Beginner's Section

Keep It Simple

"The study of money, above all other fields in economics,
is one in which complexity is used to disguise truth or to evade truth, not to reveal it."
[John Kenneth Galbraith]

Savings & Investing

Before you can invest you need to save something to invest (usually money).
Before you can save you need to produce more than you consume.
Before you can produce more than you consume you need to have a job or income.
The easiest way to save is to live below your means or income/pay from your job.
Accumulated extra income can be saved, just as squirrels store acorns for winter.
Usually, but not always, that which is saved is money.
Once you have been fortunate enough to save, the savings can now be put to work as investments to earn a profit.
Check out the following link to learn more about savings: The Mint: Investing Money: Savings Accounts
Besides savings accounts, you can invest your money in stocks, bonds, real estate, and commodities.
Check out the glossary on the site as it has lots of info about terms used in investing.
Remember this well:

The greater the possible profit -

the greater the risk of losing your money.

Trends

It is important to know what the major trends are in any given market: stocks, bonds, commodities, real estate, currencies, precious metals, etc.
The most important trend is the long-term trend.
There are also intermediate-term trends.
And short-term trends.

Time

Long-term trends are measured in months and years.
Intermediate-term trends are measured in weeks to months.
Short-term trends are measured in days to weeks.
Traders use intra-day and even hour-by-hour and minute-by-minute trends.

Alignment

Short-term trends can be aligned in the same direction as intermediate-term trends.
Or they can be counter-term trends aligned in the opposite direction of the intermediate-term trend.
Intermediate-term trends can be aligned or in the same direction as the long-term trend.
Or they can be counter-term trends aligned in the opposite direction of the long-term trend.
There is a saying that the trend is your friend.
This is true IF you are on the right side of the trend - if you are invested/aligned with the trend.

Charts

There are long-term charts that show the price action in months and years:

Monthly Chart of XAU (gold stocks)

There are intermediate-term charts that show the price action in weeks and months:

Weekly Chart of XAU

There are short-term charts that show the price action in days and weeks.

Daily Chart of XAU

Bulls & Bears

The long-term trend of any market is either in a bull market or a bear market.
A bull market is when the trend or direction of the market is rising upwards in price action.
A bear market is when the trend or direction of the market is heading downwards or falling in price action.
This is a chart of a bull market or upward trending market. A bull market is constructed out of a series of higher lows (correction prices), and a series of higher highs of new rising price action.

Bullish Trend

The series of higher lows and higher highs forms a stair step or escalator of rising prices. This is when the trend is your friend if you are invested and aligned with the bull trend or long the market.
This is a chart of a bear market or falling trend market price action. A bear market is constructed out of lower lows and lower highs.
The series of lower lows and lower highs forms a stair step or escalator heading downwards.

Bearish Trend

Risk Versus Reward Is Key

Direction

The direction of the prices on the above two charts is a picture worth a 1000 words.
On the upper chart of gold, you can see that prices have been steadily rising upwards since May of 2001.
If you had been long gold and aligned with the trend, you would have accumulated good profits.
On the lower or second chart of the US Dollar, you can see that prices have been steadily going down since late 2002. If you had invested long in dollars at that time, and sold your position out today, you would have lost a large portion of you investment. The trend has been down.
To make a profit on the downward trend of the dollar, one would have had to be aligned with the downward trend, which is called shorting the market, playing that it is going to go down.
So we see there are bull and bear markets.
We can take a long position or align ourselves with a bullish trend upwards.
Or we can short a market or align ourselves with a bear or falling trend.
It is best to find a long-term bullish trend and to take a position in alignment with it.
It is much harder to take and play a short position on a bear market in a downtrend. That takes experience in the markets.

First Things First

There are many different markets available for investing. Some of the most popular are:
1. Stock Market
2. Bond Market
3. Real Estate Market
4. Currency Markets (forex)
5. Commodity Markets
6. Precious Metals Market
The first thing to do when you have saved some money to invest is to look at the long-term trend of whichever market you are thinking of investing in.
1. The long-term trend is also called the primary trend.
2. The intermediate-trend is the secondary trend.
3. The short-term trend is the tertiary trend.
Then determine if the market's primary trend is bullish or bearish.
Remember above when we looked at the chart of gold to see what a bull market looked like, we saw rising prices accentuated by higher lows and higher highs.
The chart was like a "stairway to heaven" rising from the bottom left hand corner up towards the top right hand corner.
That is the signature of a bullish primary trend - of a bull market.
Also, remember when we looked at the chart of the US Dollar to see what a bear market or bearish primary trend look liked.
The chart consisted of a downward path of lower highs and lower lows.
The chart looks more like a "stairway to hell", running from the top left hand corner of the page and heading down towards the bottom right hand corner.
This is the signature of a bearish primary trend - of a bear market.

The Next Step

So, the first step was to save some money.
The next step was to decide what market(s) is in a bullish primary trend or bull market. This is done by looking at the chart of the price action of the market under consideration.
Once a market has been chosen to invest in, then a "game plan" needs to be drawn up - a course of action to take.
There are two main "variables" to determining the course of action:
The first is what is called money management, which involves an assessment of your financial state of affairs.
The second is the actual decision-making process of choosing which stock or bond or precious metal, etc. to invest in.

Money Management & Asset Allocation

Write down a list of all of your various assets that you own outright without any debt involved.
1. Savings Accounts
2. Checking Accounts
3. Certificates of Deposit
4. Any other forms of saved money
5. Any real estate that you own outright without a mortgage
6. Any gifts from relatives, etc. that are valuable and can be easily sold for money
7. Total up all of the liquid assets that are immediately in cash or cash substitutes
8. Total up all the non-liquid assets such as real estate or antique cars, etc.
9. Total up both of the above two sub-totals (numbers) to get an overall asset number.

Write down a budget of all your living expenses - ALL OF THEM.
Break it down to a weekly, monthly, and yearly total.
Write down your weekly income from all sources, a monthly income total, and a yearly income total.
Now compare your weekly, monthly, and yearly income to your weekly, monthly, and yearly living expenses. You will either have a surplus of money (more income than expenses) or a deficit (more expenses than income).
If you have a surplus of income over expenses, you can invest that surplus. You should always leave yourself an emergency fund in cash of about 6 months of your yearly living expenses before investing excess income or savings.
If you have more expenses than income, then you need to either increase your income, or lessen your expenses, or both.
Now take the projected value (dollar price) of any non-liquid assets that you own outright without any debt: house, other real estate, etc. Then determine if you want to keep the non-liquid assets as they are, or if you want to sell them for cash. If you keep them non-liquid, do not count them in with your liquid assets available for investing. If you sell them for cash then include them in your liquid assets available for investing.

A Plan

You now know what your financial status is. You know what you own. You know what you owe. You know what your income is versus you outlays. You know what is available to you to invest.
In the beginning, most people do not have much excess income to invest. This is natural. It takes time and savings to accumulate enough money to invest in anything more than a savings account, money market account, or certificates of deposit. These are all liquid or "cash" holdings. Certificates of deposit will pay the most interest (income), but they are not readily available for withdrawal without paying a penalty. Savings and money markets are completely liquid.
Determine exactly how much cash money you have in total to invest beyond your living expenses, emergency cash fund, and any other cash savings you want to remain as cash savings. This figure will be your available investment funds.
Decide how you want to allocate your available investment funds. Allocate means how do you want distribute or place them in any given asset or market. Obviously, before you can split up enough money to invest in more than one asset or market, you must have saved enough money in an amount sufficient to warrant investing in more than one market or asset.
Remember this well: Compounding is one of the best ways to accumulate wealth over time. If you are young, compounding offers you tremendous potential, as you have more time to compound and let your investments grow. The best expose on compounding I have read is by the venerable Richard Russell: Rich Man, Poor Man (click link to read).
After you have decided on the allocation of your available investments funds, it's time to actually implement the plan.

Putting The Plan To Work

It's now time to pull the trigger and put your savings to work by investing. Remember this well: Go easy at first. Don't try for homeruns - a solid hit will do. Try to lessen or control risk. Measure the risk versus the reward. Compounding is the key. Don't buy any stocks that don't provide a dividend, except for gold and silver stocks. And most importantly:

It's not what you win that counts as much as what you don't loose. Don't take a big hit or loss.

Bonds are a conservative investment. They generate income. They can easily be compounded. There are many different types of bonds: Government, government agencies, corporate, tax free, etc.
Government bonds are considered the safest. Remember, the higher the rate of interest paid out - the higher the associated risk. To learn and or invest in Treasury Bonds click on the following link United States - Bureau of the Public Debt. To learn about bonds in general try: Bond Investment Strategies.
If you are interested in stocks remember not to buy stocks that don't pay dividends, unless they are gold and silver stocks.
A general rule of thumb is to only buy stocks when a bull market of the overall stockmarket is in force. If there is an overall bull market occurring in stocks, then look at what sectors (health care, insurance, home builders, banks, etc.) are performing the best. Investor's Business Daily has lists and charts and ratings for all of the sectors.
Once you decide on the sector, then choose which stocks in that sector you want to invest in. Remember dividends are important, and buying when a bull market corrects and prices are cheaper - or, right after a bear market and prices are at their cheapest, is the way to go. In a bull market you buy on weakness and sell into strength. This sounds counterintuitive but it isn't. It is, however, one of the main reasons that most do not do well in the stock market. Once again Investor's Business Daily rates all major stocks.
Do not invest all of your money in one shot. Accumulate your position over time. This will allow you to make up for any bad timing mistakes. Always keep some powder dry for use when special situations arise.
As a beginner in investing, you might want to let a professional do it for you. This can be done quite effectively by using one of the large mutual fund families that offer a wide variety of stock and bond funds, as well as retirement accounts. I use Vanguard - The Vanguard Group which has a brokerage for individual stocks as well mutual funds.
Beware of investing in any bond mutual funds. Through the Treasury Direct link above, you can open an account directly with the Treasury Department, pay no commissions, and the bonds are listed in your name, not in the street name of the brokerage house you use. You can't beat that anywhere.
I also use Rydex Funds Homepage but they are a bit more sophisticated and have a somewhat higher commission cost, however, they do offer some very unique funds that are only duplicated by one or two others. But these are more sophisticated funds and not for beginners, although they do have funds appropriate for beginners.
Our last category is the precious metals. One can either invest directly in the physical metal, or one can buy stock in a company that mines the metal. Precious metal stocks are not for the faint of heart. They are very volatile, even on an intra-day basis. If you want to invest in gold or silver stocks, you might want to check out the Rydex Precious Metal Fund.
Physical gold and silver is safer than buying the stocks of mining companies, although the stocks have greater appreciation potential, as they are leveraged to the physical asset. I would recommend buying gold and silver coins face to face with a local coin dealer in your home area that has been well-established in business for many years and has a good reputation.

If you have made it this far you must be serious in learning about investing. Good for you! What you have read above is just scratching the surface. There is much more to learning about investing then just the above. An excellent course in investing and charting which is easy to access, read, and understand can be found at the following link to StockCharts. Check it out: