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Stock Pick for 2011

December 11th, 2010 1 comment

The last few days I have been reflecting on my 2010 gamble with Motorola call options.  Well, that didn’t go so hot, and in January my options contract will expire and I’ll have lost a total of $3,100.  Barring a miracle next month this was indeed a bad run.

For 2011, I’m going to be swearing off options.  I may participate in some selling of covered calls, but I’m going to stay away from using them as a way to gamble on hunches I have about the future.  Instead, I’ll be sticking with regular, boring old stocks.

This year I have a hunch that AOL (yes that AOL… America On Line) is going to make a come back.  The future earnings projections are pretty abysmal, and I think people are being a little too negative about the company.

While AOL currently relies on old school dial up internet subscribers for a majority of their revenue (approx. $250 million in the last quarter), they are investing in a number of different areas to try and generate new streams of revenue.  At the same time, they are acquiring internet properties with high traffic volumes.  In fact, last quarter they bought TechCrunch.com.

Also, the numbers look especially bad right now compared to the recent history.  I believe most of this is from shutting down operations and  selling off some of their assets.  Hopefully, starting in 2011 things will stabilize and they can focus on expansion instead of controlling the losses.

So, how am I going to play this?  Well, I think the next quarterly statement might be pretty bad as well, so I don’t want to go all in at this point in time.  I’m going to buy 100 shares of stock this week and wait to see what happens.  If the stock tanks after the next quarter, I’ll double down and lower my cost basis.  Otherwise, I’ll stick with my 100 shares and see how the year goes.

PS.  If I had just bought stock for my hunch on Motorola instead of buying stock options, I’d only be down 3%.  That sounds a little more appealing than my current 92% loss.

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Why I don’t Need a Financial Planner

November 6th, 2010 4 comments

If you immediately thought to yourself… “because he doesn’t have any money” after reading the title, you are only partly correct.

I think that anyone who has even a little bit of financial sense should be able to manage their own money.  Assuming you’re not super rich, or have some weird circumstances, why should you pay someone else to manage your finances?  Warren Buffett has 2 simple rules to follow when it comes to managing money that anyone can understand:

  • Rule #1 – Don’t lose money.
  • Rule #2 – Don’t forget rule #1.

While this is somewhat of a humorous take on money, there is some truth to it.  While one of the richest men in the world can get away with joking like this, how could this be applicable to mere mortals like you and I?

Don’t lose money to the scammers. I have a rather broad definition of “scammer”.  A mutual fund loaded with hidden fees, a broker charging Grandma $150 to trade a stock, or a “Free Investing Seminar” hoping to lure you in and convince you to hand over money are all types of things that need to be avoided.

Don’t lose money by chasing the bull. Wayne Gretzky was awesome because he “went to where the puck was going, not where it already was”.  We should try to do the same thing.  A few weeks ago, I was talking with a Program Manager from Apple (he worked on iTunes), and he was literally in love with Apple stock.  While I can understand his reasoning, because he could very well be a millionaire from his stock options, he actually was recommending that I should buy in too.  No thanks!  He said “It just hit $300,  it’s great!”.  I replied that is exactly why it’s the wrong time to buy.

Apple could very well keep going up, but will it go up 1,000% from where it is today?  No way.  Back when Steve Jobs re-joined the company is when we should have bought that stock.  In 1997, the stock was trading for around $17.  If you bought $10,000 worth of Apple stock back then, it would be worth roughly $175,000 today.

Don’t lost money by taking unnecessary risk. I’m one of the worst offenders when it comes to this one right here.  I should have learned my lesson by now, but I keep making the same mistakes and taking the same risks.  While this type of problem could take many forms, my problems is trading stock options.

Stock options are supposed to be used to reduce risk, allowing you to shield your investment from big swings in the market.  Instead, it can also be used to legally gamble with your hard earned money.  This year I made a pretty big bet with Motorola.  In January of last year, I bought about $3,000 worth of Motorola $10 call options with a maturity date of January 2011.  My rationale was that the Android phones were going to rise and take over this year, pulling Motorola up with it.  Unfortunately, this doesn’t look like it’s going to happen and I just wiped out any other gains I would have made this year with other investments.  While if I had guessed right, and gambled on Apple, I probably would think I was sooo smart, at least I hope to learn to leave those options alone.

Maybe there’s other ways to lost money that I haven’t mentioned here, but these were just the few that came to mind as I was writing this.  No doubt, I’ll probably find a way to lose money in the future, and if I do, I’ll be sure to share.

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Frugal Savings – TDAmeritrade Account

February 21st, 2008 2 comments

Yesterday, I was reading MyMoneyBlog.com and saw a pretty good deal.

Open a savings account with TDAmeritrade, and use a special code associated with Suze Orman, and get $100. You simply need to set your account up to automatically electronically deposit $50 per month for 12 consecutive month.

I’ve never heard good or bad about TDAmeritrade’s services, so I figured I would give them a try. Setting up the account was pretty straightforward. I just entered in the information required about me and about how I will fund my account. This took about 10 minutes total.

Afterwards, you have to re-submit your bank information to allow the automatic deposits. This is where I noticed the first gotcha. At this point you’ve already deposited at least $50 to get the account opened. So their literature should say “give us at least $50 then deposit an additional $50 for 12 consecutive months”, instead of just “deposit $50 for 12 consecutive months”. Also, why should I have to go through the bank confirmation process if you’ve already deducted $50 from that same account? Anyways, make sure you finish setting up the automatic deposits within the first 30 days, or you won’t get your $100 (although they might be hoping you don’t).

Finally, there’s no way of knowing if you’ve met all the conditions in order to get the $100. If I’ve gone through all this trouble and after 12 months, I don’t get my $100, I’m going to be pretty pissed. I do think it’s worth that chance though.

If you deposit $50 for 12 months and end up with $700, that is a annual percentage rate of over 19% (calculated with TVM calculator – let me know if you’re interested in how I did this). This is way over market returns and is virtually guaranteed. Also, this doesn’t include the low rate your money will be getting while it is in the account, so the total return is probably over 20%.

In summary, I recommend to give this a try. An almost guaranteed return on your money of over 20% is almost a no brainer. As long as you don’t forget to set up the automated deposits, don’t mind opening a new account, and have a spare $50 per month, it’s a very good deal indeed.

Here is the link to start your own account: http://www.tdameritrade.com/saveyourself/message4.html – remember to enter the code when you set up the account.

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Now with Ads

February 12th, 2008 No comments

Ahh yes, the familiar Google Ads. I’ve just finished looking into what I should do as far as advertisement goes.

Read more…

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