Posted: December 30th, 2009 | Author: Joe | Filed under: 10 Investment Tips for Beginners, Credit, Debt, Economy, Investing, Scam | Tags: 401(k), bailout, blogging, Cramer, Credit, Credit Cards, Debt, Investing, Stock Market, Stocks | No Comments »
What a year it’s been!
As the history books close on 2009, I thought it might be nice to take a look back on the topics that were hot on Simple Debt-Free Finance over the past year.
2009 saw a lot of talk about the future of the 401(k). It seems only natural, given that it is one of the major means of saving for retirement for many American workers who had just seen those savings drop like a stone in the 2008 stock market crash. A lot of the talk was centered around ways to “fix” the 401(k) when it isn’t broken. This bothered me enough to blog about it in that post as well as Fixing What Isn’t Broken and Why 401K Retirement Plans Really Don’t Work And How To Fix Them
Many workers, like myself, saw their company contributions to 401(k) plans cut or “temporarily” suspended. My response to that was to give my 401(k) some TLC, a move which paid off when my balance returned to pre-crash levels in the 3rd quarter of 2009.
Bank Failures.
Another hot topic of the beginning of the year was bank failures. So many failures naturally led many to wonder what the FDIC insurance limits cover.
Investing.
2008 was a big year for gold, and 2009 was even bigger. Such a bullish environment for gold led Rosland Capital to offer Gold Eagle coins for IRA accounts.
The 2008 crash created an historic opportunity for investors to “buy low”, but it also offered many reminders of what not to do. To that end, I shared Jim Cramer’s 10 commandments of stock trading.
Since the crash created a great opportunity for new investors to get into stocks at levels unseen in a decade, I put together a list of 10 investment tips for beginners:
1 Follow The Rules
2 Be Aware Of Taxes
3 Don’t Confuse Investing With Trading
4 Tune Out The Media
5 Don’t Tune Out Too Much
6 Pay Attention To Risk
7 Don’t Avoid Reality
8 Don’t Fall For Hot Stock Tips
9 Don’t Try To Time The Market
10 Try Before You Buy
In other news, some investing sites seemed to want to attack index fund investing in all the wrong ways. I had to respond to their criticism of index fund investing.
Kiplinger was nice enough to provide a 1st phase of credit card consumer protection rules went into effect.
I had a couple of posts about 0% balance transfer offers, mostly because 0% balance transfer offers were coming to an end at the same time my wife received a 0.99% balance transfer offer.
Since it seemed to be a hot topic, for me anyway, I decided to share 6 things you should know about 0% APR credit card offers.
And all this at a time when Bank of America began imposing fees for paying off your balance… idiots!
Government Bailouts.
2009 is likely to be remembered best for the bailout craze that gripped the auto sector, bank sector, heck – the entire nation!
credit card consumers got a bailout, the NASDAQ released a “government relief index” for tracking bailed out companies and cash for clunkers gave charities some competition
What would a debt blog be without posts about, well, debt?
The year started out with discussions about toxic debt and ended with the mortgage debt relief program going until 2012.
In between was some discussion of whether debt settlement is a good idea, and why debt consolidation is (sometimes) a scam. When it’s not a scam, debt settlement and loan consolidation just doesn’t work, and you’re much better off taking a DIY approach to debt consolidation.
And just to round out the debt consolidation talk, I shared how it affects your credit score.
I asked, “Why are you in debt?”, but not too many people answered, so I got the top 10 causes for debt from BankRate.com. 
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Posted: January 6th, 2009 | Author: Joe | Filed under: Investing | Tags: Cramer, Investing, Stocks | 8 Comments »
Here are some tips for trading stocks (NOT investing!) based on Jim Cramer’s 10 Commandments of Stock Trading as covered in his book: Jim Cramer’s Real Money: Sane Investing in an Insane World.
1. Never turn a trade into an investment.
Know thy purpose. You must approach the purchase of stock with a clear goal in mind. Simply to “make a killing in the stock market” is not a goal. First declare whether you are investing or trading. Buy into investments a third at a time, to spread out your cost basis instead of trying to time the bottom. When trading, go all in and cut losses quick if the reason you bought the stock doesn’t pan out.
2. Your 1st loss is your best loss
If trading, sell when your stock declines – the trade is over. Cut your losses before you panic out at lower levels. If investing, then you should rely upon stop losses, or ride the decline out if you’re a buy-and-hold type who is in for the long haul (10 years).
3. Take a loss – when you have one.
Don’t pretend you haven’t lost money simply because you haven’t sold. If you’re holding a loser in your portfolio, sell it and harvest the tax loss.
4. Never turn a trading gain into an investment loss.
Never use the word “gain” until you have sold the stock and realized the gain. Let’s say you bought a stock just before it rises. You then figure on riding the gravy train as long as you can, and you hold on to it. The problem is, you can’t tell for sure when the wheels are going to fall off that train and you’ve held it for too long, only to ride it back down again.
5. Tips are for waiters.
If the person giving you a hot stock tip really knows something (i.e. it’s a real tip), then they would be guilty of insider trader (and so would you!) if they told you. Also, if they had a secret that worked, they probably wouldn’t share it since secrets like that usually stop working when they’re no longer secrets. It’s best to avoid the hot tip.
6. You don’t have a profit until you sell.
This is kind of the companion to #4. Gains not taken can become losses, but gains taken can never be losses. One strategy to harvest the gains while hedging against continued rise in price is to put a stop-loss order in at the level you’d like to lock your gains in at. That way, if the price continues upward, then you can adjust your stop-loss trigger upward accordingly, but if it plummets, you’ll at least realize some gain.
7. Control losses – winners take care of themselves.
1 or 2 losers can ruin your portfolio. Because of this, you need to be ruthless in cutting your losers. Rank your stocks and act accordingly (i.e. have a plan and stick to it!).
8. Don’t fear missing out.
Don’t get greedy and feel you have to get in before the market takes off without you. Be disciplined. The market is cyclical… you’ll get another chance.
9. Don’t trade headlines.
The press is almost always wrong – don’t fall for hype and misunderstanding. Of course, this often leads to the press being a terrific contra-indicator, and many times when the headlines are rosy, it’s time to sell, and vice versa.
10. Don’t trade flow.
Don’t follow the herd. Don’t buy or sell just because others are. The heard gets slaughtered. Take your time, craft a plan and have a reason for buying and selling what and when you do. This brings us full circle back to: Know thy purpose.
Conclusion.
The important distinction is that all of the above are related mostly to trading a stock over the short term and are not applicable to investing for the long term. Because of this, the above techniques are best saved for discretionary investment money and not for retirement planning.
You’ll also notice that most of the “commandments” either distill down to being disciplined, or rely upon discipline to be beneficial. I think this is true of any investment approach. If you want to be successful in the stock market, you need to have a plan and the discipline to stick with that plan. It is especially important in times like these, when the market can lose 40-50% of its value in the blink of an eye.
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Posted: January 2nd, 2009 | Author: Joe | Filed under: Investing | Tags: Cramer, Investing | 6 Comments »
This is a companion post to Cramer’s top 5 picks for stocks to buy and is based on the tips from Jim Cramer’s Real Money: Sane Investing in an Insane World.
In the top 5 picks post, I highlighted the types of stock Cramer espouses to be essential to any individual investor’s managed portfolio. In other words, if you’re going to roll your own stock portfolio, you’d better have at least 1 stock from each category for minimal diversification.
He recommends 5 as the minimum, but says that most people should at least start out with closer to 10 for better diversification. Any more than that, and you’re running your own mutual fund. Here’s a list of the second group of 5 types from the bottom of the list of 10 to round out one’s portfolio.
6. Secular growth stock.
This is going to be a large company that has a stable product which sells wells regardless of economic conditions, but is currently in a down cycle. The thinking is that this type of stock is more likely to rebound. This category includes companies like Procter & Gamble (PG), Anheuser-Busch Companies (Budweiser) (BUD), Johnson and Johnson (JNJ), Coca-Cola (KO) and Pepsi (PEP). The important point here is to only buy when the stock has a low P/E.
7. high quality cyclical stock when economy turns south.
These are stocks that tend to do well when the economy is doing well. Stocks in this category include Dow Chemical (DOW), Deere & Co (John Deere DE) , EI DuPont de Nemours(Dupont DD), 3M (MMM). The trick is to buy these at the bottoms, which is usually when the economy is in its doldrums, and sell when the economy is booming.
8. Technology company.
If you chose a tech stock for your speculative stock (from the top 5 list), then pick a technology stock that pays a dividend. Otherwise, you could be doubling your risk with little extra reward.
9. A young retailer.
Cramer’s point: a retail stock can offer huge growth – provided you get in early. Once a retailer goes nationwide, the rapid growth is near an end. What you’re looking for is a retailer who has saturated a region of the nation, but not yet expanded nationally. He recommends Cabelas (CAB).
10. Hope for the future, with a non-tech stock.
Pick something from the S&P 600. The S&P 600 is the home of the midcaps. proving ground for S&P 500. Get on the growth train before the stock gets on the radar of the “smart money”.
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Posted: December 30th, 2008 | Author: Joe | Filed under: Investing | Tags: Cramer, Investing | 4 Comments »
I’ve been reading Jim Cramer’s Real Money: Sane Investing in an Insane World on and off for a while now. I came across a section on how Cramer recommends a person pick stocks (if they decide to engage in active stock picking). I found it interesting, and maybe you will too.
1. Buy local.
Buy stock in a company that has a presence in your community. He recommends checking the business section of your local paper for a truly local business, though a local franchise of national chain is OK too. It’s good to support the people who live and work in your community, but it’s also a great way to get in on the potential growth from day one. If you pick a winner, you’ve done so before it’s hit the national radar.
2. Oil stock.
Oil stocks are consistent performers, and offer high dividends. They also tend to be solid when times are tough, as we’ve seen over the 2007-2008 market. Obvious players here are Exxon Mobil (XOM ), ConocoPhillips (COP ), BP PLC (BP ), etc..
3. Brand name blue chip that sells at yield above the S&P 500.
Look for history of raising dividends, high quality company. Especially good if you can get one from the S&P 500 Dividend Aristocrats (companies with a history of increasing dividends every year for the past 25 years.)
4. Financial stock.
Historically, financial stocks tend to be stable, and secure. They also offer nice dividends. Of course, the past year or so is the exception to the rule, but now is probably a good time to start looking for one. Interestingly, Cramer emphasizes regional banks over national banks. This is presumably because of the greater possibility of growth, though it seems that regional banks have managed the credit crisis far better than the larger, national banks.
5. A Speculative stock.
Go for a risky, under $10 stock of a small company. This is where you swing for the fences, but never have more than 25% of your portfolio in speculation.
It is important to note that Cramer recommends the above sample portfolio for discretionary investment capital only, i.e. not for your retirement savings.!
It was at this point when I started to think he wasn’t as big an idiot as his loud mouth demeanor led me to believe
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