(View entire post here)

The value averaging strategy you and I explored in my articles this week will be one of your only true friends in the stock market. Stocks are not a place to make easy money. They require discipline, a set of rules, something to guard against emotions, and the value averaging strategy provides all of that. Investors need to be very careful, and methodical in stocks.

This view of mine has changed over the years. When all stocks were going up in the 1990s, it was an easy conclusion to put every spare dollar into the market. Why not? The opportunity cost of doing anything else with cash was too high. Stocks went up, so buying them with all you had was the way to go.

It wasn't only the end of the dot-com bubble that reset expectations. It was the creeping feeling that the source of the bubble wasn't just speculative frenzy. Where was all the cash coming from? Whom was it benefiting? Those questions first appeared in the early 2000s, and doubts about former Federal Reserve Chairman Greenspan and the so-called Committee to Save the World surfaced. Was it possible that government policies of easy money, encouraged by bankers and big business, were somewhat to blame?

(View entire post here)

I looked with you yesterday at a value averaging system to achieve steady 3% quarterly growth in your investment accounts, stress free! Today, I'll give you a nodding acquaintance with the strategy.

You're probably familiar with dollar-cost averaging, which is just adding the same amount of money to an investment on a steady basis. For instance, you might add $100 per month to an index mutual fund. It works well for a couple of reasons. First, you build a capital base over time and, second, the steady payments automatically buy more shares when the price is cheaper and fewer when the price is more expensive. If the shares are $5 in October, $10 in November, then $8 in December, your $100 would have bought 20 shares in October, 10 in November, and 12.5 in December.

Value averaging asks these questions: Instead of just sending the same amount of money when the price is cheaper, why not send more? Instead of just buying fewer shares when the price is higher, why not buy none or even sell some? Then, the benefits of buying more of the cheaper shares and fewer of the expensive ones will be magnified, right? You bet, and that's what we accomplish with value averaging. We put in place a framework for knowing whether we need to send more money, less money, or even pull money out of the investment to keep it on track to reach our growth rate target. In our example, that target is 3% per quarter.

(View entire post here)

One thing I do between editions of the "The Neatest Little Guide to Stock Market Investing" is collect feedback from readers. I learned over the past two years that, while many people like the firepower of the book's permanent portfolios, others wanted me to present a less stressful, methodical strategy for extracting steady profits from the market. This is a tall order, to be sure. The axiom holds that the more return an investor seeks, the more risk he or she will need to take (within reason, of course). Balancing the risk and reward of a portfolio is the art of the successful investor. Is there a low-stress way to map out the money growth we need and then keep that growth on track?

Yes! I'm proud of a new system introduced in the 2010 edition that uses a technique called value averaging to achieve a steady rate of growth. I didn't invent the approach. I took research presented in a 1988 article by Michael Edleson, who later expanded the concept in his book "Value Averaging: The Safe and Easy Strategy for Higher Investment Returns," and applied it to the new market products available today. The result is a system that I've been using in The Kelly Letter to extract 3% quarterly growth out of the S&P SmallCap 600 index of smaller companies.

(View entire post here)

If the stock market is a crock, easily manipulated by government and banks, pushed around by institutional investors so that small-time fundamental research becomes meaningless, is there any wise way to approach it?

Some would point to gaming actions by the Federal Reserve and government. If they pump money into the economy, as they did a year ago, stocks will go up and we should all just ride that trend higher. Fine, but what about when the free money and stimuli fade out? Down go stocks. Do you know when the money and stimuli will fade? Probably not. I don't.

Oh sure, there's heated debate about it. Second guessing the Fed's next move is a cottage industry in the investment world, but it's no easier than guessing the market's next move. Giving up on guessing market direction in favor of guessing Fed policy is like standing up from an ice chair to lie down on a snow bed.

Among the few things we know for sure about stocks is this: they fluctuate. They go up, they go down, and you don't really know which they're going to do next. If you can accept that, you're already ahead of about 80 percent of investors who have to learn it the hard way -with real money.

Stocks go up, they go down, and we all know we should buy them after they've gone down but before they go up. With me so far? Good, then the next challenge is how to know when they've gone down and should be bought, or have gone up and should be sold.

Since you don't know, and I don't know, and neither do any of the confidently talking heads on TV, let's use a formula instead. Let's let the market's price itself tell us when it should be bought for future profits, or sold to book current profits.

(View entire post here)

The stock market is a crock. Let's be honest. For so many years now, decades even, people have been told to sock money away in stocks, buy for the long haul, it'll pay off later, and so on, only to see in the last decade two - count ‘em, two - massive bear markets during which no amount of individual research spared anybody.

I've been writing about stocks for more than 15 years. When I started, historical data showed that an ordinary person could look at basic company factors like how much it earns, its marketing plans, and how expensive its stock is, to decide if it's worth owning. That's called fundamental research, and anybody could do it.

Did it matter, though? Not really. When big factors like loose money policy from the Federal Reserve or bank shenanigans like we saw in the subprime mortgage crisis cratered the whole economy, owners of nearly every stock got slammed. The big, the small, the good, the bad - they all went down as a block. All that time people spent sifting through details was time wasted. Stock = stock = stock = good luck when factors beyond your control kill ‘em all.

That's what ticked me off a little more than a year ago when I decided that the 2010 edition of my bestselling "The Neatest Little Guide to Stock Market Investing" needed to give people some new tools to defend against the craziness. The problem with where society is heading is that there are so few ways left for regular folks to get ahead. What, overpriced homes? A dollar backed by a government drowning in debt? A block of stocks that go wherever government and banks want them to go? Nice options.

(View entire post here)

Jason Kelley is our guest blogger during the week of March 15th. If you have any questions for Jason Kelly, add a comment to any of his posts. Here is some more information about The Neatest Little Guide to Stock Market Investing:

The essential stock market guide updated with timely strategies for investing after the crash

Now in its fourth edition, Jason Kelly's The Neatest Little Guide to Stock Market Investing has established itself as a clear, concise, and highly effective guide for investing in stocks. This comprehensively updated edition contains tried-and-true investment principles to teach investors how to create and refine a profitable investment program. New strategies and content include:

• Basic tips on when to invest and how to reduce the amount of risk in this turbulent market
• A new core portfolio technique that shows readers a way to achieve 3 percent quarterly performance with the IJR exchange-traded fund
• An exclusive interview with legendary Legg Mason investment counselor, Bill Miller, including his thoughts on the financial crash of 2008

Accessible and intelligent, The Neatest Little Guide to Stock Market Investing is what every investor needs to keep pace in the current market.

About Jason Kelly