Stock Portfolio Update

With such a crazy market since the first of the year, it's easy to just sit on the sidelines and wait for more stability. Always the bull, when it comes to the stock market, I can't help but see opportunity everywhere! My IRA account, which I opened in December, is up 14.5% for the year. AFLAC (AFL) was my best purchase for this account, up an astonishing 67% since my original purchase. I think it will go even higher. Advance America Cash Advance (AEA) earned me a whopping 97% gain for my regular investment account.

So even though it's been a rough ride for the first five months of the year, as far as I'm concerned, it has presented us with a very rare opportunity to make some marvelous short term trades and fantastic long term investments.

I don't want anyone to get the idea that my life has been smooth sailing through this economy. My job shut down on January 10th and I'm still looking for work. I've had to cut back on the amount of money set aside for investing and I've practically stopped buying anything aside from the basic necessities. But I've been through much worse and this too will pass.

Don't Take My Word For It

O.K., so I've been writing since January about how this is the perfect time to get in to the stock market, albeit on a very selective basis. I always search for investments that provide current cash flow and the possibility of future capital gains. For anyone who thought that I couldn't possibly know what I was talking about, check out this article from the Rich Dad Blog by Robert Kyosaki:

When Pessimism Prevails, It's Time to Get Rich

If you go back and read some of my articles for this past year, you'll see that I've been saying basically the same thing Mr. Kyosaki is talking about in this article. I've read most of his books and he is by far my favorite author when it comes to investing, so I was pleased to see that his most recent post is validating a lot of the things I've been writing about. So, don't take my word for it, read what someone who's already made millions has to say.

Oil Prices and A Few More Stocks I Like

I've written about oil prices before, saying it was all about price and demand. Well now everyone seems to be in agreement. When the price reached the point where most Americans had to start cutting back, the price is beginning to falter. Seems everybody is backing away from their predictions of $200 dollars a barrel for oil and $5 dollar a gallon gasoline. I truthfully never expected it to get to that price. Most of the people I know and work with simply could not afford it. They are struggling now at $4 per gallon, so add another $1 and they simply would be out of commission. When the public can no longer afford something, no matter what it is, the drive behind increasing prices is gone. The new catch phrase, "demand destruction" is occurring on a huge scale, just as I predicted it would. Will China and India continue to drive demand? Only if they can sell their products and how is that going to happen if everybody is spending their money on gasoline? Demand destruction is occurring, not only from consumers switching to smaller cars and driving less, but also from the shift to alternate energy sources, such as bio-diesel, solar and wind energy, all lessening demand for petroleum products. I wouldn't predict oil at $40 per barrel like the guy they interviewed on CNBC earlier this week, but I do see the prices dropping dramatically.

So how is this affecting my investments? Fortunately, since I'm mostly buying, the price drop in equities has been good for me. I'm searching for stocks that I feel have room for growth, solid earnings and pay current high dividends. While the share prices of my portfolio holdings have dropped, along with everyone else, my earnings from dividends have been increasing month after month. I am currently re-investing all dividend income in bargain priced dividend stocks. When the market starts to recover, I will re-evaluate my investment plan and possibly shift dividend income to fixed income opportunities or real estate investments. But while the prices are down, I'm being greedy and adding to my holdings as much as possible. Whether we're at the bottom or not, STOCKS ARE CHEAP! Buy when they're on sale.

My latest additions to my portfolio include Biovail Corporation (BVF), a pharmaceutical company with a whopping 15.10% dividend yield and Windstream Corporation (WIN), a small rural telecom with solid earnings and an 8.4% dividend yield. Both should fit nicely with my overall plan of building a portfolio of high dividend stocks and increasing monthly income from dividends. Any price appreciation on top of that is just icing on the cake. Since I have no intention of selling any stocks within the next several years, I can wait on price appreciation.

I currently don't need any of the income from my stock portfolio, but the ever increasing flow of dividends into my money market account make it a lot easier to afford new investment opportunities as they present themselves. Robert Kyosaki, one of my favorite writers, says to "look at a deal a day." I've made that my goal. I can't always afford the deals, but it keeps my mind active and on the lookout for my next investment.

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.

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.

http://thebluecollarinvestor.blogspot.com/2008/02/why-i-dont-invest-in-mutual-funds.html

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

http://thebluecollarinvestor.blogspot.com/2007/11/iras-and-401ks-and-lions-and-tigers-and.html

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:

http://richdadblog.blogspot.com/2008/05/playing-mutual-fund-lottery.html

Don't Be Afraid of Listening to People Who Are Smarter Than You.

"Dependent people need others to get what they want. Independent people can get what they want through their own efforts. Interdependent people combine their own efforts with the efforts of others to achieve their greatest success." - Stephen Covey

Even though I haven't had the benefit of an extensive secular education, I still consider myself as pretty intelligent. However, one thing I have learned is, there is always someone smarter. When it comes to investing, no matter how much I learn, I know there are people who are more in the know than I am. A very important part of intelligent investing is to take advantage of advice from people who are smarter than you.

I recently came across this blog by Michael E. Brisky:


http://briskycapital.blogspot.com/


I didn't have to read too many postings before realizing this guy knows way more about investing than I do. So you better believe I'm going to be keeping up with his postings. While I might not take advantage of every piece of advice he gives, I think this guy definitely knows what he's talking about. Thanks Michael, keep up the good work!