The Rich Get Richer and The Poor Get Poorer

We've all heard the statement, "The rich get richer and the poor get poorer." This has been especially true in the past several years and may be even more true in the years ahead. But have you ever asked why this is the case? It is simply because the rich keep doing what makes them rich and the poor keep doing what keeps them poor. I saw a video on Youtube recently and the guy was talking about when he realized what he was doing wrong. He said he realized at the early age of 24 that it is ALWAYS possible to spend more than you make. If you always spend more than you make, you'll always be broke.

If you're tired of being one of the poor, and believe me I'm very tired of it, then you have to change the way you think about money and the way you act upon your thoughts. I had to get over my little pity party and get away from the victim mentality of "I'll always be poor." You'll always be poor if you keep doing the things that make you poor.

A lot of people think, "If I just made more money." Well you first need to be able to handle the money you do have. Do you want to have more and possibly even be one of the rich getting richer? Then you need to take control of your finances and stop spending more than you take in. Once you've accomplished this simple rule, then you can put your excess money to work. When your money works for you, that's that much less work you have to do yourself. John D. Rockefeller once said that the only thing that made him truly happy was the dividend checks he got every month. I can relate to that! I've worked hard all my life, starting at age 5, but never really had anything to show for it until the past 10 years or so. Now the money comes in every month in the form of dividends and interest and you can't imagine how it makes me feel to know that I didn't have to do any physical labor to earn it. I'm still a long way from being one of the rich. But I have every confidence that the more I learn about handling my finances, the more money I will make and the less I'll have to physically work for it.

If this sounds good to you, then take a look at your personal circumstances. We can all find reasons or excuses why we can't put any money aside to invest, or why we can't improve our situations. It's when you STOP making excuses and START looking for ways to improve your situation, then your life will change. It may not be easy and you might not like all the changes you have to make, but believe me, it will be more than worth the effort. Don't wait for a bailout from the government, help yourself to a better life!

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!

Getting Started Investing in Stocks

My first investments in the stock market were in the form of mutual funds. Back in 1993, when I first returned to Missouri, I made very little money, so I only had $35 a month to get started. That didn't stop me though. I opened a savings account and let the money build up until I had enough to buy in to my first mutual fund. Within a few years I was able to build my account and eventually owned 7 different funds. I didn't do to bad, but it seemed to me that with the fees charged to my account and the fact that the mutual funds didn't really increase much in price, I could probably do better with individual stocks. To test my theory, I purchased a few shares of Mobil Oil. A few months later they announced their merger with Exxon and my shares of stock zoomed from $65 to around $120. I had almost doubled my money in less than a year! That convinced me. I sold all my mutual funds and started investing in stocks.

I have always followed the pay yourself first rule, at least to a point. I have never quite been able to put aside 20% of my gross income, like so many money experts seem to recommend. However, I've always decided on an amount my budget would allow and pay myself before I pay any of my bills. I can't say I've never touched the capital. It is very seldom that do, but "time and unforeseen occurance befall" us all. For the most part though, I've left the money alone to accumulate.

Along the way I've had some really good years and some pretty lean ones. This year has been a pretty rocky road for stocks, but I've still done pretty well. I think the biggest change I've made to my portfolio this year was to convert all my stock investments to dividend paying stocks. I had carried a lot of growth stocks, but the thing I noticed with growth stocks is that the "growth" can dissappear very rapidly in a down market. The same was true with dividends re-invested in the stocks that paid them. So I now have my dividends paid into a money market account where they earn interest every month until I decide to where to re-deploy the capital. I'm not suggesting that this is the best way to invest, but it has worked well for me.

I currently own stock in about 20 different companies. My investments are pretty diverse. I own shares in a couple of banks, a few consumer goods companies, some Canadian energy trusts, a couple of utility companies and some Greek shipping companies. Right now I'm concentrating on building my positions and increasing the amount I recieve on dividends each month. This strategy has worked out pretty well, since my budget doesn't allow for much of an increase in my monthly deposits to my account. That will all change before long, since I'll have one of my major bills paid off and I'll be rid of a monthly payment of over $300. I'm planning to keep making this payment, but I will pay this amount to my investment account instead of to the creditor. In the mean time I've been picking up extra work so I can keep increasing my current investment amounts. Everything is working out pretty well so far.