From time to time I am asked questions about the stock market, investing, owning a business, and other questions relating to generating and maintaining wealth. Most often the question for those without a high personal net worth is how to create wealth, and for those already on the path how to accelerate their growth. These are not simple questions and each has several different answers. There is no single blueprint that leads to wealth or a higher personal net worth.

Perhaps one thing I’ve noted is that anyone can create a net worth if they are willing to commit the time to it. Another universal fact, in my opinion, is that creating and growing net worth is based on time perhaps more than any other factor. I have virtually never seen anyone have a net worth that has not worked for it and spent time cultivating it. Those that have, either through an inheritance or a lottery win, generally have thrown away their wealth within 5 years because they have not built up the foundation for the funds they received.

One of the best rules of success, I feel, is something I learned from Napoleon Hill’s Think and Grow Rich. The principle is simple – Do what you do as well as you can, never worry about the money, and the money will come. It seems odd to some, but in my life I would say it has always worked. If you are not doing your best, you will never be paid as well and thus you will never have enough money or wealth for what you want. If you use your energy and time worrying about the bills or what is in your pocket, you have none left to generate the funds you need or want. Of course that is not to say that you don’t have a plan for your money, just not an obsession about that plan.

More directly I would generalize that for those looking to enter the stock market there are a couple of things you should do. Read the Wall Street Journal (or similar daily economic newspaper of high regard) for a year, ask for and read several (a dozen or more) mutual fund prospectuses, and get a stock broker you are comfortable with. While all that is happening, set a budget that takes 5-10% of your discretionary income (at least, more if it’s affordable) and set it aside in a separate savings account.

Now I say read the Journal because there is a terminology used in investing that is not used anywhere else. One of the biggest hurdles I hear is that people are unfamiliar with the terms used and thus are unnerved by investing. In reading the Journal daily you get a familiarity in learning those terms. (Don’t be embarrassed to have a dictionary at hand to define difficult terms, I did it and so have many – whether they admitted they started like this or not) In addition it will help you get a feel of the market and the cycle that occurs.

I recall that when I was a new stockbroker, I had a gentleman ask me if I had spent a cycle in the market. I had no idea what he meant, to which he laughed. He meant that I had been a broker for a year at least, and had seen the overall cycle of earnings reports, forecasts, reactions and other events moving the market.

Understanding the timing of the market is as important as understanding the terminology. You don’t want to buy stocks in the short-term to start with, but if you know that say the travel industry in the U.S. is weaker in the spring than say the fall or winter, you may get a better purchase price to start with. Another thing the reading will provide is the reactions that the market has to events. Whether it is a disaster, political unrest, missed earnings, or an unforeseen event companies have immediate reactions. While each reaction is individual it helps to know that missed earnings can lead to a drop in stock price for a short while, but does not mean that company is a bad investment long-term. A disaster could hit the market, but not affect long-term returns. And when a company is in trouble you can learn some of that wording as well. It’s not fool-proof, but it will help you sleep at night while others panic over something that could be minor. Trust me that I have seen this.

As you get familiar with the general market cycle and terminology read the mutual fund prospectuses. This will tell you about the goals of the mutual fund, the historical returns, the administrator of the fund, and the stocks that are – or can be – in the fund.

There are big differences in mutual funds. Some only buy bonds, some only large corporation stocks, or just banks, or just eco-friendly companies and so on. Some only look to preserve your money, some seek to grow at all costs, others are more balanced. There are funds that can buy penny stocks – considered the most speculative equity investment – others buy junk bonds – the most speculative debt investment – and some can use options – highly leveraged investments. There are funds that started on a great year for market returns (like during a market bubble) and therefore have great historical returns, improving the performance in bad years in their average, and others have been around for decades showing a more realistic return over time. Some advisors are hotshots taking huge fees for their names, others are unknowns starting out, and many are just working hard. All of this is important, to varying degrees on how well you can sleep at night and what performance you wish to have.

The last step is to get a broker. After spending time learning the terminology of Wall Street, and the reactions, and mutual funds that you are comfortable with, you now have a means to evaluate what kind of broker you want. Some are newbie’s and desperate to show performance and take risk. Some are seasoned pro’s but with huge numbers of clients. Some like to spend time talking to clients, some don’t. Some are better with a specific area in the market, like banking or biotech. What you are comfortable with will help reach your long-term goals.

And I believe a broker is necessary. The market is a constant, changing, gut-driven industry. A good broker can hear the unspoken words in an earnings report and be cautious, or have an eye for something the market will want in the future. They aren’t always right and it does cost money, but this is what they do everyday all day. It’s not a 9-5 job, and not everyone can do it. In my experience a broker may be wrong 40% of the time, but investors on their own tend to be wrong 70% or more of the time. And when you compare wins, investors on their own just don’t match up. But that is what I have seen with a good broker, which only you can decide for your self.

And I do emphasize starting to grow your wealth with mutual funds. The risk is lower and cost to invest is as well. It’s easier to add to a mutual fund position, and cost effective. The fee to a broker is not prohibitive, in my opinion. And it allows you time to see results and plan for future growth. You may not agree, but it’s one way to create a net worth and grow it.

Now this is just one suggestion for growing your worth. In the future I will mention others. They are all based on my experiences and those of friends and family. There is no guarantee they will be the key for you. I always advise speaking with a trusted professional in the field I speak about.

Hopefully this is the first step in helping you attain the worth you desire and deserve. If you have more suggestions or experiences to share, please comment. But always do what you do best; I believe that if you do that the money will come.

Labels: investment, mutual fund, Napoleon Hill, penny stocks, personal net worth, political unrest, savings account, stock market, stockbroker, Think and Grow Rich, Wall Street, Wall Street Journal

I almost feel bad for Hillary Clinton, almost but not quite. And I say this because in the Indiana primary Hillary holds a lead of 4 percentage points over Senator Obama with 88% of the votes counted at the time of this post. It’s sad because Hillary was expected to have a double digit win, no less than 10 points, over Senator Obama according to polls Monday.

The fact that Senator Obama has gone through 8 weeks of dealing with the media driven Reverend Wright issue, 2 press conferences by Reverend Wright and Senator Clinton’s preposterous patronizing call for the public to vote for her to save 18 cents on their gasoline cost have all culminated in one of the slimiest victories in this Democratic nomination process yet. It’s just embarrassing, but there is one fact in these numbers that no one has accounted for yet. In fact today was the first time I heard any suggestion of polls revealing this fact. Republicans voted for Hillary.

Rush Limbaugh, back in March as I recall, asked Republicans to vote for Hillary to exacerbate the nomination process. Tonight reports have stated that Republicans indeed did vote for Hillary and accounted for potentially 7% of the total. If that is correct then as of the writing of this post Hillary would in fact have lost by 3%. This takes the embarrassment of her projected 10-point win and makes it a landslide of disappointment.

I am happy that Senator Obama took the high road in reference to the gas tax 'holiday'. I’m even more greatly pleased to know that 16% of the voters in North Carolina realized the obvious polispeak trickery that Senator Clinton was trying to employ; given the Republicans voting for Senator Clinton its reassuring to know that the majority of voters in North Carolina and Indiana saw through the Clinton campaign's desperate plea to buy votes by any means necessary.

With all this said we can only hope that the Clinton campaign has used up all of its tools in its bag of tricks and its manipulitive power by now so that they can not coerse the Super Delegates into stealing the Democratic nomination from Senator Obama. Of course Senator Obama will not win the Presidency most likely because of the massive damage Hillary and Bill Clinton had inflicted on his reputation and experience. But at the very least there is something to be said for justice and equality in America with him winning the Democratic nomination.

For those states still waiting their turn to vote I suggest you listen carefully to the Clinton campaign, former President Bill Clinton and Hillary as they slash and burn their way to the convention.

I’m not saying that I guarantee there will be more “misspoken” statements (lies) but I wouldn’t go to Vegas and make a bet against it.

Labels: Las Vegas, Polispeak, Presidential election race 2008, Rush Limbaugh, Senator Barack Obama, Senator Hillary Clinton, Super Delegates, tax policy

The title of this post is not a joke, it’s a serious question. It’s a question that I’m not asking, Senators McCain and Clinton are asking it. It’s a cheap polispeak bid to buy your vote for as little as possible.

Now it’s being packaged really nicely. Lots of bluster, with claims of a summer long holiday or an attack on big business. It’s a cute claim that if you vote for X Congress will suddenly get shocked from their slumber and force the price of gasoline down. And I have a bridge to sell you too.

I will give Senator John McCain a bit of credit here. He came up with the idea and started to sell it before Clinton even noticed it was an issue. But there is no doubt that Senator Clinton noticed the positive polling McCain received and jumped on the bandwagon. I will give Senator Obama credit as well for not going along for the ride.

Now lets assume for a moment that this ‘gas holiday’ actually happened. Yeah! You get to save about .30 cents a day, or $27 over the summer. If you went to see Iron Man, plan to see The Incredible Hulk, WANTED, Indian Jones or any other summer movie you spent all the savings. That’s just seeing one of those films. Short holiday huh?

Of course when you add up all the people ‘saving’ money you can quickly get into the tens of millions of dollars or more. And every dime of that money will be sucked out of the roads in your particular state. Hope you like potholes and closed roads. How much more gas do you use to go through a detour? Still think McCain and Clinton are doing you a favor?

Now let’s get back to reality. This will never pass. I say that because this is not the first time this has been suggested. It never passed before, and it won’t now. Because the roads have to be driveable and open. And if the taxes are lost from the pump, you are guaranteed to pay for it elsewhere. So the real question is what do you want to be taxed on.

As for the idea of taking the profit from Oil companies, hurrah America is now a socialist nation. Because only socialists, and their economic cousins communists, believe that the government knows how much money you should make. And if you think that Democrats and Congress voting to increase the taxes of everyone making $31,850 or more is 2-faced, wait till they say that your business exceeded the profit for your industry and takes away all your money. You made a better mousetrap, made millions and employed thousands – but you went over the cap and so you made $100,000 while the government took your $10 million to spend on a study on whether or not the spotted owl is surviving. Doesn’t that feel good?

Of course we have left out the other part of stealing the money of companies, the economy. As the government takes money from all corporations, yes even your small business – just like they promised to raise the taxes of just the ‘rich’ – they have less money to invest into research (they fired half the R&D departments since the cash wasn’t there and they need reserves for a bad economy, loans from banks to buy new equipment, and bonds that are out), to put into retirement funds (kiss that 1-for-1 contribution to your 401K goodbye), mergers are too expensive (so much for your mutual funds and stocks). Since growth is low as are interest rates foreign investments pull out of the nation the dollar drops and things get really expensive.

And that’s just what I can foresee. Imagine what a real economist can tell you. And if you think I’m wrong just sit and think of all the things connected to corporate profits and/or the federal gas tax. It won’t take long to get numbers in the billions falling away, being spent by a government that hasn’t balanced it’s checkbook in my lifetime and runs every aspect of it’s operations about as well as your local DMV on a really good day.

And the Senators know all this. They know the arguments and have seen the projections. They know the Congressmen and women. They already counted the votes. So they know it will never happen, but it sounds great and makes people think they care, as long as no one stops to think it through.

Of course I don’t expect better from Senator Clinton. She tends to think the public is either dumb or forgetful. Because it was only early this year she promised to use the money from big oil to pay for healthcare. And she is used to making empty promises, like telling upstate New York she will create 200,000 jobs (after 7 years there still hasn’t been one made on her watch, but 30,000 have been lost – great management there). Or there is the wonderful campaign promise she made that would give every child in America $5,000 for college the day they were born. Amazing that she stopped talking about that once people (including me) asked where the money for that would come from, what happens to the money for those that don’t go to college, or does that include children that are illegal aliens. But that kind of polispeak got her headlines and votes, which was the real reason for the offer to buy your vote.

So considering this I ask voters in Indiana and North Carolina, is your vote worth 18 cents?

Labels: college tuition, illegal aliens, Indiana primary, North Carolina primary, Polispeak, Senator Barack Obama, Senator Hillary Clinton, Senator John McCain, tax policy