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It never hurts to add up your own numbers

It’s a good question. A couple of jobs back, I had an 401k account. They didn’t match, but they put 3% of my salary into my 401k, regardless of what I put in. So I put in 3%. As the times were good, I watched it grow. It was a measly amount, maybe $3500 at its best time. Gains were totaled in the 20% range, even after 2-3 years of not working for them anymore (no more in).

Then times weren’t so good. I dragged my feet on opening up an IRA and rolling it over, and it cost me. By the time I rolled it over, the account was worth slightly south of $2100. $1,400 hit. And these were invested into very good funds. I had a slight amount in a very aggressive fund, some in a more moderate fund, then 40% in bond and money market funds. I did the safe path, just like they tell you to do.

When I opened up my IRA, I had already gained some experience with the markets before hand. I decided to take “the risk” of using some money, particularly from overtime to start with, and buy some stock. But what to buy?! There are soooooooo many options out there, and even with screeners, you can find hundreds that fit your criteria. So I went with what I knew, and in some ways trusted my gut.

My first move was unfortunately stopped short. I had opened up an E*Trade account, and I didn’t realize the 7 business day delay before I could start buying. I had been eyeing Wachovia on Friday, it had moved into the $10 range, and I figured it was a good time to strike. Monday morning I logged on to buy, realized that it was in the 80 cent range, and went for it. 300 shares. Whoops, couldn’t buy it yet. But at least I had witnesses. The deal was appraised to roughly $1 a share, so I figured I was in the green, but figured that that price was still too low, someone else was going to make a move. By the end of the week, I was right. Wells Fargo stepped in, launching the share price north of $6. By the end of the next week, I would’ve been able to sell the stock for an over 750% increase. But at least I had some confidence.

Next move was to a couple of companies I was a bit more familiar with. Bank of America and Fluor Corporation. Bank of America had dipped to $20, but worked its way back up to $25. I bought some. Fluor was running slightly above its low at the time, and scooped up a few for $42.

I began doing some research and looked into other companies to buy. Off a hunch, I picked up some shares of VRS (my long shot honestly), and I bought into a company called the Potash Corporation of Saskatchewan. Their product, Potash, is a primary ingredient for fertilizer, and they had nearly a quarter of the global market share. They were also in the $70 range, off from highs over $250. So I bought some.

Then overtime, I built up stronger positions in these companies. While I was a tech contractor at Bank of America, I watched their share price plummet. Instead of freaking out like so many other shareholders, I used this time to build up a strong position with them (relatively. I’m a poor man, but I do own 300 shares). In fact, that is the strongest position I have. I wasn’t privy to insider information, but I was able to tell from the attitudes of the employees and managers at BoA that they weren’t going to be nationalized as the media speculated, and that they were going to end up much stronger than they started. So while all of these scared little lambs “sold sold sold,” I kept hitting the buy button. FYI, I stopped buying in mid-February due to financial trouble, but I currently have a 89.48% gain on Bank of America with my personal brokerage account. I trust my instincts. And excluding VRS, the lowest gain I have is still over a 10% gain.

So I finally opened up my IRA and rolled everything over. Time to take what I had learned, and apply it to my retirement savings. I wasn’t too thrilled about being down so much, and I was intent on formulating a plan to return that lost savings. My plan included a few details:

• A stock based mutual fund that required no more than a $1000 buy in, was down, and primarily was invested into companies I believed had the most potential.
• Stocks in sectors that had been hit hardest but I considered to be undervalued
• Included on this list, Bank of America

So while I was waiting for my rollover check to arrive from my 401k servicer, I did my homework. I did a mutual fund search on E*Trade, and quickly found what I believed to be a good fit. A fund that had been around for quite some time, was able to provide steady returns as the economy had improved over the years, had relatively low management costs included, invested heavily in corporations that I believed would recover well from the recession, and most importantly, No Load, No Fee funds. The particular fund is FMIEX, Wasatch 1st Source Income Equity.

As a side note, I was somewhat disappointed that my preferred first choice, the Columbia Value and Restructuring Fund (UMBIX) was not open to new shareholders, nor was it minimum buy in within my criteria either ($2,500 required). I had a chance to meet and talk with Dave Williams, the fund manager, while I was in Naples, Florida last year, shortly after his had completed an interview with Barron’s. I also got to meet his assistant Dana in Essex, Ct, 2 months later. Great guy, very knowledgeable, but very down to earth, and I’ve seen a number of other sources who agree to that. I didn’t even know – nor could I imagine – he ran a $9+ billion fund nor drove a Maserati until it was brought to my attention. At some point in the future I hope to get in on that fund; it has already rebounded fairly well.

So now I have FMIEX and BAC. A very kind bank employee pointed me out to another stock that fit my bill. A stock more like a fund really. CHN, China Fund, Inc. They are “a non-diversified, closed-end management investment company. The Fund’s investment objective is to achieve long-term capital appreciation through investment in the equity securities of companies engaged in a substantial amount of business in the People’s Republic of China.” China, the fastest growing economy in the world. I did a little homework and they were on the list.

So that’s what I did. Call me nutty, but 50% mutual fund, 25% BAC, and 25% CHN. If I had a financial advisor, he’d have a conniption fit. In fact, I have little to no exposure to the “safe” bond markets right now. Call me crazy, but ask me why I should. Marginal returns. Let’s bet on the safe place that everyone ran to, so I can run back into the water like everyone else, but everything is inflated again. Am I saying the bond markets are bad things? No, absolutely not. But right now, there is NOTHING there. The returns are so slim, you make more money digging through the neighbor’s couch for change. Why?

I’ve learned a lot of lessons by taking on the markets on my own. Buy what you know. Believe the cliche “when people get greedy, be fearful; when people get fearful, be greedy.” Don’t always believe the “experts.” The experts gave me a 30% loss, while my own planning and objectives have provided me a 44% gain. My first foray into the market, trusting only what I new with little planning, has given me a 67% gain. My only regret is not having enough money to buy what I wanted. After I learned a bit I started paying attention to more stocks, bought them in my mock portfolio, and it is up over 130% right now.

These times aren’t normal, so why attack them with normal strategy. Yet that is what far too many financial advisers have done throughout the entire recession. And a lot of people have lost a lot on money on the faith of these men. It’s easy to make returns when the market is going up. But when everything is going to hell in a hand basket, you need to think your plan through.

I hope this inspires a tad bit of confidence for those straddling the fence, waiting to jump into the water. If you wait to jump in until everyone else does, you might miss what you truly seek. I’m better for putting myself in charge of what my money does. I’ve learned valuable lessons, and I’ve also been able to develop my own plan for future investments, not based off of what some guy in a suit tells me, but from what I’ve learn from my own successes and mistakes, but also from others. So just remember, it is your money, who do you want to trust with me?