Monday, May 26, 2008

Summer Cost Cutters For My Investments

For traders in the stock market, summer is usually a time for laying low. "In May, go away" as the saying goes. For my personal investments it is usually a time to re-evaluate my plan and assess changes that will improve my portfolio performance. I also think of it as a good time to pick up stock in some of the big blue chip companies while prices are down. As an example, I sold my AT&T stock in early spring of last year, while I had a nice price gain and bought the company's stock back in late summer when the prices were down. From the profit I made in the spring, I was able to purchase more shares of this great company when I bought back in at the lower prices. It has performed quite well since.

As for improving performance of my portfolio, this year I have decided to increase the dollar amount of each of my investments and purchase larger blocks of stock each time. While I'm building up cash for stock purchases, the money is parked in my money market account where it earns a nice interest rate. By increasing the size of my investments each time, I will save on brokerage fees. I don't think anyone would consider the amount I pay in brokerage fees to be extreme, but every dollar you save is like earning two, since the saved dollar has already had the taxes taken out. So I'm looking to save every way I can on investment related costs.

The biggest threat to my portfolio this year is high gasoline prices. Not only does this have a negative affect on the economy overall and on the cost of doing business for a lot of the companies I invest in, it drastically reduces the amount of discretionary income I am able to devote to my investment plan. I believe we will see a break in gasoline prices soon. I just don't think it's possible for the average working person in the U.S. to continue paying ever increasing gasoline prices. People have already started to make drastic changes, replacing larger vehicles with smaller ones, riding bikes to work or taking public transportation, in many cases they never would have considered these things before. As for me, I simply don't drive any more than I absolutely have to. All these things add up and when the demand falls, so will gasoline prices. My plan B, you should always have a plan B, is to change jobs and reduce my commute or to relocate closer to my work place. For now I'm cutting back and waiting for a price break. I would much rather be putting this money towards building investment income rather than burning it up in my car.

Wednesday, May 21, 2008

The Power of Thoughts

"The Law of Attraction attracts to you everything you need, according to the nature of your thought. Your environment and financial condition are the perfect reflection of your habitual thinking. Thought rules the world." - Dr. Joseph Edward Murphy

In other words, you are what you think. If you think you will fail or that you will be a resounding success in life, then you're absolutely right.


Sunday, May 18, 2008

Create A Cycle: How I Stopped Living Paycheck To Paycheck in 30 days

What a fantastic article! Everyone should read this, especially those who think that it's just not possible to break the cycle of living paycheck to paycheck. Thank you Perry for a terrific post!

Create A Cycle: How I Stopped Living Paycheck To Paycheck in 30 days

Saturday, May 17, 2008

Personal Wealth Is Not All About Money

I recently read this quote on wealth and thought it an appropriate reminder that true wealth is not all about money. I thought I should share it with my readers.

Wealth Comes In Many Forms

My mentor, Bob Proctor, once said, "Don't cry over anything that won't cry over you." People will often create tremendous suffering for themselves just because they're in debt or have lost money. They'll generate intense feelings of anger, sadness, and fear, all of which are destructive and actually make it more difficult for them to regain the wealth they lost. Because they're upset, they may fight with their spouse over money or become severely depressed, not realizing that the power to create abundance for themselves once again is always available to them.When you understand that money is simply one form of the tremendous force known as abundance or wealth, and that you can always receive riches from our ever-giving Universe, it becomes easier to let go of negative feelings about money and the destructive belief that material wealth is more important than other manifestations of abundance.

Ask yourself how much money you would take in exchange for your eyesight and your abundant health. How much would I have to pay you for you to give up your relationship with the person you love the most? My guess is that your health, your eyesight, and the people you love are far too precious to trade for any amount of money.If what you receive isn't money, open yourself up to it with gratitude and joy. Allow your creativity to flourish and you can discover ways to convert the abundance into the form you could most use right now.Wisdom and knowledge are types of abundance that we often overlook.

An antiques dealer I know often purchased items from homeless people who brought him furniture and other objects they'd found in the garbage.He was always gracious and kind to them, and one day one of his regular sellers, who was a homeless man, noticed that the dealer had recently acquired a gold record by a celebrity."You have that underpriced," he said. "I used to work in the music business. I know."The antiques dealer listened to what the man had to say and decided to take his advice and quadruple the price. A few days later, the dealer's dentist came in, got very excited about the gold record, and said, "Listen, I'd love to own that, but I don't have that much in cash to spend. How about if I do that dental work I recommended to you, in exchange for the gold record?"The antiques dealer was able to pay for expensive dental procedures he needed and couldn't afford, because he valued the abundance that came to him from an unexpected source and converted it into something he could use.

Peggy McColl

Monday, May 12, 2008

My Latest Dividend Investment

Altria Group, Inc. (MO, NYSE) engaged in the manufacture and sale of cigarettes and other tobacco products through their wholly owned subsidiaries, Phillip Morris U.S.A. and Phillip Morris International. Altria Group is also the majority shareholder in Kraft Foods, Inc.. With a current dividend of $3.00 per share, which represents a 14.30% yield on investment, I think this will make a great addition to my portfolio. The rest of the numbers look good, with a 34% return on equity, very low price to earnings of 4.70 and price to book of 2.38 and reasonably low debt. While I realize cigarette and tobacco products are a shrinking market in the U.S. and some of the more developed countries, their sales are increasing in other parts of the world, so I think they will be making money for several years to come. With a dividend payout ratio of 68%, the company is retaining enough earnings to service debt and provide for future growth and possibly even allow for increases in future dividend payments to shareholders. With a recent price of $20.94, the company is looking like another bargain stock to me, so I'm buying in.

Now I know all the people who are going to argue about the morality of investing in a company producing tobacco products and I don't intend to defend tobacco over the health problems it causes. I am making this decision strictly from an investors point of view, not a moral point of view. As for the people who are on their soap boxes about the evils of smoking, I would point out that every time I see something on the news about another group rallying against smoking, I can't help but think about how they got to their meeting. Can you really in good conscience berate a bad habit like smoking if you're driving an SUV or any other gas burning vehicle? Cigarettes pollute the air and cause major health problems, but so do the vehicles we drive and the foods we eat and a lot of other things. So, the way I see it, it's "six of one and half a dozen of the other" as my mother always used to say.

Thursday, May 8, 2008

IRA's, 401k's and Mutual Funds Revisited

On February 25th of this year, I wrote an entry in my blog explaining why I don't invest in mutual funds.

On November 14th, 2007 I also wrote an entry concerning my views on IRA and 401k retirement accounts.

Needless to say, my views are not extremely popular. I'm sure that, due to these two articles, a lot of readers and so called "investment professionals" would question my credibility as an investor. However, I'm not exactly writing to give investment advice to anyone. I'm writing about what I personally am doing to build my investment portfolio, it's up to the reader to make up their own mind about what's right for them.

Having said all that, I thoroughly enjoyed reading Robert Kiyosaki's latest post on the Rich Dad blog, "Playing the Mutual Fund Lottery." I came to many of the same conclusions expressed in this article after my experience with mutual fund investments and after reviewing both IRA's and 401k's and deciding against investing in them for retirement. Robert Kiyosaki's credibility, as a successful investor and best-selling author, is unimpeachable. Read what he has to say on the subject of mutual funds and retirement accounts at:

Tuesday, May 6, 2008

Why I'm Not Investing In Gold

It's the gold rush all over again! No, they haven't discovered gold in Missouri, not to my knowledge anyway. I'm talking about the hype in the gold market since prices have soared. Everybody seems to be rushing in to gold, with some reasoning it is a hedge against losses in the value of the dollar or the stock market. Sounds reasonable, the price certainly has skyrocketed as the dollar dropped and markets went into turmoil. However, I think that now is not the time to be investing in gold. If you wanted to invest in gold, the time to invest would have been when gold was $300 an ounce instead of near a thousand dollars an ounce. If I had bought gold then, I would be selling now. Perhaps the price will continue to climb, maybe even going over $1,500 or as some are predicting, $2,000 an ounce although I tend to doubt that.

I think gold is at or near the top. When everyone wants in, that's usually a good time to exit. With recent buzz that the Federal Reserve may be through cutting interest rates and may begin to actively fight inflation and work on strengthening the dollar, gold prices are likely facing a correction. I doubt we'll see $300 an ounce again any time soon, but I do see prices dropping dramatically when the Fed's shift their focus to fighting inflation. Like I've mentioned in previous articles, this has all happened before. I was there for the last big run up in gold and silver prices and got caught up in the whole ordeal at exactly the wrong time. This time around, my investment strategy kept me away from precious metals, since I tend to invest for current income as well as future growth and income. While it is possible to make some fantastic gains in gold trading, it's not something that particularly interests me, so I didn't want to spend the time learning the business. But one thing I'm pretty sure of is, now is definitely not the time to be getting in.

I suppose, in the interests of full disclosure, I should mention that I do hold silver as part of my investment portfolio, in the form of silver coins. I never really set out to be a coin collector, but I have built up quite a collection over the years. I'm not seriously expecting a great deal of return on those either, but I like the coins and occasionally add to my collection.

Monday, May 5, 2008

Revising My Financial Plan for 2008

After reading Robert Kiyosaki's latest article in the Rich Dad blog about thinking big:

I decided I needed to make some revisions to my financial plan for the year. I have already accomplished many of the goals I set back in December of 2007 and I'm thinking that maybe I need to expand my plan. While I think it's good to set realistic goals, so you don't always set yourself up for failure, I realize now that my goals may have been too short-sighted. In other words, I've been thinking too small and need to expand my perception of what I am able to accomplish for the remainder of the year.

Of course it would be easier to leave things as they are and coast through the rest of 2008, knowing that I will have attained all of my personal and financial goals for the year. However, nothing worthwhile in life is ever really easy and if my true goal is to be on the fast track to financial freedom, then I'm going to have to come up with new goals and expand my plan to accomplish them. Once again I've gotten a wake up call from one of the best financial writers in the business. Thanks again Robert....

"You can achieve anything you want in life if you have the courage to dream it, the intelligence to make a realistic plan, and the will to see that plan through to the end." - Sidney A. Friedman

Saturday, May 3, 2008

National Healthcare

CNBC had a panelist discussion on National Health Care this morning, spawned by Hillary Clinton's appearance on the O'Reilly Factor, where they talked about her proposed health care program and how it would bankrupt the nation. I too believe that it is impractical to think that the nation can afford nationalized health care, since we really can't even afford the health care programs we have in place now. If everyone played by the rules, perhaps medicare and medicaid would be in better condition. However, after working several years in the health care profession, I know that it is rife with fraud. I have seen health care providers billing the government programs for services they did not provide. So any government run program is bound to be way to costly for the taxpayers to afford, simply because there is no effective way to control such a program. Add to that the fact that in countries with nationalized health care, the quality of health care leaves a lot to be desired and I believe a National Health Care Program is really only political rhetoric. Might be good for picking up votes but for all practical purposes it most likely will never happen.

So what should be done to solve the health care crisis? Perhaps the government should consider a national group insurance program instead. It could be a group insurance plan that is open to all legalized citizens and residents of the United States. The insurance premiums that individuals pay could be based on income to make it affordable for low income households. I know that people would argue that this would hurt the insurance companies, leading to loss of income and loss of jobs, but that doesn't have to be the case. The government could pass legislation whereby private insurance companies have to provide the coverage, perhaps offering tax incentives to the companies who comply. As for people who absolutely cannot afford to pay anything for insurance coverage, a tax code provision which allows for deductions of insurance premiums in addition to the standard deductions, should cover the cost for the poorest Americans. There would be a lot of details to work out, but it would keep the government out of the health care business while providing health care for everyone.

Of course I realize, this too will probably never happen. However, I just wanted to make the point that there are workable alternatives to a Nationalized Health care program. The bottom line is that the United States as I see it is nearing or has already gone beyond the tax threshold. When you see wealthier citizens leaving the country to escape high taxes and corporations parking earnings in overseas subsidiaries to delay tax payments or worse yet, leaving the country entirely, then it's a pretty safe bet that more taxes are only going to make our problems worse. Make no mistake, no matter what the politicians would have you believe, a nationalized health care program would mean more taxes and probably much more than any of us could afford to pay.