Articles by mgedwards

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.

Boomslang Barry: Zambia’s Answer to Groundhog Day

Punxsutawney Phil saw his shadow today and foreshadowed six more weeks of winter in the Northern Hemisphere.  Phil is an interesting meteorological barometer, and I would enjoy spending February 2 someday in Phil’s home, Punxsutawney, Pennsylvania, watching him predict the change of season.  Watching the Bill Murray film “Groundhog Day,” one of my favorite comedies, convinced me that it would be worthwhile making a pilgrimage to rural Pennsylvania in the middle of winter to see an overgrown rodent tell the future.

To my knowledge, the Southern Hemisphere does not observe the tradition of looking to a larger-than-life animal to predict future weather patterns.  Animals play an important role in foretelling a change in season (e.g., the opening of hunting season), but Punxsutawney Phil doesn’t have a counterpart in the other half of the world.  Perhaps it’s time for a country, town, or village south of the Equator to anthropomorphize a prescient creature that signals a significant event and popularize it to attract tourists who want to gawk at its predictive prowess.

If Zambia were to adopt this tradition, the termite might be the most fitting creature because it appears whenever the rainy season starts (in late October/early November).  Unfortunately, termites aren’t loveable like groundhogs and would not be popular with termites.  Watching termites appear with the first rain would not draw in significant numbers of tourists.  Rather, the animal or insect would have to be adorable and irresistible to those who are attracted to odd traditions for the sake of superstition or curiosity.

Zambia might do well to adopt the snake as a national weather barometer and cash in on its newfound fame.  As they are often temperamental, and sometimes lethal to farmers, farm animals, and bystanders who cross their paths, snakes are not popular here.  Many Zambians differ from Americans in that their natural inclination is to kill snakes rather than to avoid them.  Nevertheless, snakes are good predictors of weather changes here because of their reptilian nature.  Whenever the weather changes from hot to cold or dry to wet, snakes often move to warmer places such as road surfaces.  Zambians could turn local logic on its head and emulate one type of snake – a more beautiful, “less” dangerous variety such as the beautiful but deadly boomslang – as a harbinger of change. A town or village could establish a festival signaling the beginning or end of rainy season and adopt one snake that can publicly announce the season change in front of throngs of tourists.  Boomslang Barry, perhaps?

Boomslang Barry

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Windows 7

I just bought a new computer with the Windows 7 operating system pre-installed.  I like it so far.  As many critics have pointed out, Windows 7 is a much better OS than Windows Vista.  Windows 7 runs faster than Vista and has some improved GUI features that enhance the user experience.  The little touches count, and the layman can tell that Microsoft spent considerable time, effort, and money to make Windows more user-friendly.  Gone is the bootup DOS screen, and instead of using ALT-Tab to scroll through open screens, Windows 7’s taskbar has a dynamic feature that allows you to see the Windows when the mouse pointer passes over icons.  I do wish that Microsoft would consider replacing CTRL-ALT-DELETE in a future OS with some other easier to use method of bringing up the intro screen and make it easier to find certain settings it changed from previous OS such as the “Show Desktop” feature on the taskbar (now hidden to the far right).  Despite these mild critiques, I’m impressed.  As my contacts at Microsoft know, that’s not easy to do.  Microsoft will be happy to know that at least one user prefers its latest operating system to Apple’s Snow Leopard OS, which left me feeling as if I were driving on the wrong side of the road.