make money in the stock market you set a stop above the current price and then move it progressively down, following the position as it trends downward.

This means that once you have a profit, you move your stop nearer to the current price so you�ll stop out with most of your profits intact if the position moves against you. If the stop executes and you decide you want to trade the position again, you can buy it back at a better price than you sold it for and then ride it up again. That�s how a good trader makes and keeps money, make money in the stock market by taking small profits multiple times, rather than risking too much waiting for a big win.

Minimize Your Investment Losses

"One of the advantages of a fellow like Buffett is that he automatically thinks in terms of decision trees." -- Charlie Munger

Decision trees, decision trees, decision trees. I believe one of the biggest errors (myself included) that investors make is attributing results to decisions, rather than to decision trees.

Let me give you an example. Suppose someone offered you a bet: If you win, you get a billion dollars. If you lose, you have to do the Macarena in a crowded mall. The odds of winning are 75%. Would you take this? Heck, yes, you would! The downside is minimal, and the upside is astronomical.

Now let's tweak that a little bit. Instead of doing the Macarena in a crowded mall, you have to run blindfolded through freeway traffic. Now the decision is not so clear, because the decision tree (if I win, I'm a billionaire; if I lose, I have a high probability of dying or suffering debilitating injury) has a grim downside.

Heyyyy, Macarena!
As investors, we spend too much time focusing on only the most likely outcome, and too little time on the different scenarios that might occur and their corresponding probabilities. In the two scenarios above, the most likely outcome is overwhelmingly positive -- you win a billion dollars. However, the decision trees are drastically different, and thinking through the probabilities of the second scenario (with a 25% chance of possibly dying) leads you to make the correct choice to reject the bet.

In investing, the future for even the simplest of companies has countless possibilities and probabilities. As Buffett says, never lose money, so let's focus only on downside risk -- in a decision tree, this would be the arrow that goes down. Assessing our downside risks involves asking three simple questions.

1. What is the worst-case scenario that could develop?
A while back, some very smart people like Marty Whitman and Eddie Lampert figured out that Kmart's investment decision tree was heavily tilted in their favor. For example, the company was already in bankruptcy, but they realized they could still recover billions of dollars worth of real estate, so they would make money even in the worst-case scenario. However, not only did they sell a lot of real estate, but Lampert was also able to turn the business around, and the company, now Sears Holding (Nasdaq: SHLD), has gone up about 1,300% in the past four years.

However, not all worst-case scenarios are quite so rosy. Industry juggernaut USG (NYSE: USG) hit a perfect storm and went bankrupt in 2001, and Time Warner's (NYSE: TWX) AOL, once an Internet titan, now offers its services for free. Worst-case scenarios can and do unfold, and investors need to strongly consider the consequences if they do. (And although this is obviously said with perfect hindsight, perhaps this would have helped Time Warner sidestep the AOL merger.)

2. What is the probability of the worst-case scenario?
For Coca-Cola (NYSE: KO), I'd imagine the worst-case scenario is that people stop drinking Coca-Cola products. If this happened, the business would be worth its liquidation value. However, the probability of that happening is so low that we can pretty much ignore it. Coke has been the dominant carbonated drink for ages.

It can be really hard to pin down an answer on this question. For instance, what's the probability that ethanol will be a viable alternative energy source in five years? What's the probability that the price of a barrel of oil declines to $40? What's the probability that Google will still have the dominant search engine in five years? Unlike dice, where we know the exact probabilities, businesses have too many factors. Often, the best we can do is guess. The trick is to only make guesses where you have enough knowledge to get somewhere in the ballpark.

3. What's the company worth in the worst-case scenario?
Sometimes, as with Kmart in bankruptcy, a company has substantial value even in the worst-case scenario. Other times, as with a one-drug biotech company, the company is virtually worthless if the drug doesn't work. A quick and dirty way to value a company in its worst-case scenario is the liquidation value of its assets, or the lowest price one could reasonably expect a competitor to pay to buy the company.

For companies with nearly impenetrable moats like Coca-Cola or American Express (NYSE: AXP), the worst-case scenario might be flat growth -- so my worst-case valuation would be ascribing a "normal" multiple to a high-quality company.

It's darkest before dawn
If you invest only in companies where you're paying less than or equal to the company's worth in the worst-case scenario, then it's pretty hard to lose money. You can either do this by paying less than liquidation value for a deeply distressed company, or by paying a mediocre multiple for a great company. This is a methodology that takes time to understand and apply correctly -- as well as an enormous amount of discipline and patience -- but I believe it's the best way to invest your hard-earned money.

Source: fool.com

How a rate cut could affect you

With some many expecting the Federal Reserve to cut interest rates, it's best to be prepared on how it will work in your favor.

By Gerri Willis, CNN
September 13 2007: 4:11 PM EDT

NEW YORK (CNNMoney.com) -- All eyes are on the Federal Reserve and whether or not it will cut rates next week. If you're looking for a loan, wondering whether to refinance or just anxious about real estate, here's how to play the Fed's decision in your favor.

Investors are expecting the central bank to lower rates by at least a quarter of a percentage point, but some are hoping for as much as a half-percent cut. Fed Chief Ben Bernanke hasn't tipped his hand, but he has indicated the central bank is prepared to make rate cuts to protect the economy from the impact of a global credit crunch.

Even if the Fed does act, some experts are saying there may be little change in mortgage rates. Here's why: Typically mortgage rates follow the rates of interest that the government pays for 10-year Treasuries.

But in the last few weeks, 10-year Treasuries yields have fallen substantially, while mortgage rates have remained stuck around 6.2 percent. Those rates aren't budging because bankers are so uncertain about the mortgage market that they are requiring borrowers to pay a premium.

"It's going to take a series of moves [by the Fed] to allow credit to flow again. The mortgage market isn't going to behave normally until next spring or summer," according to Mark Zandi of Economy.com.

But the markets could also have to deal with a more pessimistic economic outlook that comes out that morning from the National Association of Realtors. The trade group will update its monthly economic outlook. The NAR has been cutting its forecasts for both the volume of home sales and prices regularly in its reports since the spring.
1: Play both sides

It's not just about what the Fed does, it's more about how the market reacts - specifically the bond market. There's a chance the Fed could cut rates, and mortgage rates won't go anywhere because there's still a lot of fear on Wall Street.

You can always lock in a rate with one lender and have your mortgage broker float you with another bank. There aren't any fees associated with this if you use a broker. This way, if rates don't come down dramatically, you can always stick with the first deal, says Melissa Cohen, a mortgage broker with Manhattan Mortgage.

And keep in mind too that if you're looking for a traditional 30-year mortgage, you'll have an easier time finding banks to back your loan.
2: Evaluate your situation

If you're in a longer adjustable rate mortgage, like a 7-year or a 10-year ARM, decide how long you want to stay in the house and figure out how much time you have before your rate adjusts.

If you have less than one year left, it's time to refinance. The process of refinancing takes at least 60 days. If you have two years left and good mortgage terms, it'll be worth your while to wait, says Bob Moulton of Americana Mortgage.

Consult your gut, too, though. Some folks will simply be too anxious to wait it out and watch rates.
3: Refinance sooner

If you are facing a rate adjustment and housing prices have fallen a bit, you may want to refinance sooner rather than later. That's because it's likely prices will fall even further.

Earlier this week, a survey came out indicating that home prices are up a measly 2.6 percent - and that's the weakest gain in over a decade. Places where there were the biggest price declines include California, Florida and New England.

Plus, credit standards are only going to get tougher. It's not just the Fed game you're going to have to play, it's the credit game.

Source: CNNMoney.com

Protect Your Hard Earned Money

Consumers lose billions of dollars every year to investment fraud. It touches all segments of society, every level of income, and every age. Investors are lured by the promise of high returns or huge tax savings with little or no risk. Sounds too good to be true? Well, it usually is. Far too many investors plunge into investments without first investigating them. The same scams are used over and over again on people who do not take the time to check out the offers or learn the danger signs.

The Securities Division is a division of the Office of Secretary of State. This office regulates investments sold in Missouri and the people who sell them - stockbrokers, financial planners and the companies they work for. If you would like to check the registration of the promoted investment, inquire about the licensing status and possible disciplinary history of an investment professional, or if you need to file a complaint, contact the Secretary of States' Office, Securities Division's Investor Protection Hotline at 1-800-721-7996

Carnahan Urges Investors to Use Caution and Common Sense

[ Download Carnahan Urges Investors to Use Caution and Common Sense ]

Be wary of unexpected phone calls, letters, e-mails, or personal visits from strangers who offer quick-profit schemes that require an immediate investment.

Be skeptical of any promise that the investment is guaranteed or that you can "double your money" or expect some other high return on your investment within a short period of time.

Turn down money requests accompanied by high-pressure warnings such as "Tomorrow will be too late" or "Act now because there will soon be a long waiting list of others who want to take advantage of this great opportunity."

Always demand written information about the organization behind the investment plan and its track record. Bear in mind, though, that printed documents can easily be created, forged, or falsified.

Be suspicious of claims of "inside information", hot tips, and rumors that supposedly will give you a big advantage over other less knowledgeable investors.

Ask for a prospectus, offering circular, financial statement, or similar document before you consider investing. Then read the small print carefully and make sure you understand the terms thoroughly before signing any kind of commitment.

Get an outside opinion on the information in the prospectus from a professional such as your attorney, stockbroker, accountant, or other reliable consultant, before making a commitment.

Check it out with the Secretary of State's Office, Securities Division to confirm that the company or individual is properly licensed to sell securities in Missouri and whether there have been any complaints and violations of law. Contact the Investor Protection Hotline at 1-800-721-7996.

Know who you’re dealing with whenever possible. Deal with established businesses whose reputations are known and respected in their communities.

When in doubt – Hang up. When in doubt, make no promises or commitments, no matter how tentative. It is far better to wait and lose an opportunity than to take the plunge and lose everything. When hounded on the phone by an aggressive promoter, do not be afraid to hang up without explanation. You don't owe the caller anything, no matter how nice the caller may seem. In fact, this kind of solicitation is an invasion of you privacy, and may be a violation of federal and state law.

Source: http://www.sos.mo.gov

Tips for Avoiding Investment Scams

• Don’t believe claims that there is no risk. There is always risk in investments, and no one but a con artist will tell you otherwise. Know the risk before you invest.

• Beware of promises that you’ll make big profits fast. No one can accurately predict how an investment will do. Often the investments that promise the most pay-off are also the most risky.

• Get the details in writing. Legitimate companies will be happy to give you all the information you need.

• Don’t agree to anything on the spot. Pressure to act immediately is a danger sign of fraud.

• Understand your investments. Do you know the difference between stocks and bonds, margin accounts and cash accounts, options and futures, mutual funds and certificates of deposit? If not, do your homework before you invest.

• Don’t act on testimonials from strangers. Someone who appears to want to share a friendly tip about a great investment opportunity may actually be a con artist trying to lure you into an investment scam.

• Be especially wary of investments in commodities. Crooks often promise that the value of investments in coins, precious metals, artwork, oil leases, gemstones, and other commodities will rise. The truth is that the value of these types of investments can go up or down significantly.

• Steer clear of “offshore investments.” These are often promoted as a way to avoid taxes. Actually, you are still liable for taxes, and the investments themselves are usually very risky.

• Be cautious about emails for investments. Many unsolicited emails are fraudulent.

• Take the time to check out investment offers. A good place to start is with your state securities regulator. Other resources for information to help you make wise investment decisions include: the federal Securities and Exchange Commission, 800- 732-0330, www.sec.gov; the North American Securities Administrators Association, 202-737-0900, www.nasaa.org; and the National Futures Association (for investments in commodities), 800-621-3570 (in Illinois, call 312-781-1467), www.nfa.futures.org.

Source: http://www.fraud.org

Top Ten Investment Tips

1. Diversify
The expression, "don't put all your eggs in one basket" is meaningful when it comes to investing. Don't put all your money in one stock. Also, buy fixed income securities (i.e. bonds) and stocks. Don't pick only one type of investment.

2. Do Your Homework
Obtain and analyze as much information as possible before making your investment decisions. This will alert you of any problems a company may have, or what to expect from your investment.

3. Set Goals & Limits
Determine the price (high target price or low stop-loss price) at which you're willing to sell. Analyze interest rates to decide what return you want.

4. Don't Gamble With Money You Can't Afford To Lose
The less you can afford a loss, the more conservative you should be in your choice of investments.

5. Don't Be Greedy
Don't expect your broker to recommend stocks that will double in value within a few months. If you do have a stock that goes up considerably -- i.e. 50% or more -- sell.

6. Invest For The Long-Term
Company stock prices will fluctuate, sometimes unfavourably, in the short-term. Invest for the long-term, but keep your current financial needs in mind. You never know when you might need some of that money.

7. Avoid Acting On Impulse
An impulse buy, whether at the mall or on the stock market, is still an impulse buy. Stick to your plan. Don't buy a stock on a hot rumor; you'll get burned 90% of the time.

8. Go For Value
Undervalued stocks will help create the most growth in your portfolio. Look for bonds of companies that are out of favor too. They should be selling at a deep discount.

9. Tax Planning Is Important
Consider income-splitting techniques. (Ask your investment advisor).

10. Get Professional Help
If you're starting out, hire the best professional help you can afford. Professional advice will likely pay for itself within a short period of time. Once you become used to the market, do the research yourself. Later on in the game, switch to an online broker.

Article Suggested By: Mel P.

Source: AskMen.com

Keys To Success

Find your own place – Find one or several techniques that you feel confident with.

Don’t expect immediate results – Process and habits take time to build, some failures at first will be necessary. Therefore trade small initially until confident built.

Have minimal expectation – Do not expect profit initially, but rather accept the fact that learning the game will cost you tuition both in term of time and money

Play your own game – Do not be distracted by anything else, include search for better systems and the influence from magazines and newspaper.

Set clearly your goal – Set targets to achieve in long term, short term and daily trading.

Don’t let good profits turn into losses – Once there are profit you should try your best not to let it become losses and to get out for at least a break even.

Don’t force trades – Trade only if your system tell you so. Don’t hesitate – Every moment you lose in entering or exiting a position is a moment that may cost you money.

Don’t overtrading – Overtrade will kill your trading plan and confident.

Persistence – Ability to continue trading even when results have not been good. Some of a trader’s greatest successes will occur following a string of losses.

Willingness to Accept Losses – Once you set a stop loss, never remove or lower it.

Specialize – To make money is to catch the big move, not to have too many positions to take care. Afterall, the lesser your positions are, the more you can concentrate.

Keep a Dairy – Keep detail record of your trades, so that you can learn from past mistake and sharpen your future trading skill.

When in doubt, stay out – Remember you have nothing to loss if you stay out of the market.

Do your homework – Without detail homework, you can not compete with professional players and win.

Keep thing simple – Both your trading system and your analysis.

Trade active markets only – Do not fall into an excuse of thin market and can’t get out.

Be a Contrarian – Remember majority are wrong, take advantage of mob psychology.

Source: http://www.him.com.sg/

How to Stop Losing Money in Stocks

Joe Magyer
August 31, 2007

Losing money hurts. Literally.

The way humans process financial loss is similar to the way we process physical pain, according to a recent study by Dr. Ben Seymour from the Wellcome Trust.

So if losing money causes us pain, and we don't like pain, we should try to avoid losing money, right?

Right
I hate to disappoint, but despite my mischievous headline, there's obviously no guaranteed method for eliminating stock market losses. But we little guys needn't be completely defenseless.

Here are four steps you can take to shore up the defenses of your portfolio while still allowing for hearty capital appreciation. Given the recent market turmoil, there's no better time to put these principles to work.

1. Take shelter with dividends
Dividend payers typically sport strong and growing cash flows, which also happen to be the drivers of a growing stock price. In The Future for Investors, Dr. Jeremy Siegel exhaustively argues that investing in dividend-paying stocks and reinvesting those dividends has proved to be a market-beating strategy over the long haul.

What traits should you look for in a winner of a dividend payer? For starters, make sure the dividend is secure and unlikely to implode on you. Also look for consistent payout ratios and earnings growth.

2. Invest in strong brands
Investing in unheard-of small caps is not the only path to outstanding returns. Some of the best investment opportunities are supported by branded products and services you already know and use. Use your knowledge as a lifelong consumer as a tool to boost your portfolio.

Strong brands allow for premium pricing and superior margins. The strength of their brands and the resulting fat margins give companies like Wrigley (NYSE: WWY) and Procter & Gamble (NYSE: PG) enhanced downside protection in bear markets. By seeking out companies with strong brands and offering growing, secure dividends, you're practically halfway home to significantly lowering your portfolio's downside risk.

3. Avoid sky-high valuations
It doesn't take a battle-worn market guru to know that stocks with sky-high valuations have much further to fall. It is easy to get swept up in the greed-induced euphoria offered by a Google (Nasdaq: GOOG) or Jones Soda (Nasdaq: JSDA)-like situation. Trading at 41 and 125 times trailing earnings, respectively, though, the reality is that those companies' enviable expected hyper-growth is already priced into their valuations. When these high-growth, high-priced companies slip, mom-and-pop investors are usually the last ones holding the bag.

If you want to gamble, go to Vegas. We're talking about your retirement, your kids' education, and your life savings. If you're serious about limiting your losses, don't overpay for growth when reasonably priced dividend payers such as Johnson & Johnson (NYSE: JNJ), Wal-Mart (NYSE: WMT), and Walt Disney (NYSE: DIS) are sitting in plain sight.

4. Diversify
Investing in only a small number of companies might work for Warren Buffett, but running concentrated portfolios is not appropriate for the average investor. You can achieve diversification with funds, a broad range of individual stocks, or a mix of both. How many stocks should you buy? There's no perfect answer, but if you're balanced between an index fund and 10 stocks, you're OK. If you just own 10 stocks, well, watch out.

Let's review
So, again, that's:

1. Take shelter with dividends.
2. Invest in strong brands.
3. Avoid sky-high valuations.
4. Diversify.

A simple, defensive, and profitable set of strategies. So while there is no way to eliminate losses in the market, you can minimize your risk of loss and earn market-beating returns.

The Fool's Income Investor investing service, to which I was a charter subscriber myself before becoming a full-time Fool, has followed its own dividend-focused strategy en route to market-beating returns. If you'd like a few of our top dividend stock ideas, you can now try the service free for 30 days.

Fool editor Joe Magyer does not own shares of any companies mentioned in this article. Wrigley and Johnson & Johnson are Income Investor selections. Wal-Mart is an Inside Value selection. Disney is a Stock Advisor recommendation. The Motley Fool has a disclosure policy.

Source: Motley Fool

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