With certain types of investments in the stock market, I lose money. With others I gain money. Often I invest in stock long-term. Sometimes I try to make a short-term killing. The long-term approach works. My short-term attempts only make me humble.

When you follow the economic news, it is easy to form an opinion if we are in a bull or bear market and if stocks should gain or fall. In the short-term stocks do not do always what they should do. At that moment, you might see an opportunity to make some short-term gains. Because the stock market is moving in a different direction than it “should be” and will soon correct. Markets should be rational, isn’t it?

Playing these short-term “opportunities” is not working out for me most of the time. Why I still fall for it occasionally? Probably I need that lesson now and then that I am not smarter than the market; just putting me with both feet back on earth. What I have learned is to limit my losses. I keep my short-term bets rather small.

The Long-term Stock Approach

When I take a longer term approach, it works out much better.

There are two different “long-terms” here:

1. The length of the period after which you measure your gains.
   
   
2. The length of the period that you aim to hold on to your investments.

Having a real long-term investment approach covers both aspects.

As a long-term stock investor, you aim to make great returns over a period of many years, maybe even decades. You do not aim to be much wealthier in a few months time.

And as a long-term stock investor, you aim to keep your investments for a period of multiple years. Of course, there are times that you have to revise your buying decision and sell your holding much quicker than originally thought.

Investing in funds and stock with a long-term perspective does not mean to be rigid, inflexible and blind to reality. You can change your mind. The intention counts.

Solid Investment Strategy

The only way to make a good long-term return on your investments in the stock market is to have a solid strategy… and stick to it (read here more about how to avoid impulsive investments).

Remember that a stock market investment strategy is a personal choice. The strategy has to match your skills, available time and ability to control your emotions.

Short-term tactics to make money in the stock market are hard to find. And anybody who has discovered one will not tell you.

It is easier to find successful long-term stock market strategies. The users of these strategies do not mind sharing them. Only people who are dedicated to them over a period of many years can make them work. Sharing these strategies does not reduce their returns.

Please like our Facebook page and sign up for our free long-term investing newsletter.

What is your long-term stock market investment strategy?

 

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Here are 7 ways how not to invest in stocks. If you want to know how to do the stock market, learn here first from my mistakes. I have learned my lessons the hard way and wish I had a top 7 like this 15 years ago.

It is easier to do the right thing, when you first learn what not to do.

 

 

Most investments turn sour because of when the investment was made; when and what purchase was done. Few investments in stocks deliver a poor return because of how or when you sold them. Thus your prime lesson here is to buy wisely.

Do the Stock Market... But Not This Way

Here is, in no particular order, my top 7 of how not to invest in stocks:

1. Buy the stocks of the company where you work, even when the industry is not doing great. You may think that you know your company very well. You may know that your company will beat all its competitors. But you could be blind to the fact that the company is operating in an industry with declining revenues and profit margins.
   
   
2. Buy the stocks of a very well-known company that are just costing pennies now. You know this company. For example, you always drove a car of this brand (GM?). Or you always bought their photo cameras and films (Kodak?). And now you could buy their stock on the cheap. Remember that big brands can have huge financial difficulties.
   
   
3. Buy the stocks that are listed in foreign stock markets and in foreign currencies without a solid foreign stock market strategy. Fluctuations in the currency exchange rate could cause you heavy losses if you do not know how to handle them.
   
   
4. Buy stocks when everyone else around you got rich already because they invested in stocks and you didn’t. Greed creeps under your skin. You want a part of the pie as well. But you could be too late to the party and lose your shirt.
   
   
5. Buy well-known mutual funds that invest in stocks without having checked their strategy, cost-level and long-term performance. You may feel save that you have put your hard-earned savings in the hands of a professional fund manager. You just did not know that 80% of the mutual funds underperform the market index.
   
   
6. Buy mutual funds that target a specific “hot” industry without that you understand the valuations and growth potential of the companies in that industry. The internet has a great future. But when you invested all your retirement savings in internet funds in 2000, you probably now have to work till you die.
   
   
7. Buy stocks or funds just because a friend of a friend on a party last night told you so. Or even when it is a close friend who told you so. Do you really know how good all his investments have done the last decade… or do you just think you know?

In our investing guide and other blog posts on this website you can read how I do invest in the stock market, using trend following and index funds.

Please like our Facebook page and sign up for our free long-term investing newsletter.

What lessons have you learned that you want to add to this top 7 of how not to do the stock market?

 

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Should I take now some of my savings and invest them in the market? The stock markets are having these nice gains the last few weeks. Fear starts to creep in. Is it my strategy that I am missing the big market rally?

 

It seems that everybody else get these great returns. But my savings are getting just this miserable interest at the bank account. What to do?

In situations like this, rule #1 is to avoid impulsive reactions.

When fear and greed are entering your brain, you rarely make wise economic decisions. Fear is a great emotion when you need to run away from a wild animal. Fear is the worst emotion when you want to decide if you should invest your savings now in the stock market.

How to avoid impulsive investments

You can avoid impulsive reactions when you have a strategy to fall back on. Such a long-term strategy tells you in which direction to move and what actions to take to get there. You have defined this strategy when you were not under stress to make an impulsive decision. The strategy is based on your priorities and what is really important to you.

What is your strategy for situations when you start fearing that you miss out on a big stock market rally?

Having a strategy is one thing. Following it is a completely different matter. Having no strategy and making impulsive economic decisions is ignorance. Having a strategy and not following it is utterly stupid.

How to follow your strategy

To avoid acting stupid and to help you to follow your strategy, do the following:

• Write down your strategy in clear and plain language. Limit it to maximum 70 words to keep it simple.
  
  
• Read your strategy out loud once per week. Do this at a fixed time of the week to be prepared and have peace of mind with whatever happens.
  
  
• Whenever, you still feel the fear creeping in and you get the urge to take rash investment decisions, get out the paper with your strategy and tell yourself to stick to it.

 

Never revise your strategy during a time of stress or crisis. Let the calamity pass. When the situation is calm again, review how your strategy has done for you in the long-term. If you think that you need to make any changes, make them at that moment.

Invest now in the stock market yes or no

When you see the stock market rallying the last few weeks, what do you do? Do you invest your money now? Do you wait? There is no general right answer. The right answer for you is that it depends on what your strategy is. This strategy will tell you what to do.

My strategy tells me to wait with taking any action till the end of the month. Then we review the long-term trends in the stock market indices. I base my actions on the direction of these trends and only take investment decisions once per month. This strategy works for me since I accept that may miss an occasional short-term rally while I know I will capitalize on the long-term trends.

Do you have a clear long-term investing strategy for your savings? If not, start spending at least 2 hours per week till you find a strategy that addresses what is important for you.

Click here to read more about the stock market investing strategy that works for me.

 

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Yakezie is a network of personal finance and lifestyle bloggers and websites. Some of the sites in the network are well known and established. Others are new and emerging.

white;vertical-align:baseline">  white;vertical-align:baseline">The websites in this network are all very different. But the common denominator here is that these sites provide an enormous amount of information, tips and perspectives on your finances and way of life. white;vertical-align:baseline">  white;vertical-align:baseline">I have joined the Yakezie Challenge to grow my blog and to help others to grow theirs. white;vertical-align:baseline">  white;vertical-align:baseline">On a regular basis you will find me in the blog posts here pointing out articles to you written by other members of the Yakezie network and challenge. Some of them will not do it for you; others you’ll love. white;vertical-align:baseline">  white;vertical-align:baseline">See below a list of links to recent and selected articles by a number of these personal finance and lifestyle bloggers. Click on the titles that attract your attention. white;vertical-align:baseline">  white;vertical-align:baseline">Happy reading!     Recommended Articles from Yakezie Bloggers white;vertical-align:baseline">  white;vertical-align:baseline"> "Helvetica","sans-serif";Times New Roman";color:#222222;">In Defense of Technical Trading   Ninja’s 2012 Canadian Stock Picks – Part 2   7 Tips For Young Investors   Long Term Investing Strategies background:white">  white"> color:#111111;">How to Spot Investment Scams   RSP? RRSP? Mutual Fund? Bonds? ETF? TFSA? A financial freedom plan.   white;vertical-align:baseline"> "Arial","sans-serif";Times New Roman";color:#1C4779;">Trustee Investment Planning: Ethical Pension Investing for Experts   white">
What is a Portfolio?     And some more...     background:white">
background:white;border:none;
padding:0cm;"> font-family:"Trebuchet MS","sans-serif";Times New Roman";Angsana New";color:black;">15 Ways to Grow and Protect Your Net Worth   background:white">The 3 Stages of Financial Freedom background:white">  white"> color:#2361A1;">Financial Blessings – Reader Stories   It’s Saturday Night And There Is No Recession       When Life Gives You Lemons Add Vodka   white;vertical-align:baseline"> "Helvetica","sans-serif";Times New Roman";color:#222222;">Drum Roll Please…What Was The Paycheck Like?   Bonus Time! background:white">  background:white"> color:black;">A Guide To Getting Ready For Your Tax Return background:white">  background:white;vertical-align:baseline"> font-family:"Rockwell","serif";Times New Roman";Angsana New";color:#222222;">Top Reasons Why You Should Use Car Finance background:white">  white">
border:none;padding:0cm;"> color:#555555;">How To Save More For Retirement If You Don’t Make Much Money background:white">  background:white">  And a final batch...   How I Budget   white;vertical-align:baseline"> "Arial","sans-serif";Times New Roman";color:#4C4C4C;">Should Parents Pay for College? background:white">  background:white;vertical-align:baseline"> font-family:"Georgia","serif";Times New Roman";Angsana New";color:black;">Using Price Comparison Websites to Save Money background:white">  background:white;vertical-align:baseline"> font-family:"Tahoma","sans-serif";Times New Roman";
color:black;">Accelerated Mortgage Amortization On Your Terms   font-family:"Arial","sans-serif";Times New Roman";
color:#333333;text-transform:uppercase;">Even small amounts have a big impact when prepaying the mortgage       background:#474C52;vertical-align:baseline"> font-family:"Arial","sans-serif";Times New Roman";
color:#D2D8DE;">Random Thoughts From the Biography of Steve Jobs | Technology as Art background:white">    Jai Catalano Amazing Photography    

Are you also very disappointed with the annual interest that you get on your savings in your bank account? Yes... join the club. Maybe it is time for some smart investing. Here are some tips for how to start.

 

 

Return Of and On Investment

When you invest your hard-earned money, you are not only interested in the return on investment but definitely in the likelihood of the return of your investment. You want your money back. Depending on your attitude towards risks, you may accept it that in the short-term your investment declines a little in value.

But in the long-run you definitely want to get your money back and have made some good money on top of that.

Tip: When investing your savings, think about your long-term returns, not about your short-term gains. Aim to be very successful over a period of 5 to 10 years. Do not focus on next month.

It is easy to focus just on the potential (but not guaranteed) higher return on investment and forget about the return of investment. When investing, there are no rewards without risks. We are here to help you to manage these risks and make smart decisions.

To protect and grow your savings, you first need to make the decision in what to invest.

 

How to Invest Your Savings

When thinking about to invest your savings, most people think about three types of assets:

 

1. Stocks
    
2. Bonds
    
3. Mutual Funds

 

Stocks

All the business information, emotions of investors and risk assessments are represented in the current stock price. Unless you have inside information, very few investors, if any, can consistently make accurate predictions about whether the price of an individual stock will rise or fall on a given day.

Of course you can try to pick the long-term winners. People like Warren Buffett are very good at this. This is what they do. This is their profession. The people that can do this are extremely talented and rare. If you are one of them, you are truly blessed and would not need any stock market investing tips.

 

Bonds

When you buy bonds, you lend money to a government or corporation. You expect these institutes to pay you back the money plus a certain interest rate that is higher than what you get on your saving account. Just be aware that sometimes something goes wrong and they cannot pay their debt. In that case, bonds decline in value. Remember Enron. Think Greece.

When the central banks lower the interest rate, bonds increase temporarily in value. When they increase the interest rates, bonds decline temporarily in value. How much the value changes, depends on how much the interest is changed and how far in the future the bonds will have to be paid back by the borrower.

This is not the place to provide a complete investing guide into investing in bonds. Just be aware that not all bonds are without risk. Bonds with a shorter time-horizon are in general safer than similar ones that mature further out in the future. But shorter-term bonds provide also lower interest rates.

When investing your money in bonds, do your home work carefully and make sure you invest in very safe bonds. US treasury bonds and Inflation Protected Treasuries (TIPS) are probably your best bet at the moment of writing.

Here is a good article on another blog about how to invest in bonds and making certain mistakes with it.

 

Mutual Funds

Mutual funds are managed by a fund manager who invests the money of the people who buy that fund in a number of different stocks and, or bonds. Certain funds only invest in stocks; others only in bonds and a third category (Mix Funds) invest in both. Fund managers use their own buy sell signals and stock timing strategies.

Be aware of the extra risk that most mutual funds that invest in bonds carry compared to normal bonds. When normal bonds mature, you get in most cases a full return of investment. However funds of bonds invest in bonds with different maturity dates. The fund gets at a certain moment the money back, but since this is for all the different bonds at different moments, there is no guarantee that the value of the bond fund will at a certain moment in the future be higher than when you bought it. Return of 100% of your money is not guaranteed.

Mutual funds that invest in stocks follow the aggregate movements of those stocks. As an investor in those funds, you leave the stock picking to the fund manager. Mutual funds can spread the risk over many more individual stocks than that you can do as a simple investor. That sounds good. But are you aware that 80% of the mutual funds underperform the stock market index?That makes putting your money into mutual funds immediately a less attractive option.

 

Tip: Here is a better alternative than stocks, bonds and mutual funds. Invest in Index Funds. Go Index Investing!

 

Invest in Index Funds

Index funds are like mutual funds without any stock picking. There is no need for stock picking because a stock market index fund just invests in all the stocks that are included in the market index. There is no need for an expensive fund manager; thus your costs are lower. And the fund cannot underperform the stock market index… because it invests in this market index.

Now you may say that the index fund also cannot outperform the stock market index. And that is correct. You do not have that potential upside because you also do not have the risk of the potential downside.

 

Beating the Market

There is however a proven strategy to outperform the stock market index in the long-run. This approach is a combination of index investing and trend following and is sometimes called long-term market timing. Click on the links above to get more information on this.

When you want to achieve a higher return on your savings than you get at your savings account, your only solution is to invest your savings. Investing always carries risks. Before you invest your savings, make sure you are fully aware of these risks. Only invest the part of your savings that you do not need for the years to come. Take the long-term approach. Do not try to re-invent the wheel and use the proven investing approaches that are out there.

Read here more about how you can try for just one dollar a simple and proven stock market strategy to invest your money.

 

The stock market trends of 2012 will build on those of 2011. And those in 2011 were a continuation of 2010.

 

 

 

Our 2011 stock market trend overview showed that the long-term trend direction started to point down in Quarter 1 (Q1) of 2011 for the BRIC countries (Brazil, India and China) and in Quarter 2 (Q2) of 2011 for the US and European markets.

At Stock Trend Investing, we normally never predict trends. What we do is analyzing what the long-term direction is at this moment. The long-term trend changes direction on average only once in the few years. Therefore, you know that when you check on a monthly basis what the trend direction actually is, more often than not, this direction will stay the same the coming months.

2012 Stock Trends

A long-term down turn in the stock market lasts in most cases between the 1 and 2 years. Since the US and European markets started the downturn in Q2 2011, the long-term trend for these markets most likely will bottom and start to point up somewhere between Quarter 2 (Q2) 2012 and Q2 2013.

Thus, the most likely scenario is that the beginning of 2012 shows a continuation of the down-trend that started in the first half of 2011 and that somewhere after Q1 2012 we see the markets starting to turn up.

Market Crash in 2012

Will the market crash in 2012? Maybe... Markets crash due to panic. Markets do not crash that often. In 1987 there was a market crash. In a matter of days, the market lost unexpectedly a significant part of its value.

In most cases, the markets do not crash in a few days or weeks but lose most value during a downturn that lasts longer than a year like in 2008 and between 2001 and 2003. You can see these long-term downturns as a crash if you just look at the markets once in a year. If you check the long-term trend direction every month, you would not call a long-term decline a crash.

My personal prediction is that we will not see a market crash due to the European Euro situation. Europe is expected to enter a recession and it is a big question how Europe can get its economy growing again. However, that is more likely to cause a longer down-turn than an abrupt market crash. Furthermore, the central bankers have been practicing during 2008. Thus I do not expect that we will see a stock market crash due to the sovereign debt problems.

Black Swans

If we get a market crash in 2012, it is most likely caused by an unexpected event with low probability and huge impact… a black swan.

Since they are unexpected, it will be difficult to list them here. But let’s name one. Different reports tell that Iran will reach before the end of 2012 the point of no return of having nuclear weapons… or they will be stopped in one way or another.

Nobody wishes to see the following, but imagine that in a matter of days, an armed conflict arises between Israel and the US on one hand and Iran on the other hand. And suppose the different states in the Middle East chose different sites and the conflict escalates enormously.

In such a disastrous scenario, oil supplies will be disrupted and oil prices go sky high. The outcome of the conflict is uncertain. Many lives are lost. The costs are enormous. It would not surprise me if in such a situation, stock markets will crash deeply. Let’s just hope that a peaceful solution is found before the end of 2012.

Or…

Of course it is possible that the markets move differently than the scenario that you read at the beginning of this article. Maybe for one reason or another US, European and Asian markets stop moving in similar directions.

Maybe the recession in Europe is not as bad as expected; maybe China finds a way back to 8% to 10% growth; maybe the US economy continues to pick up steam regardless of what happens in Europe and maybe companies find ways to grow profits when sales decline. Maybe the long-term stock market trends start to point up now already in Q1 2012.

Since nobody knows for sure what the future will bring, we do the only sensible thing. We just check at the end of every month what the situation is and then we act and react accordingly. Read here more on how you can get updated every month of 2012 on the latest status of the long-term stock market trends.

Now at the beginning of 2012, it is a good time to look back at the stock market trends of 2011. This will not be the final account. The real review of the long-term stock market trends of 2011 can only take place in 6 months.

 

How we shall interpret the movements of the last few months will then only be clear. But here is what we can say now already.

 

US Market Trends

 

For the US markets, the first 3 months of the year continued the trend up that started in the beginning of 2009.Then we got 5 months of falling stock markets. The last 4 months, the markets have shown huge fluctuations. But the year ended roughly at the same level as September started. As it looks like at this moment, Q2 2011 was the beginning of a long-term down trend.

The US markets ended 2011 about at the same level as they started the year. The S&P 500 was exactly flat. The Dow Jones gained 5.5%, the NASDAQ lost 2% and the NYSE lost 6%. These differences show that the 30 stocks of the Dow Jones are not such a good indicator for the overall US market.

 

NASDAQ 2010 and 2011 Market Trends

 

European Stock Markets

 

The main European markets shown a very similar pattern as the US market. Also here the long-term trend seemed to have changed direction during Q2 2011. The difference between the US and European markets is that the losses in Europe for 2011 have been much bigger. The German DAX lost for example 15%, the French CAC about 17%. The UK FTSE kept the losses limited to 5.5%.

 

BRIC and Other Stock Market Trends

 

The biggest losses during 2011 were seen in the BRIC countries Brazil, India and China.
For these countries, the long-term stock market trend turned already down in Q1 2011. These emerging markets seem to run about 3 months ahead on the US and European markets. The 2011 losses were 18% for Brazil, 22% for China and 25% for India.

The Korean KOSPI seems to have followed the trends of the US and European markets.
The Hong Kong Hang Seng Index gives the impression to be merger of the Chinese market on one hand and the US and European markets on the other hand; about flat in the first half of the year and heavy losses in the second half.

The trends in the Australian S&P/ASX 200 show how much the Australian economy depends on China. The Australian and China markets seem to move in general nicely in sync.

 

Gold in 2011

 

Gold increased 9% in value over the course of 2011. The long-term trend for the Gold price points already up since the beginning of 2001. The last 6 month of 2011 showed very large fluctuations for the Gold price. At the end of August, Gold had an all-time month-end closing price. It closed the year 15% below that peak. In 6 months, we can see for sure if the current movements form just some temporary corrections or the beginning of the change in the long-term direction of the Gold Price.

 

Currencies

 

For the currencies, we can see that the Japanese Yen continued in 2011 its advance compared to the US Dollar that started in Q3 2007. From Q3 2010 onward, the Euro was strengthening versus the US Dollar. During Q2 2011, this trend turned direction. During the second half of 2011, the Euro is on a down trend versus both the US Dollar and Japanese Yen.

 

At the end of the year it is easy to see what the market trends were in 2011. However, now it is rather late to capitalize on the changes in long-term trend directions. Read here more about how you can get an early warning when the stock market trends are changing direction.

 

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Market timing has a bad reputation... which is not completely justified. Opponents say that you cannot be smarter than the market. They argue that you can be lucky a few times but not consistently.

The problem is that the term “market timing” is used for a variety of investing strategies. When you discuss the merits of a market timing strategy, you first want to distinguish between short-term and long-term strategies.

My experience and accomplishments are in long-term market timing.

 

Long-Term Market Timing

 

Another term for long-term market timing is “trend following” or “trend investing”. Long-term here refers to a period of many months or even years.

Investors seek higher returns by timing when they buy and sell their assets. They want to buy assets when their price is relatively low. These trend investors buy at the end of a long-term bear market and beginning of a long-term bull market.

They sell when the assets are relatively high in price; when the market is at the end of a bull market and the beginning of an expected long-term down-turn.

Since nobody can predict the future with certainty, long-term market timers use proven market trend indicators. These indicators are based upon objective calculations and are more often correct than wrong.

Warning: never start using a market timing strategy if you cannot accept that reality occasionally turns out different than what you expect. In those situations, be prepared to correct quickly.

Long-term market timers count their gains and profits over a period of years and multiple trades. They do not judge if their strategy is working based on a single trade.

 

Asset Markets and Funds

 

Long-term timing of the market can be used as a profitable investing strategy for a number of different asset classes:

 

• Stock market index funds
   
• Commodities
   
• Individual stocks

 

Personally I apply the trend following approach to stock market index funds and some commodities like “gold”.

My recommendation is to stay away from investing in individual stocks unless you have the time, knowledge and insight to invest in these companies.

 

Short-Term Gambling

 

Market timing has got its bad reputation from the short-term bets that some people like to take. These traders seek the best moment to buy and sell during a day. Or they look at a time frame of a couple of days.

My recommendation is to leave this approach to the professional traders. They have a set of advanced tools and the personality that gives them a chance to make this work. Many are still losing money. Very, very few casual investors will make money in the long-term by using a short-term market timing approach.

For most people, such a short-term strategy is a guaranteed road to sitting the whole day behind your computer screen, losing money and getting stressed.

 

Strategy for Long-term Timers

 

If you are interested to grow your savings in the long run, you have come to the right place.

I use a long-term trend following approach to invest and grow my savings. By timing the moment when you buy and sell stock market index funds, you can get much better investing returns than when you just buy and hold these funds.

 

Click here to find out how you can get the long-term market timing signals that tell you when to buy and sell which stock market index funds.

 

Which trend following book to read depends on how you intend to apply what you learn in this book.

 

There are two different types of readers of trend following books:

1. Traders
    
2. Investors

 

 

Traders spend a considerable amount of time each day or week on managing their money and trades. They aim to make a living or additional substantial income from trading.

Investors have a long-term investing horizon (short term investors are traders). Investors aim to substantially grow their savings in the long-term. They spend the majority of their time on their career, managing their business or on their family and hobbies.

Are you an investor or a trader?

 

Trend Following Books

 

When you are a trader or want to become a trader, a good start is to read the trend following books by Michael Covel.

Click on the link above to get a list of and links to these books.

These books tell you all about how traders have been able to earn a lot of money by applying this trading strategy.

When you are more an investor, these books are still a good read. They are logical and rather easy to read. They do not provide you with a system that you can apply immediately yourself. But they do give you insight and understanding of the ideas behind trend following.

There are not that many trend following books for long-term investors. Maybe the reason is that traders spend more money on books and systems than long-term investors.

 

Free Resources

 

Here are a number of free trend following resources for investors:

• Here you can download the trend following e-Book PDF that explains the different long-term Trend Signals and how to use them.
   
• When you sign up for our free trend following newsletter, you get as a welcome gift our e-book “Beating the Market” that tells the story behind the Stock Trend Investing system (trend following for investors).
   
• Every month, we publish the updated long-term trend direction for the S&P 500. You can get there by clicking on the link in the previous sentence.

 

In case you have any questions on trend following, do not hesitate to contact us. Please leave a comment when you want to recommend a relevant and related book or resource for this topic.

 

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The Rich Dad Poor Dad Book is all about your attitude towards money and how you manage money. Here you get a short synopsis of the book. Further below you get a link to where you can download a summary in PDF format for free.

 

 

 

Everybody who wants to accumulate wealth has to start with saving money and making this money work for you. The Rich Dad Poor Dad book shows an entrepreneurial approach to earning money.

Before you start investing your savings in the stock market to grow them faster, I recommend that you have a good understanding of the concepts that are explained in this book.

 

Visionary Statements in Book

 

Here are some visionary statements from the book:

• Take the road less traveled
   
• Work to learn, don’t work for money
   
• Excessive fear and self-doubt are the greatest detractors of personal genius
   
• Don’t play it safe, play it smart
   
• It is not the smart that get ahead but the bold
   
• Learn how to acquire assets that generate income
   
• Money is only an idea. If you want more money, simply change your thinking
   
• Action always beats inaction

 

 

Rich Dad Poor Dad Synopsis

 

Click on the link in this sentence to go to the page where you can download a free Rich Dad Poor Dad Summary PDF.

Remember that summaries are great but that nothing beats the original. I suggest you get the summary, read it and if you like it buy the original Rich Dad Poor Dad book as well.
Here below is a short preview on one of the chapters in the synopsis of the book.

 

Assets and Liabilities

 

• The rich acquire income generating assets and the poor and middle class acquire liabilities.
  
  
• Assets generate a regular net income. Liabilities generate a regular net expense.
  
  
• Assets: stocks, bonds, index funds, mutual funds, notes, income generating real estate, IPR, business that do not require your presence, and anything else that has a value, produces income or appreciates and has a ready market.
  
  
• Income from assets: dividends, interest, rental income, royalties.
  
  
• Liability: debt, a higher mortgage.
  
  
• Expenses: tax, property tax, insurance, maintenance, utilities, rent, mortgage.
  
  
• Financial independence and increasing wealth: the net income from the assets exceeds the expenses.
  
  
• Focus on growing the income generating assets, and on keeping liabilities and expenses down.

Here at the Stock Trend Investing Guide, you find an approach for growing your savings by investing them in stock market assets when the long-term trend indicates that these assets will increase most likely in value in the coming months and years. Read the other posts on this trend following blog or contact us for more information.

 

If you think that you got some useful information here, please share this page with others via Facebook or Twitter.

 

Michael Covel has written many books about trend following. Further below you find a list of his most well known books.

Before buying and reading any of the books written by Covel, be aware of what you can expect. Michael Covel is a firm believer and promoter of the trend following idea. His books will tell you why it works and how it works. Do not expect any arguments in the books against trend following that he cannot handle.

Traders and Investors  

Covel’s books are very much aimed at traders. The successful people described in the books are traders. These are people who are trading as a profession. If you want to become a professional trader, these books can give you a great step up.   The books are not directly written for the people who are earning their money in a different field than financial trading. If you are a hard-working professional who has a career in a different field than financial trading, the Covel books still offer you a good read. They provide you with insight and ideas. However, they do not provide you with a system to invest and grow your savings in say an hour a month.   My recommendation is to do the following:  

1. Buy one of the Michael Covel books that we have listed below to learn about how trend following is used by traders to make good money.
   
   
2. Sign up for this free newsletter to get more information on how to use trend following to grow your savings in less than an hour per month.
   
   
3. Download here the free Trend Following PDF that explains the different long-term trend signals and how to use them.

  When you are interested to use a trend following approach that takes little of your time to grow your savings with a long-term perspective, read here more about a suitable information service.

  5 Trend Following Books by Michael Covel


Here are the main 5 books written by Covel.   Click on the links below to see on Amazon what the contents of each book is. Then you can make a better choice which book to buy and read.     Trend Following: How Great Traders Make Millions in Up or Down Markets (2007)     The Complete Turtle Trader: How 23 Novice investors Became Overnight Millionaires (2009)     Trend Following: Learn to Make Millions in Up or Down Markets (2009)     Trend Commandments: Trading for Exceptional Returns (2011)     The Little Book of Trading: Trend Following Strategy for Big Winnings (2011)       If you think this page about Michael Covel the Trend Following author was of some use to you, please share it with your friends and followers via Facebook and Twitter.    

The S&P 500 gained 7.6% during the last 3 days of November. Great news you may think. However, you need to see it in perspective. Even after these last 3 days, the S&P 500 still lost 3% during November.

During periods like now, when markets fluctuate multiple percentages per day, it is easy to lose the overview of the real direction that the market is moving.

 

Have a look at this S&P 500 chart that shows the month-end closing values for the last 14 years. See how the moving average for the last 6 months points down. See how the S&P 500 closing price for the last 2 months is almost on top of this moving average.

Just looking at this chart, where do you think the S&P 500 will move the next few months?

That is a subjective question of course.

To remain objective, we analyze every month a new of mathematical long-term trend signals (like hedge fund managers do).

Now all these S&P 500 long-term trend signals are pointing down.

If you want to start investing now or put your savings back into the stock market, I suggest you be very careful. I keep my savings out of the stock market and would consider anything else more gambling than investing.

If you think this update could be interestting for your friends, please share it via Facebook or Twitter.

 

 

 

 

Here are 9 great articles on Personal Finance and Stock Market Investing from November 2011.

These articles have appeared on various blogs. They are selected because of their diversity and the useful information that they provide to the readers. The writers of these posts are independent and not related to the Stock Trend Investing blog.

The 9 articles below are shown in no particular order. I recommend reading them all.

  Richard Rhodes’ 12 Trading Rules ritholtz.com   Very slow growth 2012 then long bear to 2020 - MarketWatch marketwatch.com    Bespoke Investment Group - Think BIG - Dividend Stocks Outperforming bespokeinvest.com   When to Use a Financial Advisor obliviousinvestor.com   Goal Update: Investment Portfolio Asset Allocation & Holdings – Nov 2011 mymoneyblog.com   The Age Wealth Gap is Getting Bigger & Our Net Worth Sucks. Here’s how we Fix it. 20somethingfinance.com   Is Your Home an Investment? thesimpledollar.com   Review: The Bold Truth About Investing thesimpledollar.com   Lump Sum vs. Dollar Cost Averaging obliviousinvestor.com  

 

Our own favorite article that we have published in this period is:

• Study this strategy before you invest in foreign stock markets
  

Feel free to comment and link to great articles for this period that I have missed or to suggest great articles that are published in November.

 

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Click here to sign up here for our free long-term investing newsletter.

 

 

 

 

November has not finished yet, but hereare already the links to a bunch of articles on the economy and the situation with the Euro that are informative and that I have enjoyed reading.

My aim is to point out articles and links that have a longer relevance then just a few days or weeks.

 

 

Top Articles on Economy and Euro

 

How Germany could save the euro - VoxEU.org

 

Print or Perish - ritzholtz.com

 

Niall Ferguson on 2021: The New Europe - WSJ.com

 

Changing the Rules in the Middle of the Game. ritzholtz.com

 

Simon Hunt November/December Economic Report - ritzholtz.com
 

Spiegel: Germany’s Finances Not as Sound as Believed

 

US/Eurozone GDP Component Comparisons - ritzholtz.com

 

The Difference Between Northern and Southern Europe - thereformedbroker.com

 

Daily overview of the best links of the web - daalder.posterous.com

(This has commentary in Dutch but the links are in general to articles and information in English; and the graphs are language-independent anyhow).

Please share this list of top articles on the Economy and Euro troubles from November 2011 via facebook and twitter with your friends. Your suggestions for what to read as well are very welcome.

 

 

In one of our previous blog posts we have seen what the trap is you can fall in when you invest in foreign stock markets. In this post you will learn a strategy for how to avoid that trap.

The unique catch that foreign stock markets pose to an investor is the currency risk. When we talk now here about foreign stock markets, we assume that these markets use a different currency than the currency in your home country.

 

Now here is the principle rule:

"Only invest in foreign stock markets (that use a different currency than your own countries currency) if you accept that a steady part of your savings will be invested in those foreign currencies."

If you cannot accept that a certain percentage of your savings is standard invested in these foreign currencies, my suggestion is to invest just in your home market and avoid investments in foreign stock markets.

Steps to Invest in Foreign Stock Markets

If you do accept the principle that you diversify a certain percentage of your savings into foreign currencies, here are the steps to follow:

1. Define what percentage of your savings you want to hold in what currency or group of currencies. For example, you could hold 40% in US Dollars, 40% in Euros and 20% in Asian and stable Emerging Markets Currencies.
   
   
2. Identify the following for each of the currencies or group of currencies that you want to keep investments in:
   
   
   • The stock market index funds that you want to hold when the long-term trend in the stock market for that currency region is up (trend following).
     
     
   • The savings account, money market account or short to medium term bond funds that you will park your money in when the long-term trend in the stock market for that currency region is down.
     
     
3. You invest your savings into the different funds for the different currency regions according to the percentages that you set under “1” and as defined in “2” according to the direction of the long-term trend in the stock market.
   
   If you do not have any substantial holdings in foreign currencies and you start implementing this strategy, my suggestion would be is to implement it in 2 or 3 steps spread out over a few months. You are in that way less dependent on the currency exchange rate of the day.
   
   When the direction of the long-term stock market trend changes for a certain currency region, you move your holdings accordingly from the stock market to the cash/bonds or vice versa.
   
   
4. Now every 6 months, you rebalance your savings over the different currencies.
   
   
   • You calculate all your foreign holdings back to the value in your own home currency. Add them all up to calculate the total value of your holdings.
     
     
   • You compare now the actual percentage of your total holdings that is invested in each currency with the percentage that you set out with.
     
     Over time your actual percentage will probably have changed compared to what you set out with due to differences in the performance of the different markets and changes in the exchange rate.
     
     For example, if you had set out with a division of 40%/40%/20%, this could now have turned into 35%/42%/23%. Note that these changes in percentages do not tell you if the total value of your holdings has gone up or down during the last 6 months. Most of the time it will have gone up; sometimes it has gone down.
     
     
   • Now you sell and buy the appropriate holdings to re-balance your portfolio back to the original division over the different currencies. For example, sell holdings to bring the 42% and 23% back to 40% and 20% and buy to increase the 35% holdings to 40% of your total.
     
     You do this only if these orders are in size much bigger than the commissions you have to pay for these trades. Otherwise it does not make sense.
     
     By re-balancing in this way, you systematically buy low and sell high.

With the major currencies in the world moving up and down compared to each other over time, this strategy is effective to avoid the currency trap of investing in foreign stock markets. And by re-balancing regularly, you can even make some extra gains.

This is only a very short description of this strategy and I can imagine that it raises quite a few questions. If you have any question on this approach, I will be very willing to try to answer them for you. Just leave your questions as a comment below or contact me here.

If you like this strategy for investing in foreign stock markets and think that your friends may be able to use it, please like or share it on facebook.

Investing in foreign stock markets and being invested in foreign currencies is not something that everyone will feel comfortable with. But if you are up to it, foreign markets could provide you with extra gains and reduce your exposure to a single currency. In current times with all the uncertainty around the US Dollar and Euro, that is a bonus as well.