Money Sense Tips

In an op-ed piece Warren Buffett wrote for The New York Times last fall, the Oracle of Omaha pointed out:

Over the long term, the stock market news will be good. In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.

Here is the advice – don’t buy into any of these myths that could one day keep you from living out your dreams …

Myth No. 1: It’s too early to plan for retirement.
According to a study, 49% of people ages 25 to 34 have less than $25,000 saved for retirement. While that’s not particularly surprising, this certainly is: A mere 23% of people over 55 have more than $250,000 saved up — and they’re within a decade of retirement!

Too early to plan for retirement? Hogwash! Can you imagine if Tiger Woods’ parents had told him he was too young to swing a golf club, or if Roger Federer’s coach had told him he didn’t need to practice his forehand yet? A large part of the reason those two men so dominate their sports is because they got a jump start — and they never let up.

The same holds true with investing for retirement. You need to practice, work hard, and focus — so that when game time finally arrives, everything is effortless and just falls into place. Is it a coincidence that Warren Buffett began investing at 11, has practiced every day since, and is now the richest man in the world? I think not.

So, what gives? I think it has a lot to do with the second investment myth you need to ignore at all costs.

Myth No. 2: I can’t beat Federer — so I shouldn’t play.
If you’ve watched professional tennis anytime in the past decade or so, you know that virtually no one can beat Roger Federer — except for Rafael Nadal. Likewise, most people can’t beat Tiger Woods, on Sunday or otherwise. You probably can’t, and I certainly can’t.

Furthermore, it’s not very likely any of us will ever be a better investor than Buffett. Nor is it likely we will one day be able to brag about how we got in early on the next Google (Nasdaq: GOOG) or Netflix (Nasdaq: NFLX) and then rode off into the sunset.

So what? Just because I can’t beat Roger Federer doesn’t mean that years of practice and dedication won’t turn me into an exceptional tennis player. I may never be better than Tiger, but hitting a bucket of balls at the range every day will nonetheless improve my drive immensely.

And just because you may not ever match Warren Buffett’s wealth doesn’t mean you shouldn’t follow his investing style — regular purchases of excellent companies selling for less than they’re worth. Yet many investors mistakenly believe that the only hope for securing life-changing wealth is to “get lucky” and stumble onto the next Genentech (NYSE: DNA) before anyone has ever heard of it.

But as my colleague Seth Jayson points out, there are plenty of well-known stocks that can still deliver superior long-term returns. Believe it or not, from 1957 to 2003, well-known names like Abbott Laboratories (NYSE: ABT), Crane, and Colgate-Palmolive would have delivered you more than 15% annual returns (assuming dividend reinvestment).

And thanks to the unprecedented market sell-off, many strong businesses with high yields are selling at nice discounts. Take, for example, Caterpillar (NYSE: CAT), Coca-Cola (NYSE: KO), and Philip Morris International (NYSE: PM).

Myth No. 3: Planning for retirement is hard.
The final thing that seems to keep many people from achieving their dream retirement is the very thing that could achieve it for them in the first place: hard work.

There’s no sage advice I can quote here, and I’d be lying if I said investing well or planning for retirement was simple. But you must make it a commitment and a priority today — for the sake of your future. Plus, with a little help, it can be far easier than you ever imagined.

If you don’t believe me, I invite you to take a free 30-day trial of Motley Fool Rule Your Retirement. You’ll get full access to all of our retirement experts’ tips and advice, as well as detailed information on the best place to invest your money — whether you’re 20 years out from retirement, 10 years away from retirement, or already there.

Remember, it’s never too early — or too late — to start working toward your dream retirement. Simply click here to get some help on ruling your retirement.

[Source: The Motley Fool]

For those who work on Wall Street, stock trading is an everyday occurrence. For many of the rest of us, it is an enigma. It just seems so complex, especially when you don’t have a clue what goes on behind the scenes.

Actually, stock trading isn’t terribly difficult to understand. Here are the basics.

How Stocks Are Traded

The actual trading of stocks takes place at a stock exchange. The most familiar stock exchange for most Americans is the New York Stock Exchange. This is the place that we often see on the financial report on the news. It is full of traders working to facilitate smooth, quick transactions between buyers and sellers.

But not every stock exchange operates like the New York Stock Exchange. Today, many stock exchanges are operated electronically. The NASDAQ is one such exchange. It utilizes a computer network to match stock sellers with buyers.

Stock Brokers

Not just anyone can access a stock exchange, electronic or otherwise. Only licensed stock brokers are allowed to interact with them. This helps ensure that all rules and laws are followed.

As with stock exchanges, stock brokers may be live or electronic. A traditional stock broker can provide a more personalized service, but this service comes at a price. Electronic brokers are designed to make trading faster, and they usually charge lower fees. Still, inexperienced stock traders often do better when working with a living, breathing stock broker.

Buying and Selling

When you choose a stock broker to work with, you must open an account with them. Most require a minimum deposit to get started. Once you’ve established your account, you’re ready to start buying stock.

It’s up to the investor to research any stock he is considering. Once he settles on a stock and decides how many shares he wants to buy, he contacts his stock broker. The broker places the order, deducting the stock price and a commission from the buyer’s account.

In order to turn a profit, the investor must watch his stocks and see when they gain value. When that occurs, he contacts his broker and lets him know that he is ready to sell. The broker once again sets up the transaction, deposits the profit into the investor’s account, and takes out his commission.

In order to make money trading stocks, it is best to make large trades. Brokers usually charge the same fees for small or large trades, so if you buy and sell in small amounts, the commissions will eat into your profits. If you plan to make small trades, an online broker may be a better option due to lower commissions.

The act of trading stocks is pretty simple. The hard part is deciding which stocks to buy and when to sell them for maximum profit. Trading is far from a guaranteed money-maker, so if you have a low tolerance for risk, putting your money into more stable investments could be the way to go.

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