Make Money Investing The Warren Buffett Way
The following is an excerpt from my book, Your Financial Playbook: A Guide to Navigating the World of Personal Finance.
It doesn’t take $10,000 for you to get started investing. You can invest with as little as $50. That’s right! You can buy stock with as little as $50. The first step is to determine what asset class that you would like to invest in. You can invest in any asset class (stocks, bonds, mutual funds, CD’s) online.
If you typed in symbol BBI today looking for Blockbuster’s stock then you may have been surprised to find it no longer listed. Blockbuster was delisted from the New York Stock Exchange today for failing to maintain a $1 share price. Shares of Blockbuster haven’t traded at $1 since last October. The movie rental chain had hoped to stay listed by convincing shareholders to agree to a reverse stock split by merging Class A and B shares. Blockbuster could not garner enough votes among shareholders to approve the plan.
This might just be the final curtain call for Blockbuster. Blockbuster blamed low voter turnout for the failure of its reverse split plan. This begs the question, if shareholders are so apathetic that they didn’t even bother voting for the stock to avoid delisting then who will rescue Blockbuster? It’s not the bondholders. Bondholders have refused to budge on restructuring the $630 million dollars worth of bonds outstanding paying 11.75%. Bondholders seem content on forcing Blockbuster to make these high interest payments even if it is going to drive the company out of business.
There is no way that Blockbuster will survive this year with its current debt obligations. Blockbuster had to request an extension until August on a $42.4 million dollar interest payment that was scheduled to be paid tomorrow. Do bondholders really believe that Blockbuster will be able to repay the principal due to bondholders in 2014? The belief of bondholders must be that Blockbuster is worth more money in liquidation than as an ongoing entity in the future.
If shareholders and bondholders aren’t buying Blockbuster’s recapitalization plan then neither should you. Bankruptcy is now the best alternative for Blockbuster. It is the only way for the company to unburden its $900 million debt load. Blockbuster could emerge from bankruptcy as a leaner more efficient company with a legitimate chance of competing against Redbox and Netflix.
Blockbuster’s stock was worth 15 cents per share when it last traded on the NYSE. Blockbuster now trades on the pink sheets under the symbol BLOKA.PK.
Disclosure: I do not own any shares of Blockbuster
1. The first step is to determine what asset class that you would like to invest in. You can invest in stocks, bonds or mutual funds.
2. Now it’s time to get started. If you choose to invest in stock, you can use online sites like Buyandhold or Sharebuilder which allows you to buy stock with only $20. These sites have very low fees and are great for the beginning investor. Buyandhold has a fee of only $6.99 per month which allows you 2 free trades every month. Sharebuilder charges no monthly fee and costs $4 to buy stock and $9.95 to sell.
3. If you choose to invest in bonds, you can use the TreasuryDirect website. TreasuryDirect is the US government’s website that sells US savings bonds. I bonds and EE bonds can be bought for as little as $25.
4. If you would prefer to invest in a mutual fund, then should look at companies like T Rowe Price and the Principal Financial Group. These firms offer automatic asset builder plans that let you invest for $50 per month.
