Rough Week for the Stock Market.

It's been a pretty tough week for the stock market. My portfolio closed down approximately 8% for the week. I almost gave in to the herd mentality and was tempted to sell some of my stocks to retain the capital gains. However, I decided instead of creating a taxable event, I would stick with my positions for the underlying reasons I purchased the shares in the first place. From the research I've done on the companies I'm invested in, I believe their long term outlook is very good. While the market may be on the bearish side right now and could continue on this course for a while, I'm willing to stick with my choices. As long as the dividends keep rolling in I'm pretty happy. I'm taking all of my dividend payments in cash at the present time, letting them accumulate in my money market account so I can build up extra cash. I intend to scout out some new dividend stocks to add to my portfolio while the general direction of the market is down. What a great opportunity to pick up some quality stocks at a lower price. My stock investment plan has always been to accumulate dividend paying shares as rapidly as possible until the income from my portfolio meets my monthly expenses. Once I've reached this point, my earned income will be invested elsewhere. I've got a ways to go yet, but it is encouraging to see the dollar amount increase on a monthly basis. Just think if you had a job where you got a raise every month, wouldn't that be about the greatest thing you could imagine. While the news is filled with so much distress over the falling stock market, I find myself extremely excited about the possibilities of picking up a lot more shares with my hard earned investment dollars.

A Little Extra Income.

In the spring of this year, business at my workplace slowed and like so many other businesses, my employers cut everyones hours. I can understand that, from a business point of view, every dollar saved on labor goes directly to the bottom line as profit. However, my bills did not slow down and I didn't want to cut down on my investment program. I also didn't like the idea of getting a second job. Don't get me wrong, I have no problem with working. But like Ronald Reagan once said, "I know hard work never killed anybody, but I figure why take chances." At any rate, I determined that I really only needed to make an extra $20 per week to keep up with my bills and my investments. So instead of getting an extra job, I decided to see if I couldn't drum up some extra work on my own.

I got the idea to cut grass on my days off. As it turned out, my next door neighbor needed someone to cut grass for them. They had the mower and weed eater, all I had to do was provide the labor, for which they paid $20 each time I mowed. So I had my $20 extra per week. In the mean time I had put the word out among friends and aquaintances that I was available for odd jobs in case they were needing any help. Little by little I picked up extra work here and there, doing window cleaning, steam cleaning carpets, painting and most surprising of all some commissioned art work. I say the art work was surprising because I'd never really thought about making any money at it. As it turned out I sold over $250 in sketches I did in my spare time.

What did I learn from all this? I found out how easy it was to make money without a regular job. I just wanted to make an extra $20 in income per week to cover the cuts at work. As it turned out, when I actually started looking for ways to make extra money without an extra job, I ended up making anywhere from $250 to over $500 extra per month. Since I always have three days a week off from my regular job, it was not really a problem to work one of those days.

Now I'm looking at ways to turn this experience in to a part time business. I've come up with a lot more ideas for making extra cash and I'm pretty excited about the whole thing. Who would have thought that there were so many different ways to make extra income?

Have a Plan Before You Invest

A lot of people don't really give any thought to an investment plan before they begin investing. They buy some stocks, bonds or mutual funds or maybe a combination of investments, but don't really have any definite goals set out that they wish to achieve. It is very important to take the time to figure out where you are financially and where you would like to be, so you can establish a plan to get you from point A to point B. You should set a specific time frame for accomplishing your goals. Your plan should be in place before you invest any money, otherwise you may just end up spinning your wheels so to speak. Once you've established your current financial position and you've set a goal that you would like to reach by a certain deadline, it is also important to keep an open mind about investing. In order to reach your goals, you may need to move beyond the type of investments you are comfortable with. I'm not saying you should get involved in high risk situations, like I said in my post yesterday morning, you should invest in what you know. Something to keep in mind though is that the more you know about a different types of investments, the less risk there is involved. Because you learn how to avoid the mistakes. Like it says in the Bible, "There is nothing new under the sun." So any type of investment that you may be considering, someone else has already been there. You may need to attend a seminar to learn about a new investment, or talk with people you know who have already done what you would like to do. For example, I'm planning to broaden my investment plan to include rental properties. I have to admit that I currently know little about investing in real estate. However, one of my best friends has owned and managed rental properties for over 20 years and has been very successful with his investments. Also, my younger sister has purchased several properties at very low prices and rehabbed them for rentals and resale and done very well. So in my case, I'm not jumping in to real estate blindly. My time horizon for making my first purchase is within the next 2 years. However, before I buy my first property, I intend to learn everything I can from their experiences. This will lessen the risk of, what for me, is a new investment, in the sense that I will be able to avoid many of the mistakes that a lot of first time real estate investors make. My comfort zone for investing has always been with the stock market, since that is where I have the most knowledge and experience. However, after reviewing my plan I saw the need to broaden my investments beyond the stock market. The point being, that once you have your plan and your time horizon in place, your mind begins to work on ways to help you accomplish your goals. You will be able to reach them, if you learn to not limit yourself. Opportunities for making money abound in this country, we simply have to educate ourselves and open our eyes and minds to take advantage of them.

Invest in What You Know

Almost every book I've ever read advises you to invest in what you know. I've found this to be some of the best advice when decided where to put your money. In all of our lives we are surrounded by terrific sources of inside information. In my case, I work for a major restaurant chain. Every day I work, I see what goes on there. I see the products that sell the best and the ones that don't sell well. I have access to the packaging the products are delivered in, so I've been able to determine which companies the best selling products originate from. Then I'm able to look up the information on each company and determine their profitability and decide on the ones I think would make the best investments. Since our restaurant is part of a national chain, I know that all the other restaurants are ordering the exact same products. From this type of inside information, which is perfectly legal, I've been able to make some terrific investments in 4 great companies and have my eye on 2 more that I'm waiting to purchase stakes in as soon as the price is right. Another example of a type of inside information that is available to everyone would be the people you do business with personally. Who do you write checks to every month? Are they a publicly traded company? I've found it a lot easier to part with my money when paying the phone bill or the electric bill when I know that every quarter they are going to give me some of my money back in the form of dividend payments. A few more things to think about, where do you shop? Where do you go out to eat? Have you looked in to the stocks of the companies you frequent the most. Chances are very good that your not the only one going to these places over and over again. Take the time to look up their stocks. You'd be surprised how many of these companies may be way more profitable than you might think. Maybe they're not the ones you hear about in the news all the time, but then again, by the time they're in the news, they're usually over priced and ready to drop. Best to find these gems before they hit the news. I really love the idea that when I leave my job, even though they have no retirement program, I'll be making money off of them for years to come through the stock dividends I receive from the companies they do business with. So instead of trying to keep up with the latest trends or to try and figure out how the latest tech companies are going to make money, invest in the companies who make the products and deliver the services that you use on a regular basis. You already know how they make their money.

Investing in Insurance Companies

I've always liked the idea of investing in a good insurance company. I figured after all the years I've paid out insurance premiums and never collected a single dime, they just have to be making money, and I'd sure like to get some of my money back. But until recently I hadn't run across any with good enough financials to justify the going share price. I routinely search through smaller stock issues in hopes of finding an undiscovered little gem of a company that stands a good chance of paying off well. But being the type who likes the cash flow of dividends, my search criteria are usually pretty hard to meet. However, I did manage to find a small insurance company in the state of Florida that specializes in re-insurance, which means they underwrite the policies of other insurance companies. Their financials looked great, their profit has double every year for the past three years and they pay out a nice dividend while retaining earnings for future growth. They also have very little debt and a low stock price so I was able to buy several shares in the company. What's not to like? I've already gotten part of my investment back, in the form of 2 quarterly dividends to date, and the price has appreciated about 20% over what I originally paid. This one looks like a real keeper!

7 Tips for Saving Money to Invest.

Tip No. 1

Never spend your change.

When I first began my savings program to build up money for investing, one of the easiest ways I found to trick myself into saving more money was to stop spending my change. I made a habit of paying for all my purchases with bills and pocketing the change. At the end of the day, all the spare change goes in a jar and when the jar is full, I take it to the bank and deposit it in my savings account. You'll be pleasantly surprised how much money you will accumulate this way. I once purchased 25 shares of stock in a large food company entirely with money I'd saved from pocket change.

Tip No. 2

Shop for the best deal on your car insurance.

I was astounded at the difference in prices and the huge amount I saved by switching my insurance. And no it isn't the company you might be thinking of, but I still have my insurance with a nationally recognized company for a whole lot less money.

Tip No. 3

Take your lunch to work.

I used to buy my lunch at work every day. While I got by cheap, usually around $5 and I only work 4 days a week (10 hour days), that still amounted to $1,040 per year. I found that if I took soup and crackers (one of my favorite lunches) it only cost me $1.70 per day, or $343.60 per year. A savings of $696.40 per year! As an added bonus, I lost 20 lbs.!

Tip No. 4

Use your coupons and motor club discounts.

Manufacturers coupons are the same as having extra cash instantly. The trick is to use only the ones for items you already purchase. I didn't realize how much I could save this way until I tried it out for a few weeks. I have also had a membership with a national motor club for years and yet never took advantage of the discounts offered on auto service, motel stays and entertainment. Now that's the first thing I look for when needing my car serviced or when planning a trip.

Tip No. 5

Adjust your thermostat.

In the fall of the year I set my thermostat at 60 degrees and leave it there until spring. If it gets a little cold, I dress warmly. In the spring I shut the heat off and open the windows until the heat or my allergies make me turn on the air conditioning. Then I set the thermostat on 78 degrees and leave it alone. The point is, adjust the heat down as low as is comfortable for you and the air up so your utility bills stay low. Money you don't use in utilities may just buy you some shares in a utility company that will pay you dividends to help pay those utility bills.

Tip No. 6

Shop out of season.

I love doing this. I get most of my clothes this way. I'm really big on brand name clothing, but I nearly go in to cardiac arrest when I see the full priced items. Now I buy my spring and summer clothing in the fall and winter clothing in January through March. I get the same brand names for anywhere from 50% to 90% off the original price.

Tip No. 7

Buy your cars used.

It's always better to purchase a good low mileage car that's been maintained than to purchase new. New cars depreciate in value faster or almost as fast as you make the payments. If you can pay cash for the car and save having to pay interest on a loan, all the better. Wouldn't you much rather be putting that money in to something that's going to pay you instead of making car payments?

My Take on the Credit Crunch and Housing Woes.

There has been a lot of doom and gloom in the news lately about the problems with the credit markets and the increase in foreclosures due to some poor lending practices in the housing markets. While this has caused a lot of uncertainty in the U.S. economy, it's my opinion that we really have very little to worry about. In fact, unless you're one of the unfortunate people who took out one of these mortgages or, like myself, waited a little too long to unload shares in REITs, this could actually turn out to be a good thing.

I've been around long enough to remember a very similiar situation in our economy. Back in my 20's, when I was more interested in partying than in investing, our country was faced with a Savings and Loan crisis. It seems the Savings and Loans had played fast and loose with some adjustable rate mortgages and they had gotten themselves into a bind when the foreclosures started to reach epic proportions. Peoples interest rates adjusted and therefore their monthly payments went through the roof and many of them simply turned in their keys and walked away because they simply could not afford to make the payments. Sound familiar? The situation now is so similar it is almost spooky. The American dollar is down against foreign currencies, the price of gasoline has syrocketed, the government has had to step in to help stabilize the economy (although the Feds interventions are a lot less drastic than were required during the Savings and Loan crisis). So why do I say this could be a good thing?

In the years following the S&L crisis you couldn't throw a rock without hitting a great opportunity for increasing personal wealth. That is, as long as you were one of the sane ones who ignored all the people preaching doom and gloom and actually assessed the situation for what it was. When the American dollar dropped so low back then, it made our goods less expensive and more attractive to foreign countries. Our exports began to boom, just as they have now. The price of oil and gasoline were outrageously high, so everywhere you looked there were large gas guzzling cars and trucks for sale and nobody wanted them, because they were all switching to more fuel efficient vehicles. Which is exactly what is happening now. When the country en-masse switched to driving mostly smaller vehicles our gasoline consumption dropped dramatically and the price of oil and gasoline followed suit. Basic economics, the law of supply and demand. As for real estate, after the dust from the S&L disaster began to settle, people began to realize that expensive properties were going extremely cheap. Those who had the good sense to buy some of those investment properties at or near rock bottom made out like bandits in the ensuing years as the real estate markets began to recover and prices shot back up to or above their previous levels. I believe 2008-2009 will be the big buying opportunity again in investment real estate and I have no intention of missing out on this one.

As for the stock market, I believe it is a victim of sorts of the information age. With all the business news channels, the internet business websites, every little obscure bit of news from around the globe is analyzed to death. I believe a lot of the fluctuations in the market are irrational and you just have to pick stocks in well run companies who have a solid financials and you have to stick with them and ignore all the hoopla and sensationalism from most of the business news. If you invest in solid companies who reward their shareholders with regular and increasing dividends, the effects of market fluctuations are most likely to be temporary ones. Remember, your supposed to buy low and sell high, which almost no one ever does. So when everyone else is fleeing the market, that's the time to be doing your homework and finding the bargains. I can tell you from personal experience, there will be plenty!

So, in summation, while things might seem pretty bleak right now, in my view we are faced with a great window of opportunity within the next couple of years. I've already put my plans in motion to take advantage of what I see as another great shift in wealth in the U.S. economy.