Warren Buffett’s 10 Ways to Get Rich

During a week like this one – where the market is tanking, investment banks are failing and people are running scared – it seems like a good time to get back to basics Buffett Style.

Yes, it’s time to check in with that ol’ investor Warren Buffett to find out a few of his secrets. Luckily for us, there’s an article on WalletPop.com about Warren’s 10 Ways to Get Rich. And what I like about these ways is that they’re all pretty much common sense.

According to Buffett, if you want to get rich you should:

1: Reinvest Your Profits
In the beginning, don’t spend the profits from your investments. Reinvest them. It will give you a bigger stake to invest and profit from in the future.

2: Be Willing to Be Different
Don’t blindly follow what others say or do. Make your own decisions based on your own research and situation.

3: Never Suck Your Thumb
Don’t wait around idly trying to “make up your mind.” Take action swiftly. Read more

Lehman and Merrill and A.I.G….Oh My!

OK, by now you know that Wall Street is in the middle of a major crisis – Lehman Brothers filed for bankruptcy protection, Merrill Lynch saved itself by selling itself to Bank of America, insurance giant A.I.G. is in dire need of an influx of about $40 billion to keep it “financially sound”, the Dow opened down more than 300 points today and oil is trading below $100.

So, What should you do?

1. Don’t Panic.

2. Really, don’t panic.
Panicking never helps anything. It just throws you off your game.

3. Re-evaluate your goals.
What do you want in your life? What do you want your investments to accomplish? Seriously look at every aspect of your life and what you want your investments to do for that aspect of your life.

4. Re-evaluate your investments.
Do your investments have the same objectives as your goals? This is probably the most important part of your investment plan. If they don’t jive, they don’t thrive.

5. Take smart action.
Yes, smart action. Evaluate everything – then do what you need to do. And remember, DOING NOTHING is also taking action. Don’t do something just to do something. That could be the worst thing you can do.

Times like this remind us that we need to keep a closer eye on our portfolios.

Let us know what you think about all this and what you’re going to do. And we’ll all get thru this without too many scrapes and bruises.

Invest Like a Horse Racing Bettor.

OK, maybe bettor isn’t the right word. But when you think of horse racing, you don’t think of investing. You think of betting, gambling, taking chances, getting some “action”.

But on today’s TheStreet.com, Scott Rothbort wrote a great article about what investors can learn from horse racing.

According to Scott, there are 5 things from racing that can help investors become better investors. Here they are.

1. Don’t Bet Every Race.
Just like in horse racing, many investors are tempted to always be “in the game” and always have at least one trade going. But this temptation can ruin you - if you’re a horse racing bettor or a financial investor.

2. Do Your Research.
This seems obvious, but just like the many bettors who pick a horse on a “hunch”, a lot of investors pick an investment on a “hunch” or a “guess” or a “tip”. All of these will just take more money out of your pocket.

3. Eliminate the Losers.
There are obvious losers in any horse race/investment class. So, if you do your research, you’ll be able to highlight them. Then, all you need to do is steer clear of them.

4. Not All Favorites Are Good Favorites.
Favorites are not always graded on the same scale. You need to go deep into your investment/horse to find areas where you can judge it rigorously.

5. Be Aware of Derivatives.
In a horse race, they’re called exotic bets. In investing, they’re called derivatives like options, swaps, convertible securities and futures. In both areas, these bets/investments are highly risky. And are best left to experienced and sophisticated bettors/investors.

So, if you want to become a better investor, maybe you should approach it more like a bettor.

Buy & Hold? Quit & Fold? What Can You Do?

“Stay the course.” “Stick to your plan.” “Don’t make emotional decisions.”

No matter what type of investor you are, the advice given above is usually pretty solid. And will usually keep you on track toward your goals.

But then, in a down market like this, even those of us with the strong intestinal fortitude have to take a step back and look at what’s going on. And what we can live with.

This is the basis of a very eye-opening article I read on today’s NYTimes.com.

The author, Paul J. Lim, explores some important questions – such as: “Should buy and hold investors think about selling some of their lagging stocks?”

He goes on to tell us that the S&P 500 has basically gained nothing over the last 10 years. So, what does that do for buy-and-holders?

But then, what about those investors who sell at the first sign of despair? Aren’t they hurting their long-term prospects? Yes and No and Maybe. It all depends.

And that’s the big phrase here “It all depends.” There are no hard and fast answers here. But Paul and his interview subjects reveal a few options that can help all of us get thru this economic downturn.

So, if you’re wondering what you can do now, check out the article. It could help you make some important decisions that can help you not only now, but also in the long run.

Want to Become a Full-Time Investor? Here’s How.

I don’t know about you, but there are times when I think “Yeah, I can make a living just from investing in my portfolio.” Usually, those times are right after I close a great trade.

But then I come back to my senses and realize that I probably don’t have all that it takes to be a full-time investor. At least not now.

So, when I saw an article about how to become a professional investor on today’s TheStreet.com, I just had to read it.

Written by professional investor and finance professor Scott Rothbort, the article gives a great rundown of what you’ll need to become a successful full-time investor.

According to Scott, the first thing you need to do is to get organized and write a business plan. Yes, professional investing is a business. And you should treat it as such.

Then you really need to look deep within yourself to see how you work – both alone and with others. One thing I didn’t realize is that you’ll need to decide on what legal structure is best for you – such as a sole proprietorship, limited partnership or LLC. This should fit in with the money/tax structure you choose.

Once you make the above choices, you have a few more decisions to make. Are you trading for your own account? Are you managing money for others? Are you doing both? If you’re a money manager, is your fee based on assets or performance?

Yeah, I know that that’s a lot to think about. But then, if you want to be a successful full-time investor, you need to do it the right way. And I’m betting that a pro like Scott knows the right way.

So, if you’ve ever thought about investing full-time, check out Scott’s article. It could be your first step to becoming a pro investor.

Hybrid Funds: The Way to a Greener Portfolio?

In a market like this, we all could probably use more “green” in our portfolios. And I’m not talkin’ environmentally-friendly stuff. I’m talkin’ green as in Jeffersons, clams, greenbacks.

OK, so how can we put more green into our pockets? Well, with hybrids, of course. In this case, we’re talkin’ hybrid funds.

You see, hybrids are balanced funds that combine equity and fixed-income securities. And according to an article on today’s TheStreet.com by Kevin Baker, the best-performing hybrid in the Q2 (March 31 - June 30) returned 14.25%. For those 3 months! Not bad.

That hybrid is CGM Mutual Fund (LOMMX). And it’s not alone in the quarterly double-digit gains department. The second-best fund for Q2 was Fidelity Convertible Securities Fund (FCVSX), and it gained 10.60%.

Now, these are pretty great returns for a measly 3 months in a bear market. But will they hold up for a longer period of time – say, a year? That’s the big question.

But for now, it might pay to do some in-dept research on hybrids. The first place to start is the article on The Street. Who knows? Your portfolio just might become a little greener.

The Good News Bear Market.

When I hear the phrase “Bear Market”, I shudder. I know that there’s a great chance that my portfolio will lose value. And that’s bad news in my book.

But, not all the news in a Bear Market has to be bad. In fact, you can find good news in a Bear Market – it just depends on how intelligent an investor you are.

Today, I read a great article on WSJ.com that shed some light on what you can do in a Bear Market. According to the author, Jason Zweig, we’ve been in a Bear Market for years. And he’s looking forward to us staying in one for a while. Why? Well, when you check out the article, you’ll find out that he sees great opportunity in Bear Markets.

As I was reading it, I found out that one the greatest investors of all time, Warren Buffett, seems to love Bear Markets. This year, during the Berkshire Hathaway annual meeting, Buffett stated that as an intelligent investor: “If a stock [I own] goes down 50%, I’d look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month.” Read more

Are Savings Bonds A Good Deal Now?

The headline on the article on MainStreet.com read “The Savage Truth: Don’t Buy Savings Bonds”. It shocked the heck out of me.

Why? Because, I thought that U.S. Savings Bonds were at least a nice, safe, OK investment.

But according to the article, there seems to be a few things about new bonds that might not make them a smart investment right now.

And although I don’t want to see unpatriotic, I do feel like I have an obligation to share with you any ideas that might affect your finances - so you can make your own decisions.

Now, according to this article by Terry Savage, older bonds seem to be a good deal. But the newer bonds, like Series EE, carry low fixed rates that can’t keep up with inflation. In fact, the EE bonds have a fixed rate of just 1.4%. And if you buy them before November 1st, they’ll have that rate for the next 20 years until they reach maturity. If you hold these bonds for the full 20 years until maturity, they’ll reach their “face value” and provide you with an effective yield of 3.6%.

I don’t know about you, but waiting 20 years for a 3.6% return doesn’t rock my boat. And then, after you redeem the bonds, you have to pay federal tax on the interest you earned.

But if you own older EE bonds or Series I bonds, you might have a great deal on your hands. If you’re thinking of cashing them in before they mature, find out what their guaranteed base rate is by going to TreasuryDirect.gov.

In any case, if you own savings bonds or are thinking of buying some, please check out Terry’s article to get an in-depth look at how savings bonds work. And then you can decide if they’re a good deal for you or not.

Bear Market Investing Basics.

I read a good, short article yesterday about how to profit during a Bear Market, which we’re in right now.

The piece, by Keith Fitz-Gerald on the terrific MoneyMorning.com site, lists the 5 Keys to Bear Market profits.

According to Keith, these secrets are:
1. Don’t buy a stock if its fundamentals don’t match it’s price
2. Don’t overpay for a stock, even if you think it’s a “bargain”
3. Look for companies that are keeping their prices stable or even increasing them, and still keeping their customers
4. Look for companies that have new research coverage by analysts
5. Look for companies that pay good dividends

These seem to make total sense to me. And they seem to be the same basic parameters that we should always be looking for - no matter if we’re in a bear or bull market. But honestly, a lot of us don’t follow these basics. And we then pay the price for it.

Check out Keith’s article. Then look at your portfolio to see if you’re following these keys. You just might see something that you want to change in order to better position yourself for profits in this market.

Where Can You Put Your Cash Now?

Yesterday, the market dropped to such historic lows, we were “officially” in a bear market for a while. Plus, we just had the worst June since the Great Depression. And in the first half of this year, the Dow dropped 14.4%, the S&P dropped 12.8% and the NASDAQ dropped 13.5%.

So, where can you put your cash right now when the market is this bad? Well, according to an article by Kevin Baker on TheStreet.com, you might want to look at Tax-Free Money-Market Funds.

Yeah, I know that their returns aren’t great compared to what you were used to with stocks and mutual funds a few years ago. But when the market is in bear territory, you might want some of the security that these bond funds can offer.

The article talks about funds like Evergreen Institutional U.S. Government Money Market Fund (EGNXX) that’s returned 3.9% in the past year. I know that’s not something to write home about. But when you consider that it’s tax-free, now we’re talking a return that’s way better than a lot of stocks, mutual funds and ETFs, not to mention taxable savings accounts.

So, if you’re looking for a little more safety, you might want to check out this article and the bond funds that it features.

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