13 Steps to Investing Foolishly - Step 13

Step 13: Make friends and influence Fools.

In May 1997, the world's greatest chess master, Garry Kasparov, was famously defeated in an historic six-game match. What made the duel so momentous was that the winning "player" wasn't human; it was a computer built by IBM, nicknamed Deep Blue. The final game wasn't even close: Using its 11.38 gigaflops of calculating power, it took Deep Blue less than one hour and only 19 moves to crush the reigning world champion.

So what exactly does the Deep Blue story have to do with you and your portfolio? Everything.

Deep Blue is how you beat the market
In the next day's paper the headlines blared, "Machine Beats Man!"

Machine beats man? That's not how we Fools saw it. You see, the machine didn't beat Kasparov. His real opponents were the dozens of IBM programmers who teamed up with the world's top chess experts to program the machine that beat the man.

It took the collective intelligence of the world's masters to beat the mighty Kasparov. Key difference.

Now imagine if investors pooled their collective brain power and funneled it into a stock-picking supercomputer. If it worked like Deep Blue, the result would be, well, mind-boggling. It would spit out better information, deeper insights, broader perspectives, and bigger profits than any single mom-and-pop investor, Wall Street analyst, or even an entire hedge-fund research team could get by going it alone.

That was exactly our thinking when we launched our own supercomputer called CAPS.

What everyone thinks about your stocks
Like Deep Blue, the CAPS database captures the collective insights and opinions of tens of thousands of individual investors (as well as more than 100 professional Wall Street firms). Want to find out instantly how a stadium full of people rate the stocks you own (or any of the roughly 5,000 rated companies on the service)? Find out right now -- it's free! Here's how it works:

• Members rate the stocks they own or follow, and predict whether they will outperform or underperform the market during a given time frame. 
• The CAPS supercomputer then assigns a rating from one to five stars to each stock based on all of the opinions. But not every opinion carries equal weight. Accuracy counts.
• The proprietary CAPS algorithm takes into account each member's stock-picking ability when it assigns the star ratings. The more accurate your predictions, the more they influence the stock's rating.

When you log on to CAPS, you enter a world of interactive, community-based research from doctors, techies, homemakers, accountants, mall rats, and investment junkies of all shapes and sizes. It's a completely new model for stock research, and it's much more powerful than the opinion of one lone analyst. And the CAPS community is just one way to tap into the experiences, expertise, and insights of Fools. 

The world's greatest investing water cooler
If you haven't yet spent some time hanging out on our discussion boards, you're missing a lot. Our discussion boards feature thousands of conversations on myriad topics. They've helped people pay off tens of thousands of dollars of debt, find great investments, raise money for the needy, quit smoking, survive the Internet bust of 2000, tile their kitchen floors, tar and feather the disgraced giant called Enron, get help with their stupid computers, and make it through the meltdown of 2008. Fools (emphasis on the plural) discovered a little upstart company called Iomega. And it was The Motley Fool community that launched a grassroots campaign that led to the passage of the SEC's "Regulation Full Disclosure" in 2000.

Come on in to strike up a conversation, chime in on one already in progress, or just listen in (or "lurk," as it's known among seasoned discussion board posters) -- all are welcome. Never again do you have to quote your portfolio, read your 10-Qs, check the stock charts, keep tabs on the news, and track your performance alone. This 24/7 sounding board means that no investor has to settle for solitude.

Of course, you're probably wondering …

Who are these people, anyway?
Sure, we're biased, but we think our community members are smart, opinionated, informed, generous, and helpful. Several have been on Jeopardy! (and won!). Many are doctors, lawyers, and teachers. You can learn a lot from them, and they from you. But you don't have to take our word for it. Here's how a Fool we know as Windowseat described her first impression of The Fool:

The Motley Fool was a revelation. I discovered that ordinary people, people who didn't have millions of dollars, people who studied the stock market on their own, could still invest small amounts of money. I found the message boards, and, purely by accident, discovered that the first rule of message boards was "Thou Shalt Not Write in All Caps."

THAT'S A GOOD RULE-OF-THUMB TO RE- … oops … remember. On the boards you'll also meet people like Tom Engle (we know him as TMF1000 on the boards), who discovered the Fool community back in 1995 and has been an active Fool -- with more than 20,000 posts under his belt -- since then:

The chat rooms, much like today's TMF discussion boards, introduced me to stocks I had never considered as investments before; it changed the ways I thought about building portfolios; it expanded my realm of research which eventually resulted in much wider circles of competence … All I had to do to learn it was to ask someone who knew, and those in the know were everywhere …  I seldom buy a stock without first posting a page on the appropriate board about my target stock and carefully read the feedback. No matter how long I research a company, after I posted my research someone would provide additional facts that supported my thesis and/or additional risk factors I hadn't considered.

Since the first pioneering messages Motley Fool co-founders David and Tom Gardner posted on the Internet frontier in 1993, more than 17 million posts have been written by the Windowseats, and TMF1000s, and all of the people who make up this diverse, globe-spanning community of Fools.

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13 Steps to Investing Foolishly - Step 12

Step 12: Pay It Forward

The very fact that you are reading this sentence tells us a lot about your character.

Clearly, you crave knowledge since you're actively seeking information to increase your financial smarts and portfolio returns. Having gotten this far in this 13-step primer, it's likely you've acquired the skills needed to handle most money-related matters in a take-charge, in-front-of-the-8-ball way. You have no problem picking out a decent bottle of red wine, are vigilant about using your turn signal, and are above-average looking.

OK, those last three are just hunches. Still, we think the world of you, Fool. And we think the world will be a better place now that you've gotten a bit more Foolish.

Have we sufficiently buttered you up? We hope so, because before we come to the grand finale of this motley Magna Carta, we have one favor to ask: How about paying it forward?

Put your checkbook away
The kind of "pay" we're talking about is much more valuable than writing more zeroes on a check or donating your lightly used kitchen doodads to charity. We're talking about giving away a bit of your most precious asset -- knowledge.

If we've done our jobs right (fingers crossed!), you are now on the path to financial freedom. Now you can help others do the same by passing on the important money lessons you've learned. It's as easy as clicking the "Email" link at the bottom of this page (or any of the other 12 pages in this primer), and sending the information to a few friends or loved ones.

If each of us pays our knowledge forward -- the money lessons we've learned here and in the school of hard knocks -- we will improve the financial footing of someone we love and care about. But the giving doesn't stop with one person.

The pay-it-forward idea is like a chain letter (minus the absurd promises, over-use of exclamation points, and threats of doom befalling those who do not comply): If two of the people you tell about the importance of taking control of their financial futures tell two people and the process keeps repeating, after only about 29 iterations, everyone in the United States will be on their way to becoming successful individual investors. After 33 iterations, we'll have reached everyone on the planet.

And it's all thanks to your original, selfless act of paying Foolishness forward.

More ways to pay Foolishness forward
If you've got more to give, consider helping a friend plot a retirement savings plan, teaching a youngster in your life some basic money math skills, or helping your parents get their important papers in order.

You don't have to come up with a way to pay it forward on your own. Ask worthy recipients for suggestions for how you might help lessen their financial worries:

• Maybe a co-worker is worried about having too much of his 401(k) in the stock market. Talk about the risk-reward tradeoff, and show him the chart in Step 8 that illustrates how much money he should have in cash versus stocks based on his age.
• When your neighbor asks for a hot stock tip, instead show her how simple it is todiscover great businesses.
• If debt's weighing heavy on a friend's shoulders, print out a copy of "How to Reduce Your Debt" and lend a sympathetic ear whenever the urge to splurge strikes.

Of course, this naturally leads to a very important question …

What's in it for you?
Besides the warm-fuzzies and a few giant scoops of good karma, plenty. Paying it forward pays you back.

Specifically, there are three ways generosity is good for your mind, your wallet, and the world.

1. It'll make you smarter. First, we guarantee that you will get smarter by sharing what you have learned with someone else. Studies about the way we process information have found that 10% of what we learn is through listening, 20% takes hold when we get involved (or "own" the information by taking notes and actively participating in the learning process), and a whopping 70% of what sticks in our brain for the long haul gets ingrained by the act of teaching what we know to others. 
2. It'll make you happier. According to Knox College psychology professor Timothy Kasser, people who focus on generosity are happier (and healthier) than those mired in materialism. That's right, we actually experience a psychological lift from helping others. A University of Oregon study found that giving stimulates the brain centers that tell us that our basic needs are being met (the foundation for success, according to Abraham Maslow -- the man behind Maslow's hierarchy of needs), letting us know that it's safe to dial down our hunt-gather-hoard-guard setting. You don't even have to write a check to get good giving vibes: Offering time or lending skills to a good cause takes us out of our navel-gazing routine and connects us to something grander.
3. It'll make you richer. Another nice side effect of generosity is that giving has been shown to tangibly boost the benefactor's bottom line -- and not just in a tax-writeoff way. Research shows that people who are observed behaving charitably are often recommended for leadership positions in their professional lives.

Imagine the kind of movement that we could start if everyone reading these words right now did just one thing today to improve their finances. You are one click, one phone call, one conversation away from making financial freedom and stability a way of life. Thanks for paying it forward, Fool!

Action: Pick your top three. You're stranded on a desert island (without your iPod), and you can pick three people to keep you company until your rescue a year from now. They must be living, at least an acquaintance, and not a celebrity (unless you have celebrity acquaintances). Quick, you have 15 seconds to name your top three. That's a toughie, eh?

Here's an easier one: Choose three people in your life (same criteria as before) who could benefit from a little Foolishness. Maybe it's your spouse, a best friend, your grandparents, grandkids, bocce partner, or dog-walker -- anyone you think would benefit from a few of the financial tips and tricks contained in these 13 steps. Got your names? Got their email addresses?

Click the "Email" link below and put them into the "To" box, jot something in the subject line (e.g. "Come Fool around with me") and hit "Send." Pat yourself on the back -- you have just made the world a better and more Foolish place.

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13 Steps to Investing Foolishly - Step 11

Step 11: Retire in Style

And now, ladies and gentlemen, the inflation-adjusted million-dollar question: Can you afford the retirement of your dreams?

While you ponder that, it's likely that a few other questions will come to mind:

• How much money will I need when I retire?
• What kind of lifestyle will I be able to afford?
• What will my current savings be worth by then?
• How much can I afford to take out every year?
• Will I need to adjust my plan?
• Does anyone have a brown paper bag? I'm feeling lightheaded.

Relax. We're going to tell you almost everything you need to know about retirement, right now, in less than five minutes. Ready? Here goes.

1. Contribute to the right accounts.
If you've read this 13-step investing primer in order and took the 15 to 30 minutes it took to complete the action items in Step 4, then this part is done.

Just to review: If your boss matches your contributions to your retirement plan at work (your401(k), 403(b), 457, or other employer-sponsored plan), save at least enough to take full advantage of that benefit. Remember, contributions reduce your taxable income, and the investments grow tax-deferred.

The next stop in the retirement account hierarchy is to fund an IRA (either a Roth or traditional variety). If you're not eligible for the Roth, contribute to the traditional IRA only if contributions are tax-deductible. If not, stick with your 401(k) (unless it really, really stinks), because you'll get the tax deduction.

2. Choose the right investments.
A lot of people get tripped up on this one. But don't let it stop you from putting a plan into motion. In Step 8, we showed you how to construct a well-balanced retirement portfolio with a whole day's supply of vitamin D.

The "right" investments for you will change over time as you near the point where you stop investing new money and start spending what you've saved.

But it's important to remember that retirement is not your investing finish line. You probably still have many years of productive life ahead of you after you retire. While the income and safety of bonds and Treasury bills may seem appealing, approximately half of your portfolio must still be invested in stocks) to ensure you can maintain purchasing power and avoid the devastating effects of inflation.

3. Save enough.
With life expectancy increasing by leaps and bounds, if you give notice at the traditional age of 65, you may want to think in terms of a 30-year retirement. That's a lot of electricity bills and all-you-can-eat buffet brunches.

So, how much do you need to save? As much as you can.

A more specific answer can be found in the following table, which assumes you have not yet started to save for retirement:

Your Age	Percentage of Income to Save
20s	10%-15%
30s	15%-20%
40s	20%-30%
50s	30%-40%
60s	40%-50%
70s	50%-60%
80s	Vegas, baby!

3. Run your numbers to see if you're on track (and then run them again).
Are you saving enough to retire when you want? Are you withdrawing too much in retirement? There's one way to find out: Run your plan through a good retirement-savings tool.

Check out some of the free financial calculators on the Internet. Since each will give you a different answer, try at least three. First, try our suite of retirement calculators on Fool.com, in particular "Am I saving enough? What can I change?" and "How much will my savings be worth?" You also might find some good tools on your broker's website or as part of your personal-finance software.

If you start pricing it out now, you won't experience sticker shock when your ticker isn't quite as strong. Our post-retirement expense calculator will help you figure out how much that round-the-world trip, fishing cabin, or class in paperclip art will cost.

The good news is that many expenses decline or disappear completely in retirement. Once you've retired, you no longer have to pay Social Security or Medicare taxes; you no longer divert money to 401(k)s or IRAs; and retirement income is often taxed at lower rates.

4. Stop paying for other people's retirements.
Unless the person managing the money in your mutual funds is bound to you by matrimony or blood relation, you probably don't intend to contribute to their bank accounts. 

Too many investors overpay for underperforming investments, ponying up 1.4% in management fees (a typical expense ratio) for funds that barely keep up with their benchmarks.

Your generosity is not properly appreciated. By choosing lower-cost but better-performing funds, you can add 1% to 2% a year to your portfolio returns. Compounded over many years, we're talking tens of thousands of dollars.

So keep a sharp eye on fees. Below is a pocket guide to what we Fools think is reasonable to pay:

The Motley Fool Fee Swatter: What to Pay for Financial Products

Financial Service or Product	Reasonable Fee
Index funds	0.3% or less for domestic index funds; less than 0.05% for others (REITs, international, etc.)
Actively managed mutual funds	1% or less for domestic funds; 1.5% or less for global funds
401(k) administrative fees	0.25% or less (unless your employer picks up the tab)
IRA administrative fees	Free, if possible. Many brokers charge no administrative fee for retirement accounts, though they may require a minimum investment.
Non IRA/401(K) administrative fees	Free, if possible. Many brokers waive administrative fees if you maintain a minimum account balance or sign up for an automatic investment plan.
Stock trades	$20 or less
Financial advice from a certified financial planner	1% or less of assets under management, or (even better) choose a fee-only financial planner

5. Know how to crack your nest egg.
Finally, the big day. You kissed the boss good-bye, and you're ready for a lifetime of ... well, whatever the heck you want. It's time to begin tapping your portfolio. Should you start with your traditional IRA, your 401(k), or your regular brokerage account?

This is no small matter. One study found that choosing the right order could extend a portfolio's life expectancy by more than two years. The general rule: Start withdrawing from non-retirement accounts. After that, move on to tax-deferred money, and save your Roth for last. However, there are many exceptions to these rules, so take the time to learn more before you retire.

Live it up today, too!
We'd be remiss if we did not give proper due to a very important period in your life: The here and now.

In the words of John Lennon: Life is what happens when you're busy making other plans. At The Motley Fool, we firmly believe that saving for tomorrow is not about sacrificing today -- it simply requires striking the right life-money balance. So we'll end this lesson with your moment of Foolish Zen: Living rich and getting rich are not mutually exclusive.

Action: Find out if you're saving enough for retirement. Well, are you? That's what calculators are for! Our Foolish retirement calculators can help with the heavy arithmetic. (Check out the "Am I saving enough? What can I change?" calculator in particular.) You will also be able to play "what if" games and see the results quickly, should you decide to vary things like inflation, rates of return, date of retirement, and desired income.

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