Money Making Schemes

Nagesh answers:

I love the way you put the question “have the most money left at the end of the year” Well put.

Unfortunately, many doing really well are in my opintion over priced. But what do I know?

Here are a list of the pest performing stocks:

POT this stock is going great guns. Up 200% in one year. UP 6 points today. Makes fertilizer.

FAST is doing very well also. Up 25% ytd. Not too shabby. It is a little better value than POT. But still kind of expensive.

PNRA is doing well also. Up 25% ytd. This one had a tough 2006 and 2007. It looks like maybe it is beginning a recovery.

TSL is speculative but a decent speculation. Their earnings should explode this year.

Is that enough for your contribution?

Nagesh answers:

Hi,

If I were young, I would be investing in small cap growth mutual funds or stocks. Go here for excellent low cost advice (http://www.aaii.com/aaiiportfolios/commentaries/stockportfolio/200701comment.cfm).

Don’t be alarmed at the low cost – it has some of the best financial advice on the Web.

You have lots of time before retirement which means the magic of compound interest will just keep building and building. It really works and if you keep investing every year, in 10 or 15 years you will be surprised at how it mounts up. In 30 years you could be a millionaire which probably won’t amount to much in 30 year owing the the ravages of inflation.

And that’s the primary reason to keep investing in small cap growth stocks – they will flog inflation to death.

When investing in mutual funds, select the no-load funds only. Do not invest in mutual funds with a “load”, an up front commission that you have to pay before when they sell you the mutual fund. Some charge as much as 10% which is a rrip-off. Many studies have shown that the no-load funds do as well as the load funds and sometimes a lot better.

Look at the AAI Shadow Stock Portfolio. I would try and emulate that portfolio if you want to invest in stocks. It was up 25% as of November 2006. The Vanguard Index fund is only up 14%.

AAII has some of the best financial advisers and the cost is very low. They have excellent guides and advice.

You may need a broker so go to e-Trade or Scottsdale who have low commission rates.

Do your own due diligence. Your own ideas are the best. Do not depend on someone else to select investments for you. Learn about investing so you don’t have to ask what stocks to invest in.

Be self reliant.

Remember what Emerson said: A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do.

Find stocks that have steadily rising net profits (earnings), low debt, and good P/Es, lots of cash, companies buying back their stock..

What interests you? Find stocks that pique your interest and passion.

You need fast growing good stocks with good earnings and in good sectors. You need to learn more about the stock market before you even think about investing in it.

The stocks world is divided into 12 sectors such as energy which chevron belongs to. It is next to last in the sectors list today.

Technology is numero uno, but things can change in a new york minute, but within the sector, the fastest growing are computer services, not Microsoft. Then, Electronic Instruments and controls. Next is computer storage devices.

The next hot sector is Healthcare, but heed the warning below. Go here for sectors: (http://clearstation.etrade.com/cgi-bin/Itechnicals?Event=srp&Section=redge&Refer=/redge.html)

The best software is Vector Vest if you can afford it. It has sector investing.

Here is a free Web site for charting stocks: (http://www.incrediblecharts.com/).

First of all, stay away from “professional brokers” and tips coming to you via e-mail or friends and acquaintances. And tips at Yahoo! Answers. And e-mail tips. Do your own due diligence – don’t rely on someone else. Read Emerson’s essay “Self Reliance.

Hey! They will say anything to get you to buy their junk. If it’s too good to be true, it is.

Remember this, they are just sales people trying to sell you what their firm is pushing. They are not security analysts or financial planners, not even financial advisers. Trust me, I know from experience that they cannot be trusted especially with a million dollars. You risk losing it all. A million dollar account is known as a “whale” and they would love to get their greedy little paws on it and suck it dry. They just want to make commissions on what they buy and sell for the suckers, err…clients..

Risk avoidance is the name of the game.

Remember, the harder I work, the luckier I get.

Penny stocks are highly speculative. I would avoid the ones under a dollar a share. For example, Best Buy started at less than $5. So there are some good companies, but it takes a lot of digging to find the good ones. You are looking for companies with good earnings, little debt, low capitalization, and good P/Es. For stocks under $5, very few will meet these requirements.

Stay away from the pharms unless they have patented drugs – do not invest in generic pharms, no growth there.

Check out which business sectors are the most popular and invest in the companies in those sectors. The number one, two and three are: technology, health care, and cyclicals (retail). These change periodically so keep current.

Go here for a list of growth stocks: http://www.thestreet.com/_googlen/newsanalysis/ratings/10345212.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

There are these lists all over the Web – you pays your money and takes your chances.

Watch CNBC, but don’t pay too much attention to the talking heads, except for Jim Cramer, the wild man – but he tries to teach you how to invest and has some great advice.

Get Jim Cramer’s Real Money: Sane Investing in an Insane World by James J. Cramer

Listen to Jim Cramer on CNBC.com

Go to Clearstation for quotes and tutorials on investing at (http://clearstation.etrade.com/). Sign up is free. Look up a few stocks. Do their tutorials. Check out the sectors.

Get this book: Value Investing: From Graham to Buffett and Beyond (Wiley Finance) by Bruce C. N. Greenwald, Judd Kahn, Paul D. Sonkin, and Michael van Biema.

Another good book: The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of (Motley Fool) by David Gardner, Tom Gardner, and Selena Maranjian

Jim Cramer’s Mad Money: Watch TV, Get Rich by James J. Cramer and Cliff Mason

I Want to Make Money in the Stock Market: Learn to Begin Investing Without Losing Your Life Savings! By Chris M. Hart

Sensible Stock Investing: How to Pick, Value, and Manage Stocks by David P. Van Knapp

Stock Investing For Dummies (For Dummies (Business & Personal Finance)) by Paul Mladjenovic

All About Stock Market Strategies : The Easy Way To Get Started by David Brown and Kassandra Bentley

The Motley Fool Investment Guide and their Web site (http://www.fool.com/).

The Little Black Book of Microcap Investing: Beat the Market with NASDAQ/AMEX Microcap Stocks, OTCBB Penny Stocks, and Pink Sheet Stocks by Dan Holtzclaw

How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition by William J. O’Neil

Trading for a Living: Psychology, Trading Tactics, Money Management by Alexander Elder

Big Trends in Trading: Strategies to Master Major Market Moves (A Marketplace Book) by Price Headley

Extraordinary Popular Delusions & the Madness of Crowds (Paperback)
by Charles Mackay (Author), Andrew Tobias (Foreword) This book talks about the Tulip craze in Holland where people would mortgage their homes to buy Tulip bulbs. Same thing happened in 2001 – 2002 with the Internet bubble that brought the stock market to its knees. The dot com companies were the Tulip bulbs.

Buy Investors Business Daily. It has lots of tutorials and I like it better than the stodgy Wall St Journal.

Money Game by Adam Smith

Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classics) (Hardcover)
by Philip A. Fisher. Recommended by Warren Buffet who took $100,000 and grew it to $34 billion!

Value Investing with the Masters by Kirk Kazanjian

Valuegrowth Investing by Glen Arnold

The 5 Keys to Value Investing by J. Dennis Jean-Jacques

The Intelligent Investor Rev Ed. (Collins Business Essentials) by Benjamin Graham. Warren Buffet was his student at Columbia.

The Money Masters by John Train

The Bogleheads’ Guide to Investing by Taylor Larimore

Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor by John C. Bogle

Why Smart People Make Big Money Mistakes And How To Correct Them: Lessons From The New Science Of Behavioral Economics by Gary Belsky

Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! By Phil Town . See his Web site at (http://www.ruleoneinvestor.com/). Free sign-up. I got the book at the library.

Listen. You don’t have to spend a lot of money on these books – most can be found at your library and those that your library doesn’t have they can usually get from other libraries in your state.

Most of these books talk about stock and mutual fund investing, but for a good introduction to other forms of investing Gerald Appel has a great book called Opportunity Investing – How to Profit When Stock Advance, Stocks decline, Inflation Run Rampant, Prices fall, Oil Prices Hit the Roof and Every Time In Between.

First, Break All the Rules: What the World’s Greatest Managers Do Differently by Marcus Buckingham and Curt Coffman Not a book on investing, but it’s a nice segue into the next book.

Now, Discover Your Strengths by Marcus Buckingham and Donald O. Clifton

Go Put Your Strengths to Work: 6 Powerful Steps to Achieve Outstanding Performance by Marcus Buckingham

Finding your strengths is important when investing. These books teach you to build on your strengths, what you a good at. Everyone is good or passionate about something. Why not get better at what you are good at?

Another good book is: Opportunity Investing: How To Profit When Stocks Advance, Stocks Decline, Inflation Runs Rampant, Prices Fall, Oil Prices Hit the Roof, … And Every Time in Between (Hardcover)
by Gerald Appel

Most mutual funds do not even keep up the the return on the S&P. That’s like 99% of them.

Vanguard Index funds are a no brainer.

A CD is better than a savings account. They range from six months to several years. You cannot touch your money tho until the time limit is up.

Check out this Web site on Direct Investment Plans where you can buy shares directly from companies: (http://www.fool.com/School/DRIPs.htm). Usually no fees and you can buy one share at a time.

Bonds are probably the safest. But they are not for the young. You might try a bond fund. They might return 5 or 6 percent. At 5% a million would return $50,000 a year – not a bad income. Remember, you have to pay taxes on the $50,000.

There are also municipal bonds and the income from them is taxfree especially if you buy them in a state that offers them, but they only pay about 3%, but it’s mostly taxfree.

Look into Fidelity sector funds. Buy the top three, then in six months look how they are doing and if not so hot, select the next three that are best. Do this for a few years and you will make lots of money.

Kindest Personal Regards,

Walt Brown
Site Build It Certified Webmaster
capecod1@capecod-beaches.com

P.S. This is a life-long learning process. Reading these books and applying the rules to analyzing stocks that may be good It takes time. Be patient and keep reading and listening. Don’t be a sucker and follow someone elses advice. Be your own man or woman. Depend on no one except yourself. You can only get smarter and stronger that way.

P.P.S. Internet has lots of good stuff, for example (http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_average_conve
Stockcharts.com is very good and their discussion of MACD is one of the best, barring its originator, Gerald Apple, but now we are getting into Technical Analysis and that is not for beginners. But it is an important factor in finding good stocks that are going up and growing. Remember, tiny acorns grow into mighty oaks.

Nagesh answers:

Unfortunately for you, stocks are not a good place to make money quickly. They are a great way to make money over decades, but if you try to make money quickly, you are more likely to lose money.

Nagesh answers:

First, not all companies pay dividends. Some retain their earnings and reinvest in their business. Of the companies that pay dividends, most pay the dividend quarterly. Many of these companies have dividend reinvestment plans and to sign up for them you should talk to the company’s investor relations department or their stock transfer agent. The stock transfer agents run most of these programs.
The way in which your investment in a company is recorded, determines how you receive your dividend. In the old days, you bought a stock through a stock broker and several weeks later, the company mailed a stock certificate to you. You became the “registered owner” and dividend checks were mailed directly to you. There are some people who still hold their stock certificates in “physical” form. However, in an effort to reduce paperwork and make the settlement of trades more efficient and less costly, the stock brokerage firms formed the Depository Trust Corporation or DTC. DTC has become the record holder for a majority of the shares traded today. When you buy a share of stock through a broker, the broker will no longer arrange to have a paper stock certificate sent to you and instead your shares will be reflected electronically in the records of the brokerage firm and on your account statement. All of the brokerage firm’s account holders will be aggregated together on the books of DTC. In this way, we shares are traded between stock brokerage customers, DTC simply makes a bookkeeping entry on their system, showing the shares being traded from one stock brokerage firm to the other. The individual brokerage firms then make the notation on your account statement.
When dividends are paid by a corporation, the corporation usually sends the payment in two separate wire transfers. One is sent to the corporation’s stock transfer agent who then sends paper checks to those owners who hold physical shares. The other wire transfer sent electronically by the corporation to ito the holder of record of the shares held in “street name” (who is DTC) and DTC deposits the money in each of the brokerage firms’ accounts at DTC. The broker then allocates that portion of the dividend to your individual account. This happens almost immediately on the dividend payment date. This eliminates the need for paper checks and results in the faster receipt of dividend payments. Once the money hits your account, you can access it.
For dividend reinvestment plans, the stock transfer agent receives that portion of the dividend payment for those who elect to reinvest it. Depending on the program, the stock transfer agent can then either enter the market on a specified day and purchase shares in the market (usually at the close of trading or before the open, so that normal trading isn’t affected), or it can use the average trading price of the company’s stock over some period, like 10 days, and purchase the shares directly from the corporation (sometimes at a slight discount to the average trading price). In this case, the corporation would be issuing new shares. Sometimes investors can sell their shares held in the dividend reinvestment plan through the stock transfer agent, and the agent will purchase those shares for those who are reinvesting their dividends.
For investors who own their shares in a brokerage account in street name, you have to sign up through your brokerage firm. Sometimes there are fees to participate in these plans.

Nagesh answers:

With stocks, it isn’t money, it’s diversity and time. If you’re looking to turn a profit, first, do yourself a favour and pay off any existing debt that you have, because that’s compounding faster in most cases than your compound interest will be, so you’ll have more money in the end by doing that first.

Then, you need to know that you can expect lots of losses, but the point is that by leaving your money in a long time, you end up with a lot of it. Compound interest means that by not withdrawing your money from investing, and scraping to add more, you end up with lots more profit.

If you invest over a long time, an economy that grows will increase more than the losses, if you’re sufficiently diversified. If it tanks, you’ll want to have invested some of your money in low-risk things that aren’t so volatile. So think about how long you plan to be working on this, and read some more below on what vehicles are out there to invest your money.

The stock market won’t make most people rich quickly. So let’s look at some basics about what you want, how much time you have, and how much risk you tolerate.

*I am NOT a certified investment advisor, and will instead be pointing you to other people’s information. This is provided solely for general informational purposes. You would be very well advised to visit a financial planning manager at your bank, because there are a LOT of other options out there for investment, some with much lower risk.

Http://money.cnn.com/magazines/moneymag/money101/lesson5/

This is a very basic overview. There are different types of stocks out there. It’s a long lesson but very clear and worth reading all the pages.

Http://www.fool.com/investing/beginning/what-should-i-invest-in.aspx

The motley fool is a great place to look for basic advice on what to do with your money; they aim to be accessible to regular people, not just businesspeople who invest for a living.
Http://www.fool.com/how-to-invest/thirteen-steps/index.aspx

*note: When they say “foolishly” they mean “according to the motley fool’s advice” not stupidly. It’s their tagline and brand ID.

You can start with very little. Here’s a guide to start with just $100:
http://articles.moneycentral.msn.com/Investing/StartInvesting/StartInvestingWithJust100.aspx
and another beginner’s guide:

http://education.wallstreetsurvivor.com/GettingStartedInvesting

As you can see, lots of people are talking about how to do this. BUt talk to your bank, because you will also have to deal with things like taxes, and it’s always good to have someone on your side whom you can turn to for advice, and many banks offer free financial planning services. You don’t have to do what they tell you, but they can make you aware of a lot of other opportunities and ways to increase your wealth- even starting very, very small. Compound interest makes fortunes, it just takes time.

Good luck, and remember that it’s not about how much you start with.