Scores of Books That Come

¶ … scores of books that come out saying, "Make it big on Wall Street!" "Make millions of dollars on the Stock Market!" In most cases, the only one making money is the book publishers. In the majority of situations, none of these approaches work. One book has been around for years, 1973 in fact, and keeps on being republished. That's a Random Walk Down Wall Street by Burton G. Malkiel. The reason why it is so successful? It is a lot of common sense. There are no big bells and whistles, yet following his advice can help people financially.

What Malkiel is saying is very easy to understand. Instead of trying any gimmicks and getting in and out of the market and trying to second guess what is going up when, just put the money in a good fund to begin with and then let it sit. In his own words, or what he calls "the random walk theory.": "Stock price changes have the same distribution and are independent of each other, so the past movement or trend of a stock price or market cannot be used to predict its future movement." In other words, just as the name of the theory says, stocks take a random and unpredictable path. Thus, no one can outperform the market without taking on further risk. Malkiel continually says that the best thing to do is buy and hold. No one should try and time the markets Such attempts based on any other kind of analysis are ineffectual. To prove his theory, he shows that most mutual funds do not beat benchmark averages like the good old S&

According to Malkiel, there are ten easy steps to follow when investing so it is possible to gain not lose money (in this writer's own words).

Sit down and set goals on your investment strategy. Why are you investing (college for kids, retirement, a yacht to run away in?). Too many people plunge right in and do not give this enough thought. If you need help, then read up or get advice from an "objective" (meaning, they do not want your money) source

Do not start to invest until you have some money to invest. In other words, do not begin investing when you own $15,000 on your Master Card. Pay off these outstanding bills first.

Do not trust anyone, until you have read all the fine print. Just because someone has a fancy title or works at a prestigious firm on Wall Street, does not mean he or she is trustworthy or only wants your money. Read the financials and learn as much as you can on your own.

It is okay to follow the herd, as long as they are investing passively and staying with funds, indexes and other easy portfolios. As soon as they want to start jumping the fences and go into active portfolios, leave them behind. You need to find the real value and bargains. This will not happen over night. Do not worry if something passes you by in the meantime. Something else will come along. Promise.

Be "humble" like Wilbur the Pig. Even though you are doing well, do not get cocky. Keep it slow and easy. You do not want to lose everything you have to gain. Remember Wilbur almost lost it all with the axe after he got good and plump.

Going back to Wilbur...there was also Charlotte, who was very patient. Charlotte had a lot of patience, and it was well worth the outcome. Do not panic when the markets dips. If it is a serious dip, then still take your time. A few more days will not make a difference. Timing is very important.

Just like with everything else in life. Moderation is best. Putting all your eggs in one basket or pulling out to quickly or investing too fast does not work.

Investing too much is not a problem many people have, but it can happen. It is said that the pain of a loss has twice the emotional strength of the pleasure of a gain. For some people, this results in them pulling out of the market prematurely, as mentioned above. With time, you can learn how to make the best use of any losses.

Do not do OC (obsessive compulsive) investing and keep on looking at your account. Let sleeping dogs lie, as they say. If you look at it too often, you will start getting itchy fingers and want to make changes. and, that has already been covered in an earlier number.