Gasoline, Crocs, Ipods and Beer

A friend of mine made an interesting comment to me the other day. He simply stated that I didn't give him enough information on what to specifically invest in, although I always stress to him the importance of investing.

He actually gave me grief for not "sharing."

Deep breaths... 10...
9...
8...
7...

I'm in a no win situation here. If I'm right with every recommendation (which I'm not) and he makes lots of money, he'll only want more recommendations. If I'm wrong, I'll never hear the end of how I lost him money. So in my infinite wisdom...

... I continued counting.

Then let my Ivy League BA, Harvard MBA, Stanford PhD. buddy realize how difficult he was making this "investing thing".

All we all have to really do is ask the right questions, if we truly want the right answers.

So I asked Mr. 1580 SAT, "What's ridiculously expensive right now?"

"Everything!"

"Everything like what," I smirked. He looked at me and pointed to a sign across the street.

$4.09 Premium.

Hmmm. That's all it took.

Expensive gas prices--Oil companies are at 5 year highs. Ever heard of Exxon Mobil? Last quarter they made a gazillion dollars. Remember $2.00 gas? How everyone cursed and screamed, blah blah blah! What if you asked the right question...

"What if this is only the beginning?

You went online, typed in yahoo.com, went to the finance section and found the symbol for Exxon Mobil -- Genius!!

Jan 06 XOM is $50, today $95! That would have paid for a couple gallons of gas.

The Ipod is a no brainer but again paying a little attention to your surroundings can make you big money. But for those of you that missed it (another one of many)--Apple Computer stock the last 52 week high and low $202!! The low $93.

75% of you reading this post own some type of Ipod but not one single share of apple stock.

You've owned how many pairs of Nike and never bought a share of stock?!

Gap Jeans?!

Those of you with teen age daughters that had to have a pair of furry Ugz. Should have bought the stock. How many of you hate those little rubbery, plastic pink, green and purple CROC's? If you'd bought the stock 3 years ago.

$9 to $80?!

Lord that's a lot of money!

What do people do when they're happy?

DRINK!

What do people do when they're sad?

DRINK!

If you're a beer drinker, how about you make a deal with yourself and buy 10 shares of Budweiser stock for every case you drink? I've heard crazier investing strategies.

Lets face it, no investment strategy is "fool proof" and any day trader or billion dollar money manager will agree. But every stock has a story behind it. The stock market is literally there for the taking with a little money, a little patience and a lot of common sense.

For my Harvard buddy, he now drills his poor 13 year old daughter as to why she has to change her ring tone every other day but continues to miss the point.

Hmmm, ring tones? I just got a brilliant idea.

Starbucks Loves You!

Americans lovvvvvvvvve their morning cup of Joe. It's not a secret and I didn't just discover this as if uncovering the true murderer of Tupac. It's okay to consume the products which we really love, the things we can't do without. We do live in the United States for God's sakes. We can't live without our "Dancing With the Stars", toilet paper, Mike Tyson knockout videos (no matter how old) and $4.00 cups of coffee.

Cut to sound of record scratching.

I'm sorry, did you say $4.00 a cup?

Starbucks, God Bless them, is famous for creating the coffee "experience." Nice plush purple lounge chairs, maple wood tables, warm lighting, it's extremely intoxicating. But, correct me if I'm wrong but isn't the point of coffee to WAKE you? Not seduce you into buying more? (See Starbucks marketing director). I've always had a tough time buying $2.00 cups of coffee. $4.00... Never! Maybe being a kid of the 70's I was used to the basics like smog, wonder bread, Kool Aid, Chuck Taylors, great music and bad clothing.

Coffee, was what my parents drank in the mornings and spilled as they dragged me and my sister out the door or suffered through at work before they could stomach their co-workers to make it through the day. Now I say all this not to bash Starbucks, well maybe I do. But what does the gourmet coffee house experience really cost us?

Well lets see.

If you decide to buy store bought coffee and prepared it every morning and invested the savings, rather than get your caffeine fix from your favorite coffee shop, i.e. STARBUCKS! How much would you save?

Well, I'm a numbers guy (see financial consultant) so $3.75 for a cup of Mocha Locha Loco Double Expresso Latte with Low Fat Milk, Lightly Steamed Grande --

Sorry, I need a breath.

Store bought coffee at .40/cup

Once a day, which I know is low balling it.

250 Coffee Drinking days a year, (no week ends)

Investment Yield of 6%

After year one you'd save $837

year 2 $1725.25

year 5 $4721.07

year10 11038.92.

No matter what you're thinking right now, this is real money, its not imaginary. Part of a financial advisor's job includes saving you from yourself from time to time and this is the first place I'd look.

It doesn't matter if your net worth is $10 million or Ten DOLLARS, everyone LOVES "found" money.

Like when you can't find the remote control and you lift the sofa cushions and are ecstatic to find .37 cents.

Imagine the dance you'd do if you found $837 BUCKS!

It's always about the small changes you can make that over time will give you enormous results. So work hard, take care of your family, move up the corporate ladder, become successful entrepreneurs but most importantly...

just say no to Starbucks!

If you're scared, say you're scared!

Every one has the same pipe dream when it comes to investing.

You time the market perfectly, waiting for the absolute low on the DOW and you drop your entire nut in tech. In one week, you’re up 390%. It couldn’t be easier right?

Well in the real world the stock market kicks your butt, especially if you think you’re smarter than it. So what should you do? You know you should be investing, you’ve read all the articles, watched Cramer on CNBC, talked to friends, joined marketwatch.com and you still haven’t invested a single dollar.

What’s the problem?

Let me help you out.

If you’re scared, just say you’re scared.

You can lose money and predicting market highs and lows is a feat no one has ever fully mastered, despite the claims by some that they have just the right strategy that enables them to buy and sell at the most opportune times.

They may be selling but we ain't buying.

Predicting which direction the market will go or investing based on your lucky high school jersey can get you in trouble, or at the very least may cause you a great deal of frustration. One strategy that may help you avoid these investing pitfalls is dollar-cost averaging.

Dollar-cost averaging involves investing a set amount of money in one investment type (like a stock, ETF or mutual fund) at regular time frame for an extended period, regardless of the price.
I’ll say it again, REGARDLESS OF PRICE!

Let’s say you have $6,000 to invest. Instead of investing it all at once, you decide to use a dollar-cost averaging strategy and contribute $500 each month, regardless of share price, until your money is completely invested. You’d end up purchasing more shares when prices are low and fewer shares when prices are high.

For example, you might end up buying 20 shares when the price is low, but only 10 when the price is higher.

This strategy has the potential to reduce the risk (my favorite four letter word) of investing a large amount in a single investment when the cost per share is higher. It also helps protect “scaredy cat” investors who sell too soon when markets pull back drastically, potentially causing a huge loss.

The average cost per share may also be reduced, which has the possibility to help you gain better overall profits from the market.

The bottom line is that the average share price has the potential to be higher than your average share cost. This occurs because you purchased fewer shares when the stock was priced high and more shares when the price was low.

Dollar-cost averaging can also help you to avoid the stress of always monitoring the market in an attempt to buy and sell at the perfect moment.

Dollar-cost averaging is a long-range plan, which I preach over, and over and over. It’s all about the average.

But it works the best when you’ve stuck with it for a while, despite any nerve-racking swings in the market.

Remember, in the stock market you’re nothing without a plan. When other “scared of their own shadow” investors are scrambling to get out of the market because its dropping like a rock and think they can pick a time when it makes a comeback (genius), you’ll keep investing.

You my friend will have changed your mindset to investing and will see opportunity when the rest of your buddies will try to make up the lost in their portfolio at the casino.

Why I Hate 7-eleven's!

My favorite "four-lettered" word is RISK. Lord knows there are plenty of surly terms to choose from especially when you're dealing with the stock market every day.

For the most part, people of color associate risk with "lose every single penny". This quite frankly couldn’t be further from the truth.

I grew up watching my grandparents play the illegal "numbers" every day. They actually bought the tickets from my step-grandfather. But that’s another story. In the evenings, I rode with dad to 7-eleven to watch him play the "legal" numbers. I didn’t really understand how the “number system” worked and didn’t care.

But I absolutely hated 7-elevens', even if I guilt tripped my dad into buying me a big gulp. The last thing I needed at nine years old was an extra large Mountain Dew! If I remember correctly, I think my dad hit the number 3 times in ten years.

If he was lucky he made $1500 bucks.

7-eleven was happy, they the sold millions of overpriced big gulps, the state lotto sold us the dream and we got a mound of ripped lottery tickets. I’m still not sure why my dad kept them when he knew they were worthless. Talk about separation anxiety. I'm a child of the 70's and money was just as tight back then as it is for folks now. 30 years later, the lotto has expanded world wide and it still sells the same lame dream to the same inner city neighborhoods.

What a scam but the bright side is maybe you'll be lucky enough to have a dream about it.

You remember, “Last night I dreamt I was swimming, get me the dream book!” Your family members flip through the tattered blue book and find a couple of words associated with the dream, but that’s all they need.

Play 738! I dreamt I was painted blue-- play 747! I dreamt I was dying, no maybe I was being born -- that's 839 and 938 all day long son!

How about I dreamt I was rich?! What’s the dream book say now?How many families would be living another type of life if all of the money wasted on illegal and state run lotteries and dream books would have been invested in the stock market the last 25 years?

I'm not saying they would be rich but I know they'd be better off.

The same folks that spend $10, 6 days a week on legal numbers could have invested the same amount over a year's time.

That’s $3120 a year on the lottery up in smoke.If a stock broker recommended that you buy 10 shares of a $1 stock at the market open and knew it would be worthless at the close...BUT RECOMMENDED IT ANYWAY, you would think he was incompetent. Irresponsible! An idiot! You'd probably sue him and he’d deserve it.

"Hmmmm... "

If you ever make money with lotto – IT’S By LUCK! CHANCE! A FLUKE!

But folks do it anyway.Take that same $3120, at a 7% return for our "investor" after 1 year – $3338,

5 years $22318.

Problem is, I can hear what you’re thinking, "That's all I’d make? I'm sticking with the numbers!" That mentality has killed us for years.

Dr. King stated, "Take the first step in faith. You don't have to see the whole staircase. Just take the first step."

I'm going to say this once, and only once, "There's been more millionaires created through investing in the stock market, than have been created by lotto. It's not even close!"

For too many of us, it's impossible to believe.The stock market rises and falls. This is an undeniable fact.But it also rises --- after falling and it’s done this consistently since 1926.The key to successful investing is managing risk while still being able to make a satisfactory return. I hate to burst your bubble but adequate is 10% per year.But guess what, this all involves RISK!

How many times have you been told, “Don’t put all your eggs in one basket.” Spreading the risk over traditional and non-traditional investments (REIT's, ETF's), as well as over several different sectors can help offset a loss in any one investment.

During tough market period like these can help your portfolio avoid direct hits; see Enron, WorldCom and Bear Sterns -- $150/share to $2 in less than a year...ouch!

Diversification is one of the main reasons why mutual funds are so attractive for all types of investors.Whether you are investing in mutual funds or are putting together your own combination of stocks, bonds, and other investment vehicles, a great rule of thumb is to diversify.

Do yourself a favor, invest in the stock market, delete 7-elevens from your navigation systems, diversify and embrace R-I-S-K.

For a four letter word -- trust me, "RISK" ain't that bad after all.

Stop Reinventing the Wheel!

When it comes to investing, there are many pools of thought. You have your day traders, options traders, commodity traders, currency traders, technical traders, fundamentalists, short term bond traders, long term equity strategists, etc. etc etc...

There's no perfect way to invest and MAKE MONEY but I am absolutely positive there are thousands a ways to lose money in the stock market.

Look at it this way, "The stock market has a funny way of taking money away from stupid people and giving it to smart people. And it does this over and over and over."

I may be simplifying it a bit but here's why.

The majority of stupid investors normally think short term, they have the belief that holding a position through lunch is a long term hold. They believe a "Wall Street Miracle" happens every day. You know, you take your entire 401K and buy shares of the new hot tech company before earnings at 8, they announce numbers after the close, the stock opens the next trading day at $45!

Couldn't be simpler.

Dream on bro, dream on.

In my business there are a couple things I know to be true. That young brokers waste there first years commissions on strippers and the individual investor is always WRONG when they think short term.

Sorry, I know a lot of individual investors are reading this but it's better to hear the truth from me...now.

Think about it. We all know that the information on the market and individual companies is available for everyone to see and that the playing field is to be level.

What seperates the "Pros" from the "Joes" is how we interpret and act upon the information available combined with our RESPECT for the market.

Outside of the shows on CNBC, where theY'll have you believe all money is made short term, you will never and I mean never read an analyst report where he gives a minimum price projection on a company stock less than 12 months. If he believes it or not.

Don't be like Mike, be like Buffet. Warren Buffet, arguably the best stock market investor of all time.

He has 3 Golden Rules:

First Golden Rule of Investing: Know who you are before you start investing in assets that have risk—don’t use the marketplace to find out.

Second Golden Rule of Investing: Know why you are buying a particular stock—don’t wait until its price goes up or down to think about it.

Third Golden Rule of Investing: Take your time—you are investing for the rest of your life.

He also says that if you aren't prepared to own a stock for ten years, don't even think about owning it for ten minutes.

Remember, you don't have to invent a new wheel when it comes to investing your hard earned benjamins. There are a lot of opportunities out there to take advantage of.

Like it or not, you've got nothing but time.

Just Say No!

Everyone remembers Nancy Reagan's anti-drug campaign, "Just Say No to Drugs!" Great in theory, ridiculously weak in practice. Didn't have a chance but what did she know, Nancy had to stand for something. The same can be said for bank CD's and your retirement. Good in theory...

I can't tell you the amount of grief I've been getting over this blog. It's easy to say when you speak the truth, you've got to take some crap -- no matter the subject. But when it comes to peoples view of money. Fuhget about it!

Case in point. By a show of hands, who believes a bank CD is the safest investment you can make outside of a savings account, that pays less.

Uh huh. I see a lot of hands.

Opposed? Not that many.

Most people wouldn't associate CD's with any risk at all. They offer a guaranteed return and the FDIC insures them up to $100K.

So what's my problem -- today?

My problem is too many of us are still relying to heavily on CD's when it comes to our retirement savings. The R-I-S-K, not a four letter word comes in to play when you think of a CD as a long term investment. When you're planning for retirement your money needs to grow. I strolled into Bank of America yesterday morning and did everything I could to hold my laughter in when I saw a sign that read,:

1 Year CD Rate 2.75%.

Why even make a sign?

If anyone, I mean anyone is putting their money in a CD today, they should have their head examined.

Why?

Bank of America stock closed today at $40.37 on the low range of its 52 week high of 52.96.

It's paying a yearly dividend of $2.56.

That's a yield of 6.3% a year!

The stock can stay exactly where it is and you'll make money. If it goes down 6.3%, you break even. Heck, you might even lose money but at least you're in control! Not the Bank of America, that takes your money, gladly pays you your 2.75% and makes 4 times that somewhere else. It's 2008, lets join the rest of the world's population when it comes to investing and incorporate RISK!

Why would anyone walk into Bank of America, wait an hour to see their "investment advisor" and decide to voluntarily invest in an instrument with a guaranteed return of 2.75% and avoid the stock investment with more than a double rate of return?

Why, because our communities hate risk.

In the stock market, no risk equals tiny, tiny, tiny reward. Ok make that no reward. Why bother, 2.75% doesn't keep pace with inflation, that always measures around 4%.

There are a number of investments that provide some safety but more important diversification. Private REIT's, Index and Variable annuities are more expensive but provide guarantees up to 7%.

They're not too good to be true, they're too good to be free.

Corporate Bonds are another alternative.

Please use some creativity when it comes to your retirement. In todays stock market you have to. But your retirement cash needs to have track shoes on not 1968 snow boots when it comes to having enough money to live comfortablly in retirement. So don't let your CD rollover--again. Put on your thinking cap, call your investment advisor and assume some R-I-S-K!

What Enquiring Minds Want to Know...

The question I am most asked by a landslide is, "How Much Do I Need to Save for My Retirement?"

Unfortunately not everyone likes my answer.

With all the information available about retirement, it's extremely difficult to find an answer appropriate for your specific situation.

So lets make it easy. Think 80% of your pre-retirement salaries to maintain a similar lifestyle in retirement. Now if you're partying like a rockstar or hanging with P. Diddy in the Hamptons every summer, it's a little more difficult to figure out but fortunately, for the rest of us in the real world, there are several factors that can help you work toward a retirement savings goal.

Retirement Age

When do you expect to retire? Most people are way off in their assumptions and usually will retire later than they actually think; health problems or workplace changes (downsizing, etc.), always slow you down. Of course, the earlier you retire, the more money you will need to last throughout retirement and folks are living longer. Much longer.

It's impossible for you you to know when you'll die but there are a few factors that may give you a hint.

You should take into account your family history—how long your relatives have lived and diseases that are common in your family—as well as your own past and present health issues. Also consider that life spans are becoming longer with recent medical developments. More people will be living to age 100, or perhaps even longer. Yikes?!

When calculating how much you need to save, you need to factor in the number of years you will spend in retirement. Think 25-30.

Another factor to consider is the cost of health care. Health-care costs have been rising much faster than general inflation, and fewer employers are offering health benefits to retirees. Long-term care is another consideration. These costs could severely dip into your savings and even result in your filing for bankruptcy if the need for care is prolonged.

Factoring in higher costs for health care during retirement is vital, and you might want to consider purchasing long-term-care insurance to help protect your assets.

Lifestyle

Another important consideration is your desired retirement lifestyle. Do you want to travel further than Broward County? Are you planning to be involved in philanthropic endeavors? ? Are there any hobbies you would like to pursue? Can you afford to take them up? The answers to these questions can help you decide what additional costs your ideal retirement will require.

Many baby boomers expect that they will work part-time in retirement. However, if this is your intention and you find that working longer becomes impossible, you will still need the appropriate funds to support your retirement lifestyle.

Inflation

This is high on the list. If you think you have accounted for every possibility when constructing a savings goal but forget this vital component, your savings could be far from sufficient. Inflation has the potential to lower the value of your savings from year to year, significantly reducing your purchasing power over time. It is important for your savings to keep pace with or exceed inflation. Factor at least 4% a year.

Social Security

The 20-80 Rule.

The Social Security system is going bust. Baby boomers are retiring and fewer workers are available to pay their benefits. And the reality is that Social Security currently provides only 20% of the total income of Americans aged 65 and older with at least $44,000 in annual household income. That leaves 80% to be covered BY YOU.

Sorry for the dose of reality but ther's no frosting on this cake.

MSN Money has a great retirement calculator so get to work.

I told you when I started this post that you wouldn't like my answer. Not many people do.

Use Your Head Fo' Something More Than a Hat Rack!

You've done everything right.

You were a good kid that listened to his or her mom and dad. You got great grades and elementary and high school was a breeze. You made your parents proud and recieved a full ride to college. You were a stand out student and ranked in the top 5% of your graduating class. You've always known what you've wanted and that was a post graduate degree---done no problem.

Now you're getting job offers out the whazoo! $85, 90, 100K to start. You picked the perfect job, they move you, throw in a company car. You're off to a fantastic start!

Now it's your first day of work, time for a brief orientation. You shake hands, you're welcomed aboard, everyones impressed with you and your guided to Human Resources for paperwork.

Your first major decision in your new profession is not a 125 page competitive analysis of a Chinese company in Singapore. It's choosing what mutual funds to place in your new 401K account.

A decision that can and will affect the rest of your life.

You close your eyes and take a deep breath and make your decisions the same way you did when you had no clue of what the answer was.

You PICK C!

Or in this case, every third mutual fund.

Now some of you laugh but I can't tell you the number of stories I've been told of how well-educated young professionals decide to pick investments for their 401K's.

So if you're clueless, it's okay. It is what it is but what are your options?

In the words of a young woman about to make this decision with no idea of what funds to choose.

"...I could feel the HR Director becoming impatient. So I just filled in the circles. I didn't want her to think I was stupid."

You've done everything right your whole life, how could you screw this up?

The fact is you don't have to decide immediately. An HR Director friend of mine says, "Most corporations will give you up to two weeks to decide, so take your time. Call a financial advisor."

He's absolutely right. Many advisors would love to help and establish a relationship with a possible new client. Give it a shot, you'll be surprised.

So listen to your parents, get good grades and get the perfect job. And when it comes to deciding what funds to choose for your 401K, as my Granny would say,

"Use your head fo' something other than a hat rack!"