Resolve to Make 2012 A Great Year


Happy New Year! How did you enjoy ringing in the new year? Did you wake up feeling great or with a literal or proverbial hangover? Now that the celebrating has subsided, are you ready for 2012?

This year may be a momentous one with some major milestones on the calendar, from the Chinese Year of the Dragon to the end of the Mayan calendar. Some dates are already set, such as the Expo in Yeosu, South Korea (May 12-August 12), the Summer Olympics in London (July 27-August 12), not to mention the landing of the Curiosity rover on Mars in August, and, barring a new framework agreement, the end of the Kyoto Protocol on December 31. Some major events this year are already known, while others are not. No one really knows what will happen in places such as North Korea, where newly-installed “supreme commander” Kim Jong Un takes over as leader; possible sanctions and threats to blockade the Strait of Hormuz; unrest in Syria and other protests sparked by the Arab Spring; the European financial crisis; protests in Russia; potential economic slowdown in China; general elections in the United States and in dozens of other countries worldwide. No one knows what will happen. On December 21, 2012, when the Mayans purportedly predicted the end of the world will occur, we’ll look back at the year 2012, analyze the fall out, and, hopefully, be around to tell about it on December 22. Until then, we can only speculate about the future.

There’s no reason to worry about 2012. We can only control what falls in our own sphere of influence, which for most people amounts to whatever affects us directly. What do you have planned for yourself this year? Have you considered making some life changes? I believe in making and achieving goals, and I consider New Year’s resolutions worthwhile. Realistic resolutions can help frame a goal and give you a specific objective to achieve. You may not achieve everything you set out to do in a given year, but if you achieve at least one resolution or make progress toward one, you’re better off than you were. I met half the resolutions I set for myself in 2011 and set some new targets to achieve in 2012. The ones I did not achieve will be carried over to this year. They range from publishing a new book to losing weight to strengthening my faith to learning the guitar. Some will be easier than others, but I resolve to tackle them all in the next 12 months.

Even if you’re not the type of person to make New Year’s resolutions, there’s one goal you can resolve to achieve this year. Make this year a better year than 2011. Make it the best it can be. It doesn’t matter if you had a good or bad year last year. Life can always be better. Resolve to make 2012 a great year.

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Vote Now! MarketWatch’s "Next Great Investing Columnist" Contest


VOTE NOW!  I entered an article in MarketWatch’s "Next Great Investing Columnist" contest.  Vote for it by clicking on the Facebook "Like" button.  There are many great entries, and the top vote getters will head to a second round with a third and final round in November. The winner gets a six month contract to write as a columnist for MarketWatch, an affiliate of the Wall Street Journal.

Here’s the full link:  http://blogs.marketwatch.com/great-columnist/2011/10/19/finding-shelter-in-financial-storms/

The article draws heavily from my experiences in Thailand in the midst of flooding. The floods are a good analogy for the recent swings in the world’s financial markets, with both flood victims and investors looking for shelter. The article offers some concrete suggestions to investors on how they can stay afloat during financial turbulence.

Thanks for reading my article and for your support!

Sound Investment Principles


Some people have asked me about my investment strategy.  Here are some investment principles that have paid dividends.

  1. Buy what you know.  What companies or sectors do you know?  What products do you use?  Are they good companies with promising futures and good growth prospects?  If so, buy some of their shares.  But do your homework first.  Buyer beware.
  2. Don’t try to time the market, but know the season.  It’s folly to jump in and out of the market when you think it’s going up and down because sometimes you win, sometimes you lose.  It’s better to look at the long term and invest accordingly.  What’s in store for this year or the next few years?  Do you believe the market do well this year?  What do the experts say?  If you have a broker, what does he or she say?  Going with your gut instinct is often the best check and balance to investing.  If it sounds too good to be true, it probably is.  Likewise, the situation never seems to be as dire as some predict.
  3. Don’t spread yourself too thin…concentrate.   Don’t try to track too many stocks or funds.  Pick a few (up to 10-12) that you like and focus on them.  Study them and look at their fundamentals such as P/E ratio and EPS.  Professionals don’t try to track too many stocks, and you shouldn’t either.  Add or remove companies as they under- or outperform.
  4. Don’t sell too high or too low.  Since you can’t time the market, set upper and lower price limits to trigger buys and sells.  Don’t ride a stock to delisting; get out while you can still recover some cash.  Don’t wait for an investment to reach an unlikely price target.  Better to get out while you’re ahead.
  5. Watch those fees.  If you don’t feel like a savvy investor, read the fine print before hiring a broker or buying a fund.  Sometimes the fees can be in excess of 2% of the total principal, meaning that your broker would have to outperform you by at least that much to justify the fee.  Sometimes doing it yourself – and employing available investing tools such as stock and fund screeners – yields better returns (or fewer losses) than hiring someone to do it for you.  If you feel more comfortable using a broker, ask them for their fee structure up front.  Some will charge a fee to open and close account as well as monthly wrap fees.  These can be palatable if your broker offers a low fee structure (1% or less) or handles your account carefully. 
  6. Move past the basics of investing.  The smartest investors don’t put all their eggs in one basket.  Consider real estate, a small business, options/margin trading, micro-loans, IPOs and private equity investments to diversify your portfolio.  Prosper.com lets you offer higher interest loans to Americans, and Kivu.com does the same for international micro-loans.  Try the IPO market.  W.R. Hambrecht offers periodic open IPOs.  Try angel investing or secondary shares of privately held companies on a site such as SharesPost.com or SecondMarket.com.  MergerNetwork.com offers real estate and businesses for sale around the world.  Try investing in foreign markets or currency trading.  InteractiveBrokers.com facilitates trades in foreign exchanges and currencies.  (Disclaimer:  I have investments through some of these sites but have no personal financial stake in them.)
  7. Make investing a habit.  These are several basic investment strategies you can use to improve your financial situation by investing just $50 per month (every little bit helps):
  • Open a Roth IRA and invest in it as an after-tax retirement benefit;
  • Increase your 401(k) withholding until it hits the annual ceiling;
  • Open 529 accounts for your children and set the money aside for future college expenses;
  • Set the money aside in a Health Savings Account (HAS) or Flexible Spending Account (FSA) to pay for anticipated expenses tax free; and/or
  • Pay an additional $50/month on any credit card debt and/or mortgage.

What you should NOT do:

  • Spend the money on depreciable fixed assets (aka “stuff”).
  • Spend it on dining out, entertainment, or any expense that offers a one-time benefit.

Investment Principles and Strategies


Occasionally I chat with others about investment principles and strategies.  Here are some of my investment philosophies.  They’re not original ideas, but they work for me.  They continue to evolve.

1. Buy what you know.

What do you know? What products do you use? Are they good companies with promising futures and good growth prospects? If so, buy some of their shares. But do your homework first.

2. Don’t try to time the market, but know the season.

It’s folly to jump in and out of the market when you think it’s going up and down. It’s better to look at the long term and invest accordingly. What’s in store for 2010? Will the market do as well in 2010 as it did in 2009? Not likely. The January swoon will get better in February or March, but with all the structural issues the U.S. is dealing with now, it’s better to either put money in conservative investments or look to the global markets for gains. Although I could be wrong in the short term, my long-term view has a much better chance of being correct.

3. Don’t spread yourself too thin…concentrate.

Don’t try to track too many stocks or funds. Pick a few (up to 10-12) that you like and focus on them. Study them and look at their fundamentals. Professionals don’t try to track too many stocks, and you shouldn’t either. Add or remove companies as they under- or outperform.

4. Watch those fees.

If you don’t feel like a savvy investor, be sure to read the fine print before hiring a broker or buying a fund. Sometimes the fees can be in excess of 2% of the total principal, meaning that your broker would have to outperform you by at least that much. Sometimes doing it yourself – and employing available investing tools such as stock and fund screeners – yields better returns (or fewer losses) than hiring someone to do it for you.

5. Move past the basics of investing.

The smartest investors don’t put all their eggs in one basket. Consider real estate – the next two years will be a good time to buy a rental property. Consider options/margin trading. Consider micro-loans. Prosper.com lets you offer higher interest loans to Americans, and Kivu.com does the same for international micro-loans. Try the IPO market. W.R. Hambrecht offers periodic open IPOs. Try angel investing or secondary shares of privately held companies. Try investing in foreign markets or currency trading. Interactive Brokers facilitates trades in foreign exchanges and currencies.

Investment Strategies

These are several basic investment strategies you can use to improve your financial situation on $50 per month:

1. Open a Roth IRA and invest in it as an after-tax retirement benefit;

2. Increase your 401(k) withholding until it hits the $15,000/year ceiling;

3. Open 529 accounts for your children and set the money aside for future college expenses;

4. Set the money aside in a Health Savings Account; and/or

5. Pay an additional $50/month on any credit card debt and/or mortgage.

What you should NOT do:

1. Spend the money on depreciable fixed assets (aka “stuff”).

2. Spend it on dining out, entertainment, or any expense that offers a one-time benefit.

Apple and Google – Gifts that Keep Giving


A year after I bought shares of Apple and Google, I am happy to announce that I still own them and that they’ve been paying dividends.  Well, not true dividends — neither company offers dividends to shareholders.  However, Apple’s stock gained over 115 percent since last October, and Google over 60 percent.  My only lamentation is that I wish I had bought shares of Amazon.com, which is also up substantially.  Thankful, the contrarian strategy of buying equity in concentration rather than diversifying worked well during the economic rebound.
 
What’s next?  Real estate.  We’re moving cash out of equities in anticipation of buying a property in the next year.  If you have any extra cash, you might consider the same strategy.  The best time to buy is when things look most bearish. 

Thanks, Google and Apple


After over two weeks of watching my investment portfolio get pummeled, I decided to take matters into my own hands and try some market timing.  I sold six "safe" — actually, lousy — mutual funds that had been trounced in the market, and ploughed the money into Google (GOOG) and Apple (AAPL).  The funds were attempts to hedge against the domestic financial market, all 5-star Morningstar rated funds with moderate risk, high return ratings.  Some were international funds and hedge-type funds. They lost over 40 percent collectively since I bought them last fall.  Forget about being cautious.  I decided to go back to my tried and true friend, Google, and pick up some shares of Apple.  I’ve won with Google twice, the first time being when I picked up shares at IPO ($85) and made a killing.  Google dropped from $707 per share last year to almost $320 last week.  I picked up shares of both on the bounce.  While the financial markets will probably be volatile for the foreseeable future, these two companies are undersold.  My gut tells me to ride them on the bounce until they recoup my loss and then jump off.  I think it’s a good contrarian move.  While it’s not always a good idea to concentrate in a limited number of stocks in a volatile sector such as technology, there’s one rule that trumps this adage — sometimes it’s better to go with your gut.

The “lease renewal” ritual


We have a couple of properties.  One is located in the Seattle area managed by a property management company; the other is in the Washington, D.C. area and managed by us remotely from Paraguay.  Each year about this time we go through an odd mating ritual known as the "lease renewal."  We would love to have long-term tenants in both places, but alas, we have to lease them from year to year.  Our Seattle property is leased by a company that provides corporate housing for a major corporation.  They take good care of the house and are dependable, although they keep us on the hook from year to year and renegotiate at the last minute.  The property management company does a decent job taking care of our Seattle place, but they charge a large fee up front each year for "finding" a tenant that renews the contract each year, and they charge a monthly service fee to boot.  It adds up.  We don’t have many headaches with the place but don’t see as much rent as we would like. 
 
Because we manage the Virginia property ourselves, we don’t have to pay a property management company to manage the property (we retain a local legal representative as required by law but manage it virtually ourselves — well, I do anyway).  The tradeoff of course is that we have to manage the property remotely.  We rent to our colleagues and have developed rapport with each of them, allowing to work together in the event of difficulties with the home.  Nevertheless, owning a rental and managing it yourself is a challenge, especially if you live thousands of miles away from the property.  Whenever the tenant needs a repair, we’re on the phone right away to get the house back in order.  Finding a new tenant is another challenge entirely.  So far we’ve been very fortunate to have lined up tenants fairly easily.  Because they’re our colleagues, we can advertise within the greater community and find someone whose timing and price match ours.  We have been very fortunate over the past three years.  We’re negotiating with prospective new tenants right now and should be able to work something out with them.  This happens every year, and each year I wonder whether I should just throw in the towel and hire a local property management company.  Then I think–why would I every want to spend so much for some company to do so little?  Doing it myself is worth the trouble.