As you probably know, the U.S. economy is collapsing yet again. S&P downgrades, massive drops in the Dow, Emeril Lagasse is the new judge on Top Chef – things can’t get much worse. So why am I smiling? I’m smiling because I understand what is happening and what will likely happen in the future. Today I am going to share with you a little secret. This secret allowed me to profit during the “Great Recession” of 2008 and the aftershock of 2010. This secret makes me believe that I will pull in record profits this year. As a gift to my disciples, I am going to share my secret right now.
What I’m going to tell you is not complicated, it is actually insanely simple. The difficulty comes in not giving in to the general fear of the masses and using common sense and research to make educated decisions. The secret is this: When the stock market fluctuates this rapidly it is usually based on the confidence or lack of confidence of the masses. When there is a serious lack of confidence like there is now, prices drop across the board for shares of companies. This usually has absolutely nothing to do with an individual companies earnings or their future growth. Essentially, all of the publicly traded companies are currently on sale. Some are still a bad buy, but many represent great deals for phenomenal companies.
There are some obvious caveats. The 2008 collapse occurred through a combination of horrific banking practices, inflated real estate values and consumers who overspent on homes. In 2008, even after the collapse, I would not have invested in real estate. I still will not. However, I did invest in a little company called Alcon Technologies. Even though Alcon’s earning were solid, even though they had a strong line of new products, even though their products were medicinal (the last thing people usually stop buying) their share price dropped by more than 50%. That was crazy. There was no reason for that drop other than the market’s overall reaction to the economic climate. So I purchased the cheap shares of Alcon and watched with glee as it made all of its losses back within 6 months.
The moral of this story is that now is the time to invest. Now is the time to start researching companies and start making informed decisions to better yourself and your family. Whether you invest $5 of $5,000 don’t let this opportunity pass you by (Wow, this sounds like an infomercial). For many, this may seem like an imposing task. Venturing into an area you’re unfamiliar with can be scary but it does not need to be. Investing is very simple. All you are doing is purchasing part of a business. You do not need to run the business, create the product or market anything. All you need to worry about is whether it is a strong profitable company with a high likelihood of future success.
I will undoubtedly be writing more about investing in the coming months, but here are some exceptionally simplistic answers to questions/statements I have received in the past:
I don’t have the money to invest.
Look at where you are spending the money you do have. Can you make cuts. Investing $5 today can bring you $10 in the future, Will your daily Starbucks coffee do that?
I don’t have the time to figure out how to invest.
Look at where you are spending the time you do have. Would it be better to retire at 55 filthy rich or to watch every episode of The Bachelor? Plus, it doesn’t have to take that much time.
Where do I start?
A brokerage house. I like Fidelity Investments but there are others. Fidelity has offices in most major cities. Talk to them about your options. Also, if you have a 401k and an employer who matches contributions you need to max that baby out. Otherwise, you’re just throwing free money away.
How do I pick the company? I don’t understand all of those numbers and symbols.
I’m all about educating yourself, however that does take some time. Fidelity has great learning tools on their website. Also, keep reading this blog, I will likely have much more to say in the future. If you simply refuse to put forth the effort you should still consider mutual funds. This lets someone else do all of the work for you. You’ll still need to find a fund you like, but your broker can assist you. Funds range from ultra conservative to very risky so there is something for everyone. You could conceivably find the right fund(s) for you within an hour or two.
I have a bank CD, is enough of an investment?
For some of your money, perhaps. However, if you are not making at least 3% (and in this economy I doubt you are) you are actually losing value. Why? The rate of inflation is over 3%. $100 stuffed away in your mattress will simply not have the same buying power five years from now.
In conclusion, people generally don’t get rich by going to work every day (unless they are a pro athlete or movie star). They do so by making their employment income work for them. Regardless of your age, income level or competence with investing now is a great time to get started.
Orbson's TV Fix - True Blood! Until this show aired, I'd never seen anything where I can laugh out loud, be grossed out, get scared and get aroused within 30 seconds. Jessica better not be dead though, or Orbson will be pissed.
Orbson's Take- Bert and Ernie don't NEED to get married. It should be their CHOICE whether or not to get married.