Invest

INVESTMENT ADVICE

Here are the topics covered on this page. Please scroll down and watch for the large type.

* BASIC ADVICE *SPECIFIC COMPANIES *HINTS

BASIC ADVICE

First of all, investing in stocks or mutual funds involves risk. There are no guarantees that you will make money. Historically, stocks have done better than bank accounts, but again, no guarantees.

Your best bet is probably to dollar cost average into a no-load mutual fund. To dollar cost average is to contribute the same amount each month, regardless of whether the market is
up or down. If you go to a broker, he will try to sell you a loaded fund. You do not need a broker to buy a good fund, and you do not need to pay his fees. Vanguard Funds is a well-known and well-respected mutual fund group. Their funds are no-load, and have comparatively low annual fees.

Check out a mutual fund's Morningstar rating. Try to invest in a 4 or 5 star fund.

You can buy individual stocks from a broker and pay his fee. Or, you can buy some stocks directly from the company. Go to the websites of individual companies and see if they allow
you to buy direct. Do not buy direct unless you plan to keep the stock for a long time. You can also utilize DRIP plans of individual companies, which means you reinvest the dividends rather than taking a check each quarter. It is a very efficient way to invest in individual companies.

Another thing. Diversify. That means to not buy all the same kind of company. My portfolio probably has too many utilities right now, but I am at the age where I invest as much for the dividends as for the growth.

You should also compare the 5 and 10 year average returns for similar funds. Don't try to compare a balanced fund with an aggressive growth fund, for example.

One important concept about investing is to "pay yourself first." You can do that with mutual funds by getting a bank draft for a
set amount each month. $50 is usually the minimum, but some funds require $100. Most funds require an initial investment of $1000
to $3000, but some will allow you to get started with as little as $250 if you agree to dollar cost average with $50 or $100 per month.

Start slowly, because the market goes up and it goes down. If you happen to start in a down cycle, you might find yourself losing money. If this happens, do not panic. Rather, hang in there, because if you are buying, you want the market to cycle downward. Dollar cost averaging through a few down cycles is how you make the concept work in your favor.

One last thing. Don't get too aggressive right now. Buy a safe fund, one that will not fluctuate wildly in price. After you get used to the ups and downs, you can investigate buying different things. The easiest thing to do would be to sign up for the minimum amount of dollar cost
averaging into something like Vanguard S&P Index fund, Wellington Fund, or Windsor Fund. Don't buy a huge chunk of any fund in the late fall of the year because all funds will distribute capital gains in November or December, and you will owe taxes on gains that you did not really get. Signing up for dollar cost averaging is fine any time.

SPECIFIC COMPANIES

Vanguard Wellington Fund is a balanced fund that I use. It invests in approximately 60% stocks and 40% bonds. It is a low risk fund.

Here some individual companies I own. All of these can be bought directly from the company, which means you pay no broker fees. Aqua America (WTR), British Petroleum (BP), Sara Lee (SLE), and Dominion Resources (D).

HINTS

Rule of 72. This is a very useful concept in figuring out how much you will make over the years. Here is the formula: Interest rate times number of years it takes to double your money equals 72. Example: If you are getting 6% interest, it will take 12 years for your money to double. If you are getting 2%, it will take 36 years for your money to double.

Raising cheapskates. Here are two ideas for making your kids money conscious. First, anytime you need to give your child some money to go on a school trip, a church trip or other short day trip, tell her she can keep whatever she doesn't spend. Second, when you go out to eat, tell you child that you will give her a dollar if she orders water instead of soda pop. It will cost you the same, it will be healthier for her, and she will learn the value of a dollar.

Credit Cards. Credit cards are nice, if you can control your spending. Except for rare cases, you should pay off the entire balance each month. If you cannot control you credit card spending, don't cut up all your cards, because you may need them one of these days. Rather, put them in a baggie of water and freeze them. Cancel all but the best two or three cards. (Cutting them up does not cancel them.)

Precious Metals. After you get established with your investing, most experts recommend putting about 5% of your portfolio in precious metals. Personally, I like silver coins, but to each his own, I suppose. It is easy to buy or sell recently minted uncirculated American Eagle silver dollars. I actually have much less than 5% of my portfolio in silver, but when I buy on line, I usually use Bullion Direct. I also buy what is called silver rounds from local coin shops. Silver rounds look a lot like a regular silver dollar, but they are minted privately, which means they are cheaper. You can usually sell your American Eagles or silver rounds at local coin shops for a little less than whatever the current price of silver is for that day.

403b. If you are a teacher and are wanting to know about a 403b plan, click HERE. The site will answer all of your questions and offer advice on how to get the most for your money.

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