Why would intelligent people do this? Because they are responding to the very simple desire to make money and grow their wealth. There is nothing wrong with that. But they are also responding to a few other emotions like laziness, greed, wanting quick answers and other perfectly normal human factors.

Well, unfortunately, this approach of using others' advice only works on rare occasions. A lot of the time, the shares are bought and the result ends up as a loss. Most people do not realise that you only make money when you sell shares, not when you buy them. How often do these trusted advisers or non-experts come back and tell you that it is now the right time to sell the shares that they told you about last month?

Interestingly, some people just seem to achieve more of their goals more often than others.

Did you know that it is estimated that only 10% of people commit to actually crystallising their goals by writing them down? And only a further 3% of these people actually review their goals! So, given these statistics, is it any wonder that only a small percentage of traders and investors are successful? It would seem that many traders do not have effective goals in place for their trading, after all, how specific is "make money"?

Your trading goals should take on a long-term view, as trading is a long-term process.

Many plans can be repeatedly implemented for years-and-years. This takes the focus away from any one individual trade, as the results are insignificant to your overall trading approach. A losing trade doesn’t have to reflect negatively on your trading goals but can still be a success when considered from the viewpoint of the other measures mentioned.

This concept may sound revolutionary to inexperienced traders, but market veterans have learnt not to take any one, two, three weeks or even the last months trading results to heart. This works both for losing and winning trades, which is helpful in overcoming the usual highs and lows associated with swings in winning and losing trades. Successful trading is the result of an ongoing approach. And, of course, the best guarantee available is your own successful track record.

Can the skills of a successful investor be learned? Or are they innate, some sort of sixth sense a lucky few are born with? Richard Dennis, the legendary Chicago trader who turned $400 into $200 million in 18 years, has no doubt. Following an experiment with a group of would-be investors, he's convinced investing can be learned. Over the past 1 1/2 years, a group of 14 traders he taught earned an average annual compound rate of return of 80%. In contrast, about 70% of all non-professional investors lose money on a yearly basis.

How long does it take to learn to trade successfully?Of further interest is the time it takes people to learn to invest successfully. Market Wizards, the best-selling classic reference book by Jack D. Schwager, delves into the minds of some of the world's most successful investors finding that they took up to a decade to learn to trade effectively.

Al Weiss, who pioneered the development of the urethane skateboard wheel, spent four years developing his trading before he averaged 52% per annum between 1982 and 1991 with his fund AZF Commodity Management.

In a recent audio interview Larry Williams, famous for winning the 1987 Robbins World Cup Trading Championship where he managed to turn $10,000 into $1.1 million, said it took him 6 to 12 years working out how to invest.

Christopher Tate, the famous Australian author on trading, actually claimed it took him around three years just to break even.

Why does it take so long? You can see that some of the most successful investors took many years to master trading. Why does it take so long? There are a few good reasons:

Firstly, the students of Mr. Dennis had a distinct advantage since they were shown how to invest by a successful investor, demonstrating that one of the most successful ways to learn to invest is to get instruction from a professional, observe what they do, ask questions and have a go yourself. Of course, many of the classic trading books were available at the time of the Turtles experiment, yet the participants were not successful until the expert knowledge and investing experience of a successful investor was imparted to them.

Secondly, investing is a practical skill set. A theoretical understanding doesn't make a successful investor. The gaining of experience is a vital ingredient to trading as demonstrated by the length of time committed by some of the world's most successful investors above. Having the discipline to implement your trading plan is perhaps one of the most important elements of gaining practical experience.

Financial freedom eludes so many people these days who by all logical conclusions and observations should have obtained it. It's commonly cited as one of the most important and sought after goals in life and yet is rarely attained. This article does not attempt to give you a magic formula for success but I do share with you the choices that made a difference to me and can, if you choose put you well on the path to freedom.

Consumption

Investment

You can choose to spend some or all of your money on investment items such as revenue producing real estate, shares, interest bearing deposits, businesses that produce revenue, etc.

Consumption or investment

Two important factors need to be understood about the simple concepts of consumption and investment.

The first factor is that spending on "consumption" items results in reducing the total value of your assets (net worth). Spending on investment items aims to increase your net worth. The second factor is that you have choice. You can choose between spending on consumption or investment items.

Of course, the best spending patterns are those that aim to attain a balance between spending on consumption and investment items.

Choosing consumption or investment

You now know the difference between consumption and investment spending and that you can choose between the two.

All you need to do is to think before you spend. Consumption spending can contribute to your lifestyle (driving a new car is fun, even if it was bought on credit and has created a liability of three to five years of payments). Investment spending provides income and wealth.

Shades of Grey

There is, of course, some spending that is not clearly defined as consumption or investment.Buying your own home is considered by many to be an investment. It isn’t! The purchase usually is financed and the repayments are a liability. The upkeep of a house costs money. There are rates and taxes payable on it. You do not get any revenue from it. If you plan to sell it in a few years to make a profit on its increased value, then it may be an investment. However if you have to buy another house to live in are you really any better off?

In order to build wealth, some investment spending is necessary. The more that goes into investment spending, the bigger and quicker your wealth will grow. However, if too much goes into investment spending, and not enough into consumption, then lifestyle can become meager. But you can choose.

Accumulation over time

Most people are not born rich. Certainly, some inherit wealth, but consequently may not appreciate it. A few win wealth in lotteries, but ironically, perhaps because they have not worked for it, or are not used to it, could end up squandering the temporary riches.

Everyone, however, has one thing in common. The same amount of time goes past for each of us, and at the same rate. How you employ that time is significant.

Imagine that at the age of 21, you invested $1,000 at an average annual rate of return of 10%, and then by the time you reach 65, you would have accumulated over $70,000 without doing anything else.

If at the age of 21, you invested $1,000 at an average annual rate of return of 10%, and each month invested an additional $100, then by the time you reach 65, you would be a millionaire, without doing anything else.

If you did neither of these things, then the same time would pass, and you would not have accumulated any wealth.

These examples of investment, quite deliberately, use amounts of money that are affordable by most, and if spent on investment, rather than consumption, would probably not be missed.

In terms of investing, time is on your side.Of course, you may not be 21 any more and you may wish to accumulate wealth at a faster rate. This is possible by increasing the amount invested, and the annual rate of return. It is not possible to systematically accumulate significant wealth (millions) without looking at a timeframe of several years (say 5 to 10). If you are trying to make more money in less time, then your objectives may not be realistic. Perhaps a lottery ticket, crossed fingers and large amount of luck could produce your desired result, but don’t hold your breath waiting.

The power of compounding

In the above examples there is an additional factor at work. The entire return was reinvested and participated in earning the same rate of return as the original investment. None of the investment return was withdrawn and spent on consumption items

This is one of the questions that I'm asked the most and it's an answer that I like to answer in two ways.

The more technical or objective way to answer it is to compare your performance to something concrete. For example the market average in your own country. For us here in Australia it's the All Ordinaries index which has returned well over 40% in the last few years and has averaged over 10 percent per year over the last 25 years. If you haven't made a return of at least this rate then you haven't performed at a satisfactory level. I know it's a fairly cold way of looking at things but that's the facts.

So consider this, it is a well known fact that 70% of fund managers don't actually beat the market average. However, being an individual investor and not faced with the same constraints you should comfortably be beating this average to consider yourself successful.

How do I beat the average you ask – well there's a very logical answer to this question. It comes from three very important characteristics of any share.

Firstly, the share should be a leading company within the industry. For example within the top 100 largest companies. Those with a proven track record of success.

Second the share's price history should exhibit the characteristics of a long term uptrend. When you look at chart of such a company you should see it starting in the bottom left hand corner of the page or screen and finishing in the top right hand corner.

Thirdly the share itself should be outperforming the market average. That makes sense if you want your share portfolio to outperform the market average as well.

If these three criteria are applied to all shares within your portfolio you will be selecting shares that are performing well fundamentally. You will be selecting shares have been moving in an upward direction so it is easier to make money from them. And you will be selecting shares that are already performing better than the average. So logically the shares that you have will be giving you the best possible chance to outperform the market average.

What do you want?

The second way I answer questions on how well people should be doing is by asking them how well they want to be doing. It is always fun to hear people umm and err at this question because they simply don't know. They don't know what returns they want so how will they ever know when they've achieved what they want. It is much easier to reach a goal if you define it up front. You also know if you are not reaching it and so can do something about it.

Every investor has several characteristics that combine to make them successful. The degree of success depends on how well you can implement these and how well your strategy works.

The method investors have for selecting shares that they want in their portfolio is arguably one of the most important areas of being a successful investor. For me personally I have stuck to selecting shares that are leading ie blue chip companies, whose price histories are in a long term uptrend and that are themselves doing better than the market average.

The next vital component is the trading plan. This doesn't need to be overly complex. You just need to know what you will do if the share price goes up, down or sideways. If you can cover these three things then you have a contingency for anything the share price can throw at you. And more importantly you will prevent yourself from reacting to sudden market fluctuations that happen all of the time.

The trading plan should also incorporate an overall strategy for the share that you have selected and explain the reasoning behind why you're doing what you're doing ie why you decided to place your order level at this particular point.

You will need a robust risk management strategy and to be successful in the long term you will need to implement the strategy. The number of times I've seen people unwilling to action there risk management plan when the share price reaches their pre-determined value price is a little bit scary.

The above three things are great to have in place but don't forget that you must be disciplined in implementing them otherwise you're setting yourself up for failure. And you should remember that to get good at anything you need to practice and you need to gain experience. Champions are made in training. Not on the track.

After identifying these strategic factors you should consider how much you are willing to outlay on each share. It is important to try and spend the same amount on each share ie $5000 across a portfolio of 10 shares in different industries in order to maintain a balanced portfolio.

Finally before deciding to go ahead with any investment you should asses whether its risk to return is worth it. There is no point risking $1 to try to make 50 cents. Over my investing lifespan I have stuck with a ratio of 1:3. For every dollar that I am risking I stand to make at least three or if I stand to make $3000 from a trade then I am willing to risk $1000 in order to make it. The reasoning behind this ratio is that no matter how good you are you will always loose in some of your investments. Having a ratio like this ensures that when the of the investments pay off they more than compensate for any that lose.

To recap any successful investor must exhibit these characteristics over the long term.

Take responsibility for themselves and make their own decisions. They take the credit for making profit and accept the responsibility for any losses. They learn from these decisions and improve over time;

Make investment or trading plans and stick to them They make trading plans based on reliable information in the clear calm light of day and not emotional reactions that may emanate from the panic or euphoria of the share market. And, they stick to their plan;

Assess the Risk/Return Ratio of each trade They only enter into investments that offer reasonable potential for profit;

Manage the risk of every investment . And never lose too much;

Allow for contingencies in the plan so they know what they are going to do if the share being traded goes up, down or sideways in price. The share price can do nothing else. But you can do what you planned. The plan then dictates the actions and prevents unprofitable emotional reactions;

Only put their money into financially secure companies ;

Buy shares when they are cheap and sell those that are expensive relative to their price trends;

Only trade in companies whose prices are in trending up;

Trade unemotionally and have the discipline to trade the plan. They plan the trade and trade the plan;

Keep taking money out of the market. You only make money when you sell shares; and

Have sufficient confidence that has been gained from experience.

Managing Risk

Every deal, trade, investment or business must be undertaken on the basis of a strictly applied limited risk approach. That is, you should only be prepared to lose a fixed and limited amount of money on the investment.

You have no control over what the market will do; you have no control over the share price. Strangely, however, one of the few factors completely in your control is how much you are prepared to lose.

Each time money is invested in a share, the risk being assumed by that investment action must be identified before the investment is made. Once the risk amount has been identified,the next decision is to decide on the method of risk control which will be employed as part of the investment plan. Saratoga's Safe Investing Method^TM uses three alternative risk control methods.

Each investment must also have the potential for profit of several times the risk.By strictly applying this rule for every investment, the overall profits will end up greater than losses incurred.

You never know whether a share investment (or other investment) will profit when you enterinto it. Every investment you undertake must therefore have a risk-to-reward ratio of better

than 1 to 2. Then, even if only half of your investments are winners, you must make money.

It is good practice to target a minimum of 1 to 3 risk-to-reward ratio.

Managing Money Through Diversification

There needs to be a spread of investments (or trades or deals), in order to ensure an overall profit. If you knew which particular investment or share would provide the best return in the future then you could put all of your money into just that one investment and wait for the return. Unfortunately, no one knows the future, so putting all your eggs in one basket is a very high risk strategy.

Any deal, trade, or investment can completely fail. Occasionally one will. Rarely, a bluechip company will go into bankruptcy. These factors are not known up-front at the time of making the investment. If they were, you would not make that investment.

The safeguard for this contingency is to invest only a small percentage of your wealth in any

single investment. This is called diversification. For example, assume you had ten different investments each of equal value, and one of them failed completely, then at worst you have only lost 10% of your wealth. It is probable that you will still make an overall positive return for the year despite this major failure as the other 90% of your wealth continues to work for you.

"The share market is a place where people with money meet people with experience.The people with experience get the money. And the people with money get the experience.-Anon"

Below is the development path that I have advocated and seen work successfully for over a decade.

Step 1:

Education about the share market and strategies for investing The Safe Investing Method has been designed to provide a thorough grounding in share market principles and the development of successful investing habits.

Step 2:

Practice investing in simulation using historical data Saratoga's Trade Simulator has been designed to help you learn how to invest without using your own money. Investing strategies and methods can be tried out during different market conditions such as downward trending markets (bear markets), or strong advances (bull markets) in order to improve investing capability. A structured review process has been included to help you identify problem areas which you can then work on for improved results. However you can also practice safe investing without software products through simple paper trading.

Step 3:

Practice investing in simulation using live data. This logical progression moves you very close to a live investing environment in that decisions are made in simulation but are executed in real time using live data. This gives you the opportunity to assess how well your investing habits have developed during simulation and how well you might perform in the real market.

Step 4:

Investing in the real market using your own investment funds (capital).Saratoga's Trade Simulator can be used to support your live investing and track your performance. The review process is as essential as ever and can be used to maintain and improve your current rate of return during live investing. You should also continue to use the simulation environment to continuously improve your investing skills and test different scenarios or new investment approaches. As you should be able to see this is a logical and practical approach to share market investing. If you genuinely take the time to implement this strategy I have personally seen time after time that you will reap the rewards.

Despite "Reminiscences of a Stock Operator" being written in the early 1920's, it continues to be one of the most useful and most-loved book ever written on the subject of trading and speculation. In this novel, Edwin LeFevre offers advice that still applies today. These guidelines are for the most part even more applicable today than they were in the early 20th century as more and more investors are not professionals.

1. Caution

Excitement (and fear of missing an opportunity) often persuade us to enter the market before it is safe to do so. After a down-trend a number of rallies may fail before one eventually carries through. Likewise, the emotional high of a profitable trade may blind us to signs that the trend is reversing.

2. Patience

Wait for the right market conditions before trading. There are times when it is wise to stay out of the market and observe from the sidelines.

3. Conviction

Have the courage of your convictions: Take steps to protect your profits when you see that a trend is weakening, but sit tight and don't let fear of losing part of your profit cloud your judgment. There is a good chance that the trend will resume its upward climb.

4. Detachment

Concentrate on the technical aspects rather than on the money. If your trades are technically correct, the profits will follow. Stay emotionally detached from the market. Avoid getting caught up in the short-term excitement. Screen-watching is a tell-tale sign: if you continually check prices or stare at charts for hours it is a sign that you are unsure of your strategy and are likely to suffer losses.

5. Focus

Focus on the longer time frames and do not try to catch every short-term fluctuation. The most profitable trades are in catching the large trends.

6. Expect the unexpected

Investing involves dealing with probabilities - not certainties. No one can predict the market correctly every time. Avoid gamblers' logic.

7. Limit your losses

Use stop-losses to protect your funds. When the stop loss is triggered, act immediately - don't hesitate. The biggest mistake you can make is to hold on to falling stocks, hoping for a recovery. Falling stocks have a habit of declining way below what you expected them to. Eventually you are forced to sell, decimating your capital.

Human nature being what it is, most traders and investors ignore these rules when they first start out. It can be an expensive lesson. Control your emotions and avoid being swept along with the crowd.

Often people believe that if they do their research and select the right shares they have conquered the game of share market investing. However putting in the effort of selecting the right shares is only half the story.

After you have identified which shares will give you the best chance of succeeding then you need to create a trading plan so you know what you will do IF the share moves in a particular direction. Why the big IF, as hard as it is to take none of us have a crystal ball - but we can compensate for this through planning.

Every trading plan should be made up of several components. An overarching strategy or plan should be in place so that it doesn't matter if the share moves up down or sideways you will always know what course of action you need to take. Think about this for a second, if you have a set course of action to take regardless of what happens with the share the fear or trepidation that you may have felt before will be gone.

As a consequence of this strategy you should know where you want to place your order, risk and target prices. It is very important that these levels are realistic and not just made up to make your investment seem worthwhile. Having these levels set cuts out a lot of the emotion that you'll experience while in the markets and prevents you from committing the cardinal sins of share market investing.

Next you should ensure that you are making a worthwhile trade ie is the amount that you're risking on the trade worth the return that you could potentially gain from it? Generally a ratio of 1:3 should be sought. In other words if in a particular plan you stand to make $3000 if the share price goes up you should not be willing to risk more that $1000 if the share price goes down, so for every dollar that you are risking you should be looking to make three.

Finally you should decide how much money you actually want to use in any one trade, the best course of action here is to ensure that you are using a similar amount across your portfolio and that you are buying shares based on dollar value rather than a set amount of shares each time. This is purely to ensure that you maintain a balanced portfolio.

For example if you decided to buy 1000 shares with each trade and one stock is $30 and another is $3 then your portfolio will be out of balance as you will have $30000 in one stock and $3000 in another.

In general this type of trading plan is sufficient for an investment approach. However the more information that you include in your trading plan the better. And most importantly don't forget to track the results that your plans are producing, you will only be able to gauge your success in hindsight so you must know why you decided to take a particular course of action.

Getting started in the business of investing is much easier than it used to be. So is improving your returns if you already invest. No longer is the field restricted to the wealthy or large financial institutions. More and more these days every day people like mums, dads, students and even children are trying their hand at what used to be the exclusive playground of the rich.

However before delving into what is a very exciting and potentially financially rewarding world you should assess what type of investor you actually want to be. In the thirty years that I have been investing I have seen people who haven't answered this question come and go and lately I've seen it happen with alarming frequency.

Think about it for a second.... have you really thought about what you need to do to start creating wealth for you and your family. If not you need to seriously consider what type of investment style would be best for your position.

Types of investors

The buy and holders of the community put their money into shares that they feel are good value and hold them for expanses of anywhere between 1 and 50 years. This investment style is most suited to people who are long term orientated by nature, not looking for a quick profit and have an eye for good companies. The most famous proponent of such an approach is the world's second richest man, Warren Buffet, so you could say that it isn't such a bad style.

Day trading is the complete opposite of the buy and hold approach and involves individuals who buy and sell shares in a very short period generally within the same day. If you have a lot of time and are prepared to watch market movements very closely then this approach may be for you.

The next thing you need to look at is what sort of analysis you want to conduct on the shares that you are considering. Generally there are two schools of thought, one being fundamental and the other technical. You will always find people pushing one or the other but it makes more sense to incorporate a blend both.

Fundamentalists tend to look at company profits, management direction, future plans/growth prospects, the economy as a whole and such like company and economic factors.

While those with a mathematical or scientific background might look at share price charts employing various technical analysis techniques, ratios, indicators and trends in order to identify which shares they want to look at further.

You should realise that relying wholly on one or the other is not the wisest thing to do. For example a chart that has all the indications that a share is going to be a good choice for the future is useless if the company is going to file for bankruptcy. As I mentioned earlier a blend of the two should be considered.

When you are deciding what type of investor you want to be, one of the most important considerations is your risk threshold. In other words how much you are willing to loose. This again will have an impact on the investment style that you choose and will also have a relationship to the level of returns that you may be seeking.

Investors come in many forms and there is no right or wrong way. Different things work for different people. It is vital that you decide which method best suits you and that you stick to this method.