First – let’s be clear. You’re not going to retire rich by investing in Certificates of Deposit (CDs) or money market accounts unless you already have five or ten million dollars. If you have five or ten million dollars, you can afford to put your money in a CD or money market paying 3% and get by living on the interest. Note that you can get by but you are not ever going to get richer. You are already rich. If you want to continue to build wealth, CDs or money market accounts will not get you there. Taking inflation into account, these accounts will not keep you rich either. You need to make over 10% annually, just to stay even, with taxes and inflation.

If you are like me, you never had millions to sock away in CDs or fixed income vehicles. I once owned a closed end fund of municipal bonds from Nuveen. In the tax bracket I was in at the time, the rate of return was over 10% taking into account the effect of not having to pay Federal taxes. It was also fun to talk about my muni bonds at parties, etc. I was out of the stock market for a while and was trying to get a better rate than CDs to park my short term money. Since I have learned about equity investments like stocks and mutual funds, 10% in a muni bond fund no longer appeals to me.

Second – if you are new to investing you need to know how to paper trade. Paper trading was something I learned from Ken Roberts, the author of “The World’s Most Powerful Money Manual & Course”. I bought the course through the mail in the mid eighties, and while I never really understood all of Ken’s teachings, it was where I learned about paper trading.

I used to “buy” stocks on paper and not in a real stock brokerage account. I used to track the closing prices on graph paper, every night. When I sold, I sold on paper and tallied up my gains or losses. All of this trading was done on paper; hence the name paper trading. Although now-a-days I no longer keep track of stocks with paper, I still use the same concept with Microsoft Excel.

One area that I paper trade is the FOREX. FOREX is an acronym and it stands for the Foreign Exchange. If you think the Euro will go up against the dollar, you can buy the Euro on the FOREX. The FOREX market is also known as the FX. There are many ways to buy one currency and sell the other and the market is very interesting. But I have never actually bought anything.

Third – You need to understand charts and how to use them. Most of my money has been made because I watched the market using charts. They are also an excellent tool for back testing. Back testing is where you have an idea or theory on how to trade in a certain way. But you don’t want to test your theory in the marketplace using real money. So you go back in time using charts to see how your theory would have fared. That’s called back testing. I sold my stocks and was out of the market in early 2008 because I had been watching the market using charts.

In the article I wrote titled, “Investing For Retirement Course 101”, I gave several chart resources. Go back and take a look at that article for more information. To be continued . . .

For Taking Early Retirement (TER), I hope you are enjoying a great retirement or are close to that day!

Jeremiah John

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