Shaping Your Investment Strategy

An important step that any individual should take in investing is to clearly define and develop one’s investment objectives. Determining your investment goals and objectives will help you in finding the best strategies to meet your goals. There are some key questions listed below that can help you in formulating your investment strategy. Grab a pen and paper and write down the answers to the following questions.

 

1) What purpose are you investing for?

This is the most important question because it pertains to your investment purpose. The purpose of your investment could range from retirement needs, children’s education, purchasing a home, buying an automobile or simply financial independence. Setting goals helps to add a clear cut direction to your investment strategy. If you have a specific purpose in mind, then you will be much more likely to stick to your plan.

 

2) What is the exact amount of money that you will need to reach your goal?

Now you have to figure out the amount of money needed to reach this goal. Your goal may be as small as $5000 or as large as $20 million dollars. Write this amount down so

that you know what you are aiming for. Listing the amount of money needed will help you in figuring the necessary weekly or monthly contributions necessary to accomplish your goal.

 

3) When will you need to access this money?

Next, it is important to determine your time frame. The time frame may range from as short as a few months to 50 years. Determining the time frame for cash needs is critical in ensuring selection of the proper investment vehicle and proper scheduling of the necessary distributions. For example, if you invested $10,000 in a 5 year certificate of deposit and wanted to withdraw the cash after 3 years. You would not be able to access the cash without paying a substantial penalty.

 

4) How much of a return do I expect on my money?

So, exactly what kind of return are you looking for on your investment? Be reasonable! Don’t expect returns of 50 or 100 percent yearly. Even the greatest investors find it difficult to beat the market year after year. The average return of the market is 10 percent annually historically. The return on your investment should directly relate to the amount of risk that you are willing to take.

 

5) How much risk am I willing to take?

Figuring out your risk tolerance will be useful in determining the securities that best fit your particular needs. If seeing your portfolio lose 30 or 40 percent of its value causes you nightmares, then you may want to stick to guaranteed investments such as C/D’s and Treasury bills.

 

6) How much are you willing to sacrifice in order to meet this goal?

Eliminating unnecessary expenses and purchases can make the difference in realizing your dreams. You have to know the difference between a want and a need. A need is something that is essential, whereas a want is a luxury. In order to accomplish your long term goals, you may have to sacrifice some short term wants.

GM CEO Wagoner to step down

By TOM KRISHER and KEN THOMAS, Associated Press Writers

General Motors Corp. Chairman and CEO Rick Wagoner will step down immediately at the request of the White House, administration officials said Sunday. The news comes as President Barack Obama prepares to unveil additional restructuring efforts designed to save the domestic auto industry.

The officials asked not to be identified because details of the restructuring plan have not yet been made public. On Monday, Obama is to announce measures to restructure GM and Chrysler LLC in exchange for additional government loans. The companies have been living on $17.4 billion in government aid and have requested $21.6 billion more.

Two people familiar with the plan said Sunday that the Obama administration would give GM enough government aid to restructure over the next 60 days, while Chrysler will get up to $6 billion and 30 days to complete an alliance with Italian automaker Fiat SpA. The officials spoke on condition of anonymity because they were not authorized to make details public.

Wagoner’s departure indicates that more management changes may be part of the deal, but it is still unclear who will be in charge of GM. The automaker recently promoted Fritz Henderson, its former chief financial officer, to become president and chief operating officer. Many in the company thought he would eventually succeed Wagoner.

Detroit-based GM issued a statement Sunday saying that the company expects the administration to make an announcement about the automaker’s restructuring soon but that “it would not be appropriate for us to speculate on the content of any announcement.”

A person familiar with Chrysler’s management said the company has been given no indication that the government will require any changes at the Auburn Hills, Mich., company, which has been led by former Home Depot CEO Robert Nardelli since August 2007. The person also spoke on condition of anonymity because Obama’s plan has not been made public.

The full story can be found here

Natural Gas At A 7 Year Low

I bought 200 shares of the United States Natural Gas ETF (UNG) @ $15.15 per share on Friday. This ETF mimics the price of natural gas futures contracts. With natural gas trading at a 7 year low and UNG hitting its 52 week low on Friday I figured that it was worth a shot. Natural gas traded as low as $3.63 per 1,000 cubic feet. It hasn’t been this low since the fall of 2002. Natural gas, coal and oil currently account for approximately 80% of the United States energy needs. Natural gas is a nonrenewable resource and prices are expected to increase in the future.

My Mistake With GE

As stated previously I currently own a couple thousand shares of General Electric (GE). I had been buying the stock between $7 and $13 per share. My plan was to buy thousands of shares when GE hit the $5 range. A few weeks ago the stock dropped below $6 per share and the Dow was down to 6,500. When this happened and I saw GE at $5.90 I got worried. I started thinking, what will stop GE from going to 4 dollars or zero? I didn’t buy any shares when GE hits its 52 week low of $5.87. Over the past three weeks GE has almost doubled and is trading near $11. I missed a tremendous opportunity to make a hefty profit all because I allowed emotions to interfere with my investing thesis. I knew that while GE Capital is struggling that GE Industrial has a value of approximately $12 per share alone. Needless to say I learned a valuable lesson: When all else fails, stick to the plan!

Agribusiness Sale

Sold shares of MarketVectors Agribusiness ETF (MOO) at $30. I bought the shares two weeks ago below $27 and wanted to take some profits. The market has been rising for the past two weeks consistently and I expect that there will be a near term pullback.

Bought Mittal Steel

Bought 100 shares of Mittal Steel (MT) at $21. I have owned shares in Mittal Steel for the past three years but at a much higher cost basis. I think that many of the metals like steel, aluminum have already bottomed. Oil appears to have bottomed in the 30’s and has been on a tear climbing all the way to the mid 50’s. Hopefully, demand will pick up for metals as well which would help companies like Mittal.

US Steel

US Steel (X) has had a nice run up to over $25 a share. I have sold my position at this time. There is too much short interest building in this stock and I think that a decline in the share price may be coming soon. I bought shares between $18 and $19 so I have a decent gain over the last 2 weeks.

How to find free stuff

Yahoo Article By Lori Bongiorno on the best ways to find free stuff:

  • Log onto Freecycle and other reuse groups to search listings of items being given away by people in your town.
  • Craigslist has a whole category dedicated to “free stuff” for each of its participating cities. Find everything from cardboard boxes to electric sewing machines to computer games.
  • Search for free reusable items with the Local Reuse application on your iPhone.
  • CouchSurfing connects travelers with hosts around the globe. The result: You get both a free place to stay and locals to hang out with for an inside glimpse of other cultures.
  • Want free accommodations while travelling, but aren’t up for sleeping on a couch? Use Digsville, Home Base Holidays, HomeExchange.com, and HomeLink to find traditional home-exchange opportunities.
  • Favorpals is all about helping you trading skills and favors. Clean someone’s house in exchange for dog walking when you’re at work or for tutoring your kid in math. Or offer painting services and get help with designing a website.
  • You can trade anything from babysitting and calligraphy lessons to pianos and foosball tables to cars and boats at U-Exchange.
  • Swap books, music, DVDs, or video games via mail through Swaptree. Print a postage label right from your computer for easy mailing.
  • You can trade clothes, accessories, shoes, and even cosmetics at Swapstyle.
  • Trade kids’ stuff you no longer need at Tots Swap Shop or Kizoodle.
  • Get free new jewelry at Silver Jewelry Club. What’s the catch? This jewelry manufacturing company is looking to get the word out about its designs. Be prepared to pay modest shipping costs.
  • MyOpenBar.com helps people find free (or cheap) drinks in New York, Los Angeles, San Francisco, Chicago, Honolulu, and Miami.
  • ThefreeSite.com, StartSampling, and Free Stuff Channel are just some of the websites dedicated to helping users find giveaways, samples, trials, and other promotional items.

Big Rebound

As expected financial stocks soared today based upon a government plan to buy toxic assets from financial companies. Bank of America (BAC) is up to $7.80 a share. Just two weeks ago the stock was at $2.53 amid fears of nationalization.  I still believe that Ken Lewis is in trouble but Bank of America will be okay as long as the stock can stay above $5. B of A  has some very profitable businesses and should post solid numbers in an economic recovery. JPMorgan Chase rose $5 today to $28.86 per share. Wells Fargo (WFC) jumped 24% to rise above $17 for the first time in awhile. Even though these stocks have rallied over the past two weeks, many of them are still down over 80% over the past year. While I wouldn’t jump in and buy a ton of shares at their current prices; I would be a buyer on any pullback of 10% or more. I have been buying shares of Wells Fargo monthly.

Bank Stocks May Finally Be A Bargain

The US Treasury is finally set to unveil its plan to buy toxic assets from banks. The public private partnership is expected to buy up to 1 trillion dollars in bank assets. The government hopes to entice private investors with guarantees and offering low interest loans to remove toxic assets from bank balance sheets. The government will share the risk if the toxic assets continue to decline in value. If these assets are removed from bank balance sheets without additional government ownership then the major banks should see their share prices increase substantially.

The Public-Private Investment Program should benefit Bank of America, Citigroup, JPMorgan Chase and Wells Fargo the most. These are 4 of the largest banks in the country and have balance sheets riddled with toxic assets. The 1 trillion dollar plan should help alleviate some of the problems facing these banking giants. All of the assets that are currently deemed as bad assets are not such and will have some value in the future. If the government holds these assets until the economy improves then the stock prices of the major banks should rise over a time. It may take a few years to see a significant rebound in price but with a plan finally in place the financial sector should improve. I have been a buyer of Wells Fargo, Bank of America and JPMorgan Chase at these distressed prices.

I don’t know if 1 trillion is enough to remove all of the bad assets from the balance sheets of banks but it is a good start.