IT'S MUCH HARDER TO INVEST A LITTLE THAN A LOT

When deciding on a new stock investment, I find it more difficult to invest a small amount of money, than investing larger amounts.  Well duh, you might say, but what I really mean is, I spend a lot more time evaluating stocks before making a final investment choice, because I'm more aware of the need to get the most bang for the buck. 

For instance, my quarterly IRA investment is coming up in April and it was a tough choice deciding where to put my money to work.  I finally narrowed my choices down to two stocks:  Spectra Energy Corp (SE:NYSE) or Abbott Laboratories (ABT:NYSE).  While I believe both stocks are good sound investments, I could only choose one for the amount of money I have to invest in my IRA account.  Both have great financials and good business models and while Abbott is a pharmaceutical company, they are not facing any major near term patent expiration like many of their rivals.  Spectra is involved in natural gas distribution, but a great deal of their profit comes from their toll-bridge like storage and pipeline operations.  Both carry similar dividend payouts of around 4%.  So it was hard to choose one or the other.

Since I had to make a decision, I finally went with Abbott Labs due to their slightly higher yield and their lower price to earnings ratio.  I also liked the fact that they have a great deal of cash on hand and a payout ratio of 58% compared to SE's 62%, leaving them more room for future dividend increases.  I have put in the order to purchase ABT for my IRA, but decided to buy shares of SE for my regular taxable account.  I'll have to wait until I collect enough dividends to purchase the SE shares, but I think they'll be a great addition to my portfolio in the long run.

I sure miss the good old days, before the "Great Recession", when my problem was having more cash and not being able to find enough good investments. 

Legally Invest on Inside Information

Almost every book I've ever read about investing advises you to invest in what you know. I've found this to be some of the best advice when deciding where to put your money. In all of our lives we are surrounded by terrific sources of inside information. In my case, I used to work for a major restaurant chain. Every day I worked, I saw what went on there. I saw the products that sold the best and the ones that didn't sell well. I had access to the packaging the products were delivered in, so I was able to determine which companies the best selling products originated from. With that information, I was able to look up each company, determine their profitability and decide on the ones I thought would make the best investments. Since our restaurant was part of a national chain, I knew that all the other restaurants were 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 pay some of my money back in the form of dividend payments. A couple 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 you're 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 a job, even if they have no retirement program, I'll be making money off 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 investing 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.