This is a guest post by Rob Bennett

It's a question you always hear after a stock crash. It's usually asked in apologetic tones, as if it were a dumb question. It's not. It's a question that most of the big-name experts don't fully grasp the answer to. Understand this one and you go to the head of class in Investing School.

When stock prices crash, where does the money go? It goes "Poof!"

That's the truth. People think of stock investing as a serious business played by serious people. So they assume that there must be a complicated answer to this question. There must be some mysterious process by which the trillions of dollars of wealth that are lost in a stock crash disappear.

Nope. We can bid stock prices up to any level we want. We can all vote ourselves raises if we like. The only penalty is that, when we bid them up too high, they must crash back down in the following years. What is made from nothing must eventually return to nothing. It always happens that way. It always will happen that way. Now you know.

The strategy takeaway? Don't invest too heavily in stocks when prices are high. Someone has to pay the bill for those times when we bid prices up too high. It doesn't have to be you.

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Rob Bennett is author of the A Rich Life blog and recently wrote a Google Knol entitled "Why Buy-and-Hold Investing Can Never Work." (J: I don't necessarily agree or disagree with "buy and hold," (although I usually hold way more than sell) but I do find this topic interesting.)

Labels: crazy economy, guest post, investing, stock market

[Guest post by Mr. Moneybags]

Don't get me wrong, budgets are definitely attractive on their own merit, but if you were to line them up side-by-side next to stocks, it would be like comparing the attractiveness of Al Pacino to the attractiveness of Megan Fox. I mean, sure, Al Pacino is a rather cool and attractive old man but not many guys would give up one of their testicles to spend a night with him (see: Megan Fox).

And just like someone would have a massive case of approach anxiety when given the chance to advance upon Megan Fox (or any other equally hot creature), it seems that people are equally terrified when it comes to approaching the stock market.

Ever since I accidentally created the stock market in 12th century France while searching for a way to smuggle pilgrims across the border, I have noticed that people are more afraid of the stock market than they are of being viciously attacked by a pack of wild boars. If I can be completely honest: It pains me to see my wonderful creation be loathed so vehemently - which is precisely why I have decided to temporarily abdicate my secret cave (more commonly referred to as www.BigFatMoneybags.com) and clear up the bad name that investing and the stock market has gotten over the last few years via new venues (regards to J. Money).

Throughout my vast experience with the stock market, I have noticed that people use the same few excuses over and over again as to why they don't invest their money in the stock market:

1. You don't know enough about the stock market nor do you have an idea of where to start

It's okay, it happens to the best of us. In fact, it even happened to our friendly neighborhood budgeter, J. Money. (J: true, but I am getting good at copying Warren Buffett!) Thankfully, this seemingly daunting problem is quite possibly the easiest out of all problems to solve.

I've noticed that the main reason people don't go out of their way to learn more about the stock market (and other money matters for that matter) is because rather than utilizing the current educational tools that are available to them, people would rather run into incoming traffic with a paper bag over their heads (true story). Thankfully, great heroes such as the mighty Mr. Moneybags (that would be me) and J. Money exist, providing a seemingly dead subject matter with a breath of fresh air (a.k.a. humor and entertainment) while subsequently ridding the world of imbecility (and poverty).

If you have little-to-no understanding of the concept of stocks or the stock market then I would highly recommend you read the free eBook I have available on my site called "Welcome to the Stock Market!" And unless as a result of my guest post on this site, a catastrophic sequence of events leads to the implosion of the internet (or if J. Money permits) I will gladly post more guest articles educating you people as to the workings of the stock market. For now, if you have any questions, leave a comment at the end of this post and I will happily answer any questions that you may have in great detail (while explaining to you why you are an imbecile).

2. Stocks are too risky

Before I go on explaining the absurdity of that previous statement, let me start this section off by citing a statistic initially stated by the great Jeremy Siegel:

"One dollar invested and reinvested in stocks since 1802 would have accumulated to over $12.7 million by the end of 2006."

Yes, you read that correctly. This is despite two hundred plus years of stock market declines, famine, wars, bigger wars, crisis, pandemics, epidemics, depressions, more epidemics, hippies, terrorism, political turmoil, global warming and even swine flu.

Of course, you people are going to say that two hundred years is a rather long holding period or that times have changed or whatever else but the truth of the matter is that the investor is what makes an investment risky, not the investment itself.

Risk comes from not knowing what you are doing. If you know what you are doing and if you research your investments diligently enough, your margin of risk is reduced faster than King Kong plummeting off of the Empire State building.

3. You have to be a professional to make money in the markets

Nothing is further from the truth. If you can literally walk into a store and say "Wow, this looks like a great business!" then you can make money in the stock market. That's not even an over-exaggeration of any kind.

In fact, I find that the "professionals" make less money in the markets than your typical outside-the-box thinking investor (which I will teach you to become). All you really need in order to safely invest in the stock market is a strong will and a smidge of clever thinking. That's it.

Closing Thoughts

I find that those are the top three reasons people avoid the stock market like the plague. If you feel that you are unique in your scenario, do not hesitate to leave a comment and I will try to help you out as best I can - and if I can't... prepare to be destroyed.

Now get out there and make some big fat moneybags!

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This is a Guest Post from Mr. Moneybags - the richest being in the universe ever to have existed and ever to exist. He and his blog are determined to prove to the world that the subject of money shouldn't make you want to douse yourself in gasoline and run into a forest fire. (He also advises you to do your homework before investing!)

Labels: guest post, investing, stock market

I don't talk about stocks too much on here, but I thought I'd follow up on Operation Copy Buffett. If you were around back then, you'll remember I wanted to invest in stocks but I hadn't a clue where to start (and I wasn't going to randomly choose for the hell of it like previous times).

So instead, I decided to check out all of Warren Buffett's choices and cherry pick from there :) Some people thought I was an idiot, and others thought it was a great idea. After all, if you're going to copy someone, why not Buffett right? Well, just like I reported in the past, I couldn't be happier with the choices I/he's made. Here's a breakdown of all the stocks I currently own - tucked away in my Brokerage Roth IRA:


[the italicized purchase prices are averages over multiple buys]

What more could a guy ask for? Granted the recent explosion of the market has done wonders to everyone's portfolios (thank goodness cuz we needed that!), but I'd like to think these picks are in it for the long haul. Oh, and in case you're wondering, yes I did throw in some picks of my own including GE & SIRI :) I can't let him do ALL the work, right? haha...I'll continue to play a little myself, but for the most part I don't plan on risking a whole lot.

The majority of my retirement funds come straight from my 401(k) - these stocks are just supplemental to add a little more fun into the game. If I lost 100% of them, it wouldn't affect the overall game plan. It would SUCK BALLS (and the world would probably be ending if those companies all went under) but it's a small % of my overall retirement monies. I just need more action than my mutual funds can provide...

My portfolio is far from being perfect, or stable, (always best to consult with a professional - don't just do what I do!) but I thought I'd share as it's always cool to hear how others are trying to reach their goals as well. With everything in finance, it comes down to personal preference and game plans. Are you guys rockin' out anything good?

Labels: investing, roth ira, stock market, Warren Buffett

I finally took the plunge and sold off all our EE Savings Bonds! I'll be sad to see them go, but I sure won't miss the minuscule interest ;) Plus, it's been on my to-do list ever since March's net worth review, so it feels good to finally cross it off now. In fact, it also spurred accomplishing another item on that list - opening up a Roth IRA for the Mrs.

And oddly enough, converting the bonds literally only took 17 minutes! It took me some time to actually *find* a bank that would do it right there in person (you win Bank of America!), but it was well worth it in the end. This is how it went down:

- Walked into Bank of America (with a smile)
- Explained to the teller what I wanted to do. (with a smile)
- Signed and addressed the backs of all bonds in front of her. (no smile as it was pretty tedious)
- Got handed the $749.54 in cash and a printout of the transactions! (*huge smile*)

Again, if you're considering converting any paper bonds yourself, do check around and see if you can find a bank locally that will handle it for you. I came super close to just doing it online with Treasury Direct and it did NOT look fun. We're talking 1-2 weeks just to open an account (you do it online and then they mail you a card to activate/confirm your identity in the future), and then another 2-3 weeks to get them all converted (you have to physically mail them over and wait for a response)! I'm sure the process only takes seconds if you're converting electronic bonds only, but I'd hate to imagine what would happen if you filled out the paperwork wrong and/or it got lost in the mail :(



Okay, so now we're $749.54 richer and ready to go spend it, right?! Hah! Where do you think you are? ;) If there's one thing I've learned over the years, it's to keep re-investing your earnings and to make sure to do it fast. The longer that cash sits in your account, the higher the odds of it not going anywhere - or worse, being spent! (something the old me would have LOVED to do)

Needless to say, I had a plan for every last penny before it even hit my grubby little hands: our Roth IRAs. I really think we'll earn a helluva lot more in stocks & mutual funds over the long run (the key factor) than we will in bonds, even though I certainly see the benefits of them. So $496.54 of the total is going to help max out MY Roth, since most of the bonds were issued to me over the past 29 years of growing up, and the remaining $253 will go into the Mrs' Roth - being leftover of the $500 wedding present bond we got last year which will unfortunately never grow to fruition ;) I sorta feel bad for that one, but I'm an "all or nothing" kinda guy these days and I don't want 1 single paper bond laying around to worry about, ya know?

That said, I'll def. miss the nostalgia of those old boogers. The bonds dating back to the 80's were so COOL looking! I remember thinking how rich I was when I was a kid ;) It was like sitting on 3 Nintendo Game Boys! haha...oh well, can't hold on to them forever. I'd much rather have plumper IRA's to look forward to now.

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PS: If you want to learn more about the bonds you have, you can check them out at Treasury Direct w/out creating a login or anything - they're excellent for tracking their worth and all :)

Labels: bonds, investing, roth ira

Spoken by the brilliant Henry David Thoreau. That quote sums up exactly what's on my brain today - charity. The last time I wrote about this I decided to donate $25 to a new organization every month. Sadly, I continue to forget this every month until one pops along my radar or I specifically get asked to contribute to someone's latest cause.

Today I vow to make 2 changes. The first - to actively stay on top of this once and for all. Not only will I be upping this amount to $50, but I shall set up a google calendar item and have it alert me once a month to make sure my goldfish memory gets pinged on a regular basis. This should work swimmingly as I'm always connected to the internets!

The second is to create a list of great organizations and charities to pull from. If that list is always full and constantly being updated, I'll be more inspired to donate as I see an immediate impact when each charity is crossed off. Plus, I'll then have an easily accessible place to mark (and support) those favorites of mine whenever I come across any dry spells in the collection process.

This is where YOU guys come in :) I would like to create a solid list of those organizations nearest and dearest to your hearts - big or small. I know when I get passionate about something I want to tell the world about it, and I'm hoping we can do something about that here.

If there are any organizations you feel deeply passionate about, or want to spread the word on, please tell me about them. You can send details, brief bios, contact info, or simply a link where we can find it. If it's important to you, I want to hear about it :) At some point I'll be publishing this list in hopes to spread the word even more, so be sure to holler (you can email me, twitter-tweet me, or drop a comment on me, whatever's easiest.)

This is my attempt at spreading a little love, and making a difference in this crazy world of ours.

Labels: charity, goals, in the real world, investing, money quotes

Because when it comes to investing, Warren Buffett's the freakin' man! Why start from scratch analyzing and trying to pick the very best stocks out there when I know absolutely *nothing* about the industry?

Don't get me wrong, I'll still be doing my best to learn and see why, exactly, he picks what he picks, but when it comes down to it I trust his opinions over anyone else's out there - obviously including my own ;) After all, it was Buffett himself who said he doesn't invest in anything he's not familiar with! And since I'm not familiar yet, I shall copy him :) haha...

Actually, I should say I'll be copying his stock choices minus some financial ones that have been causing him trouble lately. I wish I could remember which personal finance mag I got this idea from [got it: May,09 ed. SmartMoney - "Buffett, Half Off" by Jack Hough], but either way it's genius. Especially while everything's so freaking LOW! We'll never be able to compete w/ Warren in getting the absolute *best* rates of going stocks, but while things are 1/2 off right now we can get damn close. In fact, I'd venture to say that now is the only time we can beat him if we pick up the same ones he did last year when they were much higher!

Okay, so now that you know what i'm up to over here, WHICH stocks do I plan on getting? Well, I've already picked up 3 of the 6 recommended by that same pf mag that I can't recall, and all 6 are owned by his Berkshire Hathaway company. In an effort to keep things simple for me, and not go TOO overboard, I've decided to invest $500 in each stock over time:



So far so good! Another way to "be like him" would be to just invest in one of his Berkshire funds, but considering one goes for $92,000+, and the other for $3,000+, I figured this is the better way to go ;) Again, mainly because how cheap they are at the moment.

And if you missed it, these new friends of mine will be living in my Brokerage Roth IRA. I'll continue to max out my 401(k) every year with a handful of diversified mutual funds and all, but this is my "play account". Even IF it's a bit excessive - I'd much rather spend my extra money investing & learning a bit over material stuff I don't need at all.

I don't recommend this game plan for everyone, but for me it's on like Donkey Kong!

Labels: investing, retirement, stock market, Warren Buffett

It's been a long time since I've owned individual stocks (6 years), and I'm feelin' lucky! The market's down, our savings are up, and I'm ready to give it the ol' college try again. Plus, I'm a lot better off financially and emotionally than I was the last time I gave it a shot.

6 years ago I was just rollin' the dice and doing my best to outgame the system. Sometimes I won (bought XMSR @ $20 one day, and then sold it months later @ $29), while other times I crashed and burned (bought Sirius @ $2.25, then sold it weeks later for $1, only to watch it go right back up). The reality of it all was that I just didn't have a game plan. All I knew was that I a) wanted to be a baller and "trade" stocks, and b) wanted to make some fast money with no effort ;)

Needless to say I was a financial loon, and certainly no baller. Although I'm sure E*Trade loved me! They tend to like it when you drop $10 a trade every other day, haha...even worse, I was losing a sizeable chunk of money right from the get-go! If you're only playing with $100 or $200 of stock to begin with, you're automatically giving away 5-10% every time you hit that buy or sell button. I was seriously smoking something, and it wasn't the good stuff either! (not that i know what the "good stuff" is or anything)

But if you're gonna play the game, you've got to have a plan. And this time I have one :) You ready for it? It's gonna blow your mind I just know it! Okay, here we go....drum roll please....bah-buh-bah-bah, alright, here it is! My plan is....I'm going to invest it for the long haul. Sexy, huh?! haha....well, it may not SEEM all hot & juicy, but it's a lot better a plan. You see, I'm not in the business of making quick cash anymore. Nope, I'm ready to kick back, be patient, and watch it grow over time while I earn my wrinkles.

I've also decided to give myself an allowance for this, and it's all money I can live without. That way, if my repeat performance sucks again I'm not gonna lose any sleep over it. No siree, it'll be just like taking a trip to Vegas, except with better odds. In Vegas, I bring $200 bucks to "play" the tables, and when I lose (because I always do) I'm cut off - no hitting up that ATM again. In this new venture, I bring that same $200 and when it's spent it's spent - no going back and xfering in more money to "break even". This way I get to have a little fun, but at the same time I don't go overboard.

Plus, I'm not counting on becoming a millionaire off it or anything. I just want a little more investing experience while I have the means to do so - and while the market is still so freakin' low... and I'm not gonna sell it every time it takes a dip either. This time around it's all about buying it low and holding onto it baby! I doubt I'll pick the right stocks at the right times, but you know what? That's okay. It's just time daddy gets a new toy to play with ;) I love my mutual & money market funds, but every now and then ya gotta spice things up a bit. And for me, that time is now.

Labels: investing, retirement, stock market