This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See more.

Most investors don't realize that the biggest factor in reducing their returns are the costs associated with their investments.

These costs include commissions, loads, taxes, advisory fees, market-makers, transfer agents and related costs. When you add them up, they can be very significant, reducing overall returns by as much as 40%!

Actively managed mutual funds (funds that try to outperform a given benchmark) have high turnovers of their portfolios. High turnover generates taxable transactions. The tax hit is carried by the investors in the fund, even when they don't sell their shares.

Here is one example:

The actively managed Fidelity Contrafund had a turnover of 60% in 2006. The passive Vanguard 500 Index Fund had a turnover of 7% during the same year.

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See more.

There seems to be no end of brokers, advisors, and talking heads on television who give advice to guileless investors. They discuss where the markets are headed, what stocks to buy "now," what stocks to sell, and which fund managers are "hot."

They endlessly analyze economic data and interpret it for those of us too unschooled to understand it. They tell us how it affects the markets, and what steps we can take to profit from this knowledge and from their insights.

Often they provide this information in breathless reports delivered from the floor of the New York Stock Exchange, which serves to heighten the urgency and importance of their message.

For the most part, they are false prophets. The information they impart is irrelevant to a sound investment strategy. In fact, listening to it and relying on it is harmful to your financial well-being.

Here are some examples:

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See more.

It always seemed to me that most people who said that money can't buy happiness didn't have much money.

It would be more accurate to say that if your unhappiness has nothing to do with money, wealth won't make you happy.

The harsh reality is that most of us need a certain amount of money to pay the bills and hopefully provide for retirement with dignity.

Investors who follow the basic lessons that rich people know will be taking a positive step in the direction of responsible, intelligent investing that will help them maximize their returns.

Really rich people understand that money can't buy health. It also can't buy meaningful relationships with family or friends.

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See more.

Rich people own both appreciating and depreciating assets. They know the difference.

Depreciating assets decline in value.

Appreciating assets increase in value.

It is the appreciating assets that permit rich people to purchase the depreciating assets, and not the other way around.

Rich people get rich by buying assets that increase in value slowly over time. They build up businesses. The buy and hold real estate.

They invest in the stock market differently than most individual investors. They determine their asset allocation and buy and hold a globally diversified portfolio of low-cost stock and bond index funds.

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See more.

Is this a good time to buy commodities?

What about emerging markets?

Don't value stocks outperform the markets?

Six months ago, the investment du jour was oil. Clearly, it had no where to go but up. Right?

China and India were increasing consumption at a rapid rate and oil was in short supply. Many analysts were projecting the date when oil supplies would run out altogether.

Six months later, oil tanked.

Did you think that gold was a good hedge against a financial meltdown? If so, your views were shared by many "experts."

Gold reached a record high price of $850 in January 1980. Its current price is $747. What happened?

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See the first five secrets.

I give a lot of talks to groups of investors. I like to ask this question:

How many of you made most of your money investing in the stock market?

Very few hands go up.

I get the same result when I ask: How many of you know someone who made most of his or her money investing in the stock market?

Let's drop to the bottom line:

Rich people invest in themselves.

Poor people invest in "things" that give them instant gratification, like plasma screen TVs and flashy cars.

I don't mean to be glib. Rich people can afford education and great health care. Poor people often can't. A great education and good health positions rich people to get richer.

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See them all.

The headline needs a caveat: some rich people did invest in complex instruments they didn't understand.

They are no longer rich.

Hedge funds are a perfect example.

Few people really understand them. They are not regulated. It is difficult to figure out what they are investing in. It is even more difficult to determine if they have deviated from their original investment strategy.

They promise big returns without additional risk.

Many investors and even pension funds fell for the pitch.

Few took the time to look at the data.

One study of 1,917 funds found that only 17.7% beat their benchmark.

Hedge funds are imploding at an alarming rate. One site that tracks hedge fund failures reports that, since mid-2007, 95 funds managed by 58 firms have blown up.

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See them all.

All information about listed companies is public. It is widely and instantly disseminated. This information is studied by millions of investors, who establish the price of a given stock based on this data.

Many of those looking at this data are professional analysts. They are well trained in finance and have access to powerful computer programs that assist them in crunching the numbers.

There is one piece of information they don't know: tomorrow's news.

Future events move stock prices. The market has already discounted for current news.

Because no one knows tomorrow's news, many "sure bets" turn out to be losers. Fannie Mae, Lehman, and Bear Stearns are recent examples. Past failures of top-rated stocks include Worldcom, Enron, Bethlehem Steel and Polaroid. In fact, of the 500 companies that made up the S&P 500 in 1957, only 74 of them were in the index in 1997.

Here is the real kicker: Only twelve of those companies outperformed the S&P 500 index in the period from 1957-1998.

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See them all.

What if you went to Las Vegas, sat down at your favorite slot machine, and very time you dropped in $1, you got back $2? I'll bet you would never leave!

This is the holy grail. Great returns without any risk.

It doesn't work that way in Las Vegas. Why do you think investing is any different?

The foundation of returns is risk. The higher the risk, the greater the potential for returns -- or for losses.

You can achieve returns without risk. However, to do so you need to invest in what are known as "risk-free" investments. These include FDIC-insured Certificates of Deposits and Treasury Bills.

The problem with "risk-free" investments is that they generate relatively low returns. The historical returns of Treasury Bills is 3.7%. After inflation and taxes, there is little profit remaining.

Most people want higher returns than they can get with "risk-free" investments. To do so, you need to invest in the domestic or foreign stock markets (preferably both) and in bonds, which can vary in terms of safety.

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See them all.

Bad news sells. Good news is boring.

Inside media types will tell you that they are guided by this basic rule: If it bleeds, it leads.

The financial media is no exception.

There is a steady drumbeat of news about a "deep recession" or even another "great depression." How many times in recent months have you read about the "market crash" or the "financial meltdown," all meant to convince you that it really is different this time?

Is it really?

In September 1998, Newsweek carried a major story about an "unprecedented" worldwide "economic convulsion."

Fortune predicted "a fundamental change in the world's economic condition" in September 1998. Time Magazine, in June 1970, opined that we were in "the worst economic conditions since the Depression."

A "panic on Wall Street" was headlined by the Philadelphia Inquirer in October 1987.

The list is endless.

This post is part of a series where personal finance expert Dan Solin looks at money secrets that help the rich stay rich. See them all.

Everyone understands that coin flipping is random. You can flip five heads or tails in a row and no one would believe that you are an "expert" coin flipper.

What about fund managers who have five years of stellar performance? You see the ads every Sunday hyping their superior returns.

A closer look at the data indicates that these managers are no more skilled than the lucky coin flipper.

One study looked at the performance of the top 100 fund managers over an eleven year period. Only 14% of them were able to repeat their performance in the following year.

There are many studies demonstrating that there is no reliable way to predict the performance of fund managers. This is why you always see the disclaimer that "past performance is no guarantee of future results" in advertisements for mutual funds. It's put in small type so that you won't pay much attention to it.

Here are a couple of examples (there are hundreds more):

With the plunge in the markets, the hedge fund industry has gone into a tailspin. Even top hedge fund managers -- such as Citadel Kenneth Griffin, Paul Tudor Jones, Steven Cohen and so on -- are having troubles. In fact, there's talk of hedge fund failures, consolidation, and increased regulation. For example, hedge funds may lose 15% of overall assets by the end of 2008. Keep in mind that the average hedge fund is down a stunning 18% this year.

Yet, there are some wily hedge fund managers that are striking fortunes. Perhaps the most notable is John Paulson, who manages Paulson & Co. His fund scored $15 billion in gains last year. Basically, he shorted a variety of complex mortgage securities.

Interesting enough, Paulson's hot hand has continued. That is, his funds have seen increases of 15% to 25% so far this year.

In fact, if he can maintain this pace, Paulson will have personally amassed a $3.5 billion over the past two years.
Oh, and Paulson has 70% of his assets in cash right now. In other words, when the markets settle, he'll be a nice position to capitalize on things -- and make even more money for himself.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Streetsmart Guide to Short Selling: Techniques the Pros Use to Profit in Any Market. He is also the founder of BizEquity, a valuation website.

The Wall Street Journal must have better things to do with its time and all that expensive newsprint. The paper reports that CEOs of 175 large US companies have lost over $42 billion in net worth from the end of their most recent fiscal years though last week.

By this calculations, Warren Buffett is down $9.6 billion. Microsoft's (NASDAQ: MSFT) has seen his piece of the software company drop by almost $5 billion in value.

The reason that the data is foolish is that a loss is not really ever a loss unless and until the underlying securities are sold. People like Buffett and Ballmer don't need billions of dollars now, and they are still extraordinarily rich.They are unlikely sellers Two years from now, their net worth may be higher than they were in 2007. Who knows?

The calculation of wealth, made popular by the Forbes 400 is an exercise in futile math. What the rich are worth, especially if their money is in liquid securities is a snapshot in time, and one which can change hour-by-hour.

Why bother to eat of the time of good reporters?

Douglas A. McIntyre is an editor at 247wallst.com.

In a tough economy, the income tax burden on individuals becomes more of a weight. Add the payments to higher gas prices, mortgages that are being reset at lofty levels and rising food costs and the results can be awful.

But at least corporations are paying income taxes to carry part of the burden of running the federal government, right? Too bad that it turns out that this assumption is wrong. As The New York Times writes, "Two out of every three United States corporations paid no federal income taxes from 1998 through 2005, according to a report released Tuesday by the Government Accountability Office, the investigative arm of Congress"

How sweet a deal is that?

Part of the trick is that many companies move money to countries outside the U.S. where the tax burden is lower.

In a period where the federal deficit is at nose bleed levels and individual tax payers are being crushed, Congress will probably be upset enough to pass bills to correct the inequity.

How the companies got away with it for so long is a question that is pretty disturbing.

Douglas A. McIntyre is an editor at 247wallst.com.

Some things never change.

David Sambol, the out-going president of kaput mortgage giant Countrywide Financial Corp., is taking his family on an African vacation -- on Countrywide's Gulfstream IV.

Yes, the guy in charge of the company that sold hundreds of thousands of suspect mortgages to people who couldn't afford them is leaving on a jet plane, for a nice three-week-long vacation in Africa with his family.

But you know, it's been a stressful year for Mr. Sambol, what with his company nearly collapsing and that stressful fire sale to Bank of America (NYSE: BAC). Not to mention being hauled before Congress to account for his part in helping facilitate the global credit crisis.

Marie Antoinette would have understood completely. "Let them take a vacation," she would have said. "An African safari would be nice. The kids will love it."