On September 15, Inc. magazine's Business Owners Council held its first "TH(Inc.) TANK" event at the spectacular Core Club in midtown Manhattan. Billed as an opportunity to "enlarge your brain, enhance your business and engage your passion," the event was held in the Core Club's chic "media room." The evening's guest speaker was Citibank Managing Director, Terry Benzschawel. Benzschawel is one of the top quantitative scientists at Citi, specializing in global markets and understanding what factors make financial instruments (stocks, bonds, etc.) trade at the market price.

Benzschawel began by helping the attendees understand what had happened just one year earlier, when the financial markets were in turmoil and global credit had stopped virtually overnight. As any business owner knows, the availability of credit is essential to conducting business and many are still rebuilding after having taken severe blows during that period of time.

Benzschawel took several questions from the Council members and other guests in the audience. They wanted to know how to judge if the economy and the financial system are on the right track now. The evening gave the participants a chance to push past the crowded headlines in order to get an edge on the daily changes taking place in the financial markets. Other issues addressed by this esteemed crowd of business owners included this philosophical query: what is capitalism today and what is the role of government going forward? As you can imagine, opinions were passionate but mixed.

The attendees came to hear how the world is changing so they can get ahead of the change. They left buzzing with new ideas and new challenges to consider.

Our next TH(Inc.) TANK event, on October 14, picks up where this event left off: The topic? How do you do things in a new way when the old way stops working? How do you "Pivot"? Our special guests include Tom Clarke, former CEO of TheStreet.com (and Jim Cramer's former partner) and Sam Ewen, proprietor of marketing firm Interference. Sam's got a story about pivoting that you wouldn't believe except it happened to be covered by every major news outlet in the world.

WHEN: October 14 @ 6PM
WHERE: Manhattan's new "High-Line" district, in an $8 million glass home in the sky

For more information about upcoming TH(Inc.) TANK events, email events@inc.net.

This fall, New York-area (NY/NJ/CT/PA) business owners are in for a treat. Inc.’s Business Owners Council is launching a new series of intimate events exclusively for entrepreneurs. In September, October, and November, these events will be held in swanky luxury venues such as a Madison Square Garden luxury box and the ultra-exclusive "Core Club," creating an exciting learning experience for those who attend. A look at the schedule:

September 15 at 6 p.m.

Ask "The Quant"
Featuring Citibank’s Terry Benzschawel
The Core Club

Speaker: As a director of quantitative trading at Citi, Terry Benzschawel had a ringside seat to the financial storm of the century. Now his ideas are in demand from the White House to the capitals of Asia.

Venue: The Core Club is an ultra-exclusive club and community based in midtown Manhattan. Normally reserved for the ultra-high net worth, Inc. Business Owners Council has arranged for a unique visit behind the velvet curtain.

October 14 at 6 p.m.

Work the "Pivot"
Featuring Tom Clarke and Sam Ewen
Venue to be announced

Speakers: Tom Clarke is the former CEO of TheStreet.com. Working alongside Jim Cramer, Clarke successfully pivoted through more than one dot-com bomb. Sam Ewen is the founder of the marketing agency Interference. You may not know the name of his firm but you will remember the firestorm he inadvertently created a couple of years back when a marketing campaign went awry. Find out how Ewen has successfully navigated the “pivot.”

November 11 at 6 p.m.

Brodsky's Future
Featuring Norm Brodsky
Madison Square Garden

Speaker: With six successful businesses to his name, Norm Brodsky’s track record speaks for itself. But what you don’t know about Inc.'s popular columnist is that he attributes his success to one thing above all else: his ability to read trends.

Venue: In a re-imagined luxury suite, high atop New York’s vaunted Madison Square Garden, attendees to this event can enjoy a glass of wine with Norm Brodsky and stay after the talk for a Knicks game. Two legendary experiences in one!

Attendance to TH(Inc.) TANK events is extremely limited. Attendees pay a fee to attend TH(Inc.) TANK events, which are sold on a subscription basis: $250 to attend all three events (9/15, 10/14, 11/11) . Events are not sold separately. Members of Inc. Business Owners Council attend for free. To learn more about these upcoming TH(Inc.) TANK events and Council membership, contact Inc. Business Owners Council at events@inc.net or call (800) 536-0046, option 1 "Events."

Inc. Business Owners Council recently commissioned a series of original research projects designed to help business owners make smarter decisions about their business. The first one we’re excited to release is entitled: Inside Job: Employee-Driven Fraud on the Rise in Private Business.

In the case of this research, we learn that the misdeeds of a few hurt many others. Corporate fraud not only affects the business owner, it also steals valuable resources away from the employees, the customers and the vendors and all of their respective families. Sadly, corporate fraud is on the rise as is often the case during difficult economies. This study compared the results of survey respondents in 2006 (the boom years) with another similar group in 2009. The results are startling.

To download a copy of “Inside Job,” click here.

On Tuesday, July 28 and Wednesday, July 29, Inc.'s Business Owners Council Greater New York chapter met at three different sites in Long Island, Manhattan and northern New Jersey to discuss a topic of great importance to business owners: wealth protection.

"For most business owners, if they were to lose everything to a deal that went wrong or an unexpected event, they are too old and have worked too hard to re-build from scratch. That's why people who've created wealth need to take steps to protect what they've got," says Russ Alan Prince, president of Prince & Associates, the leading family office consultants for high net worth families.

Accounting firm Rothstein Kass, which serves family businesses and small-to-medium size business, collaborates closely with Russ Prince and served as the event's sponsor and co-host.

Prince, whose clients are more likely to be billionaires with names we'd all recognize, shared with the assembled business owners in the room, some of the techniques used by the uber-wealthy.

"It's not always 'black boxes' and secret formulas. Some of it is just asking the right questions and making sure you keep up to date with the steps you've already taken to protect yourself," says Prince.

Prince, along with Tom Angell, a partner at Rosthstein Kass, listed off several areas where change can lead to increased exposure for business owners, including:
• Marriages and divorces (yours, your kids, your partners, your partners kids)
• Change in the value of your business
• Changes in tax laws (state and federal)

Some of the more colorful ideas Prince suggested were in areas of planning that most active business owners already pay special attention to:
• Estate Planning: Prince proposes "freezing your estate" so that the future growth in the value of your assets takes place outside of your personal estate, thereby reducing estate takes.
• Retirement Planning: Prince shared with the audience the pitfalls and opportunities of current retirement programs, along with some creative solutions to maximize the benefits of retirement planning for the business owner.
• Cash flow management: Every business needs to master cash flow management in order to survive and thrive. Prince presented a method called "equity stripping" as a way to protect hard assets from litigation while simultaneously creating new investment opportunities for businesses.
• Asset liability planning: The attendees became particularly excited when Prince illustrated strategies designed to turn property and casualty plans into super-charged investment vehicles called "captive insurance" programs.

Prince and Angell pointed out that business owners, who typically own assets and control cash flow, have the greatest opportunity to maximize asset protection planning, more so than those whose wealth comes predominantly from salaries. But Prince cautions those who are interested in protecting their assets about waiting too long. When asked to make predictions about future changes in tax laws and regulations, Prince offered a brief and characteristically sarcastic response: "Taxes are going up. Is that even a prediction anymore?"

Additional resources on the topic, asset protection, are provided by our sponsor, Rothstein Kass.

The Multifamily Office Solution
Rothstein Kass published this research report (PDF format) that examines the growth of the multifamily office model.

Rothstein Kass' New Jersey Tax Alert
Especially for New Jersey business and residents: On June 29, the state of New Jersey enacted legislation individual income tax rate increases for both resident and non-resident taxpayers.

Changing of the Guard
Request Rothstein Kass' upcoming proprietary research report ahead of publication. According to Rothstein Kass, the report "provides an in-depth look at how single family offices are adapting to operational, generational and strategic challenges."

Ever wonder how high profile business owners—the ones on the covers of magazines and such—manage their financial affairs? So do we. That's why we've invited Russ Alan Prince, a "wealth protection specialist" to the global uber-rich, to talk with us at our next Inc. Business Owners Council meeting.

And you're invited.

Prince, who's a personal friend and colleague of mine, will share with attendees the very techniques he uses with his billionaire and centi-millionaire clients to:
1) Shelter their assets from taxes and pass them to the next generation
2) Protect their company from litigants
3) Structure their wealth away from the prying eyes of predators and creditors

"The secret," says Prince, "is to plan early, well in advance of any kind of a threat or major pay day. Giving thought to your moves even a couple years before an event can make the difference between big success and modest success."

We hope you'll join us at this exciting event, sponsored by the CPA experts at Rothstein Kass, to be held in New York City, Long Island and Northern New Jersey on July 28 and July 29, 2009.

For more information and to attend this event, email: events@inc.net.

On June 23 and June 24, the greater New York chapter of Inc. Magazine's Business Owners Council met to discuss the commercial real estate market.

Focusing on current opportunities created by the disruption in the economy and credit markets, real estate expert Phil DiGennaro from Withers Bergman along with successful entrepreneurs Jim Berlin, CEO of Logistics Plus and Shelly Kahan, CEO of Interstate and Lakeland Lumber spoke about the role of real estate in their strategic thinking.

Jim Berlin, who was last featured in the March 2009 issue of Inc. magazine, shared with us how his firm's purchase of the Erie, PA train station had opened up new facets to his business life and transformed himself and his $90 million trucking company into a civic leader in the community.

Shelly Kahan, the 3rd generation of Kahan to run this Connecticut-based lumber company, has been thinking about real estate for as long as he's been running the family business. Today, his business owns critical transportation-friendly hubs throughout Connecticut, providing a competitive advantage for his business and a platform for the next generation to grow.

Both of these extremely successful business owners shared their strategies and their process for making the savvy real estate moves that have been instrumental to their success.

Later, Phil DeGennaro, real estate expert and attorney from Withers Bergman, offered us his golden rules of commercial real estate:

1) Whether leasing, buying or selling, find out everything you can about who you're negotiating with. This can help set the course of your negotiating strategy.

2) Be creative when it comes to financing. The current credit crisis has led to some new financing opportunities, such as "seller-financing" and "lease buy backs".

3) Consider developing a relationship with a local community bank. They are focused on helping local and regional businesses succeed and are still actively financing quality companies. (Last month we introduced the attendees to Herald National Bank, a New York-area community bank that serves the middle-market category of businesses.)

4) Do not enter into real estate deals that threaten the successful running of your core business. That business, and the cash-flow it produces, is the jewel in your crown.

Norm Brodsky offers advice to a colleague who got in over his head with real estate debt.

The attendees, business owners from Long Island, New Jersey, New York and Connecticut peppered our experts with questions as we enjoyed house tours of beautiful estate homes and a fantastic sunset from the boardroom of Inc. magazine's downtown NYC headquarters. A good time was had by all!

For more information on Inc. Business Owners Council, click here.

On June 23 and June 24, Inc. Business Owners Council is inviting business owners to meet in Long Island, New York City and Greenwich, CT, to discuss the growing opportunities to leverage corporate real estate in new ways.

Whether a business owner leases his corporate real estate or owns it, there are many new options and opportunities to boost the strategic value of a company's property program.

For example, as a renter, what would it take to re-negotiate one's commercial lease? Philip DiGennaro, an attorney from Withers Bergman, negotiates property deals with real estate and business owners every day. On June 23 and June 24, Phil will walk us through the current trends emerging in this increasingly soft commercial real estate market.

How ahttp://blog.inc.com/mt-static/images/formatting-icons/italic.gifbout buying your commercial property? In some cases, the underlying real estate can be a business' most valuable asset when selling the company. Would you like to hear from an Inc. entrepreneur who's done just that? Jim Berlin, from Logistics Plus will be joining us to share how the addition of a savvy real estate strategy not only changed his balance sheet but his public relations profile as well.

For more details about our upcoming event, click here.

On May 19 and 20, Inc. Business Owners Council, a new membership organization for top entrepreneurs and family business owners, held meetings on capital raising for business owners.

The topic of the day? What it takes to raise capital in a de-leveraged, post-economic-meltdown market. It's been more than six months since the fall of Lehman Brothers, Bear Stearns, and AIG. The worldwide credit crunch has begun to loosen up and business owners everywhere have come face-to-face with the role of credit in our increasingly global market. Now that the thaw has started, what do capital markets deals look like for private companies?

These were the topics raised during this first set of meetings. On May 19, business owners from the Long Island, New York, area gathered in a $12 million mansion poised on the tip of one of New York's most exclusive addresses -- Centre Island.

The following day, at Inc.'s sun-filled conference room overlooking New York Harbor, area business owners gathered for an encore performance of this crucial topic.

First up was Michael Laurie, a private banker from Herald National Bank, who shared with us the most common pitfalls of when business owners seek credit.

"If you own a pass-through entity (such as an S-Corp), you can't have an earnings statement that shows zero dollars and expect to borrow money," Laurie told the audience. He was referring to the common practice of business owners minimizing corporate taxes in closely-held private companies. "The problem is that your ability to pay back a loan is calculated partly on your profits. No profits, no credit." Laurie recommended a close relationship with your CPA or other advisers to make sure that your business is well-positioned to show healthy finances when seeking a loan.

In addition, Laurie told the crowd of attendees that lines of credit are harder than ever to come by. Lines of credit made sense when money was cheap, he told us. Now that capital is more scarce, lines of credit were a less attractive model to banks.

Warren Feder, a middle-market adviser shared a different perspective. Hailing from Carl Marks Advisory, a firm that dates back to 1925, Feder speculated that there's nearly $1 trillion in assets on the sidelines, waiting to be invested in growing companies. What's more, Feder shared with the group that private equity firms are less inclined to demand a controlling interest in a company. Instead, minority positions were more common these days. "But," he warned, "you better have an exit strategy in mind because private equity expects returns of more than 20 percent on their investment and they expect it within three to seven years."

Both Feder and Laurie provided a clear picture of the capital markets from the debt side (Laurie) and the equity side (Feder). For every business owner seeking capital, there's capital out there seeking a business.

When it comes to investing, January brings a clean slate. And we certainly need it. Last year, virtually every investor's portfolio in the country, perhaps the world, experienced a decline. (The exceptions: the Ghanian, Tunisian, and Ecuadorian stock markets all ended 2008 in positive territory.)

Over the next 12 months, let's shake off the annus horribilis we've just emerged from and commit to a journey, a journey of financial re-invention. By the end of the year, your portfolio of passive investments should offer the following:

It should make sense to you as a non-professional investor and as an entrepreneur. You'll understand the holdings in it, you'll understand why you bought them in the amounts you bought them. And you'll know how they fit in with the rest of your financial assets. (For example, do you hold a lot of tech stocks and own part of a tech business? Not good.)

You should be working with the right people. No longer will we keep our money at a brokerage just because our old college frat buddy or family friend's our broker. That's not a good enough reason to entrust someone with our passive assets. Instead, we'll keep our money where we want it. With a provider that's fair, accessible and reasonably priced

It should be transparent. No more oddball illiquid holdings or secret hedge funds from a guy named "Bernie." We want our passive assets in the public markets where we can see them, follow them and have faith that they're priced fairly at all times.

So let's commence a year's worth of blog posts with a very simple, but very useful rule of thumb: the "new money" rule.

The "new money" rule goes as follows. When considering any particular passive investment that you currently hold in your portfolio (a "passive" investment is one where you invest but don't have any control over the underlying company, such as a publicly traded stock, a bond, or mutual fund. I distinguish that from an "active" investment such as a company you run or a limited partnership you are directly involved in), decide whether or not you want to stay invested based on the answer to this very simple question: If you had that money in cash today, would you buy it again?

Or put another way: Do you like everything in your current portfolio? If so, keep it for now. If not, sell it.

Don't keep any holdings because you hope the price comes back. Or because you wish it would come back. Trust me, the market cares about neither. For the most part, keeping an investment because selling it creates taxable consequences is also a bad reason for holding on. The way I see it, if you're paying taxes, it means you're making money. (However, it's worth running this by your tax adviser before you make a move).

As business owners and entrepreneurs, we have some unique concerns when it comes to reaching our goals. We are, after all, wealth creators: a unique breed which adds value through ingenuity, hard work, risk-taking, and our relationships with other people. Our passive portfolio should be in balance with the achievement of those goals and a thoughtful component to our long term vision.

In the financial business, we talk about the "smart money," those people who are "in the know." Well, the smart money isn't always so easy to spot in times like these. So, let's remember on this journey towards financial re-invention that, like with entrepreneurship, the best person to trust is ourselves. We are the smart money. Let's act like it, for our families, for our communities, and for us.

As always, feel free to contact me with your questions at investingguide@inc.com.

Happy New Year!

p.s. For those of you who read my recent blog post, "Where's Robert Rubin," you'll note that Mr. Rubin recently resigned from Citigroup and cited his interest in working in the field of public policy again. The way I interpret that is this: as a much-admired Democratic financial thinker, the very smart, very capable Mr. Rubin can now go back to tinkering with the financial system as he did for President Clinton. During that time, he laid the groundwork for the financial mess we find ourselves in today. Before he picks up where he left off, I hope he brings us up-to-date publicly, including more on what he was thinking when he wrote in his resignation note, "My great regret is that I and so many of us who have been involved in this industry for so long did not recognize the serious possibility of the extreme circumstances that the financial system faces today."

It's not always easy to be nice. I'm a nice guy and I care about people. I want them to have jobs and I want them to take care of their families. I want all of these things for Americans everywhere. That's why, as the financial sector deteriorated and the government bail out program was considered, I supported it. After all, we were told, this would help shore up the banks and that would help credit markets loosen up. The credit markets, they said, were essential to getting Main Street the lubrication it needs to run its businesses every day.

So, now, as a taxpayer, I'm also a shareholder to several of the country's leading financial institutions. As such, I'm exercising my right to tell management what I think.

I think that I'm getting peeved. Here's an example of why my blood is starting to boil:

First, on Nov. 12, we saw this headline:

"American Express Co. is seeking $3.5 billion in funds under the government's plan to directly invest in financial firms."

Then, on Dec. 1, I received this in the mail:

"Two domestic airline tickets and an American Express Rewards Plus Gold Card with no annual fee for the first year. See Details Inside."

What's the problem? This credit card offer was sent to my FOUR-YEAR OLD CHILD!

I know, I know, we've all heard the story about the dog getting credit card offers and we know these credit card marketers are among the most active list buyers in the world and clearly they bought my son's name off one of the kiddie magazines we subscribed him to. So, is this just another cute story about a kid and a credit card? I don't think so.

In Joe Nocera's recent blog, he shared with us an industry insider's account of how credit decisions are made in the industry:

"I recently had a client apply for a credit card. She is a homemaker, with no personal income. The house she lives in is in her husband's name. She would have asked for a $3,000 credit line, just to pay miscellaneous expenses and to establish some credit on her own. So the computer is told that her household income is $150,000; her mortgage/rent payment is zero. The fact is that her husband's mortgage payment
is $7,000 a month (which he got with a no income verification loan). She had a good credit score, but limited credit since she has only lived in this country for the last three years. The system gave her an approval for a $26,000 line of credit!"

He goes on to describe some of the failures in legislation to protect consumers from these absurd systems and concludes with this:

"I've been reviewing many of the banks' annual reports over the last month and there is no question that the default rates are on the rise. If Congress doesn't act today, the bankers will have their hats in their hand before we know it, and doing another a tap dance before the Senate Banking Committee, and asking to be bailed out once again with our tax dollars. Sad, but true."

Well, as a taxpayer and as a shareholder, I would say that my tolerance to endure this insanity is quickly -- and I mean quickly -- drying up. This madness has to stop. We have to learn to live on the money we have. If we don't, I'll need those domestic airline tickets American Express offered my son -- to get off of this sinking ship.

Remember the early rush of press scrutiny that followed the surprise announcement of John McCain’s veep choice? The virtually unknown Sarah Palin was the subject of intense media interest in those first days. As the Alaskan governor prepared for her new national role, the media became more and more heated in their demands for a "press conference." Even after interviews with individual journalists, including Charlie Gibson of ABC and Katie Couric of CBS, the press corps continued to demand a formal conference.

Well, Sarah came and went and, to my knowledge, the press conference never happened. The press failed to get their man -- or, in this case, woman. But, lordy, it's all we heard about for three weeks of the campaign. It's worth noting that her Democratic counterpart, Joe Biden, who went on to victory, received only a fraction of the coverage that Palin did. Could it be that the press was more interested in catching a gaffe-prone beauty queen on video than hearing from the real newsmakers?

If you already have a jaded opinion about the press, then you won't be surprised to hear that there’s another incredibly important world figure, one who’s influence on the global financial stage touches literally every power center in this financial crisis, who the press has virtually ignored: Citigroup adviser and former Clinton Treasury secretary Robert Rubin.

If the press did have the stones to interview Rubin, perhaps they’d ask him about his final days as Treasury secretary, where he played an instrumental role in helping to repeal the Glass-Steagall act, which cleared the way for creating the highly leveraged mega-financial institutions we’re struggling to unravel today. Or what he had in mind when he took a job immediately after the Clinton administration with the very monster he helped to bring to life, Citigroup, to advise them on how to maximize the opportunity he’d helped create during his tenure in Washington.

Maybe they’d ask him about his role within the globe’s most powerful private financial institution, and how he failed to provide good guidance regarding their financial positions at every level, creating a more than $300 billion liability that they still haven’t come fully clean on. Or they’d ask him why he thinks he still hasn’t been called to testify in front of Congress about what happened at Citi during his tenure. Perhaps he, or someone else, can explain to me why heads are supposed to roll whenever a financial institution dips into to the $700 billion TARP fund, including calls for the dismissal of the second Citi CEO in as many years, but no one ever suggests that Rubin has any culpability in this.

In fact, Rubin is the last man standing at Citi. The former CEO, the senior risk management, and the senior derivatives traders have all been let go because of their role in nearly crippling Citi. Meanwhile Rubin hasn’t even offered up one shred of explanation as to his role at the center of a global financial meltdown. Why should he? He’s only the chairman of the bank, after all.

When asked, he says he doesn’t have day-to-day responsibility of Citi, and therefore, he’s not responsible for the actions of the firm. Does that sound reasonable? According to New York Post, the bank’s paid him $107 million since joining Citi in 1999. Chairman, a nine-figure pay package, and no responsibility? Where do I find that job?

Yes, Citi is a mess, and yes, Rubin’s at the center of it, and yes, the taxpayers are going to have to dig them out of the mess he and the rest of them created. Sounds like every other story these days on Wall Street. What’s so different about this one? Why should Rubin have to submit to a press conference while other Masters of the Universe don’t?

Because Rubin is also at the center of the Obama administration’s new financial staff. He’s got close ties to virtually every important figure now being considered for a finance-related position in Obama’s White House, from National Economic Council leader Lawrence Summers to Treasury secretary-designate Tim Geithner. Rubin has these guys on speed dial and they, along with other key Obama picks, are considered "Rubinistas."

Now, don’t get me wrong: Robert Rubin is smart. He’s an asset to our collective financial intelligence. But why, oh why, hasn’t the press or the Congress asked -- strike that, insisted -- that he explain his role, one that began more than 10 years ago while a government official, and continued straight through the Bush era (enriching him fabulously) leading him right into the seat of both financial and political power, without ever having been elected, ever having been questioned, ever having been threatened with losing his job, even though he’s presided over the most spectacular financial failure since the Depression?

Why did the press demand access to a half-baked vice presidential candidate but has given a free pass to a genuine Wizard of Oz? And where’s the U.S. Congress in all of this?

To the press, I have a question:

Why is Robert Rubin getting a such kid gloves treatment?

And my follow up question:

What the #*&% is going on?

As you know, I maintain a blog about investing in the stock market for Inc.com. The methodology is based on a sound, academic approach developed by Nobel-
prize winners and refined by financial industry pioneers over the years. In other words, it's got a lot of brain power behind it.

I'm happy to report that all that brain power has paid off. As the world stock markets have suffered horribly over the past weeks, I've not lost a single night's rest from worrying about my own portfolio.

Why? Has my Nobel-prize winning methodology hedged me against the recent world market declines? No. Does it have a secret formula for avoiding Wall Street's crumbling fortunes? No. Do I stand to inherit a trust fund? Sadly, no.

Just like many of you, I've watched my portfolio drop 30 percent, 40 percent, even 50 percent at times. However, not only have I felt fine during these crazy
market days, I'm even kind of happy about it.

No, don't call the looney bin and don't hate me because I'm beautifully at peace. Instead, let me share with you why I feel the way I do. My investing method, in place since March 1998, has some basic characteristics that turn adversity into advantage. These advantages rely on the same core asset: time.

Most people think that the best way to create a robust portfolio is to start out with lots of money ("it takes money to make money") or great knowledge ("In Cramer We Trust") but I know different. I know that if you have time on your side, the path to wealth is relatively straightforward.

First, I am a long-term stock market investor. This means that I've given myself decades to reap the accumulated rewards of the stock market. I started in 1998 when I was 28 years old. I'll continue to be 100% invested in the stock market until I'm in my 60s -- more than two decades from now. During the course of time, the crazy days of 2008 will seem like a distant memory. And frankly, I like a cheap stock market. The truth is, ever since I started my portfolio in 1998, stocks have always been to damn expensive relative to the value of the companies that issue them. I'm happy that P/E ratios have dropped considerably. As a long term investor, I look forward to 8 to 10 percent annual returns again.

Second, because I have a long-term time horizon, I'm a buyer, not a seller. So each month, I buy exactly the same dollars worth of stock. In a cheaper market, my dollars go farther. These days, every month feels like a great sale. I buy while everyone else hides and my ongoing stock purchasing strategy is being well rewarded.

Take these two together, and I'm a happy camper, investing-wise. I've got the markets right where I want them.

Now, making a living in this economy, that's another problem...

For all the details on my investing strategy, check out The Only Guide to Investing an Entrepreneur Will Ever Need.

The United States, the wealthiest nation in the world, has become the biggest debtor nation in the world. That simple, untenable, disgraceful fact explains much of what ails the stock market, the housing market, even the price of food at the grocery market.

It is a lack of leadership that is substantially responsible for our current sorry state of affairs. Leaders are supposed to show us the way. Instead, what we've had for decades, for my entire lifetime, I believe, is leadership that has chosen to pursue personal riches -- in the form of money, power, and satisfaction -- at the expense of the people they represent.

And it continues today. Even on a daily level we endure these slights and abdications of leadership. The lame duck Congress apparently doesn't have enough support from the Republican party to seriously consider a stimulus package and a bailout for the auto industry. Whatever one thinks of these programs, they're at least worth exploring. Instead, as power passes from one administration -- and one party -- to the next, the message from the losing party is "not my problem."

We've got approximately two months before the new administration takes office, along with a significant shift in congressional power. What difference will two months make? The potential for disaster over the next two months is great. From Wall Street to Main Street, everyone agrees that we're in for a world of hurt in the short term.

The current state of affairs, whether we consider what's gone on for decades, for eight years, or for the past couple of months, or even the forecasts for the next couple of months, must primarily be blamed on a lack of leadership from all quarters.

Many are hopeful that things are about to change. Whatever one thinks of President-elect Obama politically, his victory was proof that our nation has the capacity to move forward. He represents a sea change in the previously intractable issue of race in this country. I don't think it's hyperbole to believe that he can help us address our economic principles as well.

We must address them at home, too. While the willingness of our governments -- red, blue, local, state, and federal -- to spend more than it has is the root cause of so much of what ails this nation, it is also that same syndrome which effects virtually every American household as well. What ails our country has also infected our homes.

We can be hopeful that a new message of restraint will come from a new administration. Even given the historical perceptions of democrats, there's early evidence that the soaring oratory of the newest White House resident will include a call for fiscal prudence and a return to the values of an earlier time.

With that in mind, I am putting in my two cents for a new era of austerity, both from the top down as well as from the bottom up. Every household -- from the White House to your house -- needs to re-consider its poor savings and debt-driven spending habits and work towards this new reality of personal financial responsibility. In order to be successful, it needs to happen at every level, including legislative, cultural and spiritual.

America's government showed great leadership in the 1960s by taking up an unpopular civil rights agenda at a legislative and oratorical level. It took, arguably, 40 years for these ideas to fully take root in America. We're more mature as a nation now and ideas travel faster. We can't afford to sacrifice several generations while we re-center our fiscal compass. If we take that long, there may not be much of an American ideal to save anymore.

Answer: J.D. Power and Associates

J.D. Power and Associates, best known for telling us what consumers think about products, from cars to cell phones, is now extending its reach and research know-how to determine advisor satisfaction levels with their employers.

J.D. Power and Associates Reports:
Firm Performance and Organizational Support Are Primary Concerns For Financial Advisors in Volatile Marketplace

It's a great time to see a report such as this. Why? Advisors, especially independent or independent-minded advisors, are "go-betweens" placed in the middle of a financial institution and an individual client. They are financial shock absorbers of a sort, working to align the capabilities of the financial markets (in this case, the road, unyielding and without emotion) and the client (the car hoping for the smoothest possible ride on the way to its destination).

Continue reading "Question: What Do Cars and Financial Advisors Have In Common"

With the Dow shooting up more than 500 points today in the wake of a 'no' vote on the Washington bail out bill, this is beginning to feel a little like "Who's On First." I can't figure out who's on which side and what's going to protect us from them.

"Protect us from who?"

"The bad guys."

"Wall Street?"

"No, Washington."

"You mean the Democrats?"

"No, the White House."

"Who are they protecting us from?"

"The Republicans."

"The White house is protecting us from the Republicans?"

"Yes, along with the Democrats."

"I'm confused. I thought you said Washington's going to protect us from Wall Street."

"No, Wall Street's came roaring back today. They'll show Washington they don't need the taxpayer's money."

Continue reading "It's Class Warfare, I Think"

At the moment, I'm glued to CNBC. These are such historic moments, with things changing so fast, that only real-time information will do. We've heard a lot about "Main Street's" point of view but at this moment, it feels like we're hearing more about the concerns of politicians who are up for re-election. It's an epic battle -- Wall Street vs. Washington, with Main Street as a bit of an afterthought.

As I write this -- and this conversation may be resolved at any moment -- the House GOP has floated an alternative plan based on a "risk management" approach to the mortgage mess (providing "insurance" rather than outright cash for mortgages that default). What caught my attention on the boob tube this morning was the sound bite from one of the congressmen touting the alternative plan. He said, "Main Street wants a 'work out' not a 'bail out'." I thought that was an interesting perspective. The idea he's promoting is that we let the parties who own these bad assets work out their problems between themselves (with a backstop provided by nationalized insurance), rather than having the American public buy the parties out and spread the pain out among all citizens.

Continue reading "Save Money or Make Money? Which Is Better?"

The markets have thrown everyone for a loop.

As entrepreneurs and business owners, you may be in need of hard-to-find credit.

As homeowners--or for those customers who are homeowners--the feeling of uncertainty can wreak havoc on future plans.

As an investor, and as an owner of a significant asset--your business--you may wonder if you’ve permanently lost some of the value you’ve accumulated from all your hard work.

My prognosis--as an Inc. blogger asked to present views about investing--is that the situation in front of us is a dire, but not insurmountable.

Continue reading "What To Do Now"

I recently conducted a telephone survey on the topic of the upcoming elections. My survey team asked 338 successful, self-made people (I call them "Middle-Class Millionaires"--that's also the title of my recent book) about their intentions regarding the upcoming elections.

If Inc.com readers are among the millions of successful families in this country (and they are--the typical reader of Inc. has a lot in common with America's 8.4 millionaire households), then this could be the year entrepreneurs lead the charge on The White House!

A reporter named Kristen Oliveri, from Institutional Investor's Private Asset Management newsletter, got a hold of my research. Here's what she wrote:

"Millionaires with a net worth ranging from $1 million to $10 million and up plan to vote in the upcoming election, and most will donate up to the legal limit to a political campaign. According to a study by Lewis Schiff and Russ Alan Prince, co-authors of the book The Middle-Class Millionaire, 99.7 percent of millionaires who were surveyed voted in the last presidential election and three-quarters plan to donate to a political campaign this year.

"Middle class millionaires tend to be very vocal, with 98.7 percent saying they are talking to people openly about their choice for president, and are willing to put their money where their mouths are when it comes to funding favored candidates. 'They are not much different than the middle class but they are more actualized than the middle class, meaning they translate their values into action more,'" said Schiff.

"The survey found that 98.4 percent of respondents said they expect to be very involved with convincing people to vote for their favored presidential nominee. Schiff noted that millionaires consider their minds, insights, and opinions to be valuable assets that they share with others, and seek solid information in return.

"'Convincing people of the merits of their political choices is also a demonstration of their powers of persuasion and this is a muscle that they actively flex in their personal and professional communities,' said Schiff."

My survey was conducted before Barack Obama emerged as the Democratic nominee, but it indicated a Democratic-Republican split that mirrors that of the middle class at large.

I know how you entrepreneurs think: It's my money and I'll play with it if I want to. I understand how you feel, because I feel the same way.

Don't get me wrong: I believe deeply in the principles that undergird "The Only Guide to Investing an Entrepreneur Will Ever Need" -- so much so that virtually all of my money is invested in strict accordance with the principles we've laid out in our investing manifesto.

And yet, even though I believe deeply in index funds, that doesn't mean I don't come across an intriguing investment idea now and again that catches my eye. How often do I actually pull the trigger? Not often. Perhaps once every three years I will vary from my basic investment plan to take a shot with real estate or a new investing strategy or even a private business opportunity. But, when I do, it is usually great fun. Sure, some of them work out and others don't, but I always learn a lot and meet some interesting people who may be part of my success in the future.

When I do make the leap, I follow a strict nine-point checklist. These nine points make up, I believe, the smartest investing rules one can follow. As I review the potential investment against this checklist, I ask myself one simple question: Is the additional reward and potential risk worth ignoring this checklist item for? Here's the checklist I use:

1. Liquidity: The more liquid an investment, the better. That's because (a) it's easier to access the investment if I need it and (b) more frequent pricing information makes it easier to forecast gains and losses.

2. Tax Efficiency: An investment that contributes taxable gains to its owner is bad because taxes are a drag on returns. An investment that is highly tax efficient, either because it is held in a tax-advantaged status or because it can be managed to optimize capital gains exposure, is best.

3. Transparency: An investment that has high levels of transparency is more valuable. Transparency, in this case, means there's a high level of reporting to which I have access or there's frequent pricing information from the marketplace as to the value of the asset. While transparency doesn't directly contribute to financial wealth, it does contribute data that allows me to make more informed decisions.

4. Non-Correlation: An investment that has little correlation to the rest of my portfolio is great. It lowers volatility (beta), and lower volatility contributes to a higher total return on equity in the long run.

5. Diversification: This often misunderstood investment practice is enormously valuable to building a truly smart portfolio. Diversification, which is difficult to achieve in most stock or private asset portfolios, is central to withstanding the financial cycles that all economies face.

6. Volatility: Highly volatile investments are generally bad for a portfolio for two reasons. The first is purely quantitative. A less volatile portfolio delivers a higher total return on equity than a more volatile portfolio, even when they both have the same annualized rate of return over the same period. The second is grounded in behavioral finance, which reveals that a loss, or downward volatility, has a powerfully negative impact on the mindset of an investor and could lead to poor decision-making. It makes sense to avoid these situations especially when they add little or nothing to the total return on equity.

7. Fees: Expensive investments create friction on an otherwise well-performing investment, affecting total return on equity. All things being equal, fees should be kept to a minimum.

8. Ownership and Titling: In order to best manage my estate for the long run, investments should be titled in the right entities (trusts outside of my estate are the most common alternative to direct ownership). When considering an overall financial program, a well-performing investment that creates wealth could cause problems in other aspects of my estate, creating tax burdens for other members of my family. This is only relevant if your portfolio is (or will be when you die) greater than the estate tax exclusion -- which is currently $2 million.*

9. Deteriorating Assets: All things being equal, an asset that produces reasonable annual returns but has no long term value, is not as valuable as an asset that produces similar annual returns but has long term value that appreciates over time and can one day be sold. For example, a real estate investment that produces a 10 percent total return on equity and increases 5 percent in value each year and can be sold one day if one so chooses, is more valuable than a service-based business, such as a medical practice, that produces 10 percent total return on equity but whose value goes down a bit each year as the working time horizon of the skilled practitioner/owner decreases.

If you believe that your investment, which probably fails on one or more of these measures above, will do well enough to compensate for whatever objections it creates, then go for it. In my opinion, most don't. But when they do, I will only apportion a small amount -- no more than 10 percent of my overall portfolio -- toward such an investment.

* The original version of this post gave an inaccurate figure for the estate tax exclusion.

The rich are different from you and me. This week, John McCain had his George Bush-and-the-grocery-store-scanner moment. If you remember, during his 1988 campaign, George 41 committed a real doozy of a blunder when he marveled at a grocery store scanner -- even though most of us had been shopping at scanner-ready markets for years. Similarly out of touch, McCain, was asked the other day how many homes he and his well-to-do wife owned. McCain's answer was, "I'll have my staff get to you."

Since I only own one home, I've never had a problem recalling the answer to this question. However, I personally view McCain's response as reflective of someone who's more focused on the big picture than someone who's so busy buying real estate that he's lost count. Still, it was an easy moment to take a shot at him, made even easier by his response less than a week earlier to Rick Warren's question, "Define Rich?" In a self-mocking tone that he accurately predicted would be used against him, he responded "If you're just talking about income, how about $5 million." Little did he know that he'd be the one mocking himself with his gaffe just a few days later.

But enough about John McCain, who made his money the old fashioned way -- by marrying it. Which of the presidential candidates is going to make you more wealthy?

Here's what the economic pundits are saying:

Obama, along with a Democratic Congress, will push a serious tax reform agenda. He's running, in part, based on the notion that the inequities between the truly wealthy and the rest of us are too great and that government's role is to redistribute wealth for the common good. One way to do this is to tax the wealthy and use the money to create programs to help educate and prepare the less-well-off to compete.

My take: From an investor's point of view, tax reform seems extremely likely. This will probably take the form of higher capital gains tax rates. Beltway insiders tell us this would probably take effect beginning with the 2010 tax year although it may be retroactive to partway through 2009. If cap gains go up, and combine with a weak U.S. dollar, look for a HUGE flurry of selling to take place in both private business and public markets. While selling usually sounds bad, the effects of this forecast are still unknown. Selling will create a lot of mergers and acquisition activity, creating some new opportunities in a way that shake-ups usually do. It will also add a great deal of liquidity to the economy.

As for McCain, you can count on him to do pretty much the opposite of what Obama does. As I write this, we're all eagerly awaiting word on who the running mates will be, but I suspect McCain's will be more revealing about his economic plans. Choosing a strong pro-business Veep will be a signal that he really plans to continue the economic policies of Bush 43.

In summary: while I abhor market timing in general, if you were planning on selling your business or a large bloc of stock in the next couple of years, 2009 is your best bet. You may capture an extra 10 percent if you do this. Also, on an estate planning note, 2010 is the year where the estate tax exemption goes away for one year only. So my advice is to sell in 2009 and die in 2010. It's the most tax efficient generational wealth transfer plan I can think of. After all, as they say, no matter how many houses you own or how much wealth you've built up, you can't take any of it with you.

Last week, Bernie Mac, the actor and comedian, died of pneumonia in his home town of Chicago at the age of 50. While I wasn't a big fan of Mac's comedy, I couldn't help but see in his obituaries the enormous determination and sacrifice that must have gone in to developing his extraordinarily successful career.

Reading Mac's life story, I was struck by how clearly he exemplified all four of the behaviors and attitudes that my co-author, Russ Alan Prince, and I describe in our book, The Middle-Class Millionaire. These attributes -- which we call "Millionaire Intelligence" -- are prevalent in the lives of most successful, self-made individuals, and I was reminded in Mac's story that these very same tools can be used to create a successful business or develop a craft and rise to the top of your game, as he did.

The four attributes of "Millionaire Intelligence" are:

Hard Work: Before finally catching the attention of some of comedy's biggest names, Mac (born Bernard Jeffrey McCullough) could be found doing double duty in some of Chicago's toughest clubs and comedy venues. "When I started in the clubs, I had to work places where didn't nobody else want to work," he told the Washington Post -- including clubs where street gangs and motorcycle gangs hung out.

While putting his neck on the line comedically night after night, he managed to make ends meet and provide for his family as a janitor, a mover, a school bus driver, and by working at a General Motors plant, according to The New York Times obituary.

Perseverance in the face of adversity: He lost his mother to cancer when he was 16 and was raised by his grandmother on Chicago's South Side. Both his brothers died, one in infancy, the other in his twenties. To explain why he chose comedy as the focus of his talents, The Times obituary quoted him as saying that Bill Cosby could turn his mother's tears into laughter and "when I saw her laughing, I told her that I was going to be a comedian so she'd never cry again."

Networking: Mac was "discovered" and received early support from comedy luminaries such as Redd Foxx and Spike Lee. They were among the influentials who championed Mac and brought him onto bigger stages, culminating in a career on the large and small screens that won him awards, fans, and international recognition. If Mac's story is like the others I've studied, those encounters with individuals who could help him achieve his longterm dreams came about through diligence and taking risks.

Enlightened Self-Interest: When Mac was voted "class clown" in high school, he turned the honor down because he already understood the difference between clowning around and being a professional comedian. According the Times, he said, "I'm a comedian. I'm not a clown." Mac pursued and achieved great success and, in observing the path he took, one can only conclude that he had his sights set on such success early on. Every decision he made, every chance he took, was designed to help him get closer to reaching this lofty goal. Mac scaled the heights of his chosen profession and did so against great odds. One can only do that through single-mindedness and passion.

Bernie Mac knew that making people laugh was more than just clowning around, it was serious business.

I got a panicked email earlier this week from my very good friend, Maryjane, owner of a design agency in New York City:

"Lew, I had breakfast with a very savvy money pal the other night. She told me she decided to pull all of her money from mutual funds because she thinks it all may explode come September. YOU are in this market. I know you rode out other hysterical times and did O.K. when the rest of us got creamed.

"My broker told me it's volatile now. I am reading the papers and, geez, my stomach turns. The market is in the toilet, and I guess I thought I would have the stomach for it, but maybe I don't.

"I told my broker I would not touch anything for five years. I have a meeting with him next week to go over the portfolio.

What is your gut feeling about our bloody system? What should I do?"

Now, Maryjane is a bit emotional and she wears it on her sleeve. It's what I love about her. And I know her well enough to know that money is not her strong suit. I probably should have taken the time to call her, but I was traveling, so I responded by email:

"MJ, I really don't know how your money is invested so I have no way of knowing how YOUR money is doing. But in terms of the market in general, I am not changing any of my investing plans. I continue to hold diversified stocks in index funds and continue to buy a little more each and every month on the exact same day.

"Keep in mind, however, that I'm a long term investor with a 20-plus year time horizon, so I don't care if the market takes 10 years to work itself out. However, if I were a short term investor (five years or less), then I'd want to be more in cash. If I were not comfortable with risk, I'd also want to be more in cash these days because for the next couple of years, we could be in for a tough market."

How are the rest of you feeling? What would you have told Maryjane?

Many smart economic and political forecasters have been discussing the implications of the upcoming presidential election on the economy, on taxes, on your wallet, and on your company.

I'll be writing more about this as the election season progresses, but I'm hoping some of you will help me get the conversation started by answering a few questions about your expectations for how a McCain Administration or an Obama Administration would differ on issues that affect business owners. For example:

1) Do you think either candidate will make it tougher to do business?

2) Do you think either candidate will attempt to raise capital gains taxes?

3) Would the election of either candidate make you more inclined to sell your business?

4) Would the election of either candidate bring your retirement into closer reach? Make it seem more distant?

5) Are the above issues more or less important to you when it comes to casting a vote than your party loyalties, your family values, or your concern about world affairs and security?

Consider me hazed. After my second post as a blogger for Inc.com, the comments ranged from generally supportive to outright disbelief in what I was writing. As a blogger, I sincerely appreciate the feedback from the community and look forward to a continued dialogue on this particular topic -- how to make smart decisions about your money.

For those just tuning in, let me offer a quick re-cap both of what I wrote and of the response I received. I wrote that index fund investing was typically the best way for most people to invest. I used the example of Warren Buffett to suggest that if you happen to be extremely gifted at investing, as he is, then index fund investing wouldn't be the way to go. Rather, choosing stocks that go up faster than the market as a whole would. The majority of the response I got back was along the lines of: If Warren Buffett can do it, so can I.

The lesson I learned is never to underestimate the indomitable can-do spirit of the American entrepreneur. That force burns so bright in each of you, like David against Goliath. In this case, however, Goliath is the data, and the data tell a different story.

Warren Buffett and a few other extremely successful individual investors who beat the market consistently make up a tiny minority of all investors. For an academic analysis of this reality, click here, or read this summary from The New York Times, which describes the percentage of professional investors who outperform the market consistently as "just .6 percent -- statistically indistinguishable from zero." The study, which focuses on money professionally managed in mutual funds, concludes that "index funds are the only rational alternative for almost all mutual fund investors."

Obviously, if professional investors struggle to beat the market, it's going to be even harder for ordinary investors. Why?

Time: Most of us don't have the time to research investments and haven't taken the time to earn Master's degrees in economics or finance as the best investors have.

Access: Most of us don't have access to the avalanche of data, both quantitative and qualitative, that professional investors do.

Scale: Most of us don't have access to the trading systems and the institutional pricing that professional investors have.

These are extremely difficult obstacles to overcome. Even Warren Buffett agrees. Mr. Buffett has espoused the use of index funds for most investors for decades. If you need reminding, here's a comment from him as recently as May 2008:

"When a shareholder asked for the single best specific investment idea Buffett could recommend to an individual in his 30s, Buffett said: 'I would just have it all in a very low-cost index fund from a reputable firm... And I could just go back and get on with my work.'"

Some of the commenters presented very thoughtful ideas about how Buffett's concentrated portfolio approach works and why it's better than index fund investing. As I said in my previous blog post, if you can do what Buffett does, go for it. But I just don't believe, for all the reasons I've laid out here, that it can be done. And if it could be done, I doubt you'd be telling people about it on a message board. You'd probably be locked up in your castle, defying the odds and keeping it to yourself.

Last point: A few comments suggested I'm selling something by promoting index funds. Not true. I can't sell you an index fund because I'm not licensed to sell any financial product. Nor can I be compensated for referring you to someone who does. The good people at Inc.com made a compelling case about why the readers of the site would benefit from getting good, impartial investing advice from someone who has no axe to grind, no score to settle, and no pocketbook to fill. I agreed.

And by the way, I do walk my talk and proudly have most of my investable assets in index funds. Some are in variations of index funds. I never buy individual stocks -- although I do occasionally receive stock or stock options in companies I work with as a form of payment, and my wife works for a publicly traded company that pays her partly in shares in her company.

All around you, people are investing. They speculate in tiny companies with a good story, they put their money into global businesses with well known brand names, and at social occasions, they talk about these investments -- certainly their successes, occasionally their failures.

Perhaps you've collected an assortment of random stocks and some mutual funds, too. In addition to occasional bragging rights, this gives you something to watch on your portfolio list in the papers or on a Web site. On a good day, it can give you a boost and that alone can make it worth the money you've invested. On a bad day—which can stretch into a bad week or a bad month or worse—it can become an obsession and a way to relive a failure over and over and over again.

I've been talking to investors for more than 10 years, and most of them don't even understand what game they're playing, let alone the rules of the game. In a famous book from the 1930s, entitled Where Are The Customers' Yachts?, the author, a former stock broker, observes that brokers always seem to do quite well, accumulating toys and other symbols of success, while the clients (or "customers" as they were known back then) don't seem to do nearly so well. Flash forward 70 years, and nothing has changed. Study after study demonstrates that individuals fare poorly as investors.

My guess is, you're no different. There's only one Warren Buffett. If you want to buy a share of his company, Berkshire Hathaway, it's available to you. As of this writing, it's priced at $120,000 per share. Sound like a lot? Maybe it is, maybe it isn't. I've probably given this advice to go buy Berkshire Hathaway, dozens of times. When I started, a decade and a half* ago, shares of Berkshire Hathaway went for about $9,000 a share. People said "that's expensive," back then, too. They also said, "does he still have the gift?" and "Is he going to retire?" Those were all legitimate questions back then, and they are still. I wish I knew the answers. But just as I don't know what's going on in the mind of the latest CEO who's projected to save America's economy, I also don't know what's inside Warren Buffett's head. I never have. And I never will.

I do, however, understand how to make money in the stock market. Throughout history, great investors, including Warren Buffet, have told us the secret to successful investing. Only a fraction of us have followed it. The secret is diversification. Here's what you might be thinking right now: But I do diversify already. I own 15 different tech stocks. Or, I own 10 different mutual funds. Or, I have three different financial advisors managing my money.

None of this is true diversification. Diversification is mostly science and a little bit of art. Economists have won Nobel prizes for helping us understand diversification. They speak about modern portfolio theory, efficient frontiers, and asset allocation. Diversification is complicated stuff.

What most people do is spread their money out and think they've diversified. In fact, diversification comes down to a simple premise called "non-correlating markets." Here's a simple example: You own shares in two companies. One's a sun tan lotion company and the other is an umbrella company. That's a well-executed diversification plan because you own shares in companies that do well in different weather situations. As a result, you've got a way to make money whether it rains or shines. Unfortunately, the world's a lot more complicated than that example and you can't intuitively diversify your money. It takes sophisticated models to truly diversify. But the demand for diversification has been so great from the institutional investors—such as pension funds and endowments—that a slew of powerful tools have been created to develop more accessible models. And a few pioneers, like John Bogle, founder of Vanguard and the eponymous founder of Charles Schwab, have made it their lives' work (along with their lives' fortunes) to bring these tools to you.

As complicated as it is, diversification can be had today with a single mouse click. It's simple, elegant, and there for the taking. You may have heard about index funds or "passive investing." These are related to diversification, and they are an investor's best friends. Even Warren Buffett believes in them. In fact, he recently placed a million-dollar bet that an index fund based on the S&P 500 would outperform a collection of hedge funds. Embracing diversification is at the heart of this blog. To learn more about it, check out our mission statement.

* This sentence was incorrect when first published.

Got a question? Please send it to me at investingguide@inc.com.

The picture on the cover of the magazine is easy to imagine. CEO Mr. X -- the genius at the top of a massively powerful publicly traded corporate empire -- has a plan to make the impossible possible. He will innovate, motivate, execute, re-invent, and win the game. He's got the whole package -- brains, pedigree, track record, bold management philosophies, and charisma to boot. And here's the best part: if you invest in his company, his success will be yours, too.

The first step in successfully transitioning from being a gambler to a smart investor is to trash this ridiculous notion. The best person to invest your money with is you. What you've got is at least as powerful as that CEO -- a dedication to succeed and the skill or the will to find the opportunities that will lead to success. If you want to back a horse, don't rely on the two-dimensional magazine portrait. Just take a look at the face in the mirror.

In this blog, we're going to start with a blank slate. We'll address the issue of money from the beginning. What are you trying to accomplish? What tools do you have at your disposal to reach your financial goals? What obstacles stand in your path? We'll look at all the issues and use the very simple, yet effective principles of The Only Guide to Investing an Entrepreneur Will Ever Need to help you tap into the real secrets of financial success.

If that sounds a little too fantastic to be believable, it isn't. More wealth is created in America by private business owners than by those CEOs running the biggest, highest profile publicly traded companies. When you chose to go into business for yourself, you made a very smart move. Now, it's time to maximize the opportunity.

We're all starting off from different places as investors so some of this may feel a bit remedial to some of you. Before you tune out the basics, keep this in mind: 90 percent of individual investors fail to match the returns of the market! While many people know something about investing, a very small number actually achieve the kinds of returns most of us would consider worthwhile.

In the meantime, as we start at point A, feel free to jump ahead by exploring our manifesto. You can also send me your financial questions in the comment box below or -- if you prefer privacy -- at investingguide@inc.com. I'll only publish your question if you give me permission and only in a way that doesn't reveal your identity.

NEXT: Why the best wealth-creators invest outside their business.