so you want to become an investor by david m. giosa - HTML preview

CHAPTER 7- conclusion

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INTRODUCTION;

CONGRADULATIONS, you finally took the first step to a better life for you and your family. It does not end here; you will need to continue your education with the info I give you in this book. The markets change constantly, laws are being made every day, and investment techniques change every day. You will need to keep up with this. Being an investor requires as much effort as you do going to work everyday. The reason you work is to make money, the same goes for investing. I will cover a lot of things to help you become a good investor, which will help you get your feet in the water. But you will need to continue your education to swim. Don’t let me scare you off from reaching your goal, When all is said and done, you will be successful. I started trading when I was 21, to date I have been investing for 36 years, and I never regretted it or looked back. My first trade was a stock option my company offered. From there on, I went on to invest in a lot of different companies.

I will cover stocks, bonds, ETFs, mutual funds, mlps, trusts, and some real estate in this book and so on. All of this will help you become a diversified investor. Some of you may just want to focus on one thing, that’s fine. But looking at all that’s available to you, and having diversification in your perfollia will help you storm bad times in the economy.

Some people may tell you investing is gambling. Yes, investing has risks, but an educated investor learns how to handle risk. Some people will try to give you stock tips if they know you’re an investor, a good investor will do his fundamentals and technical analyst.

Before buying a stock, most tips come after the stock has already risen, that’s why you need to do your homework first before you buy. Remember you’re here to make money, not loose it. There are 3 types of animals in the market, BULLS, BEARS and SHEEP.

BULLS buy stock low and sell high, BEARS sell stock high and buy stock low, and this is called shorting a stock. SHEEP buy stock high and sell stock low; this is why sheep get slaughtered in the market. DON’T BE A SHEEP. One thing I want you to burn this into your brain and never forget it, “ GREED KILLS”. This is why most beginner investors fail, lack of education will wipe out all your hard earned money. I will teach you how to paper trade first to see if you have what it takes to be an investor. You must not let emotions get in your way, the market is like a roller coaster, you must learn what price you will get in at and what price you will get out at on every trade you do. Never go against the market, because you will always loose. I hope I did not scare you about becoming an investor, but if you are a gambler or very emotional about your money, the market is no place for you.

You are just going to make the rest of us rich. I hope you enjoy this book as much as I did writing it. Good luck and I hope you become a successful investor.

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CHAPTER 1 BUDGET

You may have heard the term “IT TAKES MONEY TO MAKE MONEY”. This is true to be a successful investor. I have come across many people who tell me that they work but they have no money. I respond with you have money, you just don’t know where its going. In this chapter we will find out just how much money you have coming in, and were it is all going. Once we calculate this, we will redirect the funds to create positive cash flow. Think of yourself as a CEO brought into a failing company, and its your job to turn it around. First thing is to find out how much is coming in, second thing is to find out were its going. Then we will try to generate positive cash flow. So lets get started, no time like the present to get the ball rolling. I want you to get a piece of paper And draw a line down the center of it. On the left side at the top I want you to write the word “INCOME”. Under income I want you make a list of all the monthly money you make. Like work, dividends, interest, and other income you make on the side. If you do things like sell at flee markets on weekends or have some type of side job. These numbers are per month, not weekly or yearly. If you have a yearly amount you receive just divide by 12 and list it in monthly format. Now we know how much money is coming in. On the left side of the page I want you to write the word “EXSPENCES”.

Now I want you to list all the things you pay for out of pocket. Like electric, water, sewer, auto insurance, credit card and so on. Under expenses I want everything you spend money on, this will include going out to diner, what you spend on lunch per week at work, gas for your car. Put it all in monthly format, don’t leave anything out. An easy way to do this is to get a receipt every time you spend money. This also may help out at tax time, because some of the things you are spending money on may be tax deductible.

Now total the two sides and put those numbers at the bottom of each row. The amount under income should be higher than the amount under expenses. If it is not, you have a problem and it is time to start cutting expenses. I will give you some examples on how to cut expenses so your not living check by check and have to work till you die. I made a list of expenses and how to cut them; you may find other ways to make cuts. The bottom line is you will need to cut expenses to increase your savings.

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ELECTRIC-this can be a big expense, but easy to control. Try changing all your lighting to diode bulbs; you can use dimmers with them, not like florescent bulbs.

They are a little expensive so do a room at a time. Another thing you can try is these outlet boxes that turn power off/on that plug into the wall, then plug your lights, TVs ext.

into them. Devices still use electric even when they’re off. Your power company offers all kinds of tips to conserve energy, look into it. Remember every time you turn on something or leave it on when not in use it is costing you money. Put a timer on your water heater, this is a big energy hog and can be controlled very easily. You will need an electrician for this, because it is high voltage.

There is a thing called a KAVAR BOX, look it up online, it is a surge protector that hooks into your breaker box. It is high voltage, so higher an electrician to install it. How it works is it limits the electric coming into your home and prevents power surges. It extends the life of all your items in the house that use motors, like heating/air, fridge, washer and dryer, ceiling fans, and so on. It also prevents your computer or televisions from power surges. It has cut my electric by 20.00 per month because I am not being charged for that extra electricity.

WATER-there are attachments that go on your showerheads and facets that slow water flow and add water pressure. To find a leak, shut off all running water and look at your water meter, if its turning, you have a leak, most of the time it’s the toilet, make sure you fix it, this can run up your water bill. Now that they charge a lot for water, you want to keep on top of this.

HEATING/AIR CONDITIONING-to start, make sure your house is airtight, seal all leaks. Make sure all vents are not blocked and keep up on changing filters. Lower heat in winter, raise air in summer. Check to see if there are peak hours on your bill were they charge more. If so, use large appliances (washer/dryer/ext) on off peak hours. Turn heat/air off in spring and fall. Check to see if your insulation is up to standard, if not, add more. On your rafters you can staple this thermal foil, it’s the same thing you see in lunch boxes. Its bubble plastic with foil on both sides, you run it down both sides of the roof in the attic, stapled to the rafters. You leave a one-foot gap at the top and bottom, so you don’t sweat the roof. The outside layer repels the cold and the heat depending how it is outside. The inside layer keeps the heat or cold from escaping, just like a thermos does with your coffee or cold drink.

PHONE-cell phone bills can cost a lot, shop around. If you have Internet, put an IP phone in. and cancel your landline. Most have unlimited calling for all over the U.S. at no charge (magic jack, vodaphone, ext.)

CABLE- get the cheapest package, even though most people stream there shows over the Internet, which is a lot cheaper. Change to FTA (free to air), hook an antenna to your TV

and run the scan button in your TV menu. You get all your local channels for free and then just stream all the shows you want to watch.

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INSURANCE;

HOME – this effects your mortgage if its part of it. Ways to cut it are to raise your deductible. Get the square footage of living space off your property tax bill, do not include basements, go on line and search HOME INSURANCE CALCULATER. Enter the square footage and your zip code, you will get 3 quotes. H1- the actual cost to replace your home, H2- my favorite, the property assessors quote. H3- policy most insures like, it over insures your property and your paying for things you will never use. Keeping this cost down also lowers your mortgage payment if it is part of it. When shopping for homeowners insurance ask to be quoted for H1, H2 and H3 policies. H1 is hard to find, but H2 and H3 are attainable, if they say they only do H3, say good-bye and hang up the phone. Don’t sit around to listen to there sales pitch. You have better things to do with your time.

AUTO- full coverage- raise deductible; ask for all discounts in quote. State minimum coverage- rule of thumb, any auto with 50,000 miles or higher should carry this coverage. If you have two cars or you drive less than 8000 miles a year, get the discount For the second car and low mileage pleasure driving.

LIFE-term insurance-cheapest, you die it pays, period. Whole life- poor investment, high commissions, stays away from. Annuities are one of the worst returns on investment.

MEDICAL- raise deductible, get all discounts, this expense alone is a killer of paychecks. So you definitely need to shop around for the best policy or look at the alternative called a Health Share, half the price of regular medical insurance.

HEALTHSHARE- these have been around for years, alternative to carrying regular medical insurance. They pay you instead of the doctor or hospital, and then you pay the doctor or hospital. They also help you negotiate the price. Research these first to see if you feel good using them. Currently 4 exist, so check all the terms with each one to see which meets your needs. Search health share on your computer, four or five should come up, check each ones terms carefully, read the small print. You should be doing this anyhow on any business agreement before signing on.

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HSA- health savings account- your insurance needs to have a $ 5000.00

deductible, you only need to keep 2000.00 in it if offered by employer, 2500.00 if self employed or retired. Anything you put in over it, you have the option to invest in a mutual fund and the money is tax deferred or tax deductible. Check with your accountant for exact amounts. Let me explain the difference between tax deductible and tax deferred.

Tax deferred- are benefits you receive from employer, like 401k plan and health savings accounts, it comes off your income before tax. This helps lower your taxable amount of pay, which is a good thing. Tax deductible- is deducted after tax, also good, used with IRAs, SEPTS and self employed or retired health savings accounts. The reason you want to use these is because when you do go to access this money it will be at a lower tax rate.

Check with your accountant for more detail.

LOANS;

MORTGAE- get the amortization schedule for your loan, it is a breakdown of your monthly payments in interest and principal format for the full term of the loan. Most mortgages are laid out where the interest amount is higher and the principle is lower in the beginning of the loan, as the loan gets paid off it reverses. The reason for this is most homebuyers either sell their house or refinance it in the first 5 years. Smart investors pay extra principle each month to cut the interest. This is how you take a 30-year mortgage and pay it off in 15 years or less. You should do this with all loans.

AUTO- interest rates are negotiable, so check with your bank before using the dealer; they usually will give a better rate if you bank with them. Also pay extra principle against the loan; these loans are not tax deductible, so try to pay them off quick.

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CREDIT CARDS- pay off your credit cards because they’re not deductible and the interest they charge is way to high. If you have a lot of credit card dept, consider a consolidation loan to get it under control. Keep just one credit card and cap it at 5000.00.

If you need to borrow more than 5000.00, go get an equity or personal loan, there is no reason to be paying these high interest rates. A credit card is supposed to be used for emergency only, if you pay off your balance each month, that’s fine, but most people destroy there credit because of credit card dept, don’t become one of them. Always pay your balance off each month so you don’t pay interest. This will also control impulse spending. Consider freezing your credit, it costs around 10.00 for each reporting agency and it will help with identity theft. No one can take loans out in your name; you just enter a password to unfreeze your credit to get a loan. With all these companies getting hacked and loosing your personal information, you need all the protection you can get. When shopping try to give the least amount of information to the retailer as possible, remember it’s all on computer for someone to hack. don’t give emails or phone numbers if you don’t need to. Have 2 e-mail accounts, one for junk mail like retailers, friends and family and a second one for people you do business with like banks, brokers and so on that have secure sights and only send you important info you need. Always be secure with your personal information, remember this is the digital age, what ever you put online goes all over the world for people to see. Everything can be hacked, if you want the world to see it, post it. If not, keep it to yourself if you want to be secure.

Check your credit report once a year, it is free and it will give you a good piece of mind.

Fix all discrepancies you find on your credit report immediately, don’t wait. THIS CAN

CAUSE LONG TERM DAMAGE.

MAC CARD (DEBIT CARD)- have bank cap withdraws to 200.00 or less a day. This will help cut your spending and if your card is ever stolen they cannot wipe out your account in one day. Make sure your not being charged for using your MAC card, if so change banks. Use MAC card for cash only, not purchases. Its better to use your credit card for purchases, this way if your identity is stolen, it’s on the credit card instead of your MAC card and it much easier to dispute without affecting your savings. When buying on the Internet use preloaded gift cards, this way if your identity gets stolen, they only get the value of the gift card.

ENTERTANMENT-if you like hitting the bar, going out to dinner, ordering out and so on, you will need to get a handle on this. Breaking these habits will be hard, but not UN

attainable. Make your own coffee in the morning; pack your own lunch for work. All these cost cuts will increase your savings. Besides it will be healthier for you in the long run.

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MISALANIUS EXSPENCES- I did not cover all expenses in this breakdown, but you should have a good idea how the budget works. Make sure you know were every penny you make is going, this will give you the exact numbers to work with. When you know all your expenses, then you will be able to do the necessary cuts. Remember the whole idea is to build your savings so you have money to invest. You may have to do without a lot of things, but most things you buy depreciate the minute you take it of the shelf anyway or its already out of date and something newer or better is already coming out.

Buy things that meet your needs, not things because it’s the newest and greatest technology.

I see so many people blow their money on junk that they use for a week then tosses it in the closet. Remember your trying to become an investor not a hoarder of junk.

Put your focus on buying things that will appreciate in value, don’t be afraid to haggle on price. When you purchase something it should be worth more than you paid for it. The whole idea about being an investor is buy low sell high. Make it your daily habit, because once you start trading you want that killer instinct to go after the best price and close deals. And if your doing it in your daily life, you will bring that instinct to the table with you when you are trading. This type of attitude will become natural to you. Well good luck with getting your budget done, just remember to be honest with it, it’s your money, you should be the one dictating how it should be spent. Just like at work, your boss pays you and tells you what needs to get done, when you are paying someone money for a service or buying something, you hold the cards. Do not be afraid to say ‘NO’ if a price is to high or you think you can get a better deal. No is a very strong word, learn to use it as much as possible.

I need to mention this before concluding this chapter; I have seen the markets wipe out many people over my time being an investor. It could be in stocks or real estate, did not matter. In real estate they maxed out there equity by taking loans out for new cars and just stupid things they did not really need. When the market turned on them, there mortgage was more than the value of the property. Build your equity by paying extra in your monthly payments. And if you’re going to use it, buy another property. There is a lot of money to be made in real estate, but that’s another book and I am not going to get into it. I wrote a book called ‘STOP TAKING ALL MY MONEY’; it will give you a basic start in real estate. As far as IRAs and 401ks are concerned, these are not your personal piggy banks. You need this money to retire and that’s what they are meant for.

This is why I put the budget as the first chapter in this book. If you do not know how to manage your money, the rest of this book is useless to you, because you are just going to loose it. Remember the old saying ‘a fool and his money are easily parted’.

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CHAPTER 2 BASICS

Once you have completed your budget and have an idea of how much money you have to invest, we can get started on where to place your money. Investors come in all different shapes and sizes from day trader, swing trader and long term buy and hold trader. There are two types of ways for picking stocks and Mutual funds. They are fundamentals and technical analysis; we will use both when researching our investments. There are certain indicators we will watch to know when to get into an investment and when to get out. We will also learn to control risk, this is very important for your survival as an investor. The market as a whole only moves in three directions, UP (greed), DOWN (fear) and SIDEWAYS (uncertainty). This is what you will be reading in the charts when you view them. I will get more into this when we get into picking stocks and using technical analysis.

Lets start by explaining the different types of traders.

DAY TRADER- day trading is just as it sounds, you buy and sell during the day and you are out of the market by the end of the day. Day traders use charts to make there trades, they will look at news and fundamentals before and after the market opens and closes so they have an idea of the direction of the market before it opens. They will not trade against the market because they are trying to capture a small profit above the opening price or below the opening price if they are shorting the stock. They make there money by buying a lot of shares at once, then selling them once they move in the direction they want it to and then cash out. To make money in this type of trading it takes a lot of money or you can borrow money from the broker on margin. This means if you lose on your trades you are out of money or you owe the broker.

This is the highest type of risk trading, as a beginner you should stay away from this type of trading until you are very good at technical analysis and fundamental. Don’t get me wrong you can make a lot of money but you can also loose a lot of money if you don’t know what your doing. I have friends who have made a good living day trading, but they took the time to train on every aspect of technical analysis and fundamentals before they started trading. I also have a lot of friends who were taking to the cleaners because they failed to get the correct training before becoming a day trader, to put it in layman terms, they were just gambling. Remember the old saying, a fool and his money is soon parted. I only touched the surface of day trading, but we will be using some of the techniques with charting on picking stocks and funds.

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SWING TRADER- this is like the day trader except you will hold the stock longer than a few seconds. Swing trades can last a day, a week and sometimes a month if you want.

With this type of trading you will do your fundamentals and technical analysis before you set up your trade. You will know what price you are getting in at and what price you will exit the trade. This is fear, greed and uncertainty come into play, your entry and exit prices may not be exact, so get as close to them as possible. Do not get greedy and try to squeeze every penny out of the trade, when you are close to your sell point, exit the trade and get out, don’t ever try to go against the market because you will always lose. In this type of trading you will use protective stops, this means if the market goes against you, your stock will be sold at a specific amount your willing to lose on the trade. Better to lose a little money than all of it. As your stock goes up, you will move your protective stop up to protect your profit. This is one way to limit risk in the market. There is a lot of money to be made in swing trading and we will be using some of the techniques of swing traders.

LONG TERM TRADER- trading long term means buy and hold, you are looking for growth and income (dividends) or both. This is the least risky of the three. Buying mutual funds are long term and can help your money grow at a safe rate, mutual funds have less risk than stocks because the fund purchases a lot of shares in different companies so your investment is more diversified than having the same money in just one stock. This is why 401ks; ira's and pensions invest in mutual funds. Mutual funds come in all different kinds of risk levels from high risk-small cap stocks, over seas stock and so on. Middle riskS&P stocks, blue chip growth and value and so on. Low risk-bonds and money market and so on. The higher the risk, the higher the return.

The lower the risk, the lower the return. The rule of thumb for risk levels is if you are 40

years of age or younger you will be holding more in stock, if not all stock. If you are 40

years and older you will do a mix of stocks and bonds to help limit risk and build capital.

In a 401k or ira I like to mix the risk because I know this is a long-term investment and I want to make as much money as possible with out totally wiping out my principle part of the investment. I buy a fund that has a mix of blue chip growth stocks and bonds in it.

This way I am making money no matter what the market is doing. With the blue chip stocks I am getting money from growth, dividends, short term and long-term capital gains. And with the bonds I am receiving interest.

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My mix is a 60% stock, 40% bond. If you are young and have a long time to wait till retirement you may want to increase the amount of stocks verses bonds in your fund. If you stay focused and do not touch this money until you retire, you will have a nice nest egg to live off in your golden years. You will see a lot of people who borrow from there retirement accounts and then have to pay it back plus interest to avoid a penalty, I do not agree with this, because this is your retirement and you will need to live off this after you stop working. The more money you have working for you the more money you will make. The only reason you should be touching this money is for emergency use only. If you did your budget correctly and stuck to it, there should be no reason to be pulling money out for pleasure use.

Mutual funds use a cash averaging approach, you put money in monthly and if the market is up you are buying less shares at the high price and when the market is down you are buying more shares at the lower price. If you have a 401k were your employer matches up to 6% more or less depends on the employer, its like getting free money, so why not at least put in what the employer is matching. Besides this is all before tax money and it lowers the amount of income tax you pay. If you are 50 or older you can also put money into a thing called Catch Up. This is for the older people so they can build up their retirement savings. If you want to retire early, you should put the max aloud by the government into your 401k, ira and catch up. There is a calculator called the 72t, it calculates how much you can take out per month from your retirement accounts if you desire to retire early and feel you have enough money saved. It gives you 3 quotes, you must go by these quotes so you don’t get penalized for early withdraw. The calculator can be found online if you search 72t calculator.

One thing I want you to know is that with mutual funds they come with 2 types, load and no load funds. When researching your funds to invest whether it funds your 401k offer or funds for your ira, make sure they are no load funds, you do not want to be paying big commissions on your money. Also check to see what the fees are for the fund, this can also eat away at your profits. To check out your funds, go to yahoo finance, and enter the symbol for the fund and check the fund out, if it does not tell you if the fund is no-load or loaded, ask the broker. If your fund is in a 401k plan, the employer usually pays the fees and load. If you leave your job, you have the option of taking your retirement account with you. Do a roll over to an ira plan, if you like the fund your in, you can request them to set up your ira and do the roll over for you. Also while were on the subject, when you go to pick a broker for buying stock, use a discount broker, not a full service broker.

There is no reason to pay high commissions if you’re the one picking the stocks. Search discount brokers for a list of their fees and commissions and minimum amount to open an account.

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When trading stock you use a stockbroker, when buying mutual funds you buy directly from the issuer of the fund to avoid transaction fees. You want 100% of your money working for you without having to pay unnecessary fees and commitions. You can buy index funds which have lower fees because they invest in the stocks that make up the index, like the DOW, NASD AND S&P and so on. When we get into picking stocks, you will get a better idea what type of stocks are in each type of index. If you want to know what stocks are in each index you can just go to big charts.com and view them under stock screener. I am going to give you a list of web sights to put in your favorites on your computer later in the book. If you want to join these sights as a member, use your junk e mail address when joining, because you will be sent a lot of garbage e mails. Now lets get into the different exchanges, there are three main exchanges for buying stocks on. There are other exchanges over seas that are in china, Europe and so on, but the main three are in the U.S.

NEW YORK EXCHANGE- this contains all your big companies, like your blue chip stocks. A lot of the stock mutual funds that invest in blue chip growth and blue chip value funds pick there stocks here. You will see these type of funds listed in your IRA or 401k plans. Because they offer both growth in the value of the stock and income from the dividends and capital gains. Long term buy and hold investors also like holding stocks listed on this exchange.

NASDAQ EXCHANGE- this contains mostly tech stocks, day traders like this exchange because it offers faster growth stocks. The risk is a little higher here, but the return on investment is also higher. Stocks that pay a dividend tend to move slower than stocks that do not.

AMERICAN EXCHANGE- this contains a lot of medical and bio stocks, speculators like this exchange because if one of these stocks come out with a new drug, big money can be made. If bio and medical interest you, try buying an ETF instead, they move up slower but do not carry the high risk that speculating does.

All three of these exchanges carry a mixture of different stocks, it does not matter which exchange you buy from just as long as you did your technical and fundamentals of the stock your purchasing. I did not cover PINK SHEETS. These are penny stocks; I do not buy stocks on the pink sheet unless we are in a strong bull market. Pink sheet stocks or penny stocks carry the most risk; so try to stay away from them. If you find you want to invest in them, only use money you can afford to loose. There are more than enough stocks in the other three exchanges to buy, so why risk your capital. You will here a lot of people complain about Wall Street versus Main Street. But lets think about that, Main Street is all your IRAs, 401ks and pensions.

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If all three decided to keep all there money in money markets or bonds, Wall Street would not function. People need high returns so they can retire and support them selves.

So remember when you hear Wall Street versus Main Street, you do have a choice on how your money is being invested. If you have ethics and do not like a certain company or industry, don’t invest in it, that simple.

Next we will cover indexes, These you will monitor every day to see which direction the market is moving. I will break down the main ones because there are a lot on them. You may want to add other indexes to monitor depending on what you are investing in.

DOW 30- this index is made up of the top 30 companies, most people use this as a glimpse of how the market is doing. This can be a false indicator due to not all companies are doing great.

NY COMPOSITE- this index is more accurate on seeing how the stocks in the NEW

YORK stock exchange are doing. There will be times you see the DOW rise and the N.Y.

COMPOSITE decline.

NASDAQ- this index is made up with a lot of tech stocks. There are other types of stocks in it, but mostly tech stocks.

S&P 500-this is the standard and pours index, top 500 companies picked by standard and pours. Most mutual funds try to compare their performance to the S&P 500 to show their returns against it. Also good for an overall view of the market.

FTSE- this index is the London exchange, it is good to monitor in the morning and after hours when the stock exchange is closed to get an idea what the market is doing before you start trading. Remember I told you this is a global economy, things that happen over seas does affect the market, which is why I monitor it.

GOLD- if you invest in metals like silver, gold, copper or mining stocks. This is a good indicator. Also a lot off investors run to gold when the market is in a decline.

OIL- this index is good if you invest in energy, gas, airlines and so on stocks.

FUTURES- these indexes are all good to monitor, they cover the future price of almost anything that is sold; coco, sugar, cattle, pork, lumber and so on. Also futures cover the 3

big indexes- DOW, NASDAQ and S&P. you should check these before you start your trading day to see the direction of the market.

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The next chapter we will be going on line to actually watch these indexes and indicators.

Make sure all your security is up to date on your computer, some programs you might want to ad to your computer are windows silver light or google chrome, ad block, peer block windows security. These programs are all-free and protect your computer from unwanted garbage on the Internet. Some sights will not work with peer block, if you come across this, just shut it off. We will be using 4 sights through the rest of this book, so check them out before we start. Put these sights in your favorite column on your computer so you have easy access to them once we get started.

BIGCHARTS.COM- peer block does not work on this sight; so make sure your security is up to date. We will be picking our stocks from this sight. Use ad block on all sights.

Do not join this sight.

FINVIZ.COM- peer block works on this sight for research, but you will be opening an account on this sight and you will not be able to use peer block when you do this. Use your junk e-mail to open all accounts on the sights we will be using to open accounts on.

We will be doing a lot on this sight, like fundamentals, charts and news. Also we will be checking futures, indexes and government data. Learn to use this sight like it’s the back of your hand will improve your investing dramatically. Use ad block on all sights. This sight does not do mutual funds. You will be creating your watch list on this site and learning paper trading before you start using cash.

FREESTOCKCHARTS.COM- peer block works on this sight when doing research, but you will be opening an account here so don’t use it to open your account. use your junk e-mail account. Use ad block on all sights. This site we will be doing technical analysis using charts and oscillators. This is another site you should become very familiar with because charting will be a big part of your trading. Charts don’t lie; the news may say one thing and the chart may show another, believe the chart. This site does everything like stocks, mutual funds and ETFs. You will be creating your watch lists on this site and learning paper trading before you start using cash.

YAHOOFINANCE.COM- Use peer block and ad block, do not join this sight. We will only be using it for research on mutual funds and hard to find stocks that are not on finviz. Also use for a quick view of the markets at open before we start trading.

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Now that you have your sites, follow the instructions I put after each site and load the sites on your computer, also load the software from PEERBLOCK.COM, ADBLOCK.COM, GOOGLE.COM and MICROSOFTDOWNLOADS.COM before you visit these sights. Get this done before you start to the next chapter, we will be going on line for the rest of this book and you will need to be ready to switch from one site to the other with ease. That’s why I told you to put these sites in your favorites on your computer. Make sure all your security is up to date on your computer; you don’t want to get maleware or viruses on it. I only picked these sites because they are the ones I have had the best results with, but there are other sites out there that are pretty good that you may find out there. But with this book we will only be using the sites listed.

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CHAPTER 3 – PICKING STOCKS

In this chapter you will need to be on your computer before we start. You should have an account with FINVIZ and FREE STOCK CHARTS so you can create your watch lists.

We will be picking a lot of stocks, but after we run through their fundamentals and do the technical analysis of these stocks you will only come up with 2 or 3 stocks worth buying.

Make sure all your security settings are up to date before we start. Ok lets get started; first web sight will be BIGCHARTS.COM, so go to it. Peer block will not let you on this page, so shut peer block off for this page. On big charts home page click MAJOR

MARKET INDEXES, next page click STOCK SCREENER.

Now we are ready to pick stocks, you will see MLP/ETF and ADA after the company names on these lists, for now we will not be adding these into our picks, I will explain them in the next chapter. Right now lets just focus on individual stocks. Your settings right below the word STOCK SCREENER should be NYSE and LARGEST % PRICE

GAIN. Lets look at this list, under price we want stocks between 5.00 and 20.00, below five could carry more risk if there is a correction in the market. And above twenty also requires more out of pocket cash. NOTE; only write down the symbols for each stock you pick, we will be only using symbols on the other two sights that we will be using. We are looking for stocks that are over sold and have a big upside to them. On the % CHANGE

line we are looking for positive numbers in green. Under VOLUME we want stocks that trade at minimum 1 million shares a day.

Under DOLLARS TRADED, we want a B or M after the number, that’s million or billon dollars traded. All these criteria’s must be met for us to pick a stock to add to our watch list. If not met, do not write it down as one of your picks. Write down the stocks on this page that meet what we are looking for. Now go to the box that shows LARGEST %

PRICE GAIN and click the arrow. Note: don’t worry if you do not find a stock in some of the pages, we will find some picks because there are a lot of stocks to go through. Now go to LARGEST NET PRICE GAIN highlight and click LOOK UP. Next go to 52-WEEK HIGHS BY % PRICE GAIN, after that go to MOST ACTIVE and last go to MOST ACTIVE BY DOLLARS TRADED. Note; we will only be checking these 5

criteria’s when researching our picks under each exchange.

If you are looking for stocks during a bear market or down day in the market, you will have fewer picks, if it is a bull market or up day you will find more picks. Now go to the box that says NYSE in it and hit the arrow, go to AMEX and hit it and go through all the 5 listings we just did with the NYSE. Now change AMEX to NASDAQ and run through your 5 criteria lists. I did not have you look at the BULLETIN BOARD list because these are usually high-risk startup stocks and easy to loose your money on. The only time I would screen this section is during a strong bull market and I would look to sell it quick after it hit my sell target. As long as the company met my screening of fundamental and technical analysis. In most cases they don’t. So that’s why I don’t waste my time with them.

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These are called the pink sheets or penny stocks, either way they are the highest risk stocks out there, and until you have gotten down how to screen stocks using fundamentals and technical analysis I would just avoid this list.

You will get a lot of mail on these stocks once you become an established trader, they will recommend this garbage, its called pump and dump, they pump up the price then the bottom falls out on the stock. Watch the movie BOILER ROOM if you want to know how this scam is run. Any stock tips you ever receive you should run them through your fundamental and technical analysis, 99% of the time there garbage, that’s why I don’t take stock tips. I have better things to do with my time then research other people’s garbage. If there stock picks are so great, let them buy it.

Ok, now you should have your list of potential stock picks, so close out of this web page.

Now it time for fundamentals and basic charting. Ok go to FINVIX.COM, you will love this site, get familiar with all the info it offers, I am going to show you some basics on the home page first before we start researching our stock picks. On the top of the home page you will see 3 charts, the DOW, NASDAQ and S&P 500, the charts are in candlestick format. We will be using candlesticks through the rest of this book so get yourself familiar with them. Red is sellers or a bear signal that the market is going down. Green is a bull market or buyers in the market and the market is going up. These 3 charts contain the stocks you just picked on BIG CHARTS.

A lot of selling or red candle sticks means the market is going down. A lot of buying or green candles means the market is going up. I usually wait till after 10:30 to see the direction of the market before I begin trading. You have to remember we are a global economy and the markets are always moving. Certain events can change the direction of the market while its closed, best to check the markets before the opening to get an idea of its direction, usually around 8:30 after financial data is released. Below the 3 charts you will see 4 little charts, the first one measures how many stocks are advancing and how many are declining, green buyers, red sellers. Next are stocks reaching new highs and new lows, red sellers, green buyers.

Chart 3 is the SMA50 (simple day moving average for 50 days) this shows stocks breaking up or down from there highs or lows over the last 50 days. SMA200 (simple day moving average for the last 200 days) this shows how many stock are breaking up or down from their highs and lows in the last 200 days. Red lows, green highs on both of these charts. And the last chart is investor sentiment; this gives you an idea of what other investors think what the market is doing also shows what the market is doing during each time frame.

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The next section has 3 blocks in it, the first block shows the stocks that are advancing, and some of your picks are in here. The next block shows stocks that are declining or over sold and hitting new lows, you don’t want your stocks in this group. And the last box breaks down the sections each stock is in like tech/services/basic material ect.. Each box has little boxes inside, these boxes are different sizes to show what investors are holding in them, and the larger boxes are stock held the most of. Red means its down; black means it did not move, green means its up. This is good for a quick view of the market in a whole. The next section down lists stocks using trend lines, slide your mouse over the symbol to see how trend lines are set, you will be using them when you do technical analysis, this will help you learn how to set them when you set up your charts.

The last box shows major news coming out on some big stocks. Move down to the next section which is news, this section is very important, at the top of this page where the charts are, if you see a big spike in a candle stick up or down you can go to the news at the time frame on the chart to see what happened. If the spike happened at 1:00 pm, you go to the news at 1:00 pm and see what happened that would cause that spike, this will help you determine what is happening in the market and if you should buy, sell or just hold. If you’re a long term trader news spikes don’t matter as much, but helps to know what’s going on with your individual holdings. I want you to learn how to use charts with the news so you can track down what individual stocks you picked are doing and why they are doing it.

If a stock is filling for chapter 11 or announced a reverse stock split, you probably don’t want to own that stock. Note: a reverse stock split is when the company gives you less shares than what your holding to pump up the stock price, like 1 for 7 reverse stock split means for every 7 shares you own, you will receive 1 share. So if you have 700 shares in a company, after the split you have only 100 shares. Ok let’s move down to the next section of financial data, this is the most important section on the home page and make sure you understand it. This is what moves the market and effects your every day living financially.

A good or bad economy is reflected in these numbers, I will not expect you to be an economist, but you should understand what the data says and means. Click on the section and all the days were certain data comes out will appear. Words with a red box are the most important data, then orange is next and finally yellow. Investors wait for certain data to come out before making a trade. Unemployment numbers, fed rate, consumer confidence and other data can cause big swings in the market. An example of this is if the fed decides to raise interest rates, then any body getting a mortgage, credit card or auto loan will be effected, because they now have less buying power. This is a negative on the markets, and stocks usually fall, once the negative is absorbed by the rate hike in the market, this opens up some good buying opportunities.

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Stocks pull back on the news and then readjust, so now something you thought was to overpriced is now a buyable stock. The best thing I can tell you is familiar yourself with these terms of data and understand how they effect the market. This will make you a better investor in the long run and you will survive the bear markets and not be scared out of the market when these pullbacks happen.

Ok now lets move down to the next section, this is insider trades, both stocks held by funds and company management. You can see who is buying and selling there holding in companies you might be holding.

If you see the CEO of a stock you own dumping all his holdings, you might want to look at your stock news and any 10K or 8K fillings from the company to the SEC

(SECURITY EXCHANGE COMMISION). Lets move down to the futures section, this section is good to check in the morning before the market open and when the market is closed. This lists all the indexes and oil, gas and gold. You can click on this section to see what other futures are doing, like copper, silver, cattle and so on. The reason for this is if you are investing in a company that depends on different things that are sold in the market like oil prices, copper, meats and so on, it will effect the price of the stock. The last section on the bottom shows the price of money against the US DOLLAR and treasury prices if you invest in bonds.

When bond rates are low, I stick to stocks, if they go up I may park some money in them, but only short term. We covered the home page of FINVIZ, learn how to use all the things we covered on this page, it will improve your investing and help show you when to buy, hold, sell your holdings. Now lets take our stock picks from BIG CHARTS and analyze them. Go to the top left hand side of the home page and enter in your stock symbol of the first stock you picked were it says search ticker, company or profile. We will start with the charts, if there are any big candlesticks going up or down, we will need to find out why people bought up or dumped this stock.

What we are looking for is that the stock found its bottom and is starting to break out to the upward position. If the stock chart shows it being straight up, odds favor you missed the rally. If the stock is down and starting to reverse upward you might have a winner.

Look at the price before it went down and that is going to be your target sell price. You need to see a couple up candles (green) to see if the rally is for real. Also this is were you will pick your buying price. Once we start technical analysis we will tighten our buy and sell numbers. Lets move down to the numbers-fundamentals.

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The things I check are market cap, 200-300 mil or better, income positive, sales positive, dividend 4 percent or better, p/e around 10 but not a deal breaker, below 50. Institutional own 60% or higher, target price two times current price, 52 week range- want to get in above the low, but not much more, avg. volume lower than volume, perfect month, quarter, half, year, YTD in green or mostly green to see if there’s a turnaround in the stock, volatility 2-10 percent, little flexible, but nothing above 15 percent, don’t want to go on a roller coaster ride.

The next section is upgrades and down grades from trading houses, these do move the price but most of the time there wrong, check there price target to the date on the chart and the date they issued there prediction and you see what I mean. No one can tell the future. You are better off using the fundamentals and technical analysis to determine future growth.

The next section is news, next to some articles you will see a green number or a red number, check these, they will tell you what made the stock go up or down. On the side of the news you will see blogs of investors trading in this stock, most are day traders and it does not help you if you are looking to hold till the stock gets close to your sell target.

At the bottom of the page shows what the company does and insider transactions, you want to see a lot of buying going on, this shows if management is willing to put there money were there mouth is.

Run all your stock picks through this fundamental check, scratch out any stocks that don’t meet the fundamentals we described. Stocks that show most of what we are looking for we will put in a watch list and check on periodically to see if there are changes for the better, stocks that met criteria will go into our buy list, you can always upgrade your watch and buy lists, right now is just a training course to help you pick winning stocks.

You just need to get down the fundamentals and keep practicing them till you feel comfortable to start trading.

When you start loading your lists, make sure you put the price and date in that you picked your stocks so you can monitor your progress on the picks you made, do this for about a month and you should know if trading is for you. Basically what you will be doing is paper trading, not risking your own money until you see if you can be a successful trader. Ok now we will move onto FREE STOCK CHARTS and get into technical analysis. Go to FREE STOCK CHARTS, press free trial, let it load. I will go over the basics of this home page, get yourself familiar with this site. On this site you will have two lists, one will be a buy and the other will be watch list.

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Buys will be stocks that you feel you would buy after you did your technical and fundamental research on. Watch list will be stocks you feel have potential but are not quit ready to set up a profit potential for you. You will need to be logged into your account before you can build your lists. Lists are stored on the left hand side of the screen. You can stretch the screen to give yourself more visual look at the screen.

Ok lets get started, at the top you see a ticker with all the stocks in it, over to the right corner of the screen you can edit what you want to watch, even have your lists run on the ticker. Lets go to the charts and make our settings, you can change these to what ever makes you feel like later on, like I said I am only going to give you the basics to get you started. There is a help section at the top bar to guide you if you have questions. PRICE

HISTORY should be in candlestick, this shows you a good look of the buyers and sellers.

At the top of the charts you see add indicator, click it and add bollinger band % B, when it come on at the top of your chart, click arrow, edit, uncheck shading, check plot center line, hit ok. The bands tighten up your charts so you can see breakouts better. Now when you see a candle breaking above the top line it will give you a buy signal as long as it can hold that breakout. When it breaks above the centerline you want to watch it and see if it stays there and is in an upward trend. It would be a good idea to educate your self on candlesticks and bollinger bands, basics is green candle is buyers, red candles are sellers.

Larger candles are more buyers or more sellers, stems on candles are the high and low.

Next to ADD INDICATER is the time frame setting, for now use daily, but when you are charting for long term buys also check the weekly chart to determine the stocks trend, if the stock looks to be trending down, wait till you see a bottom and the stock reverses upward and can hold the upward trend.

Go back to DAILY charts and we will add another indicator. Go down to MACD, click it, go to arrow and click edit, change color to green, this is your leading indicator, click ok, leave the 12 and 26 numbers in place. Now edit the exp.moving average, change color to red and hit ok. The reason I use these colors is so you can determine buyers and sellers, when the green line goes above the red line that indicates a buying opportunity, when it goes below the red line that tells you the sellers have taking control, you can match the crossovers with your candle stick charts to see the buying and selling signals, you can also change the numbers in the MACD to give you early signals, play with it and see what works for you. Now go to ADD INDICATER and click STOCHASTICS, this is a tighter indicator and it’s in a channel. Go to edit and do these settings, plot-line, plot color- gold, period-12, %k- 3, average type-simple, then hit ok.

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Next hit edit on %D5, the settings should be plot-line, period-5, offset-0, avg.-simple, hit ok. Now match this chart to the candlestick chart, you can see a tighter buyer and seller ratio. The green and red lines are your channels, think of them as GREEN-RESISTANCE, RED- SUPPORT. You want the gold line to break the resistance channel line (green) to signal a breakout. Now go back to ADD INDICATOR, click DOLLAR

VOLUME, leave dollar volume alone on this chart and go to the moving average on this chart and hit edit, the settings should be plot-line, period- 50, offset- 0, average-simple.

The number 50 is the 50-day moving average, what the stocks buying and selling average has been for the last 50 days.

You can see were buyers and sellers have come in and broke above the white line to move the stock value. The red and green lines are the buyers and sellers. Ok, now we have are charts set up, here comes the fun part, if you go to a big candle stick on the top chart, you can look down at all the other charts to confirm who is in charge, sellers or buyers, all 4 charts will collate with each other on what the stock is doing. When you are using these charts, make sure they all match up to what you are thinking of doing as far as buying or selling, they will help confirm your decision.

Now lets take the stocks that you picked that you already did the fundamentals on from FINVIZ. WE WILL FIRST RUN THE daily chart looking for a breakout from the bottom and pick our buying price target. Next we will change to the WEEKLY CHART

to determine the trend of the stock. Run all your picks through daily and then weekly charts, after you are done, put them in your buy list if they are ready to buy, in your watch lists if you think the stock has potential. For now you will be doing paper trading, so make sure you put the date and price in on both FREE STOCK CHARTS and FINVIZ lists to monitor your progress.

Practice using all three-web sights for picking stocks and knowing when to sell them.

Always put 100 shares in the lists when you log the picks, it is easier to monitor. You can make changes to your charts after you have perfected using them. Only stocks that have passed your FINVIZ scan should be used to chart, others will just be a waste of your time, unless you feel they have potential, then put them in your watch list, not your buy list. I told you to look at growth/ income stocks, but as you get better with this you can raise your risk level and buy growth stocks, etf’s, mlp’s, reit’s and so on. For now learn to know good from garbage, remember it’s your money and you’re in this to make money not loose it. Learning how to read candlesticks is a big part of charting, so you should continue your education in this.

Markets change daily, so should your education of what’s going on. Practice makes perfect, good luck.

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CHAPTER 4- Basic Charting

Understanding charting is the most important part of your training. You should paper trade-using charts before you start using real money. This way you will know what to look for in the charts before you commit to investing your own money. There are 3 types of basic charts that the industry uses, line, bar and candlestick. We will concentrate on candlestick since that is the industries most used charting.

Candlesticks come in 4 colors,

Black and red in a down market and green or white in an up market. Candlesticks are made up of 2 things, the body and the wick. The body shows the open and close and the strength of the buyers and sellers. The wick shows the high and lows of the candlestick, these are the thin lines you see on the top and bottom of the candlestick. The larger the body in green or white shows the strength of the buyers and the larger the body is in red or black shows the strength of the sellers. As the bodies get smaller, that means a rally is coming to an end in most cases.

There are different formations in candlestick charting you will need to try to see when looking at a chart. This will help you figure out a trend whether it is up or down. Look at the long-term trend of a stock to see the formations in the chart to spot a trend. This will get you more familiar with using candlesticks. If you see a big body candle on you chart, go to the time frame in your news section and see what caused this big jump or fall in your stock or index.

By index I mean the DOW, NASDEQ or S&P. global news can cause big spikes in your chart, so can company news if the spike is in a stock you are holding. You need to find out why you have a spike in your chart, because sometimes it will cause a temporary reversal in the trend, or it could be a permanent reversal to the trend. Usually you should look at the indexes before starting to trade, you need to see which way the market is heading before you start trading, remember the trend is your friend.

A up trend is a good selling day and a down trend is a good buying day as long as you wait for a top or bottom to form before pulling the trigger. The market does 3 things, up-greed, down- fear, sideways- uncertainty, you will need to recognize these trends before you execute your trade. When using candlestick charts with all your INDICATERS you learned about in the last chapter, you will be able to confirm the trend with the INDICATERS. I use EFT’s to also help confirm trends, I will give you a list of both bear and bull ETF’s to put in your watch lists to help determine trend. For a bull or up trend market monitor these ETF’s.

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ETF SYMBOLS:

DIA- the Dow 30 industrial average

QQQ- the nasdeq

SPY- S&P 500

RWM- Russell 2000 (small cap stocks)

For a bear or down market use the following symbols, when you see these symbols going up, you are in a bear market. When these funds are down it is not a bad idea to have some in your holdings. When the markets down these go up and you will make money in a bear market. These funds act the opposite of the funds listed above, if the funds above are up, these funds are down and visa versa. Using these funds you are basically shorting the market.

That means you think the overall market is going down and you want to profit from it. If you are going to buy these funds, the best time is during a strong bull market so you get them at their lowest point. The lower you buy them the more you can make in a bear market. This will also give you money to buy beaten down stocks in a bear market after you find their bottoms. Usually a breakout in the upper trend in the above indexes is a sign to exit these funds.

You will be timing the market and this is very hard to do, so make sure you are good at charting before committing any money to this strategy. I am going to give you 2 other ETF’s to help you monitor the market. They represent the VIX or volatility index. The VIX always moves the opposite of the funds above. When the VIX is up, the overall market is down and visa versa is said when the market is up.

SYMBOL:

DOG- opposite of DOW 30

PSQ- opposite of NASDEQ

SH- opposite of S&P 500

RWM- Russell 2000

VXX- volatility index

TVIX- volatility index

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If you trade stocks or index’s, remember in a bull market you are looking to sell and in a bear market you are looking to buy, unless you are trading the funds above than you are looking to buy in a bull market and looking to sell in a bear market. Remember the old saying, BUY LOW/ SELL HIGH. If you are a long-term investor, you will ride the dips until you reach your target price. People in 401k’s and IRA’s are long-term investors and should be trying to accumulate as many shares as possible. In down markets you are buying more shares then in up markets, this is called cash averaging. I will teach you more on cash averaging in the next chapter.

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CHAPTER 5- ETF, MLP, ADR, DRIP, REIT

Exchange traded funds (ETF) trade like stocks but have mutual fund characteristics, in that they can be in index’s like the Dow, nasdeq, s&p. you can also buy ETF’s that short the market as I showed you in the last chapter. ETF’s are good for people who like to invest in sectors of different stocks and not take the bigger risk of owning the individual stock. When you do sector investing in an ETF, you will need to see what stocks are being held in the fund.

You can buy a bio ETF instead of being exposed to the volatility of and individual stock.

You can also invest in metals like gold, silver and platinum instead of buying them outright. This makes it much easer to sell instead of going to one of the stores that advertise, “ We buy gold” and sharing your profit with them. Always do your research before buying an ETF, know what the holdings are in the fund and use your charts to get in low, check for reverse splits in there history and how long they have been active.

A reverse split is when you receive 1 share for 2 or 1 share for 10, this will put you behind the trade and cuts profit potential. Also tells you it is a poorly managed fund and stay away from it. The bad thing about ETF’s is you have to pay a commission on every trade not like a regular mutual fund. If you are a conservative investor ETF’s are the way to go if you only want to do index investing. As you get older you will want to cut your risk and do index investing, this can be achieved by mutual funds to, and there’s no commissions on NO-LOAD FUNDS. And fees are lower on no load index funds, this helps to conserve capital. Do your homework when investing in ETF’s.

Master limited partnership (MLP) trade like stocks except you are a unit holder instead of a shareholder. You are a limited partner in the company and the tax benefits can be a little complicated. You need to file a k-1 form at the end of the year for every MLP you hold or owned during the tax year. This means you will be filing your taxes close to April 15th and could be late with your filing, you need the k-1 form before you file so take that into consideration when buying a MLP. If you do not mind the k-1 form. MLP’s pay nice dividends and have nice growth potential if you do your research before buying.

American depositary receipt (ADR) is stock from a foreign-based company held in the U.S., you are able to receive dividends and capital gains in these stocks, but you also are responsible for the tax’s to the foreign country. Take this into consideration if you are interested in investing in these.

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Dividend reinvestment plan (DRIP) are stocks issued by a company, you are buying your stocks directly from the company you want to invest in. No or low commissions make these nice for long term investors, plus you are using cash averaging to build up your holdings. Instead of receiving a dividend, your money is reinvested to buy more shares.

Nice for the buy and hold investor and the investor without a lot of cash that wants to buy into a company that is too expensive to buy outright. They offer growth and income witch makes them attractive to most investors. Remember to always do your homework on these so you are getting in at the lowest price, just like any other stock you buy.

Real estate investment trust (REIT) is trusts in stock form that are traded and have both high dividends and growth potential. These trusts usually invest in commercial and residential real estate or mortgages. Research before buying to see if there is growth potential in the trust you choose. Real estate is different than stocks and can fluctuate in different direction than your stock holdings. Take into consideration rising interest rates can affect your holdings in a REIT.

LIKE WITH ALL INVESTMENTS, DO YOUR HOMEWORK. Research before buying any investment. Make sure you do your technical analysis and fundamentals on all investments you are considering putting your hard earned cash into. Always remember to BUY LOW/ SELL HIGH. You do not want to be caught in an investment were the bottom falls out on you. If any of the investments I mentioned above you don’t fell comfortable with, don’t buy it. Take the time to educate yourself, it will be the smartest thing you can do, don’t treat the stock market like a casino. Educated investors succeed in the market; gamblers just loose their money.

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CHAPTER 6 mutual funds for Hsa, 401K and IRA In this chapter we will look at mutual funds and how they apply to our retirement accounts. The rule most people go by is to put 15% of your income away for retirement.

I know this is hard for most people with family’s and kids, or just the amount of income you have to survive on. But the fact is if you want to retire young or even retire at all, you better take this seriously. Most financial advisors will tell you that you should pay yourself before you pay your bills. This is good advise and will help you to be a disciplined investor. Do not believe your going to survive on just social security alone.

For some, social security may not even be around when they retire, which means they will be working the rest of their lives if they do not build a retirement account.

You should start your retirement account at age 21, it is nice if you get started earlier or you build your kids college fund into an ira like a ROTH ira. This way they can use the money they accumulated tax free for education. Your retirement account should be the most important thing on your to do list before any thing else and that includes trading stocks. The money you accumulate here is tax-free while you are doing it and it cuts your income taxes. It is ok to start small on the amount you invest in your account, just as long as you get started. You can always raise the amount you are putting away at a later date until you reach the 15% of income.

We will be taking a different approach to retirement accounts than we did stocks, in mutual funds the idea is to accumulate as many shares as possible and use cash averaging to make money. I will break down each account for you so you have a better idea on how they work for you.

MUTUAL FUNDS;

When picking a mutual fund there are certain things we look for like no-load funds and fees, this information can be found on morning star and yahoo finance. We want 100% of our money working for us and not lining some brokers pocket. You can buy your mutual fund directly from the company that issues it so there is no reason to use a broker to pay commissions and fees. I do not use banks; insurance companies or brokerages to invest in mutual funds, because when you buy it directly from the fund you do not pay commissions on each trade. You set up an amount you want to put in each month and pay it like you would a car loan or mortgage. There are different risk levels with each fund you have to choose from and you want the fund that will give you income even when the market is down. This income from dividends, short term and long-term capital gains will be reapplied to buy you more shares. Lets go over funds and risk levels of the different type of funds out there that you have to choose from.

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HIGH RISK; small cap stocks, bio stocks and some sector funds. These do not pay dividends or capital gains; so only the money you put in is working for you. Save this type of risk for when your buying stocks, remember this is your retirement your dealing with and you are trying to make the most money you can. You cannot move in and out of these funds like you do with stocks with out incurring fees. This is why you got to get it right the first time.

MEDIUM RISK; blue chip growth, blue chip value and blue chip balanced. These funds invest in blue chip companies usually on the NYSE. They pay dividends and capital gains and you also make money on the growth of the stock. That’s three ways that your money is making money. On the balanced fund you have a mix of stocks and bonds, so with the bonds you also are getting interest on your investment.

With the stock market going up and down its nice to be getting money when the market is down. There are also funds that invest in indexes like the DOW, NADEQ and S&P and so on, these have lower fees because they do not take a lot to manage. Check the funds investment mix to see what stocks they invest in. If you stick with the big companies like fidelity or t.rowe price you will be fine. There are other companies out there I did not mention that you could pick from.

Just do your homework on the morning star and yahoo finance web pages to see their performance and fees. Some funds have holding time attached to them, this is a fee you are charged if you pull out of a fund before the holding period. All said, these types of funds protect your money and offer the level of risk that is acceptable for you retirement savings. And remember you do not loose money unless you exit the fund in a down market.

You are using cash averaging with a mutual fund, so if the market is down you are buying more shares with your weekly, bi- weekly or monthly investment. Learn to ride the storm because there will be corrections in the market and if you have a planned out strategy you will benefit in the end when you retire. As you get older, 45 and up, you may want to limit your market exposure to the balanced funds with a mix of stocks and bonds. And when you are closer to retirement lock in your profits with bonds if you cannot handle the ups and downs of the market.

LOW RISK;

These funds contain bonds and money market investment, remember low risk means low returns and you will miss out on the gains the stock market has to offer. What you save is what you get with a little interest. This is not bad if you are retired and want to conserve capital and not risk what you have saved. But I have seen stock dividends that pay more than money markets or bonds so do your homework.

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Now I will break down H.S.A., 401K and IRA for you.

H.S.A.- (health savings account) these accounts are offered to you by your employer to help cover your deductible on you health insurance. If your company does not offer one, you can open one on your own. With the company it comes off your pre tax, which means it lowers your income tax, if you open your own, you deduct it at the end of the year. The amount you can put in is around 5000.00 per year, it moves up each year so check what the max is with your company and accountant. The plus thing about the H.S.A. is you have to keep a certain amount in the account, which are around 2000.00 to 2500.00.

Anything over that in the account can be invested in a mutual fund offered by the H.S.A.

So now not only you have a tax shelter but it is also making you money as long as you don’t get sick a lot and use up the savings. They give you a debit card with this account so you can buy glasses, medicine and so on. But the money must be used for medicine only, not anything else. When you hit 591/2 you can role this money over to an IRA or keep it to cover medical expenses. If you leave your company convert into a personal H.S.A. for your self, don’t leave money on the table, besides when you retire you will want to have this account. Medicare does not cover all your expenses.

401K; - (company retirement account) these are offered by your employer, they give you a list of funds to invest in. some companies also offer company stock in the 401k, I do not recommend buying in that with your retirement income. Buy stock separate from your retirement income. Most good companies offer a match to your investment of 3 to 6

percent and even sometimes higher. That’s free money so your contribution should be equal or more than the company match, as I said earlier 15% should be the minimum you are putting away for retirement. Just don’t leave free money on the table when it comes to your retirement. If you are self employed there are accounts you can create like the 401k that allow you to put the same amount of money away as the 401k, check with your accountant or any large mutual fund company to see what is available to you besides the IRA. The SEP (self employed person) is one were you can put more money in than an IRA. A lot of 401k’s allow you to borrow money from them, this is good if you have an emergency where you need cash, but you have to pay it back with interest. Remember if you decide to use your 401k as your personal piggy bank, that’s less shares making you money every time you withdraw from he account.

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I have seen so many people in there older age have no money left for retirement because they used this feature of the 401k.

This money is for your golden years so you can survive, not for cars, boats or TV’s or what ever junk that depreciates the minute you leave the store. If you cannot be a disciplined investor, then investing is not for you. I cannot understand why people choose to live check by check and not think about the future. When the door to opportunity opens you act, because when it closes it will be to late for you to make the changes needed to have a successful and stress free future. When you are older your body does not work like it did when you were young and why keep yourself at the same stress level when you get older.

Ask all the people who did not save for there future and are now older and still have to work just to put food on the table and a roof over there head.

IRA- (individual retirement account) you can have an IRA and a 401k at the same time and still take the same tax deductions. And if you do side work you can have a 401k, IRA and SEP to save for retirement. Check with your accountant to see what mix of these accounts you qualify for. With the IRA you can invest in mutual funds or individual stocks except with stocks you have to pay a commission on each trade. Better off sticking with a no- load mutual fund until you become a great stock trader. This amount of money you put in is tax deductible at the end of the year and will help you with retirement saving because none of your gains are taxable until you start drawing on the account. If your company does not offer a 401k, or if you get a pension, the IRA is a good alternative to save for retirement.

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CHAPTER 7 – conclusion

First and foremost I hope you enjoyed this book as much as I did writing it. I cover a lot but really I only touched the basics of investing. You will need to continue your education on investing to be successful at trading. Follow a basic rule, first get your finances in order and learn how to budget your spending and make the correct adjustments needed to have money to invest in your future. Stay away from the get rich schemes out there and make a plan and stick to it. Remember, if it sounds to good to be true, it probably is not.

The money you wasted on these schemes could have been better used to invest. Second, build your retirement account, this is guarantying your retirement will not be full of working and being stressed out to the day you die. Third, invest in stocks; this is what is going to buy you the new cars, houses and so on. You are not going to be rich just working. I know people who make good money but don’t save for retirement or invest and yet they owe more than they make.

It does not matter how much you make, its how you spend it and the way you spend it.

This is the big mistake most young people make, they run up dept and spend the rest of there lives trying to get out from under it and it carries over to when there older. And by that time it is to late to change the mess there in. BURN THIS INTO YOUR HEAD, budget, retirement, investments, in that order. This is what will make you or break you; the choice is in your hands. What you do with it will determine the life you will live. I would like to thank you for reading this book, and I hope you become one of the 1% of the population that is successful. Remember, on your way up the ladder; give back to the world that offered you so much.

Donations are deductible and you will be helping a good cause in the process. I have been trained by a lot of successful people in my time both in real estate and stocks and both groups always relayed the same message to me. “10% of your income does not belong to you”. I have heard this phase over and over again through out my life and it has stuck with me. It must be true because every person that said it to me was very successful in there lives one way or another. That 10% of your income is meant to go to charity and help others, whether its to animals or humans it does not matter. As long as you are making this a better place to live while you are here. Remember greed kills, and do you really want to leave your mark in this world as someone who only cares about him or her self, I don’t think so. Good luck with your venture and I hope you have lots of success.

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