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03 January 2006 — Buy Low, Sell High (6)

Today is the day: after a year of working on debt elimination (an ongoing process now focused on two remaining large debts), I actually get to have some fun with my money. I get to begin investing.

This may or may not be a good thing.

Several years ago, the MNF guys formed an investment club. We pooled a thousand dollars and voted on which stocks to purchase. Then, every month, we each pooled another $300 to buy something new. We dreamed big — we were going to be rich!

This worked well for a while; we had caught the very tail of the tech-stock boom. However, things quickly headed south. We threw good money after bad. We didn't approach our investments from any sort of logical perspective: our choices were based on emotion rather than actual research. A couple of us were resentful after we'd spent hours researching particular stocks, only to have our suggestions passed over in favor of passionate arguments from people who had done no research at all. (I still make snotty comments about Autobytel (ABTL), which I wanted to purchase at $1.58/share.)

The group lost money, but we learned a lot. I don't regret the experience.

Now I'm ready to give it a go on my own. I still lack market wisdom, but that will come with experience. Paul C. and Nick have been giving me advice, but ultimately I'm on my own. Until I get a feel for things, I'm simply going to "buy low, sell high". (Paul is urging me to develop a set of parameters for both the purchase and the sale of stocks. I'm sure his advice is sound.)

What have I selected as my first investment? I'm going to pump money into a 2005 Roth IRA, trying to max it out by April. As a first step, this afternoon I'm putting $200 into General Motors (GM), which is trading near historic lows (and which also pays a quarterly dividend).

I hope I get a chance to sell high!

On this day at foldedspace.org

2003Mutual of Omaha's Wild Kingdom   In which I remember watching Wild Kingdom. In which I share some brief comments on animal intelligence.


Comments
On 03 January 2006 (08:38 AM), jenefer said:

I love your positive attitude on the first working day of the new year and your financial success and discipline that have led to this investment choice!


On 04 January 2006 (12:14 AM), deb roth said:

I invested in a Roth IRA about four years ago. I asked a broker from Merrill Lynch what he thought about it, and he said he thought it was God's gift to the working class. It's done rather well, at one point was at a 19% gain. The other one I have that has done extremely well is Best Buy(bby), has split and is still double my purchase price.


On 04 January 2006 (07:25 AM), J.D. said:

In a sort of ironic twist, the very day that I made my first investment into an IRA, I also received the latest statement for my home equity loan. The interest rate has increased again and now sits at 8.25%, which is Too Much. It doesn't take a financial genius to see that paying off the home equity loan, which will pay a guaranteed 8.25% on my money, is the smartest move, so that's where my money will go. Still, I'm so excited to be investing that I'm not willing to just quit cold turker after a single $200 allocation. I'll continue to set some pittance aside each month; when the home equity loan has been paid off, or the interest rate goes down, I'll set aside a large pittance for my IRA.


On 04 January 2006 (10:48 AM), dave said:

Are home equity loans organized like college loans -- where it is possible to make extra payments directly to the capital?


On 05 January 2006 (05:36 PM), Michael Rawdon said:

One piece of advice I've heard is to consider investing in companies which you yourself would buy products or services from because of their quality. This, for instance, is why I won't invest in Google, because they don't have any products which I would be willing to pay for (although their search engine is a nice product - I just wouldn't pay for it).

I wish I'd invested in Marvel Comics back when they were in bankruptcy (back when the price of one share of Marvel stock was less than the price of one Marvel comic). They're probably a little overvalued now, since their film production engine seems to be stalled.


On 07 January 2006 (08:20 PM), Will said:

After working in the business I have learned two things.
Get professional advice.
Get professional advice.

Trying to purchase individual companies on your own is damn near impossible. It is a sea of information and economic mish-mash which results in needing 10 hours a day of wading through financial reports and 10q statements.

My advice, purchase some ETF's or quality mutual funds and pretend the money never existed in the first place. 20 years from now you will be a happy man.