The Poor Man and the Stock Market

I like to think of myself as a pretty close to average person. For the most part I try to stay politically moderate, spiritually open minded and responsible without becoming stodgy. I don't know what a multi-billionaire would think of my investing strategy but it has proved useful to say the least.

I started investing when I was in my early twenties. I had wanted to be a high power businessman as far back as I can remember. I never actually took that career path. I started working in a shop to pay the bills and got married too soon. Here I am five kids later living the "American Nightmare."

By that I mean, I missed out on alot of opportunities that popped up over the years. I have very little to leave to my children aside from debt.

It was worse, because my first marriage I was not "permitted" to invest in anything. It was difficult to get into an investment anyway at that time. If they were available back in the ninties I was not aware of any lowcost or flat rate brokers. One day I was introduced to a broker at Solomen, Smith, Barney who took pity on my plight and found a mutual fund that he could get me in the back door of. He opened a Capital Appreciation fund for me with the twenty-five dollars I had available. The catch was he wasn't going to monitor or manage it for me. I had to do it myself.

This was not the worlds greatest investment for building wealth but it did work very well at keeping my money from getting wasted or withdrawn in tough times. I started depositing little bits here and there when I could sneak it past my ex. She was convinced that investing was a waste of time and we would lose every penny. Long story short over about five years I squirrelled away about a grand. After 911 the market took a dump but I held on to that fund and it eventually returned to pre-attack prices. I have since cashed that fund in in favor of an easier internet managable account with ING.

My current wife was pleased as punch that I was trying to save money. We have had problems and had to pull funds back out of our ING account but I am dilligent about putting it back every chance I get. Within just a couple of years I had amassed another thousand dollars in my ING account. I have not been very active at all in comparison to people that make a living off the market. I have figured a few things out though. The market takes a bit of patience and alot of faith. You are putting your trust in strangers when you invest. You are trusting that they won't "Enron" you, that they will do their best to keep that company afloat and that their product is going to sell.

At the time of writing this article my strategy is pretty simple and probably a little more risky than I would like. I set up a few simple qualifications for a stock and if it meets them, I'll buy into it and hold.

The qualifications are;

Is it cheap enough that I can get a hundred or more shares?

Is it a "blue chip" company, one that has been around so long it seems indestructable. Coca-Cola is a good example

Is it in a sector I need to invest more in. Theres technology, food, industry and medical as a few examples of what I consider "sectors" of the market.

That's pretty much it. If I have enough money to buy a reasonable number of shares, I have faith that this company is run well enough to not evaporate and if I want into that market, I'll buy. Then I watch them and I cringe. They drop and drop and I groan but heres where I break out of the panic. Certain companies, when they drop I cheer. Microsoft is too evil to fall. every time microsoft drops I cheer and buy more stock. My projected sell date for Microsoft is sometime around 2015 or 2020 so I want to buy as much as I can now because they are going to do a whole lot of inovating over the next ten years. Ford is doing terrible but I have faith they will survive so I dump money into them too. I also invested in a couple of small gas and oil companies such as Aurora Oil and Gas.

Aurora Oil and Gas is an exception to my rules. It falls under my 10% gamble rule. I have to keep no more than 90% of my stocks in what I deem to be a safe company. This allows me to bet on a small startup company or a struggling corporation with no more than 10% of my stock. Well for three-hundred dollars I bought five thousand shares of AOG and every time it goes up a penny and stays there I have made fifty dollars. My risky companies haven't all payed off but I try to keep my investments small enough that it isn't the end of the world if they lose value. I have not had a single stock vanish on me yet even though some of them have lost me a few dollars.

The point is, if you are poor you can invest with very little money over the internet now. I have taken nearly a thousand dollars back out and still have about the same amount in there. I also had to cover the rent one month using another investment I had with another company. It is better to have emergency funds in a savings account but when that gets used up. I like to have redundant backup systems.

I am personally investing in three companies per sector, I sold one of my bank stocks because it went from a fifteen dollar value to a hundred-fifty. I am now looking at buying stock in another bank since the first one was bought out and is now too expensive for me to afford. I also don't know and am not comfortable with the company that bought them. As soon as the trades settle I will be reinvesting those earnings.

Examples of what I feel safe with are IBM, Intel, Microsoft, Ford, Pfizer, Lehman Aggregate bond fund, GE, Southwest Airlines, Coca Cola and a few others. Along with 10% in riskier small companies with high return potential like AOG and DDDC I have about another 10% in very expensive stocks like SPY and AGG that don't have a high share multiplier because I can't afford even one share sometimes. However they give dividends rather regularly and those can be reinvested. Again, the rest is in troubled but stable and reliable companies that I believe will recover. For the poorer people in society, If you can manage a few dollars here and there you can build up a lump big enough to invest, like twenty-five dollars.

The website that I use to manage my own investments is http://www.sharebuilder.com

Persistence and patience with a little bit of common sense will go a long way in the market. Don't go crazy and invest more than you can go without till your next check comes. Stocks don't generally make huge jumps that are very meaningful to people who only have a couple hundred dollars or less invested in them. Remember to read the tips and avoid buying and selling too quickly without adding extra funds or you'll run afoul the free-riding law.

I just wait till every sale settles before making more purchases unless I already have the money in there to make a purchase.

Legal disclaimer here, I am just an average guy off the street not an investment broker or guru. Don't take this as "Advice". This article is simply a description of what I do for myself and where you can find the resources that I use if you want to look at them. I am not suggesting anyone buy into any of the stocks I bought into for any reason. Again, just an example.