To continue my promise to write a series of articles for the younger crowd, or newer investors with longer time horizons, this chapter will begin the journey of what we are all here for. Investing.
Please review the first two chapters in this series so you can gain your footing for this one.
Obviously this one really is all about savings. The cornerstone for anyone and everyone who seeks to build a solid foundation from which to do whatever one desires. It can be a comfortable retirement, a nice home, a luxury lifestyle, whatever your priorities happen to be. Take another look at the article. It's fun, informative and real world.
Have some more fun reading this article which is NOT about saving. Actually it is just as, if not more, important. The basics on eliminating debt and reducing expenses. This chapter is even more fun than the first. Imagine living a life where you have no problems paying your bills, if you have any, and always living within your means, no matter what.
Filled with links and all sorts of ways to manage your money, as well as your financial life.
Now It's All About Investing
I can recall the day I "discovered" the stock market. To me it seemed like a rather high class "casino" of sorts. Filled with so many little stocks that I was being told could make me rich in 12 seconds. All I needed to do was to subscribe to this or that and get the "secret" stock or formula.
I was born a gambler, have been a gambler, and will die a gambler. I was hooked. I chased one cactus penny stock after another. If I had some extra money I would take a flyer on the latest "Heard On The Street" tidbits for the Wall Street Journal. I waited for rumors of buyouts and mergers, and of course the niftiest cheap little gizmo stock that will rocket to the moon before nightfall.
My strategy was simple. I did not have a clue. Not having a clue WAS my strategy. It does not have to be yours.
It really is not that difficult to invest these days. With the wealth of information available for free right here on the Internet, and great sites like Seeking Alpha, the investing world is at your fingertips. Literally.
Just follow some basic start up rules and you can begin your personal journey.
Some Rules Of The Road
- Open an IRA and fund it to the maximum every year (Roth or otherwise)
- If your company offers a 401k, fund that to the maximum, whether they match contributions or not
- To begin, buy the biggest blue chip monster stocks that pay dividends
- Re-invest all dividends until you are ready to retire and need the cash flow
- Diversify without overlap and start of with five stocks for the first year or so (get your feet wet)
- Every dime you allocate for investing, throw right into the five stocks on a dollar cost average basis
- Keep some cash available for emergencies and riskier opportunities to actually FIND that real golden nugget
- Buy, Hold, and Monitor: Review the stocks and the issues surrounding the companies once a month at a minimum
- Never panic and never sell out of fear
- Sell some shares if the stocks rise dramatically and add other blue chip monsters to keep building your portfolio
There are so many more simple rules that I could list but by following just the ones I have noted, you will be off to a great start.
What Stocks Should Be Owned
Well, this is the million dollar question to which i can only offer my suggestions. There are no definitive answers, no sure things, no risk free stocks, and nothing is ever guaranteed. That being said here are the five I would build a "team" (portfolio) around:
- General Electric (GE)
- Exxon Mobil (XOM)
- Proctor & Gamble (PG)
- Johnson and Johnson (JNJ)
- Microsoft (MSFT)
These five companies and their stocks have withstood the test of time, they pay you to own them and they are in different sectors for diversification.
Each of them has been loved, hated, maligned and applauded, but they are bigger than any individual, or any current CEO, and are living and breathing entities that have made money for shareholders for a very, very long time. Some folks might want Apple (AAPL), or IBM (IBM), or Amazon (AMZN) and that is what makes the ball game. Different strokes for different folks, and there are no 100% wrong or right answers, just different opinions and different points of view.
The point is that if you remain focused, have a goal, and stick to the basic rules, 30 years or so from now you will wake up and thank me.
You're welcome. The rest is now up to you.
Disclaimer: Please be sure to do your own research prior to making any investment decisions. This article is not a recommendation to buy or sell any security and is strictly the author's opinion.