THE SMALL INVESTOR BY JIM GARD

I've been reading a great book for people who are new to investing. It's not a new book, but it does a great job of covering all the basics of investing in stocks, bonds and mutual funds. It is very well written and easy for anyone to understand. The book is titled, "The Small Investor" and is written by author Jim Gard. I'm reading the second edition which I picked up at a used book store, but I'm sure it's still available through Amazon or Barnes and Noble.

Along with covering all the basics of investing, the book also explains why the small investor actually has an advantage in some ways in the marketplace. It tells you how to work with professionals such as investment counselors, brokers, money managers, and others whose services you may or may not need. It's not a get rich quick scheme, but it can help you make a personal plan that gives you your best shot at a reliable return on your investments, with manageable risks.

I highly recommend the book for beginning investors.

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

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.