In this issue, we present checklists for new and old investors to help them review their financial and investing game plans to make sure they are not overlooking or forgetting things that make extra profits or lessen losses. Better investors are healthy, have good clear minds and control their emotions and have less stress.

Good investing starts with common everyday concepts. Common sense, discipline and a plan can get investors started. As one better understands the influences on investment prices, they gains confidence and can address more adventurous investing.

We want to show readers how investing is closer to everyday life than many people think.


General Concepts

  • It is not what you make, it’s what you save. Pay yourself first!
  • Compound interest is the eighth wonder of the world; use it to your advantage!
  • The System is the solution-have a financial plan.
  • Buy straw hats in December- don’t pay retail, buy good values.


  • Know when to hold them, know when to fold them – you have to sell stocks to see capital gains.
  • Life is not fair; it is what you make of it.
  • Control your destiny or somebody else will.
  • Look to the past for events or fads that could affect future changes.
  • Know what you can change and accept/ adapt to what you can’t.
  • Just do it!


You have likely heard many of these quotes before and investors have used them to gain comfort with investing and minimize stress.


Areas of investing

 The Investor

 The Investment

 The Investing environment



Each area has its own considerations and skill sets. Let’s address each area separately.


The Investor

    The investor is the emotional part of the investment equation. This is the area where a person can determine how much time, money and effort he is willing to put into his financial and investing plan for retirement and other financial needs.

Some people are happy just to have certificate of deposits (CDs); some want their money to grow more in mutual funds or with a money manager; still, others like to do their own research.

The better you understand yourself, the better financial decisions you can make. Consider the following bullet points:


Know Yourself


  • Understand/know your interests, strengths and weaknesses.


  • Set goals (big and small) and reevaluate them throughout your life.


  • Teach yourself to adapt to change – watch for opportunities.


  • Disciple yourself and have a life plan.


  • Open your mind to see opportunities.


  • Imagine things from different perspectives for understanding.


  • Learn to enjoy life.

Know You Investor Self


  • Know your greed and fear levels and control them


  • Know the financial risks you are willing to take


  • Know the risks you are not willing to take


  • Know your investment goals


  • Know your timeframe needed to meet your investment goals.


Goal Planning


Define your goals and objectives. Make your plan using short and longer timeframes with easy to difficult goals.


Review and evaluate your goals and progress in meeting your goals and objectives.


Change or adjust your goals as needed.


Determine your goals by what you enjoy doing and by what you want out of life.


Develop Your Plan


Match your risk levels, time frame and investment goals to the investment products you understand and are comfortable with.


Make your plan flexible enough to change with market and personal financial conditions,


Start working your PLAN!!


Review the results of your plan and make any adjustments needed.


Know Your Investments


Only buy what you understand


Be comfortable with what you buy. Stress can cloud your thinking


Know how your investments should perform in different market conditions.


Know the benefits of diversification and use them in your plan.



 Remember to control your emotions or somebody else will – and that can

be hazardous to your wealth!





People invest to generate income and hopefully, future profits when they sell (a.k.a. speculation). Common examples are stocks, bonds, CDs, real estate, future contracts, currencies, commodities, and anything else Wall Street and others can sell.

“Experts” (Wall Street, appraisers, colleges, individuals, advisors, newsletters and charlatans) use a variety of methods to evaluate investments.

Consumers can find financial performance reports to calculate a value (or range of values) for their investment. A bond pays a specific amount over a specific time, a stock pays dividends and generates sales and earnings; real estate collects rents.

Stock (equity ownership) investments can produce sales, earnings, cash flow, dividends and risk of default but they do not produce prices.  The investor buyer and the investing environment determine an investment’s value.

Investments perform at different levels that can affect price. Some levels are consistency and quality of earnings, dividend payment record, likelihood of interest and principal being paid and condition of the asset.

There is a third type of investment that goes along with income and hope for capital gains; it is the store of value. Gold, silver, art are examples of store of value assets. They don’t generate any income and can have wide price fluctuations. They are alternative “currencies” to fiat currency when it is not accepted in uncertain times.

Most investments compete with each other on a yield basis. Bonds and CDs pay interest rates and stocks pay dividends and earnings yield. Real estate offers a cash flow yield. Compounding money is the objective of many investors.

There are investments to fill any investor’s or speculator’s objective. The investor needs to know which asset best fits his goals and comfort levels.         






The Investing Environment

The investing environment is when investors, investments, real world activities, history and theory collide to create prices.

Real estate values are determined by local conditions, rate of return on investments and borrowing costs. Other asset classes are typically influenced by supply and demand for that asset, potential rate of return and borrowing costs. Commodity prices are factors of supply and demand and financing costs.

Stocks and bonds are available in small units, which makes it possible for more people to own and benefit from income and potential profits. Let’s look at stocks and bonds.


Determining Prices

The foundation for valuing stocks and bonds begins in 1903 with books and academic research. These books include:


  • Bonds-The Principles of Bond Investment by Lawrence Chamberlin, 1911


  • Stocks Fundamental Security Analysis by Benjamin Graham, 1934
  • The Theory of Investment Value by John Burr Williams, 1938
  • Stocks Technical Analysis-the Dow Theory originated by Charles H. Dow (published in The ABC of Stock Speculation by S. A. Nelson, 1903


  • Common Stocks as Long Term Investments by Edgar Lawrence Smith, 1924. Smith “proved” that common stocks have consistently been extremely attractive as long-term investments. Allegedly, this book contributed to the roaring twenties market rally.
  • Modern Portfolio Theory by Harry Markowitz, 1950s and Efficient Market Theory by Eugene Fama, 1960s explain MPT and EMT theories that manage risk/rewards in markets that Fama concluded were too efficient to predict prices.


These theories were based on mathematical formulas and academic research that Wall Street used to justify investment risks for return on assets that could be measured and managed by rebalancing asset allocations groups. Individual stock prices aren’t considered for risk/reward. Computer programs and borrowed money (leverage) have become increasingly popular.



MPT is now the Prudent Investor Rule superseding the Prudent Man Rule of 1830. Fiduciaries no longer seem to have to be concerned with return OF assets or Compounding benefits with MPT. The Rule also tells the Prudent Man how to think.




When investors have strong confidence in their formulas, they often borrow a lot of money leaving no margin of error.

Throughout the 1900s, theories and formulas have measured price movements and have created value ranges. When prices rise above the top range average, they become over-valued and eventually fall. The reverse is true on the downside.

Below are a few of the basics that cause price changes regardless of what the formulas, governments or opinion makers say. As these basics go to extremes or shift in a long lasting correlation, prices will change daily and over time.


Basic economic facts:

Compound Interest • Supply and Demand •

Competition • Marketing


Basic Human nature:

Greed • Fear • Jealousy • Envy • Hope


Basic Market Movers:

Expectations • Perceptions • Illusions



In time, excesses correct, which forces change, creates risks, uncertainty

and unexpected opportunities.




Economic Environments

The economy is where the influences converge. Economic indicators gauge the health and direction of the economy. The stock market is a leading indicator of the economy; it leads the economy up or down by six to nine months.

“Mr. Market” eventually reflects economic growth and direction but may be distracted by the games speculators play when there is extra money and credit is flowing.

A few areas that can change economic relationships for years, or even decades include government fiscal policies, taxes and regulations that have a major impact on the growth of the economy. If government wants to grow the economy, they can cut taxes, pass legislation encouraging growth and cut regulations.

When a government has a political agenda as a greater priority, the economy may stagnate or grow depending on the issues.

In 1913, Congress created the Federal Reserve (Fed) to do its bidding by managing the country’s money and credit. Congress no longer wanted to be responsible for a political football. In addition to managing the currency, Congress mandated the Fed to manage employment, which can create conflicting policies.

The Fed can increase or decrease money supply and credit as it sees fit. The Fed’s actions are not always in tune with the economic cycle and can cause unintended consequences in the stock, bond and other markets. Providing more money than the economy needs means extra money for speculative ventures. Too little money and credit can slow economic growth.


The economic cycle is centuries old. Typically, the cycle moves from boom to bust to boom again in five to seven years. Depending upon events that cause excesses or disruptions, the timeframe of the cycle is longer or shorter.

  • Natural disasters, weather or climate changes can cause major disruptions to an area of the economy for years or decades. Some changes may benefit one area while others hurt.
  • Geo-political events may cause worldwide changes and disruptions that can last for decades or centuries.
  • Investor/consumer psychology can change as events occur or as established trends begin to shift. The change in mood can cause markets or the economy to reverse direction.


The investing environment has the most influence on price movements.  The markets can only grow as fast as the economy; any gain higher than economic gain is likely to disappear in the long term. Political and geo-political changes may dramatically change your life and finances. Watch for changes and try to understand their consequences to your life.


     In this article, we covered many areas to acquaint you with the basics of investing. We want you to consider what factors may affect your situation and we believe that a good plan will help you avoid losses and have less stress.

     Happy investing!