I began investing many, many years ago. I remember my first loss. It was on Chrysler
stock, in the late 1960s, early 1970s.
In the early 1980s, I took the Hume Investment course, opened an account with E.F.
Hutton, and began investing with a vengeance. I had very few losses, and many good
triumphs over the next 15 years. I used investing to tide me over long periods with no
other income, to pay for house down payments, and to live beyond what I could earn on a
salary. My investment career took a major hit in 1998, when I got nailed with a series of
catastrophic losses--enough to buy a house in cash.
So, now that I have paid my "tuition," let me pass some tips to you.
- Always determine your investment goals, first. If you are many years away from a fixed
income, your goal is to grow wealth.
- Bonds are a poor investment for growth.
- Margin accounts are excellent for buying stock you can't afford. Even if it's very good
stock, as mine was before a margin call wiped out the bulk of my savings, and even if you
are at a conservative margin amount, as I was before my tragedy, always have a way to pay
off a margin loan immediately.
- You should probably not buy individual stocks unless you have at least $50k to invest.
That way, you can build a diversified portfolio of stocks on which you can write options.
These options are the only kind of money that seems to grow on a tree. Always buy a stock
for its quality first, its option ability third. Oh, and make stock quality second, as
- For the typical investor, buying a mutual fund that scores well in the different ratings
systems put out by such investment journals and magazines as The Wall Street Journal,
Kiplinger's, U.S. News & World Report, etc, is the best move you are going to make.
- Do not diversify among funds of the same type. This is silly. Instead, you might invest
70% into a large cap growth, 10% into a mid cap growth, 10% into a small cap growth, and
10% into an international fund. If I were retired, I would invest 75% into a large cap
fund, 10% into a small cap fund, and 15% into a bond fund. The bond fund would allow me
access to cash in most major market downturns (but not all). Bonds do not create wealth;
they only transfer it. Therefore, the rate of return is always far lower than for equity
investments. But, bonds tend to be less risky and they are good for people on fixed income
and no way to make more money--consider them insurance only.
- Never follow the advice of a broker. Follow your own investment plan and your own
research, instead. A broker made me money once. My big fall came when I let a broker talk
me into deviating from plan--and then letting him guide me through the crisis. Had I
followed my plan, the crisis would not have happened. And had I performed any of the
several steps he talked me out of performing over the three days following the start of
the crisis, I would be a much wealthier man today.
- Just remember, if your broker is so good, why is s/he still battling the subway and/or
traffic to go to an office every day? Hmm?
- Be patient. Don't expect your investing in equities to increase your wealth at a steady
rate. Time is your ally. Make changes to your investing strategy only after careful
consideration and never very often.
- Read investment magazines and papers. Subscribe to them. Look for opportunities, then
study them. However, do not grab onto opportunities that don't fit your investment
strategies or knowledge. If, for example, you don't understand technology, then avoid
technology stocks and funds.