The Online Investing AI Blog

After reading about 25 books on investing, trading and automated trading, I finally came up with an investment system. Hopefully it will help crystallize your own investment philosophy.

Although there is an unlimited amount of information available about investing, it is a real challenge to find the good stuff. What is the good stuff, anyway? I think “good” information about investing (and in general) has the following characteristics: Read more…

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Technology will touch everything. And it will change everything. Personal finance is no exception.

Your 401(k) plan isn’t immune from the reach of technology, either. Companies probably thought they could offer their plans and it would be a secret between the company and the employee.

Most 401k plan participants can easily find out what kind of fees that plan charges, or even what types of investments their plan holds.

But a new technology is changing that.

BrightScope quantitatively ranks 401(k) plans–and participants, advisors, and companies all could be better for it.

Read more…

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In the olden days (circa 1970), people expected the government and other institutions to take care of them. They depended on the government to educate them through the school system. The depended on Social Security and their company’s pension plan for retirement income. And they depended on Medicare and Medicaid to handle their medical expenses.

How times have changed. Since those good old days, the dollar was taken off the gold standard. That means that the government could print as much money as it wanted. It could pay its own deficit with the money that it printed. This means that there is no limit to the amount of money that the government can spend. And that’s why it is spending money faster and faster. It is spending money that it doesn’t even have.

Read more…

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It’s no secret that we are in a serious financial crisis. Some of the largest companies in the country are facing bankruptcy. Foreclosures are at an all-time high. Layoffs are creating hardship for millions. Many people’s retirement accounts are down 50%. People are wondering how they’re going to survive.

Part of the reason that this financial crisis has been so damaging to millions of people is that they took bad financial advice. Most people who have a 401(k) or IRA account had no idea how to invest their life savings. So, they met with a financial advisor. This advisor may have been provided to them by their 401(k) company, or perhaps they found the advisor on their own.

Most financial advisors recommend putting your money in a combination of stock funds and bonds funds. The traditional idea is to put more money into stock funds when the client is younger. Unfortunately for the client, stock and bond mutual funds are the worst possible investment they can make. There are a few good reasons that these mutual funds are widely recommended and are the de facto investment vehicle for most Americans: Read more…

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There’s a factory near where I once lived that was built about 40 years ago and no one has ever retired from it.

Is it because the job is so great no one ever wants to quit? Hardly.

It’s because workers use their 401K plans exclusively to fund their retirement. Unfortunately, the money contributed to these plans must stay there until they reach 59.5 years old and the back-breaking work and ruthless company policies claim these workers long before they can use this money penalty-free.

They either die, or get fired before they reach retirement age.

Retirement accounts that allow you to compound money tax-free are designed to keep you in the work force until you’re too old to use the money. It’s actually a boon for organizations and corporations to maintain a hungry, available pool of labor. The system also benefits the financial industry, which can maintain trillion-dollar accounts (filled with your money) over long time periods.

If the government and your company really wanted you to retire, they would allow you to maintain any investment account tax-free. They could let you compound the money, increasing the balance exponentially, and then tax it when you withdraw it as income. If that was the case, more and more people would leave their jobs once their accounts were large enough to spin off an acceptable level of income.

And then what would your boss do?

This is not meant as advice to abandon your retirement plans. In fact, you should keep contributing and even maxing them out. You should never deny yourself free money, even when the terms are not exactly satisfactory.

But, if you want to retire early, you need to add tools that lie outside of the typical retirement plans. You need to create a trading or investment account that you control now and one that can produce consistent and exponentially-increasing returns. It may sound like an impossible order, but as technology becomes more advanced, investors and traders will have more opportunities to create just such an account.

This is the first post in a series about financial myths that make you poor. For more information, you might want to read the previous article in this series. It’s called Financial Myths That Make You Poor.

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Did I just say, “don’t save for retirement”?

Yep. But maybe I should have said, “don’t JUST save for retirement.”

I think the government and financial industry, whether unconsciously or not, have perpetuated the retirement savings scam. Through the creation of retirement plans, like 401Ks and IRAs, and financial instruments, like mutual funds and index funds, these organizations want you to put your money in a lock box and pull it out, at the point when you’re least likely to enjoy the benefits of wealth.

For the financial industry, this makes sense because the longer it takes you to build wealth, the longer they have to siphon their take away.

For the government, it keeps people financially dependent and reliant on its agencies and decisions. It also keeps people slugging away in cube farms and on factory floors. That’s why they penalize you with fees and taxes if you pull out money in those accounts to… I don’t know… enjoy your life.

These positions, which may be based on good intentions, are no longer tenable. For two reasons:

• Wealth generation should not be crimped in this economic environment. People should be able to invest and use the proceeds of those investments.
• As advanced technology increases, the life span will increase, too. Our savings will then become the carrot that the government will eternally keep out of reach.

I don’t propose to eliminate 401 K and IRA plans. I don’t believe mutual funds or index funds should be eliminated, either. I don’t believe we should penalize people for creating wealth, either. A fairer tax structure that inspires wealth generation should be implemented. Flat tax, sales tax and even a graduated tax structure that protects your ability to compound your money makes more sense than the current confiscatory tax policy.

And, I think that’s the key: the most powerful financial tool you, the average investor, has is the ability to compound money. Go head and tax the money that is taken out of an account as a form of income, don’t tax the saved and growing money.

How hopeful am I that we’ll live to see this day… or even retire to see it? Not very hopeful. People are creatures of habit, to begin with, and most folks have been taught to fear technology and finances. Jealousy also plays a role. People won’t want to see other people get wealthy by making the right decisions.

But I am hopeful that what we’re creating at Online Investing AI will be so powerful that it, in addition to smart personal tax strategies, could render the penalties on investment meaningless.

Until that day… Keep adding to that 401 K.

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