I got my start investing in stocks back in 1989.  My first stock was IBM and I believe I had a princely sum of about 20 shares (which I purchased as part of the IBM employee stock purchase program).

From that beginning, my fascination with investing grew to the point where, in 1998, I wrote an investment program which I subsequently offered for sale. That piece of software was called Automatic Investor and is still currently available today at www.AutomaticInvestor.com.

In the intervening years I wrote many more investment programs. Most were for my internal use which I used to test various theories and strategies. The interesting thing about testing is that it eliminates any wishful thinking about what sounds like it should work.

I’ve had ideas that I was certain would work but when I tested them, they failed miserably. The major lesson I’ve learned and I’ll share with you now is simply this: it is extremely difficult to beat the markets. Period.

I know there are many people and companies out there that say different. But you know what? They’re wrong. You simply cannot make hundreds of thousands of dollars in your pajamas in just a few minutes a day by loading a program on your computer and following the flashing green and red lights.

Okay, you might be saying, “I know that. I wouldn’t fall for something as transparent as that.” But would you fall for believing that there are people or programs that can predict the markets? Would you fall for believing that Technical Analysis works? Do you believe that day trading, short-term trading, Forex trading or one of the myriad other make-money-quick schemes work consistently?

If so, this is NOT the blog for you.

On the other hand, if you’re interested in following a solid long-term investment plan that has been developed by experts, and more importantly tested and proven over time, then stick around. I’ve been testing investment strategies for over 10 years now and I believe I know which ones work and which ones are a ticket to losing all of your money.

So to start off, here’s a hot stock tip…

If you want to make money in the stock market simply split your portfolio into 4 equal parts and purchase low-expense INDEX mutual funds in the following categories…

1. U.S. large-cap equities.
2. U.S. mid-cap equities.
3. Asian equities.
4. European equities.

Then, every year on the anniversary of your purchase, rebalance back to your initial allocation (i.e. 25% of each category). When you add money (and you should be adding money by saving some of your income each time you get paid), split the new money into 4 and purchase each of the 4 categories. Then hang on for somewhere between 10 and 25 years.

That’s it.

You’ll most likely do SIGNIFICANTLY better than everyone else (especially those day-trading, TA, get-rich-quick types).

A few words of caution, however…

1. You won’t get excitement from this — at least not until you start seeing your investments multiply and realize that you’re rich.
2. Some years you will not do well and your portfolio will be down. This could happen multiple years in a row. However if you hang in there, over the long-term there will be VERY little chance you won’t do VERY well.
3. Sometimes you will be making 10 or 15% and you’ll be hearing others are making 100% or 200% and you’ll feel as if you’re missing out. However if you stay the course, those 100% “investors” will eventually lose all their money while yours will be compounding over time.

Okay, so if that’s it, then there’s no real reason for continuing this blog. After all, what more do you need to know? It’s been great, thanks for visiting!

I’m just kidding. Listen, what I just said is a great way to invest and it will serve you well. In fact, over the long term, it will most likely outperform the vast majority of strategies you know about today.

However it is not the best way to invest. No, no, no. There are better ways. And my intention in this blog is to show you what they are and show you why I think they are better (and that’s where testing comes in). After all, anybody can say this or that method is the best way to invest, but that’s just opinion really.

However robust, statistically-sound testing reveals what is really good and what doesn’t work. In essence it removes opinion from the equation and replaces it with facts.

That’s it for now. I’ll expand more in future posts.