I'm not going to spend the time linking back to posts where I argue that you shouldn't listen to so-called 'experts' when it comes to investing or stock picking – I've talked about it so much that if you haven't gotten the message yet, you're on your own.

But yet again, there's irrefutable proof that even the folks the financial media and institutions hold up as investing 'experts' can make some really bad calls.

As reported in the December 2011 issue of Money magazine, three so-called experts made horrible investing choices this past year.

Who: Bond guru Bill Gross

His call: Earlier this year Gross announced that he had dumped Treasuries out of Pimco Total Return (PTTRX), the world's largest fixed-income fund. He believed yields would rise and prices fall once the Fed ended bond purchases (a.k.a. QE2).

What happened: Yields sank and prices rose as risk-averse investors sought the safety of government bonds. Pimco, among the top 13% of bond funds over 10 years, tumbled to the bottom 10% year to date.

Who: Wall Street analyst Meredith Whitney

Her call: In late 2010, Whitney, who had called the financial crisis, predicted on "60 Minutes" that loads of cities were at risk of defaulting on bond obligations worth hundreds of billions of dollars.

What happened Only $760 million worth of munis have defaulted so far in 2011, down from 2010's $2.4 billion, per Standard & Poor's. Meanwhile, munis have returned 8.1% vs. 6.8% for taxable bonds.

Who: Bruce Berkowitz, Morningstar's U.S. stock fund manager of the decade

His call: Berkowitz was so confident that financials like Bank of America and Citigroup were on the road to recovery that he kept 75% of his Fairholme fund in them. (To be fair, MONEY was also bullish on financials.)

What happened Banks have been the year's worst-performing sector. Fairholme is down 23.4%; its peers are down an average 1.6%.

Since today's post is about automation again, I can use another picture of a robot. So here's a robot with a frog.

Automating your long-term savings is the key to protecting yourself … from yourself. When you're attacking a long-term goal, it's incredibly easy to procrastinate or convince yourself that something else is more important.

When it comes to retirement investing, automation also has a number of other benefits, which you'll learn about today.

Enjoy.

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Now that your retirement accounts are up and running, it's time to start the investment process – and keep it going.

While any retirement plan you have with your employer will automatically receive contributions directly from your paycheck, you'll need to set up automatic transfers to your other accounts, like your new Roth IRA.

Follow the instructions on your financial institution's Web site to begin your investments and set up automatic contributions, using the amount you have left in your flux account. If you'd like to be investing more – which is great! – make changes to your budget to allow for a higher retirement contribution.

(While we won't suggest an exact investing plan for you, you may be able to get by with as little as two funds. Read Paul B. Farrell's "The Lazy Person's Guide to Investing: A Book for Procrastinators, the Financially Challenged, and Everyone Who Worries About Dealing With Their Money" to find out more.)

How You Benefit From Automating Your Retirement Contributions

When you set your retirement contributions to automatically occur every month, there are a number of benefits, including:

• Dollar Cost Averaging – By spending the same amount of money on your investments every month, you buy less when the market is high and more when the market is low. This is called "dollar cost averaging" because, over time, the cost you spend per share averages out.
• No Temptation to Time the Market – If you're constantly monitoring the markets for the right time to invest your monthly retirement amount, you're playing a loser's game. Let your automated contributions happen on a regular schedule and you won't waste time trying to figure out when to invest.
• Fewer Fees – Some financial institutions will not charge certain fees when you are set up to automatically invest every month. Fees can eat up your savings overtime; whenever you can avoid them, it's worth it.

Why You Should Set It and Forget It

When you're investing for retirement, you're in it for the long term. Despite the up and downs of the stock market on any given day, week or month, you will not be using that money for years.

After you determine what you'll be investing in, and set it to happen on a regular occasion – once every other week, once a month, etc. – don't touch it.

Don't take a loan out against it. Don't pull it all out when the market drops. And don't throw money at it when it's going up. You've got a schedule set with automatic contributions – the last thing you need is to add human error into the mix.

Depending on your level of confidence, you may not want to check your retirement portfolio more than once a quarter or even once a year. Remember, it will go up and it will go down – but you're not using it anytime soon.

Use your judgment to decide how often you can stomach seeing the swings in your account.

TIP: While it can be easy to procrastinate contributing to your retirement, the longer you wait, the less money you'll have. Albert Einstein reportedly called compound interest – the money you make from the interest you earn – "the most powerful force in the universe." The earlier you start investing, the more time you have for compound interest to build your retirements. 

Today's post may be one of the most important chapters in the entire book. It's a perfect example of the mentality that, if you just get it done, you will be set for the future.

We all love a little bit of procrastination, but given that saving for retirement is all about maximizing your time, you just need to get it done. No excuses. Just make it happen.

This is definitely easier said than done for younger folks, but you definitely know someone who isn't prepared for retirement. If they were in your position, they'd do things differently. Be smart and get started now.

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Retirement.

Depending on where you are in life, it's either the furthest thing from your mind or your biggest up-and-coming worry.

Wherever you are, saving for retirement needs to be a priority. You may already be started with a 401(k) at work, or have a rolled-over IRA from a previous job. You may have nothing at all, and that's okay, too.

We won't get too deep into retirement planning, but you likely want to spend less time worrying about saving for retirement and more time enjoying life.

5 Principles of Smart Retirement Savings

• Start early – The earlier you start saving for retirement, the more time you have to grow your money, ride out the bumps in the market and establish a mindset for long-term saving.
• Take free money – If your company matches a percentage of your 401(k) contributions, make sure you are saving at least up to that level.
• Don't time the market – Trying to find the best time to invest in the stock market is a loser's game. Professional money managers can't beat it consistently, and neither can you. Live with it.
• Ride the waves – When you're investing for the long-term, your retirement funds will go up and down with the market. Don't lose sleep over seeing your account shrink, and don't get excited when it balloons.
• Own the market – Stock picking is not a long-term investment strategy. The best investments for your retirement account are low-cost mutual funds that track a particular financial index, like the S&P 500. These are called index funds.

How to Get Started Saving for Retirement

If your employer offers a retirement program, like a 401(k) or 403(b), with matching savings, this is the first place you should go.

Most retirement planners suggest you save at least 10% of your income. You should at least be saving enough to get the company’s matching contribution.

Since 401(k) and 403(b) contributions happen pre-tax, your paycheck will drop less than the percentage you've set aside. So it'll actually cost you less to set aside the money that you're saving.

Using the money you still have from your flux account, it's time to set up a Roth IRA. This retirement account has tax-free withdrawals at the age of 59½ with a number of benefits.

But first, the rules:

• In order to be eligible, your modified adjusted gross income needs to be less than $107,000 for single filers and $169,000 for joint filers
• You can contribute a maximum of $5,000 after-tax dollars ($6,000 if you are 50 or above)
• Contributions are not tax-deductible

For a broader look at the history and advantages/disadvantages of the Roth IRA, check out the Wikipedia entry.

Why Index Funds are Your Best Retirement Option

When it comes to picking your investments for your retirement accounts, you may or may not have a choice. Most likely, your company's retirement plan limits – or heavily suggests – what you should invest in. But for your Roth IRA, you have the freedom to determine where your money is going.

If you're looking to spend less time managing your retirement accounts and still come out near the top with your long-term investments, look to index funds.

Index funds are the investments that professional retirement planners don't want you to invest in. They're not actively managed by a fund manager, they can never beat the stock market, and they rarely change their holdings.

Guess what? Those are all great things.

Because index funds are consistent in their investments, they have low turnover (buying and selling) fees. Thanks to fewer transactions, they don't need a money manager who takes a cut of their earnings (win or lose). And despite the fact that they will never beat the stock market, they will outperform almost every other mutual fund over time.

Where Should I Open a Roth IRA?

While many financial institutions offer Roth IRAs, it's my experience that the best one to use is Vanguard.

Vanguard founder John Bogle created the first index fund in 1976 and is undoubtedly the leading name in passive, low-cost index investing. Using his philosophy, Vanguard offers a large selection of index funds, including that first index fund – the Vanguard 500 Index, now one of the world's largest mutual funds.

Head over to Vanguard's Web site at www.vanguard.com and sign up for access. You'll need to have some personal information handy to fill out.

Follow Vanguard's prompts for getting started. Once you get your account set up, come back and we'll continue.

TIP:  Because understanding your retirement goes well beyond what we've covered here, a must-read is "The Bogleheads' Guide to Investing" by Taylor Larimore, Mel Lindauer and Michael LeBoeuf. The book – written by followers of John Bogle's investing philosophy – breaks down everything you need to know about investing for retirement. It's a great read for everyone, no matter where you are in your savings journey.

Dollar cost averaging describes a way of investing in which a person buys a stock or other asset in a series of small purchases over time rather than in one large purchase. By doing this, investors can protect themselves from the dangers of falling prices by lowering the effective costs of owning a stock or mutual fund.

Dollar Cost Averaging: An Example

Consider investor A who has $1,000 with which to buy a stock. This investor is interested in buying shares in a company that is currently trading at $10 a share. Now, one way an investor can purchase this stock is to just simply buy $1,000 worth of shares in this company. Investing in this manner, the investor would own 100 shares of stock at $10 per share.

Now, consider another investor, named investor B, who wants to take advantage of dollar cost averaging in order to protect himself from potential losses. This investor decides to break up his investment into two $500 blocks. Unlike the first investor, this person will only buy $500 worth of stock immediately.

As such, he will only own 50 shares of stock at $10 a share. He will save the other $500 to buy more shares in the company one month from now.

Fast forward one month and now our hypothetical company is only trading at $5 a share. At this point, investor B buys another $500 worth of stock. Since the stock is only trading at $5 a share now, the investor is able to buy 100 shares of stock at this price. In short, he has bought additional shares of company stock at a reduced price.

At this point, we can look at the portfolio of both investors. Investor A owns 100 shares of stock at $5 a share. But since he bought all of those shares at $10, he has lost $500 of his initial investment. It has not been a good month for investor A.

On the other hand, investor B has bought 50 shares at $10 a share and 100 shares at $5 a share. In total, this investor has bought 150 shares of stock for $1,000. By dividing, we find that investor B has only paid a total of $6.67 per share, less than the $10 per share paid by investor A.

Thus, investor B has only lost $250 of his investment, not $500. It's still not a great day, but it's certainly better than investor A.

This, in a nutshell, is the benefit of dollar cost averaging: it lowers your cost basis as a stock falls in price. Of course, dollar cost averaging works in reverse, too. As a stock increases, an investor who is dollar cost averaging is buying into a rising market, increasing his cost basis and limiting his gains.

In a sense, dollar cost averaging can be looked at as a sort of insurance policy, sacrificing some larger gains in order to protect yourself from larger losses.

Automatic Investing

Many investors who utilize dollar cost averaging use an automatic investing strategy in order to implement it. These investors put aside a set amount of money every month to invest in a stock or mutual fund. After the initial setup, investors no longer have to manage their investments every month; the investments are taken care of by the brokerage firm or mutual fund company.

This is an advantage for many investors who many not have the discipline to invest money themselves in a consistent manner. By having the money taken out automatically, the decision is now out of their hands. For many people, this may be the only way to impose a retirement plan on themselves.

Another benefit of automatic investing is that it imposes dollar cost averaging by its very nature. This is a great benefit for those who have a steady income in which to invest.

By combining dollar cost averaging with automatic investing, an investor can save consistently and safely for their retirement or other savings goals.

David Spader is a freelance writer and blogger who usually looks at savings account deals over at SavingsAccount.Org. His most recent review looked at the best CD rates.

This is a guest post by Philip Taylor, owner of PT Money: Personal Finance. Check out his blog to discover more ways to save money, make extra money, and spend money wisely. See his latest review of the best small business credit cards.

The dictionary definition of the word “bond” is something that binds or fastens, or a feeling of friendship between two people or groups.

Naturally, the world of finance isn’t all that keen on ineffable terms like something or a feeling, so here, bonds are rather more precisely defined as a debt security, or simply an IOU.

When you invest in bonds, you are essentially lending money to the bond issuer, who promises to pay you interest – called the Coupon – and repay the principal by a set date – when the bond reaches maturity. Bond issuers are usually corporations with specific projects to finance or governments who need to finance day-to-day expenditures.

So, why should you invest in bonds rather than in the stock market?

Generally speaking, bonds are a safer bet than stocks. They are less volatile than stocks and the coupon payments are often higher than most dividends, so you don’t have to place a good bet to make money on bonds, like you do when buying a company’s stocks. Also, a bond’s coupon payments are usually fixed, so they can represent a steady source of income.

When a bond reaches maturity, you are guaranteed to have the full amount of your investment returned to you. There is the risk that the issuing company will go bankrupt in the meantime, but bondholders are usually ahead of shareholders when it comes receiving cash from the fire sale of a bust company. And you can always negate that risk by investing in government bonds.

U.S. Savings Bonds are widely considered to be one of the safest places to put your money, plus the coupon payments are often tax-exempt.

Though not as liquid as stocks, you can usually release your cash by selling your bond before it reaches maturity. The only problem here is if interest rates have risen since your initial investment, your bond won’t be worth as much because higher yielding bonds will be available elsewhere.

But of course, the opposite also applies and if interest rates fall then your bond will be worth more and you can sell it for a higher price.

There are three different types of bonds, based on the maturation period.

• Short-term bonds: lasting from one to five years, these tend to have the lowest coupon rate
• Medium-term bonds: last typically from five to 10 years;
• Long-term bonds: these tie up your money for 10 to 30 years with a corresponding higher coupon rate

The high coupon rates of long-term bonds might be tempting, but since inflation can wipe out the value of these payments, it is not advisable to invest all of your funds in them. Most financial advisors will recommend a mix of fixed-term bonds, alongside stocks, in order to ensure proper asset allocation and more consistent and predictable earnings from your investments.

If you decide to invest in bonds, talk to your portfolio manager about purchasing individual bonds on the over-the-counter (OTC) market. Smart bond investments might even form that other kind of bond between you.

I woke up to a shock as I went online to check my banking.

On the screen, one of the equities in my account was showing a value of $47,025,120.00.

Yes, $47 million.

As delightful a fantasy as that is, I had no real temptation to print off the screen and go take out a loan — I knew something was wrong.

Turns out, the equity is in the process of being taken private, and sometimes when that happens, the stock units get mispriced as the back office software collates outstanding shares in the process of automatically buying them from shareholders.

I knew right away that it was a math error: a "divide by zero" type of thing, and that the bank?s software would correct itself as the purchase process winds along.

The money wasn't real, so I wasn't touching it.

Coincidentally, I?ve known more than one person to whom a bank error has delivered an apparent windfall. Most of us know that fairy tales aren?t real, but thankfully we don't act like this guy, who reportedly gambled away £20,000 in two hours after finding money that had been mistakenly deposited in his bank account.

Look, there's really no major life lesson here, beyond sharing a laugh and remembering that you should always look a gift horse in the mouth.

I totally get why some in the financial media hate writing about index funds: they're easy to explain, there's no amazing fund manager behind them, and the story generally stays the same over time.

In essence, there's only so much to say about index funds. They work. You can't over-analyze and constantly produce content about them, like you can when stock picking.

But this latest argument is just lame. And incredibly lazy.

Courtesy of The Street (specifically Stan Luxenberg): Index Funds Aren't Always the Best Choice

Consider the Vanguard 500 Index Fund (VFINX), the oldest S&P 500 fund, which has declined 0.6% annually during the past 10 years and lagged 56% of large blend funds. Investors would have been better off owning the Franklin Rising Dividend Fund(FRDPX), an active large blend fund that returned 6.5% annually during the decade.

Wait, so your argument is that a mutual fund performed better than an index fund?

Really? Come on.

Of course there are actively managed funds that out-performed comparable index funds. The whole point of an index fund is not to beat the index, but to replicate it as closely as possible, with the lowest fees and lowest turnover possible.

But Stan, for real. You're going to base an entire argument against index funds by showing one mutual fund that did well over the past 10 years?

Well, Stan goes on to show a few different index funds in different sectors (foreign and emerging markets, for example), but the point remains the same: hindsight is always 20/20, and you'll never be able to accurately find the actively managed fund that beats the index, consistently, after fees and charges.

It just won't happen. (You've got like a 3% chance).

This is a lame argument; in fact, it's the lamest argument I've ever seen against index funds.

You don't have to be 55 to start thinking about retirement. In fact, if you've waited that long, you're in a bit of a pickle.

While retirement often seems far away if you're in in your prime working years, you need to make it a priority … now. Because the scary truth is that most people don't — and that's how most people end up broke.

Take a guess at how many American workers have less than $10,000 socked away for retirement.

Ready?

43%.

And how many have less than $1,000?

27%. Yes, 27%.

Think about it for a second. $1,000 is literally almost nothing to last on; $10,000 is probably less than a six-month emergency fund for most families.

And that's scary. Especially because you can't count on Social Security to provide much, if anything, to you.

Sure, some of it is because of the economy, and people raiding their retirement accounts to keep afloat. But that's not the entire problem; the number of people who have saved for retirement (like, ever) dropped from 75% last year to 69% this year.

It's an attitude change as much as it is anything else.

Here's how you save for retirement:

1. Start Now (or as soon as you have paid off all non-mortgage debts)
2. Invest in Your Company's 401k up to the match
3. Open a Roth IRA
4. Invest only in index funds
5. Dollar cost average if you don't have big chunks of money
6. Once a year, re-balance.

All of this information is available in the Automatic Finances ebook — the $7 download that will change your life. If you haven't gotten your copy yet, click here to download.

P.S. Based on current sales trends, I am heavily considering increasing the price of Automatic Finances from $7 to $17. Soon. So if you're on the fence but want to save yourself $10, get your copy now.

What would you do if, at the age of 19, you won $1 million on a scratch off lottery ticket?

Probably a lot. A vacation here, a donation there, maybe a gift to your closest relatives, and save the rest for the future, right?

That's the situation Louis Jay found himself in two years ago when the Towson University student won it big.

Like most lottery winners, he took a bit for himself, gave away some to charity, and pocketed a ton. But despite the fact that most lottery winners go bankrupt within a few years of winning, Jay isn't actually doing all that bad:

Jay hired a financial team to handle his money so he can focus on finishing school. His adviser, Dr. Doug Sanford, guided Jay as he changed his major from computer science to business — a decision spurred in part by his lotto winnings.

"I give Louis a lot of credit for keeping grounded," Sanford said.

He said he hasn't seen any changes in the 21-year-old's demeanor, goals or attitude as the money has fluctuated."

I haven't seen any change in him. I don't think he's a person who views himself as being founded in money. He's founded in his efforts and ability, and those do not go away if the market tanks," Sanford said.

Even though he's seemingly used the money wisely, his choice to invest a lot of the money has shrunk his nest egg, along with everyone else in the market.

The after donations/gifts/car lump sum of about $500,000 has turned in to $330,000, which certainly sounds like a big drop, but given the stock market's fall, is probably not as bad as it seems.

(Please ignore the Captain Obvious headline of the linked story: "Lotto Winner Lost Money After Investing Funds." It could easily say "Housewife Lost Money After Investing Funds" or "Captain Sully Sullenberger Lost Money After Investing Funds," but "Lotto Winner" makes it sound like the kid is totally irresponsible, when in fact he doesn't seem to be that at all.)

So, what's the lesson here? Be smart, don't go overboard, and save for the future.

At this point, if you still think there really are people who are experts at picking stocks, I've got a bridge to sell you in Brooklyn.

But I'm going to pile it on with even more irrefutable evidence that stock picking experts don't exist, and if you're paying someone to actively manage your investments, you're losing out.

Enter: college students flipping coins.

As described by Index Funds Advisors:

In a study by Walter Good and Roy Hermansen, a hypothetical coin flipping experiment was compared to mutual fund manager performance. Three-hundred college students were asked to guess the outcome of 10 coin tosses. Their guesses were tabulated and charted. The performances of 300 mutual fund managers were then tabulated for 10 years (1987 to 1996) from Morningstar Principia.

So basically, here's what happened:

• 300 college students guessed whether heads or tails would come up in 10 coin flips
• 300 mutual fund managers had their performance tracked over a 10 year period
• the students' correct guesses were charted against the number of years the managers were in the top 50% of all managers

And not surprisingly, here are the results:

They're nearly identical.

So in this case, it's a tie. And when the guy who's managing your investments can't beat a college kid guessing heads/tails, it's not good news.