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  • Learning On The Fly 0 comments
    May 14, 2013 5:34 PM

    I'm always intrigued by ways to make more money. Honestly, there's probably not many people who are not intrigued by this. I assume we just go about it in different ways. If you have money, and savings, perhaps you go the route of the stock market, CDs, or savings accounts that present a decent APR (which, sadly seems to be too difficult to find, and much too low due to the fantastic lending interest rates).

    Unfortunately the low lending rates lead to other problems. Our savings aren't increasing at the rates they previously did, and our ability to get debt inducing loans is much easier. Personally, the best savings interest rate I've been able to find is about 1%, through Barclays Online Savings.

    Savings accounts aren't sexy though. Not that I need my money to be sexy, but earning 1% on $10,000, yields a whopping $100 a year. That's easy money, and it's free money. It's FDIC Insured, so you're exposed to absolutely no risk at all, as long as the bank and the FDIC do not simultaneously fail. If they do, there's more than likely going to be concerns that are much greater than money.

    Last year, I used Sharebuilder and made my first foray into the stock market. It was certainly an interesting learning experience, and at the time, showed me my tolerance for risk and losing money was not very high at all. I sold a few stocks at the first sign of a downward swing, including selling Sprint (S), which I bought for $2.34. Today, Sprint trades for $7.24 and marks probably the biggest regret I've got when it comes to trading. However, it's always easy to armchair it and say I should have kept it, but the truth is, at the time, there was no clear indication Sprint was on the verge of having competing offers for purchase.

    I dabbled a bit with a Roth IRA through Vanguard's Star Fund (VGSTX), and purchased some individual shares in Bank of America (BAC) and Cisco Systems (CSCO). All three of these moves produced money for me. Being young and inexperienced, I sold all three, including the Roth IRA, willing to accept the penalty on the earnings. Through my employer, the State of North Carolina, I receive a fantastic retirement package, so there's not a huge loss in not having a Roth IRA. My earnings on BAC and CSCO were fairly small, but it did amount to a few hundred bucks, and I felt happy with having made some money and getting out of the market.

    Fast forward to 2013 and a different mindset has taken over for me. I've found that I really like the earnings growth and potential of the market. In general, it is possible to grow your income 7-10% a year through the market alone. This presents a fantastic option, one that is clearly much better than the 1% I receive in a savings account, though there is also a much greater risk. This risk, however, can be mitigated with some solid research and planning.

    I began my latest plunge into the market using TradeKing. From a price and customer service standpoint, TradeKing blows away Sharebuilder in every measurable aspect, and if you're interested in getting started with the stock market, I certainly would recommend TradeKing. My decision making began the same way it did last time, to simply find a stock that could produce growth. Initially, I found Activision (ATVI), most well-known for the Call of Duty series. Most likely, this was not the greatest investment decision ever, but I did, in less than two months, produce a 2.5% gain, which is greater than most savings accounts will produce in a year.

    I sold ATVI and shifted my focus to dividend stocks. Since then I've purchased shares of General Electric (GE), ConocoPhillips (COP), Ford (F), and Duke Energy (DUK). Overall, in just a few months, I've produced, collectively, another 2.3% on these investments in unrealized gains. I've gone from short-term positions to looking at long-term positions that produce income growth through the usage of dividends. At present, my dividend yield is at around 3.7%, which is pretty substantial growth for a year. With an average risk, or beta, of 1.0, I'm minimizing my potential for losses in the market, while maximizing my potential for earnings through dividends and reinvestments.

    I plan to continue investing as the year drags on, and I plan to stick with this plan for the foreseeable future. The way I see it, investing is a fantastic way to grow income, especially when stocks with solid foundations are chosen. I continue to diversify my holdings and looking for ways to minimize my risk, while maximizing my earnings potential. To that point, my next investment may be in telecommunications, with Verizon (VZ) or AT&T (T). I've also considered, very heavily, getting back into the technology sector with Microsoft (MSFT), or Intel (INTC). All of these companies pay dividends and have a history of success, though the dividend yield for VZ and T are much greater than MSFT or INTC, and therefore are most likely in the lead for my next investment.

    Disclosure: I am long COP, DUK, GE, F.

    Themes: COP, DUK, GE, F
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