| A stock trading education can really help people | | | | improvements on buy and hold investing. |
| insure that they build wealth and save successfully | | | | 6. Fundamental vs. technical trading techniques. - For |
| for retirement. It is an important component of | | | | those who are willing to spend more time in the |
| financial literacy, which should be taught in school. | | | | markets, and wish to attempt more aggressive |
| Here are the 10 important principles that every one | | | | trading, it is important to know the strengths, |
| should know: | | | | weaknesses, and basic techniques of these two |
| 1. The power of compound interest. This principle is | | | | investing schools of thought. |
| important because it shows that investing is best | | | | 7. Stock market indexes and index funds. The stock |
| started early, and reckless schemes are best avoided. | | | | indexes are important because they provide |
| The "fuel" for building wealth is many years of | | | | bench-marks for evaluating your investment |
| steady returns. | | | | strategies. Also, for people who do not want to |
| 2. Knowledge of taxes - especially IRAs, Roth IRA's, | | | | invest the time and effort into active investing, |
| 401k's, capital gains taxes, and determining a tax | | | | investing in index funds make a lot of sense. |
| basis for investments. Proper tax strategy feeds into | | | | 8. Asset allocation and diversification. - This is the |
| the first principle - it allows more money to be | | | | most important component for determining the |
| compounded. | | | | long-term performance of your portfolio. |
| 3. The risks of over-trading, day-trading, leverage, | | | | 9 Value vs. growth vs. GARP (growth at a |
| options, and futures. This principle also relates back to | | | | reasonable price). - These are different techniques |
| the first. Risky strategies run the risks of causing | | | | for picking stocks. Since each method has their up |
| losses, which interrupt the build-up and compounding | | | | and down cycles, it can be worth it to learn all of |
| of wealth. Also, these strategies tend to incur higher | | | | them and follow a blended approach of selecting |
| costs, which dampen returns. | | | | some holdings through each method. |
| 4. Buy and hold investing. For most people with little | | | | 10. Fees and commissions - Wall Street firms want to |
| time or interest in investing, this time-tested, | | | | generate money from investors - therefore they |
| bed-rock investment principle is their best hope for | | | | continually innovate new financial products and |
| successful investing. | | | | techniques. Since expenses (fees and commissions) |
| 5. Formula investing (dollar cost averaging, value | | | | are the most controllable component of investment |
| averaging, and constant value investing). For those | | | | return, it's important for investors to understand how |
| who are willing to spend a little time, these | | | | to identify and judge expenses. |
| re-balancing strategies can produce significant | | | | |