Have a good year 2010. Life goes on with or without the stock markets.

Investing for Beginners:

1. For most anything, going into business whether single proprietorship, partnership, or corporation will involve risks. So does investing into the stock markets. The greater the risk, the greater the rewards expected, and the greater the chance to lose.

A big difference is that starting a business when the economy is down will involve higher probability of failure. Starting a business in an upturn will benefit a business startup to a higher probability of initial success.

For the stock markets, buying stocks can never be less risky when the stock market has been driven to the ground. Buying at the highs after several years of rally compound the risk that a sudden onset of fear or the usual profit taking procedure among the more experienced investors will make the investment a big failure in the short run for the less experienced.

2. Greed is what makes makes people to strive for a better life. Fear predominates when too much money has been made and the fear of losing that money is what precipitates panic selling in stock markets. The less money you have invested into the stock markets, the less tendency for you to be afraid of losing that money.

3. For investing, technical analysis must not be employed. It can take decades of learning the intricacies of technical analysis on the daily basis before a person can become proficient and not lose money.

Investing one’s saving using technical analysis can easily result in a faster way of losing that money than just by buying and letting time heal all wounds when making a mistake of putting the money at work at the wrong time. Technical analysis and it’s partner - trading strategies, do not allow time to heal wounds. But for those proficient enough to use TA and was able to develop time tested trading strategies, it is an excellent way to make a lot more money at the shortest possible time in the stock markets. But then again, TA involves investing a lot of time and some money toward learning that particular field. Use pocket change if possible when trying to learn how TA works. It will take an inordinate amount of time to learn the more important parts of technical analysis and trading strategies, and they are = Discipline and Patience. TA itself is easy to learn, how to implement it with consistency will require a lot of discipline and patience. Acquiring discipline and patience will involve lots of research, practice, experimentation, failures and successes, and a massive amount of time.

Investing in the stock markets does not need to involve too much time expended on learning how to invest, it just involves a lot more money than time.

Buy low sell high. It is almost always more profitable to buy pullbacks rather than chasing a rally. And it doesn’t hurt to sell a portion of an investment when greed takes over a majority of the market participants. Have discipline and patience - and the markets will always be able to make a pullback one way or the other. But then again, an excellent knowledge of technical analysis will be required for such a feat to be accomplished. Without TA, buying low and selling high can become such a very complicated matter. Follow the advice of Warren Buffett for beginners, buy for long-term hold when investing - for perpetuity if possible. Buffett himself is well experienced, so he buys low and sells high too. How could he possibly beat most investors without doing so.

4. Of course, don’t bet the farm on one stock or fund. Or simply stated, don’t put all eggs in one basket. Diversification doesn’t mean just several stocks or funds or bonds, etc.

Follow the Chinese advice. 1/3 for cash or cash equivalent, 1/3 for hard assets, and 1/3 for risky business or the stock markets for that matter.

Those are for the beginners. Experience will teach you not to follow most if not all of those advices.

- John

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