It is not true. Nobody is so broke that he or she cannot save. When I was a little boy I learned saving myself. I always wanted to be a rich man when I would grow up. My mom concerned about me that I was growing into a greedy person or so. At least she though so. She always said “You are like your uncle. He is also greedy for every penny.” For me it was a compliment.

Saving money would be the first step every new investor, young or old should do when she thinks she is broke. However the very first step it is not to save, but start working on changing our own mind about money. It really is in our own head. People want everything and they want it now. Even my sister says why saving money now, she wants to live her life now and starts saving later. Well, what is it later? In her 60s? Everybody who lives from paycheck to paycheck doesn’t realize that saving is a long term program and it doesn’t make anyone wealthy overnight. There are some advisers who honor making your own business over saving such as Robert Kiyosaki and I must admit that he has some good ideas in his books. However I remember his words in a TV show: “… work hard … save your money … retire … ” or similar (I am adding and die poor). He is advocating a personal business over working for somebody and saving money. In some point he is right, but even though an investor who starts his own business he should have his saving plan no matter what otherwise such investor may end up living from paycheck to paycheck even in his own business. And believe me I know couple examples.

I made my own business and I got pretty rich, but this is not a matter of this post. What I want to show is that everybody can start from nothing. Same as I did. Once when I was a young man about 15 or so old, second after I divorced, left all my property to my ex-wife, moved and started over. After five years I can consider myself rich again. Of course not as rich as I was originally, but still well done than five years ago.

The very best book I can recommend to everyone who wants to change her life is Money Is My Friend by Phil Laut. It was my cook book when I was 15. This book taught me how to deal with money, how to make budget, follow the rules etc. Thanks this book I learned my savings sense. I opened my first bank account in my teens and people around me thought I was a freak. As a boy I was working in summer break for my neighbors for small pennies and every day I put the money to my bank account. When I got older I started working for a local post office during summer and I was saving any tips I got as a young delivery boy. Later I opened several other bank accounts and each had its own purpose. Exactly as the book says. Even today I follow the principles from the book. I have several checking and savings accounts, and I have several credit cards as well. Companies when dealing with my credit score mostly refuse me because I “have too many credit cards with balances.” It is because they completely do not understand my saving philosophy. I do not blame them, nobody told them about it. Each card has however its own purpose too. One is dedicated to car expenses only (such as repairs, gas, etc.) another for personal care, etc. This allows me to keep balances small and affordable to pay.

Every single day as a boy and a student even as a young man I was thinking and asking one question to myself: “How can I get rich?” This question helped me searching for opportunities and it helped me to change my mind regarding personal money management. After all I learned making budget first when dealing with my personal money and stick with it no matter what, no questions. Sometimes it was hard to do it. I saw new books in a local book store which I wanted and it was hard to convince myself that I had now funds available yet, because a dedicated account was empty. It was at the time when I was a student and my only income was my parents support and money I made during summer work. Even with such limited income I could save a bunch of money so why not a grown up with a regular salary?

I believe, everyone can do the same. Just start working on it. Put this goal to a paper and create your first small budget. It can be a simple one. Put down what is your income on one side of the paper, what are your expenses on the other side. Keep all your bills and checks so it would be easy to keep track of all expenses and easy to create and adjust the budget. Try find where you can save. For example I realized that I can save almost $200 a month by stop lunching out and have my lunch at home. After analyzing expenses and finding your money holes you can seal them by changing your mind. Then you would find that you can afford to put aside $100 a month for example. This is enough to make a fortune later. Every business needs a starting capital, even your own.

After realizing that it would be a piece of cake to put $100 aside, open a savings account, name it “Emergency-short term” and start transferring money. The best way to do it is to pay yourself first. Whenever you get a paycheck from your employer or whenever he transfers your salary to your regular checking, transfer your own salary of 100 of dollars to the new savings account the very first moment after receiving it. I made a goal to have a short reserves up to $2000, which will be for emergency payments, which may exceed my regular paycheck for example new tires or lawyer payments or accountant or whatever. My second savings account is called “Emergency long term” and this keeps money, which would be needed in case I lose my job until I find a new one. Typically it is recommended to have about three to six months of last salary to keep a living standard for three to six months after losing job. I plan to keep $30,000 on this account and I am still building this reserves. The rest of my money goes to my investing account and ROTH IRA. If you want to build your emergency savings along with an investing account so you can start investing soon, you can rotate contributions. One month send the money to the savings account, next month send it to the investing account.

As my sister said, why saving now and lose my life by refusing all its temptations since I am young. I still live my life satisfactory, spending money for whatever I want while building my financial independence. Everything is in our own head, start changing it first.

Trading stocks or commodities is a very good chance for everyone to make a good income every month. Unlike other businesses an investor doesn’t need selling any goods, having hated boss, get up early every morning, paying large overhead, have no employees, dealing with competitors and an investor doesn’t have to work 8 hours a day, 40 hours a week for a paycheck which hardly covers your household expenses. An investor has the only one competitor. It is himself.

It sounds too good to be true, right? I know some traders who trade stocks for a living. I read about legendary stock operators who started this business with only $3 in their pocket at their age of 14 (Jesse Livermore, How to trade in Stocks) and they made a fortune. Jessie Livermore became a millionaire at 29, Nicolas Darvas at 39 etc. All of them considered trading stocks as their businesses. Darvas, even tough a dancer made $2M trading stocks. Livermore made $3M in one day trading stocks and commodities. Dan Zanger turned his $10,000 account into $42 M within 18 months. He currently holds a world record. There are many other successful traders around and they are the proof that it is possible for everyone to trade stocks or commodities for a living.

However about 80% of investors or traders loose their money. It is because of their own mistakes, lack of discipline, money management and rules which can protect them against losses.

A few years ago I did well. I had my own business (I still have it) and I made a lot of money annually. I felt very confident and amazed of trading stocks and commodities. At that time I traded stocks, not somewhat successfully (I always ended up even), but I was confident about my trading. Honestly I felt myself to be someone important, knowing more than others. I was proud. Instead of further studying I was looking for more opportunities for investing. I had a lot of money and I was looking for another vehicle to make even more. My poor results in stocks didn’t convince me to do something about it: study and improve and save the money prior I would learn how to get better.

One day I found a commercial in a newspaper. One local commodity broker was offering opening a trading account with a guidance (they called it somewhat money management). They presented how great results their clients could have when following their strategy how much money in a very short term I could make. Of course they told me all about risk in commodities, but all their charts looked way better and tempting. I agreed to open the account and start trading commodities even though I had no idea how to trade. Why bother! Their management was my security net which would protect me. The salesman assured me that it was their best interest always to help me making money. He said that he wouldn’t be working in such a company if it wasn’t their best effort to make money to their clients. I was convinced and opened an account.

The entire process of opening the account was usual. I had to submit a questionnaire and my income sheet and all other information to prove I am financially secured and in case of any loss I wouldn’t end up ruined. The “trader” or whatever he called himself explained me how the trading would look like. Their best analyst ever in the world would call me with his picks. He would explain me why he picked such commodity, where the buy point should be and where to place the stop loss. Then I listened a long explanation of using stop losses. I felt as a CEO of the Earth. I had a lot of money and I was treated as VIP and at that time I was going to trade commodities. Big bucks were supposed to roll into my pocket. I was going to become a big trader making millions and quitting my current job. What a bright future!

The spinning wheel started its spinning. I do not remember and do not have any records of my trading with me. I remember I was trading a crude oil, orange juice, wheat, gold, cocoa, and other commodities. Gosh what a big trader I was! Every day the analyst called me and dictated his picks. I made notes and I was proud of myself when others around me could see me talking with my broker and giving him orders what he should buy or sell. After the list was done the analyst switched me into their trading department where I dictated all trade orders back to a different guy who was executing them.

Day by day I was trading their recommendations. At first, the account showed a small loss. It was OK. I knew from the stocks trading that it is normal having a small loss. It would go back up. After a few months it really did. I was almost even and satisfied how well I was doing. Instead of continuing its growth the balance turned back down and it never recovered. I was watching my account slumping down. Within six months my $30,000 account had $1,000 balance.

I called to my “manager” what was going on. He told me that all $30,000 accounts were doing well and were showing gains. “How come that my doesn’t?” I asked. “It is because your account doesn’t have $30,000 balance and our analysis are balanced for these accounts.” I couldn’t believe my ears. “So you are saying me what?” I asked again. “Add more money to your account to rise the balance back up to $30,000 and you start making money, or change the strategy of your trading into something more secure.” was his answer. I was shocked. The bright future of the greatest trader ever was gone. I didn’t want to put more money into a black hole and I didn’t want to give it up. Back in my mind a voice was telling me to strive trading to get all my losses back. With $1,000 account it was impossible however. I decided to end up this madness and closed the account with a loss of 29,000 of dollars.

Later I was thinking about this lesson. What happened? What I did wrong? I couldn’t believe that the broker was willing to lose a good and wealthy client just for only commissions from trading. It must be every broker interest having a satisfied client trading with him for ever and generating him enough on commissions. None of this was true.

The conclusion of this story is what I realized later. Never, ever listen to tips, never, ever trade others recommendations. Do not let your broker trading your own money. They don’t care about you. They make money even when you are losing and this is their only interest. Whenever you feel you need help because you do not know how to trade, it is better to put the money aside and study first rather than lose them by repeating the same mistake. I know that I will return back to trading commodities one day. I also want to trade options, but I still do not know anything about it. Until then I will study how to trade options and commodities on paper and later I open a new account again.

Today’s sell off just confirmed my concerns regarding the market and possible addition to AFAM. This post is to finish my view at this stock. On some other web sites investors can read analysis about certain stock with possible future outlook, but then none of the web site comes back to the stock to revise their view based on the new market action. At least I couldn’t find any such web site. Even IBD which is providing very good reports and analysis gives you a view at a certain stock but next day the situation may become very different from what the report said. Once I read a stock report on FSLR which at that time was supposed to finish a cup of handle pattern, but market had changed and FSLR went down. I know that every investor shall perform his own research and all such reports shall be considered at maximum as recommendation. However sometimes further look at the stock by an experienced investor, trader or professional providing reports would be very helpful to any beginning investor. Such continuation can help to see more behind the stock movement.

This is why I am finishing this miniseries about AFAM because as per today I have made already my decision on this stock. If the market would be in a rally it would be easy to add more shares to the existing positions. The stock reacted well and as expected for a short correction. However today the stock was driven further down by the entire market sentiment, so adding new positions would be very risky. The positive thing is that the volume was low. It was still higher than average, but it is slowing down. The volume with the stock’s movement makes me wait for further development without taking any action. If the stock will touch my stop loss, I will sell. If it will go down, side ways or slowly up, I will sit tight waiting for it and buy new position when the price touches my first target price for pyramiding.

The entire portfolio will suffer small losses during this sell off period. Nobody knows when this will end. We may expect some improvement after the presidential election in November or later next year. Since then, no new trades shall be opened. For the upcoming period I will not take any action. I will contribute to the account with some cash making myself ready for future uptrend. It is difficult to be just waiting and looking at the portfolio showing red numbers, but there is no other way to do.

Last Friday AFAM has touched its 50 MA average on high volume. It started dropping as a rock and it was scary move. I mentioned that this move would be a correction only if the stock bounces back on high volume and it would be a good opportunity to add more shares to the existing positions. The stock did it today. It gapped up on huge volume. See the chart.

The question is however whether this move is enough to consider additional position in this stock. The market responded to crazy news about the Government bailing out Freddie Mac (FRE) and Fannie Mae (FNM). Was the entire market running up like a bull just to crash tomorrow? Since the market is in correction and today’s move cannot be considered as reasonable (almost all stocks jumped up just because of the above mentioned information) I would recommend further confirmation on AFAM’s move. If the price will continue up on rising volume tomorrow it would be a signal for adding another position.