Discipline Is Imperative

Discipline is the characteristic needed to:

• push yourself past the point most others stop at
• Resist the urge to spend more then you should
• Pull second shift working on your part time business after getting home from your day job
• See the potential in that stock, ignoring the fear
• Continue to learn, grow and risk

...succeed in whatever you want to succeed in.

I'll leave you with some motivational quotes.

"Discipline is choosing between what you want now and what you want the most."
"Discipline is the bridge between goals and accomplishments."

How to Determine the Market Bottom

This is an obvious question because if you can determine it correctly, just about any investment you make will be profitable.

The bottom is... when you think the economic world as we know it will end, very soon there will be no stock market and your prediction of the future economic structure of the United States is a hunter - gatherer society.
That is the bottom and it is now time to buy. This is based on the assumption that because you are experiencing this fear, everyone else is as well. During this time only the logical can stand back and notice everyone has lost their minds and the deals of the decade are being presented.

The individual who can pull the trigger at this point, manifests discipline and courage. Basically a complete absence of fear while maintaining faith that people will continue to be people and buy goods and services, hence lifting the economy, spurring optimism which only spurs more buying, turbocharging the profits of good companies as well as their shareholders.

Just be mindful of the flipside...when people are too greedy. This marks the top of the market and the perfect time to sell.

Motivate Yourself To Make Money Part 2

This is the second part of an X-part post (I'm gonna just keep posting on this subject as I come up with ideas) which focuses on becoming motivated from the inside, because most likely you don't have a personal motivation coach just waiting in the wings to cheer you on when you don't feel like pushing forward.
My tip for this month is to constantly tell yourself, "my time is valuable" whether you think it's true or not. Would someone who's time is valuable watch television, stumble aimlessly online, or socialize to much? The answer is obviously, no.
I also find this statement empowering and enlightening in a plethora of situations. So try it the next time you find yourself evading a task you need to accomplish.

How To Motivate Yourself To Make Money

This is something I struggle with often. Motivation is the fuel needed to launch those projects and ideas you have that need sweat equity before any profits come out on the other end. Usually the source for long term motivation is clear (i.e., infinite freedom, time with family, etc), but what about short term motivation. What is going to put the fire under your ass when all you want to do is sit on the couch and watch a night of T.V. pass you by (while you should be working on your business for example).

I believe I have a solution: DEBT

For someone who has strong, basic financial principals down (saving, no consumer debt, etc) debt can be an excellent motivating factor for making money.

If I can't pay my bills one month, and I have to carry over a balance on my credit card (after paying the minimum), or I'm carrying a balance on my checking plus account with my bank, these facts role around in my head all the time, 24 hours a day, I'm even dreaming about where I'm going to get the money to pay for these expenses. This acts as a fuel to think of new ways of coming into some money. Now that extra "motivation" pushes me into coming up with new ideas, working on previously abandoned projects and forces me to put down the remote control, and find new/old ways to make some cash.

As for how to get into debt, there IS a certain way to do this: Instead of paying off all your monthly expenses, let the non-urgent expenses wait, and deposit those extra funds into some sort of investment vehicle. I believe this strategy is also called "paying yourself first".

What strategies do you use to motivate yourself?

Negotiate With Patience

As I learn more and more about making money, I see several patterns which seem to emulate over and over. One of them is the importance of buying low and selling high (obviously). And in order to do this effectively, having patience on hand will always give you the edge needed to buy low, thus giving you the ability to sell higher.
An example of this could be buying a used car. If you have the luxury of time and the ability to use patience, a quality used vehicle can be purchased for significantly less then if you were in a rush and needed to buy immediately.
Another example could be the purchase of stock, and using a limit order instead of a market order. Using limit orders effectively allows you to negotiate the stock price instead of simply purchasing whatever is for sale at that moment, although a little patience may be needed.
So if you happen to be in the market for a car, or shares of XYZ, don't only exercise good judgement, but also take a moment to exercise patience.

Was The New York Yankees a Good Investment?

Watching the all star game on TV, when some sort of "fun fact" comes up on the screen about George Steinbrenner and how much he paid for the Yankees in 1973, which was to the tune on $10,000,000. The relativistic current value of the New York Yankees is $1.3 billion according to Forbes magazine.

So the question is...did old George make a good monetary investment. I say monetary because no one really buys a sports team for monetary reasons, more like for bragging, and simply because you love it, but this example is good to focus on due to the undeniable success of the Yankees ball club and the assumption that he must have made a very healthy profit from his initial $10 million.

How about some math and find out...

The first question we need to ask is, "what annual percentage rate has George been getting while owning The New York Yankees."

In order to answer this I would take out my trusty TI-86 thats been hanging out in my desk draw since I graduated from college and crank out some numbers. (you can also visit many web sites which will do these calculations for you, like right here.)

If your using a graphing calculator like me you would input ((1,300,000,000/10,000,000)^(1/38) -1) x 100 = 13.66% annual rate of return, pretax of course. The formula to go along with this equation is r=(FV/PV)^1/n -1

r=rate

FV=future value

PV=present value

n=number of years

Now if you run the same equation for the S&P500 since 1973 until today (Jan 12, 1973 - July 23, 2008) the annual compounding rate of return is just 6.44% which is nothing to be proud of compared to George's 13.66%. Turns out buying a ball club may be a good monetary decision after all.

Feelings On Retirement

My girlfriend is taking a class called "Dimensions of Aging" and retirement is a large subject in class.

One assignment in the class was to watch a PBS documentary on retirement and answer several questions. One question was...

5. After looking at this documentary,...how do you feel about the process of retirement? Do you plan on retiring from the workforce in the traditional fashion (i.e., taking Social Security as well as withdrawals from any private pension plans you might participate in), or do you plan on working beyond the normal retirement age determined by Social Security? Do you have any other questions or feelings about the process of retirement after viewing this video?

The link to the video is Here. By the way, it's 2 hours long; so I'll understand if you don't watch it. And just in case your curious, here's my answer to the above question.

"I believe the process of retirement is as good as can be expected. The population as a whole is asked to delay gratification now in anticipation of the inability to work at a reasonable age. This request is asked 30-40 years prior to gratification. In the age we live in today of McDonald's and microwaves, asking someone to delay gratification and set a significant amount of money aside each paycheck is asking a lot.
I plan to retire in my early 30's from the sale of various independent business' reinvested in stocks and possibly real estate.
I feel that society as a whole has lost the discipline and frugality needed to endure the temptation to spend more then you earn and not save at all. These virtues need to be infused into the curriculum of pre-k through high school; until we give our young the tools to act responsibly, how can expect them to save and invest in the fashion needed to independently secure their future?"

What's your answer?

Emotion Control

If it were possible to possess the ability to control your emotions, where the individual could at one moment genuinely feel the fear, worry and panic during a stock sell off, then just the next moment experience the sober, calm, rational and reasonable feelings which are more appropriate, this individual would possess an edge capable of earning wonderful returns in the stock market.
With discipline and practice I am attempting to identify the fear brought on from this automatic human response, repress it, and exercise intelligent rational trading behavior. Taking advantage of fearful, irrational and stupid prices available during panic stock sell offs.

Leave a comment and tell me what do you think of this strategy.

The Simple Choices

The everyday choices in life become simpler when a decision is made to settle for nothing less then spectacular. When a student attends high school and he or she wants to go to one of the best colleges in the U.S., the decision is simpler then a mediocre student anticipating a position at mediocre college. The decision is much more complicated for the second example student then the first, because the choices offered to those who demand a seat at the top are very few.
The same is true when making a decision to retire thirty-five years early. The decision to live fearlessly becomes simple. The decision to try hard every day becomes simple, and the decision to actually follow through and take those leaps of faith is simple. It simply must be done. Although the option to get a real nice and cozy job where mediocrity is protected is always an option for those who want to work till 65.

Unsecured Credit

I just finished a book called "The No-Nonsense Real Estate Investor's Kit" by Thomas J. Lucier. The book became increasingly more interesting as I neared the end, with part 3, "The Fundamentals of Real Estate Investing" and part 4, "Nine-Step Process for Buying and Selling Real Estate". At the close of part 4, Lucier talked about using low interest credit cards to finance short term real-estate investing. He goes on to say...

In this business, access to readily available sources of cash allows investors to take advantage of opportunities to buy properties at below market prices the moment they are known. I've found that low-interest lines of unsecured credit are the most cost-effective source of short-term financing available today.

In the past I always immediately dismissed and shredded those 0% APR cash advance checks and snarled at the cc companies for their ever creative ways of ensnaring people into cc debt, but after seeing the interest rate charged to me on my Zecco margin account, I would happily take their 0% for a year and earn interest on their money.

But BEWARE. The cc companies still have ways of making their money. They charge fees for cash advances which may out way the benefit of the cash advance. Look for a capped fee of $30-$99, which is a good deal if your withdrawing large amounts. The majority of offers I'm seeing today for 0% cash advances come with a 3% fee, so if you with withdraw $10,000 your already down $300. Look for a capped fee and make sure the interest rate remains 0% after a cash advance is requested.

Taking advantage of your revolving credit and paying on time should increase your "credibility" with your creditors. With time, they will probably increase your limits (which you should request every six months) allowing you to use this new unsecured credit to quickly finance properties with the characteristics of a great investment.

401(k) Adjustment

Today I went ahead and adjusted my 401(k) to 1% over my employers match down from 22%. I added 1% to the match because I want to ashore I meet the requirements for the company match. If I were to allocate less then the company match, I wouldn't meet the requirements and the company wouldn't add any money.
The reason I did this is to donate more money to investments I can take advantage of right now! The money in retirement accounts can only be tapped (I'm not including things like home purchase, sickness, ect.) after the much later years of 59 and 1/2. This age is unacceptable.
So why don't I just reduce my 401(k) contribution to 0%, you may ask. Well, my momma didn't raise no fool and if you want to give me free money I'll take it.
p.s. check out this website which explains government subsidized loans as well as other benefits to take advantage of for first time home buyers.

Decreasing Costs

One of my largest expenses is gasoline. I'm sure it's not a mystery to anyone that fuel costs are increasing and now I'm spending almost $80 to fill my tank. This is a problem because like many young American men I enjoy a love affair with driving and consider it a necessity to be able to drive myself anywhere on a moments notice without a second thought (the same reason I used to own an AWD sedan for northeast winters).

In an effort to rediscover my driving freedom I have decided to sell my 95' 530i BMW (20 mpg avg.) and purchase a 97'-98' Honda Civic HX (34 mpg avg.). The Honda is a less expensive car and I expect to have around $1000 left over after selling my Bimmer. This will go directly to my Zecco account to be invested; turning liabilities into assets, that's what it's all about.

In order to receive the best possible price for my current vehicle here are a few things I do to prepare.

1. Make it look pretty.

Get out the wax, Windex, and leather cleaner and give the car a good detail.

2. Make calculated judgements

If there are items that need replacing, determine whether it is worth fixing before selling it. In my own situation, the front bumper needed new trim and a left fog light; I got both for $40 off Craigslist. Something cheap and easy to replace can boost the value enough to warrant a replacement. The other side of the spectrum would be for example the drivers seat which is showing excessive ware. To replace that seat, with a used one in better condition would cost well over $300 and I wouldn't even expect to get that back after selling the car.

3. Sell at the right time

BMW's and generally all rear-wheel drive cars sell better during spring and are harder to sell during fall and winter when most drivers have an AWD or 4X4 in mind. Kinda like buying and selling a motorcycle.

4. The test drive

During test drives with potential buyers, be mindful of where you go. If your cars suspension is on the way out, take them on nice smooth roads where that feature won't stand out. But this doesn't mean to not be...

5. HONEST

An honest person always comes off as genuine which is the most important ingredient when selling anything.

Be On The Offensive To Credit Cards

Stopped by a cool blog called Debt Free Hispanic, left a comment and thought I'd share it

@-Debt Free, just recently became debt free as well and I can't stand it whenever I call Citibank for something; they are always pitching this $10,000 dollar personal loan to me, it always gets me pissed off. So to get back at them I use there credit cards for all the purchases I would have made anyway and rack up on their cash back. I've already made over $100 from my Chase Freedom and I love getting 5% off my gas from Discover. If you can resist the temptation to use those cards for un-needed purchases then take advantage of the credit agencies by playing them at their own game.

I especially like the gas incentive. If your getting 5% back, that's like paying $3.57 for gasoline that costs $3.75 per gallon. If one gas station was selling gas for $3.57 and another for $3.75 across the street, deciding which gas station to patronize would be an easy decision. Just be sure to pay that card off asap; if you can, pay the card the next time your online even though the CC company hasn't asked for it yet.

BTW - the link to the gas card I'm talking about

How To Spend Other People's Money

It was recently my birthday, a side affect of this occurrence is people close to me decide they want to buy me stuff. Usually people buy things they think are meaningful and what usually happens is they either collect dust (what they were destined to do in the first place) or are regifted.
This doesn't happen in my family because we have an extremely evolved gift giving practice. When the individual who's birthday it is, is asked what they want, they simple reply with the item and/or place to purchase the gift or they just request cash. This negates having the gift giving party wasting time, attention, and energy giving a gift that wasn't needed or even wanted. Their are exceptions of course, like a very thoughtful gift from my sister (Quicken Software) which she thought I would want but wasn't specifically asked for. She is of course going to buy the sunglasses I requested of her. Chillies Eye Gear (a.k.a Pepper's Eyeware) are great by the way, cheap polarized lenses, that you won't kick yourself for breaking or loosing them because their so inexpensive.
Another example of intelligent gift giving practices my family uses would be how I'm waiting until June (Father's Day) to purchase tools because they will be on sale like they are every year, instead of right now. The only problem with this one is my Grandma loves to give and waiting until June to give me my birthday gift maybe requesting to much ; ).

The Story

Lets start at the beginning. I was born to middle class parents, my father a musician and my mother a jack of all trades, since I can remember my mothers cleaned houses, been an aerobics instructor/personal training and now an English teacher after going back to completer her second masters degree. I was raised with the "wisdom" of if you want money you need to work for it. Despite the infinite wisdom of my parents and family I also had a God given revelation that these people have no idea what their talking about because they don't have any money!

It wasn't until I graduated from college that I realized I don't want a middle class lifestyle and more importantly it was possible to learn how to make money, not just a little but the kind that gives you the ability to buy Lamborghini's.

From college I basically learned one key piece of information. Know what you want (financial freedom) find someone who has the same thing and is willing to tell you how they got it (Books, courses, blogs, personal advice, if it's your parents, great!) and fearlessly execute your plan. I'm in the process now of fearlessly executing my plan and look forward to financial freedom.

In case you were wondering, financial freedom = buying Lamborghini's

Real Estate Investing

By this time next year, I would like to be the owner of some type of investment property. The two options I'm considering are either a multi-family home where I would live in the basement to maximize rent potential or a handyman special condo I can pick up for cheap, live in, fix up and rent out covering the mortgage and maybe even some passive income. I would tern this into a cycle, beginning a new project only after I have vested 20% of the properties worth and can withdraw those funds, using the house or condo as collateral and buy another investment property.
My plan is to continue with this cycle until rich, all the while shelling money into various other investment vehicles such as the stock market of course.
The key step's in this plan will take place during the next year. I plan to strike at the right moment in order to pick up a depreciated property not only from it's present condition but also taking advantage of the current real estate slump. The other key step is purchasing a mortgage at the perfect time, catching rates at record lows and locking in the rate for 30 years, reaping the benefits of cheap money for a long, long time.
I'm keeping tabs on the mortgage rates almost daily, if rates drop to the point of June 2003 of a national average of 5.21% I may be tempted to lock it in and buy something. I doubt we'll see a situation like the one were in right now (slowing economy, sub-prime crisis, gluten of unsold houses) for a while.

Account Status

Just transfered the funds received through my tax refund to my e*trade account. I'm currently making 3.45% interest on the money which is a whole percent less then e*trade was initially giving out but interest rates are going down and everyone is decreasing their rates so this comes as no surprise.
I've been playing with the funds in my virtual optionsXpress account at the same time as realizing how hard investing in the market is. I'm also learning a ton and loving it. I'm keeping a close eye on Anheuser-Busch at the moment.

Not Sure If I Need This

Krazology.com's Disclaimer:

The information provided on this site is not financial advice and I am not a financial professional. This is a journal that details my investments, strategy, and analysis for personal use. Feel free to read at your own risk.

Paper Trading

For the past few months I've been attempting to track my performance picking stocks through Yahoo's online portfolio account. The online account is basic at best and leaves much to be desired. Recently I stumbled across optionsXpress online paper trading system which I find to be far superior and provides great practice for a rookie like me. Their web site also provides a plethora of investment training material for those seeking trading enlightenment as well as stocks and options trading services. I haven't used any of their pay services yet and may, depending on their broker fees.
Right now I'm practicing selling covered calls and basically just trying to get my feet wet trading options since I never have. Probably won't put in any real money until I fully understand what it is I'm doing.
If anyone had any advice please leave a comment!

Save

Following the last post about self-investing, I would like to start exploring other areas of investing probably considered more conventional.

I will be researching, writing and calculating how to invest. Assuming you are below the age of thirty (>80% of my investment funds will be in stocks), have some money to invest (meaning, you can afford to lose it) and are willing to accept more then average risk, these posts will apply to you. I have a fairly high level of risk tolerance and will invest accordingly. I understand the average investor will fail to beat the market and most are better off putting a portion of their paycheck every two weeks into an index fund, but this is not where I stand. I believe with the right system, earning quadruple what the S&P500 did this past year is not fantasy. (YTD percentage yield, as of today, the Vanguard Total Stock Index Fund (VTSMX) has lost -7.52%, so even index funds are prone to significant loss).

My plan right now is to save and start investing. I opened an e-trade savings account to help me do this, earning 4.01% interest at the present time. I have right now about $600 and will accumulate until I reach $1,000. At that point I will begin to experiment with different investment vehicles while sharing my gr0wing pains and results with this blog. I will choose stocks based mostly on my own level of confidence with that company's product, while supplementing decisions with a combination of fundamental and technical research.

I will begin investing within the next three weeks using Zecco as my preferred trading tool, chosen based upon it's reputation for free trades.

Investing In Yourself

The first place anyone should begin their investing career is in themselves. This phrase may sound cliche but the rewards are often more concrete.

Ways to invest:

Going back to school

Beginning your undergrad, graduate or even professional degree pays dividends for decades after achieving that success, and once achieved, it is impossible for this investment to be lost. I would also like to state that the rewards of a higher degree are not always monetary, benefits can come in unexpected forms, like respect.

ABL

An acronym for "Always Be Learning." The learning process in your life never ends, so you might as well learn to enjoy the learning experience. Learning anything will improve you and is always a great investment since there is so much to learn and so much of it is free. (Internet, library etc.)

Get Out of Your Shell

"Action may not always bring happiness, but there is no happiness without action"
-Benjamin Disraeli, former British Prime Minister

"Named must your fear be before banish it you can."
-Yoda, from Star Wars: The Empire Strikes Back

I had another quote I really wanted to post which basically stated; one's success can usually be measured by your willingness to step out of your comfort level. I wholeheartedly believe this and are constantly challenging myself to step out in certain situations . I identify these situations simply by identifying discomfort and pushing myself into the situation and using it to not only confront the fear, but also to familiarize myself, so next time I won't hesitate.

Highest Low Yield Investing

Just opened an e-trade savings account yesterday, definitely the highest savings account interest I've seen. Right now at 5.05%, although in the future I expect it to drop due to the fed cut of .75%. Hopefully though e-trade will continue to pay the highest and stay over other online banks like ING. I will continue to feed this account with a large portion of my bi-monthly paycheck until it reaches a level I feel comfortable enough to start playing with covered calls.

On a side note, I'm not sure what the fee is involved in writing covered calls but I continually see ad banners on sites like yahoo finance for a site called TradeKing. Might have to check them out; they claim their fee per contract is 65 cents, although I'm not sure what TDAmeritrades is.

Update On Covered Calls

I just got approved to buy and sell covered calls from TDAmeritrade. Now I just need to save enough money to buy a contract, (one hundred shares) although I'm not positive on whether you can buy less then that, I guess there's only one way to find out...stay tuned.

How I Pick Stocks

I've recently began exploring how to pick stocks utilizing intelligence and intuition using both technical and fundamental analysis with an emphasis on fundamental analysis. (allow me to state, I prefer not to allow outside opinions to dictate what stocks to invest in, i.e. Jim Cramer's Mad Money. Although if it happens, it happens)

I begin by visiting yahoo.com and following the side navigation bar to finance and selecting the index that I'm most familiar with. From the following page, I select components from the left navigation bar.

On the following page are a list of all the stocks in that particular index. At this time in my investment education I have not found a better way to investigate stocks to invest in but to scroll down the list and select component names I recognize and strike me as a company I find to have quality products, effective marketing and room for growth. I look back to my experiences with those products, if I had patronized the company before, what my experience was like with that purchase and if I planned to patronize that company again.

The Lieing Annex

A couple months ago I attended The Learning Annex at Jacob Javits convention center in New York City. It was a complete waste of time. If you ever have the opportunity to attend one of these meetings I suggest reading this first.
When you arrive, you wait in line for about half an hour and they show you into the main auditorium. On the way in, their are girls dressed in skimpy clothing, lined up on both sides of you (kinda like cheerleaders while football players run onto the field) and their all screaming and yelling MONEY MONEY MONEY!!!
Basically this singing and screaming about money continues for about 45 minutes which is when I realized my day would have been better spent elsewhere.
Following this charade, people break up into different "classes". They immediately begin pitching you whatever product pertains to the "class" you selected to attend, this "class" is run by a salesman. The salesmen discussing these products were probably the best salesmen I have ever seen or heard, whatever they were paying these guys wasn't enough. As you sit there and listen, they slowly suck you into believing you need this product, and the only way you are going to achieve your financial goals is by BUYING their product. Buying is capitalized because the service, software or CD set their pitching you all cost around or over $1000. I would also like to point out that on The Learning Annex website they claim "learning" is what they are offering; the only thing they are offering is the opportunity to BUY.
The products discussed there could have value and I am not claiming they don't work. If you want to learn what is offered from these products, you can research them and determine if you want to make that initial investment from your home. The main reason I am writing this post is they claim they are going to teach you something, the truth is they are selling you something.