Radjin (radjin) wrote,
Radjin
radjin

Investing

One of my past entries mentioned investing and how it's been a very good year; that got me a number of private messages asking what I do. Well first off I won't tell you what you should do because your situation is likely far different from mine. But I can tell you what I do in general and you can decide what is the right path for you. Even better, talk to a professional investment specialist.


Some rules I follow:

1. Save! I will not tell you an amount because it is different for everyone but just do it. Set up an automatic deposit and treat it like your internet or cable bill. It's far more important then your fury porn but I will never convince some of you that so for now just treat it like you will lose your porn if you don't save.

2. Research. If you buy stocks then really do your research, know everything about your investment. Much easier is to invest in mutual funds which often consist of hundreds or thousands of stocks managed by giant computers. The fund manager has an interest in making you money because he makes more money. But still do your research.

3. Don't get greedy and pile everything into one place unless you are pretty sure it will take off. Even then check yourself as it's your life savings you may be playing with. Remember the porn thing you could lose. Personally I only buy individual stocks with funds I am can afford to lose.

4. Don't trip over a dime on the way to a dollar. The market will go up and down and drag your balance with it. Don't freak, keep an eye on the long term unless your a day trader in which case you need not bother reading this.

5. Don't watch too closely. If your like me you can't sit at your computer and watch it constantly and make adjustments. Giant computers spend all day doing that with billions and you will never compete. I am a bit obsessive and tend to lay in bed with the iPad each evening and check the numbers except on market down days where I save myself the downer of seeing my balance drop 80k; a good day to look at porn instead.

6. Don't lose faith. Not used in the religious sense as I guarantee no deity will make you rich. Markets will surprise you and excite you and really piss you off. "Why in the hell would a bad bank in Greece have anything to do with the market in the U.S.!!!" Investors are the worst kind of gossip mongers; the stupidest things will take the market to places that will baffle you. If you have invested smartly then just watch from the moon and see the average upward trend. On bad years you may have to move to Mars or Jupiter to see an overall upward trend.

7. If you just don't get it and want someone to handle it all then go with a managed fund. They charge you a fee to manage it for you with a goal you set. Remember the fee they charge has nothing to do with your gains or losses as even the experts will screw up. But in general they will drive your investments up to try and meet your goals.


Some definitions:

IRA: Individual Retirement Account. A before tax account that reduces your taxable income. Maximum investment $5000 a year until age 50 then $6000. You cannot remove funds until age 59 1/2. When you do you pay taxes then as you pull from it just like income.

ROTH-IRA: An after tax investment that is just like a savings account but all your earnings are tax free forever. $5000 a year max until age 50 then $6000. You can withdraw it at age 59 1/2. You can pull from the after tax deposits under some conditions but not the earnings.

401k: A company sponsored investment that is just like an IRA except your limited to currently $18,000 a year or $24,000 if you are over 50. It can be a ROTH type where all of it is after-tax.


Now, what do I do beyond the above rules? With individual stocks I look at companies I would like to be a part of. Are they good to environment, do they keep debt to a minimum, do they have good working capitol, do they produce something that is different or changes the world or considered the best of the best. Do they make me feel good for being a part of them. Then I look at their past for at least ten years to see how they weathered the bad and good markets, what is their business plan to see where they plan to go. Then I look at insider trading; are the people who run the company buying or selling the stock. Finally I look at the consensus list by big investors and see how they view the stock going forward because they can often see or know things I never will.

For mutual funds, I do a research for fund rating, past performance back at least ten years, are they in the sector of the market that is expected to move up, have they changed managers too often, what is their load or costs to invest, what is their turnover, what are the fund expenses and finally back to, do I want to be a part of the investments the fund owns.

If all this research seems hard, it's not. I use several investments firms but like Fidelity the best. Their call people always have the answers and will go out of their way to help you. Their research page is fantastic and easy to see everything in one place although their website is very complex and you can get lost trying to find something. I just call them and they walk me through it.

I have a 401K, ROTH and a Rollover IRAs as well as a basic savings account where I can pull from easily for bigger purchases. The 401k through work limits my ability to invest in an IRA or Roth with one exception. With a 401K you can invest more then the yearly maximum because it will switch to after-tax if you have it set up right. Then any money in the after-tax can be moved to your ROTH-IRA in unlimited amounts and as many times as you like. I am very surprised the IRS allows this.

Well that's pretty much it. The most important is save, put it in your mattress or a coffee can under the sink but just save. By the way forget the mattress and coffee can, both are far worse security wise and will earn you nothing. Again, and this is going to be redundant, SAVE, SAVE, SAVE. Find a savings plan that works for you.


Some fun quotes:

"An investment in knowledge pays the best interest." ~ Benjamin Franklin

"Every once in a while, the market does something so stupid it takes your breath away." ~ Jim Cramer

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful." ~ Warren Buffett

"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." - Robert G. Allen

"It's not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for." ~ Robert Kiyosaki

"Know what you own, and know why you own it." ~ Peter Lynch

"Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this." ~ Dave Ramsey


Good Luck and Happy Investing...



LLAP~
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