No. of Recommendations: 1
If your employer has a retirement plan, such as a 401K or 403B (the latter is for non-profits) you should certainly participate, unless the investment choices offered are terrible. Then you should also have an IRA with some brokerage company like Brown or Scottrade. If/when you change employers, roll over the retirement plan to your IRA, where you have more flexibility.

You are beginning to invest at a good time. You have the option of many different electronic tools, courtesy of the net. Take a look and see which are best for you. I use Fasttrack for nightly downloads of mutual funds and stocks. There is also TC2000. For developing trading systems, I use FastBreak. These things give you tools for technical analysis, which is the study of price action of stocks, etc. There are people who claim that technical analysis does not work, but I have a lot more money because I have used it. After all, you buy or sell a stock or fund because you expect the price to move one way or the other, so it makes sense to study price action.

At this point, with the use of the personal computer, and electronic trading, you have huge advantages over what was available to me at 22, essentially before the computer was invented. People used to have to chart things by hand, and watch the tape, if they could.

In order to trade successfully, you need two things: timing and selection. The timing component tells you when to be in the market, when to be out, and when to be short. People tell you that you cannot time the market, but that is simply not true. Nothing times the market perfectly, but there are intermediate-term trend following systems that trade 2-3 times a year and do very well.

This year, the market has so far gone nowhere, so unless you made some excellent stock picks, there has not been much opportunity for significant profit either on the long or the short side. That may change. Some timing systems recently went long, but the results have not been terribly profitable, although still a little money has been made in some of the indices.

For selection, you can do quite well if you just time the indices, either using ETFs or Rydex, Potomac, or ProFunds. And you do not have to trade often: 2 - 3 times per year.

On the other hand, CNBC and Zacks publish lists of stocks with excellent fundamentals, and you can select from those lists (usually around 200 stocks). Value line also has a list published weekly. CNBC is free, Value Line is generally available at the public library (last I looked), and Zacks requires a subscription for all of the features.

Above all, avoid just buying and holding an index fund. People like to quote the record of a fund like VFINX. It has an average compount rate of return of 11% over the last 10 years. Sounds great until you realize that the max draw-down is abut 40%, and that for the lase 5 years you would have been better off in a money market - the result is about -2.48% average annual. I would have to be taking some really good drugs to remain happy with those results. Any decent timing system would have kept you out during the bad periods, and you would have made much more.

Another thing to avoid is dollar cost averaging. While you may want to contribute to your IRA, etc. on a monthly basis, there is no reason just to blindly put the money in the same thing every month. That is what timing is all about.

http://www.fasttrack.net/
http://www.edge-ware.com/
http://www.ftmonitor.com/index.html
http://www.stocktiming.com/pages/9/index.htm
http://www.timingcube.com/app/html?page=home

The above are subscription sites - do not just blindly buy stuff, but give them a look. It is important to have the right tools, and the cost is minimal compared to losing 2.48%/year on average for the last 5 years because somebody told just to buy an index fund.

http://www.frontlinethoughts.com/gateway.htm

Mauldin's site is free, and you can subscribe to his excellent newsletter.

http://www.actwin.com/kalostrader/

My own site is free, and I have recently started posting a trading journal. You can see my good and bad trades.





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