Standing firm

I've said before that you can pick a good, strong stock, and still see the price tumble due to fear from other investors. What are they afraid of? Why, of being WRONG of course.

But it's the wise investor who, like the wise parent, knows that sometimes, you gotta make mistakes and be wrong to learn something. That way, you know when you get something RIGHT.

Case in point: I wrote weeks ago about how I was drooling over a certain stock, First Solar (FSLR). It's a leader in it's field, it's a strong company, and meets many of the marks that I look for in a good stock.

Furthermore, it posted earnings this quarter of $153.3 million. Not bad.

So WHY is it down 27.65% today? It's MAKING MONEY... what's the problem?

This is where your ovaries of titanium have to come in. The price dropped because... are you ready?: It was downgraded by several investment companies.

Investment companies will come out with their opinions on certain stocks: Buy, Sell, or Hold. If they like a stock, and they think it has immediate growth potential, they'll say, "Buy." If it has longer term, but not necessarily an immediate return, it's probably a "Hold." And obviously, if they don't like it, it's a "Sell."

I'm not saying these investment houses don't make some very accurate, and well-founded calls. However, YOU as an investor, need to know your stock.

Am I pissed that I'm losing money today? Sure. But on the flip side of that, I KNOW this is a good company, so the lower the price of the stock, the more I can buy for cheaper, and the more return on my investment I'll make when it goes back up.

Not every stock, though, DOES go back up, and you should be aware of that. Even good stocks sometimes reflect mismanagement of a very good company, or the CEO runs away with the profits down to Brazil. It's why I always say not to invest more than you can lose, because someday, you MIGHT lose it.

I KNOW First Solar is a good company, so unlike the rest of the sheep, I am not freaking out, and I will not sell. What I WILL do, is see the opportunity here to invest only slightly more money, and get a better return later.

Sometimes, when the lemmings are flocking, you have to know when to stand firm.

Your great resources cheat sheet

I feel like I've put a lot of basic, but good, information up here that anyone can read and grasp. We've talked about everything from why YOU should be in charge of your financial future, to how much money it takes to start investing ($20, Carm!).

But really, the whole point of this section was to provide you with the tools for YOU to take over. I hope you find finances just a bit less intimidating, and you've come to the conclusion that no one can predict the future of the market, and you're just as likely to make a wise, thought-out investing decision as some over-paid broker who just wants to earn his/her commission. You're just as smart, don't let the jargon fool you.

So, along this line of things, I'm going to give you some of my favorite resources for CONTINUING your financial education. Lots of these are links to bite-sized articles. It's going to look like a lot, but remember, if you read one article a day, or even every other day, you're STILL learning how to be more self-reliant and financially strong. So, here is the Banana-approved list below. Enjoy!

Fuck Wall Street!

Investopedia's Investing Basics

And of course you remember my favorite-est EVAH!

The Fool is actually pretty funny, but beware: they like to hock their own products. Read the articles, ignore the sales pitches.

Finally, the American Association of Individual Investors isn't bad, but it ain't a rip-roaring riot either. When you get a little more advanced, take a look at this site and do some serious (grown-up style) research.

Just as important is what you should AVOID. The minute you put your email into any one of these sites, they'll probably sell it to someone else. That means spam emails with tag lines like, "THE BEST INVESTMENT YOU'LL EVER MAKE!" and "HOW TO MAKE A MILLION IN A MINUTE!"

You know how you make a million in a minute? You create some stupid website that sends out emails to innocent folks who don't know any better, and then they pay you $50 or whatever to get the "FREE!" portfolio of stocks they've "HAND PICKED FOR YOU!" Trust me, the only think they're picking is their noses while you pay them your hard-earned dollars.

When you become serious about wanting to invest (and by "serious" I mean you're thinking about putting ANY money in the market, it doesn't have to be $30,000), you can get a PROSPECTUS from the company, or just do some of your own research.

You're not going to get rich quick. That's the truth. Hard as it is to hear, you are going to make money, but it won't be over night. However, in 10 years, if you do your homework and read when you can, you'll probably have more than you started with, and you'll also be comfortable knowing that if you LOSE that money, you can grow it back again because you have the knowledge, skills, and abilities to do so.

Alright, unless there are any other questions, class is ajourned for now.

...and WHY do I care about diversifying?

Moving on from the last article where I talked about investing $20, I also want to talk about diversifying your portfolio, or your groups of investments.

It's common sense that you don't put all your eggs in one basket. Well, likewise, it's important to think about the different opportunities that are out there for you to grow your money.

We've talked about stocks and bonds, but you should also consider INTERNATIONAL stocks and bonds. The Australian 10-year bond right now is running at an interest rate of about 7.5% (if I remember correctly). Two things about this: one, DON'T be intimidated by the word "international", in fact, don't ever be intimidated by anything. Remember, addition and subtraction were intimidating before you learned how to do them.

Two, be aware that while international products may be very similar to your home-grown stuff n' stuff, you may have different fees or taxes. I'll be totally honest: I have NO CLUE if you would pay any sort of tax to the Australian government. I'm leaning towards no, but I can't be sure. Also, as with most long-term commitments, bonds may have a penalty if you try to take your money out before your 10-year contract is up. If you don't think you can do 10-years, that's cool; there are different increments. No worries!

Now, if you're a strictly stocks girl, make sure that you pick stocks from a variety of industries. Energy, banking, technology, pharmaceuticals, etc. Spreading yourself out like that means that if one industry is hit with a blight, the rest of your portfolio may remain in ok shape.

Also remember, losses and increases aren't "real" until you cash out. So if your stock portfolio goes down, you haven't really LOST money until you sell your stock at a lower price. If you can, ride it out.

Stocks and bonds are good, but also consider real estate. A lot of homes are out there, and our own Kae from PNN is one hell of a real estate lawyer. I hate to volunteer her services, but she can answer pretty much any questions you may have. Having something real and tangible, if possible, is a great hedge against a fluctuating market. If you own your own home outright, then you'll always have a place to stay. If you can rent out one part, or the whole thing, now you have an additional income.

The whole point here is to figure out as many ways as possible that you can put your money to work, and to cushion yourself so that if ONE part of your portfolio falls, the rest, or most, can remain moderately intact.  

There are also commodities and precious metals, ETFs and options, and if you know what you're doing, then they're not terrible. Gold for example, typically moves inverse to the market. That is to say, when people get nervous about the market, they think to themselves, "what's the one thing that everyone wants? that the entire global market moves on?" You might think oil, but really it's gold. That means that when people get nervous about the economy, they tend to sell what they have and load up on gold. When you see gold starting to jump in price over an extended period of time, you can bet people are getting nervous.

WARNING:

There is ONE investment type that I ALWAYS advise against: currency trading. Currency trading is like the market: fear and elation, but on crack. It jumps around like an electrocuted kangaroo. You can lose EVERYTHING in, not a day, but a matter of minutes.

Currency trading involves you coming to the table and saying, "I think the pound is going to rise against the dollar over such-and-such a period of time." Whereas stocks, bonds, mututal funds, etc, are less of a "wager" and more of an educated vote of confidence, currency trading is like jumping off of something and hoping it's a street curb and not a 30-floor building.

There are so many other opportunities for you out there, I REALLY advise that you learn about everything else, and consider your options... but no matter how much you learn, in MY opinion, currencies are a fool's bet.

HOWEVER. I would be remiss if I didn't at least give you the chance to learn more about it: http://www.forexmicrolot.com/?CMP=SFS-70160000000Dbze&keyword=039001

That link should take you to a site that will allow you to make up a "dummy account." If you like being glued to your screen every minute of the day, buying and selling at a moment's notice (and paying those fees!!), then currency is for you.

If you DON'T want to die of a heart attack at 35, I would suggest you look elsewhere.

Starting your investment portfolio with $20

Let's say you decide you want to invest. You've read the crazy ramblings I've put up here, and you're pretty sure you have a basic idea of how all this works. You know the jargon, you're aware of at least the major financial vehicles (stocks, bonds, mutual funds, maybe real estate), but you don't have a ton of money to invest. Let's face it, you have a family and every dollar that isn't going towards them is going AWAY from them, right? You don't have $50,000 to start of your super-star portfolio. In fact, you have about $20. What's a person to do?!

Well, here's what you do:

If you really want to invest that money and see what it can do for you, then we're going to need a plan.

1. Invest online - by investing online, you cut out the middle-man fees from brokerage houses. There are benefits and drawbacks here: you'll save lots of money, but you're not going to get that personalized customer care. Though, if you're only risking $20, are you really that worried about not having someone there (aside from me) to hold your hand? Yeah, me neither.

Now, what you're going to need is a website that lets you use your cash ONLY for investing, and doesn't charge you any fees. Remember, you only got $20, so you can't be paying fees all over the place.

If you google "Online brokerage comparison," you'll probably make your way to www.cheap-stock-broker.com. I'm not endorsing this site, I know nothing about it, it's just one of the first sites I found.

This site does a side-by-side comparison of the cheapest online brokerage firms out there. For many, to get the good deals, you need to have $25,000 to start with. We don't. Screw them!

Then, there's TradeKing. Again, I'm not endorsing this site, I'm just giving the numbers a quick look. When YOU decide to invest, do your own research... you may come up with something better! In which case, let me know! TradeKing has no account minimums (AWESOME!!), and charges you $4.95 per trade. Well, we WANTED free, but I guess this will do for now.

But now you're thinking, "Wait, if it's around $5 per trade, and I only have $20, I'm not going to have ANYTHING left to invest!" Not true. The less money you have, the more savvy you have to be. We don't want you spending your whole day trading stocks back and forth. Why?..... (you should know this!!.......) fees. You want to make one REALLY smart move, and then leave your money like a planted seed in the ground to grow.

For everyone with outdoors experience, do you plant a seed, THEN look around for good land, pull the seed up, move it to better soil, then pull the seed up again in a day or two and move it again? No. You plant. You sit. You wait.

That's what investing should be. Plant. Sit. Wait.

Picking your stocks wisely:

Alright, you've started your account. Now, we know that you REALLY only have $15 to invest, right? Because they're going to charge you that $5 purchase fee. So what can we do with $15? Quite a lot right now, actually!

See, being in a recession is like a fire sale: all those name brands at REALLY good prices. This is where your value investor comes in and says, "the prices are right for me to buy." Not only that, but you can get a LOT more for your money right now. The downside? The market is flipping and flopping, so you're really going to have to put your money in and have ovaries of titanium, because your account is going to rise, then fall, then rise, then fall. DO NOT PANIC. DO NOT BE A LEMMING. The stock you buy now is the stock that you're going to hold on to for YEARS, ok? So YOU DON'T CARE ABOUT DAILY FLUCTUATIONS. Think long term.

So let's go shopping!!!

Ideally, you've been taking 15 or 20 minutes a day to look at Yahoo/Finance and get a general idea of what's going on. Congress is pushing money towards cleaner energy stocks, and considering what can be done about government-backed banks. There's a lot going on right now, but when you only have a little bit of money, where does it go?

Well, let's talk what to do immediately. If I had $15 to invest immediately, I'd look at names I like; these are things you've heard before: Citibank ($4.56), Fannie Mae ($1.37), Freddie Mac (1.64), and maybe some things you haven't: NRG ($25) or STP($13.47).

Now, Fannie and Freddie are going through something right now, so those stocks are only for people who feel comfortable enough to buy the shares and then let the seeds grow for a bit. Citibank is going to take some time to recover, so don't expect instant success. Ok, so how did I find NRG and STP? Well, I was reading an article on Yahoo/Finance about how much money congress is throwing into renewable resources. NRG is a strong company with a diverse customer base (clients are all around the world, which means a recession here won't hurt them as much as a company that ONLY has American clients).

STP is a different story. I don't actually WANT STP, I WANT First Solar (FSLR), but that stock is hovering around $120 a share.... WELL out of our range, but Yahoo/Finance let's me look at FSLR's competitors. That's how I found STP. If money is flooding into that sector, then it's likely that STP will get some. That will raise the stock price. If I can get enough of an increase to get me to where ever FSLR is going to be by then, I'll trade 3 of STP for one of FSLR.... does that make sense? I don't WANT to jump ship, and maybe STP will prove to be the STRONGER company, but for now I just want something that's going to move and take my money with it.

Sadly, there's no way to search stocks by their prices, not at least that I know of. Just do your reading, and think about what's out there, but remember, with $15, you can still buy 3 shares of Citi, if that's what you wanted.

No, you won't be a big spender, but nobody starts out at the top... unless you're sleeping with the boss, in which case don't forget the little bananas who got you there.   :)

Growth vs. Value... if I can understand it, so can you!

When talking about investing (no matter WHAT you choose to invest in), there are two MAIN categories: value and growth investing.

At first, these two should sound pretty similar: if you buy something of value, doesn't the value GROW? Or, likewise, if you buy a SMALL business, but it grows into a BIG business, didn't the value of your investment just go up? Well, as it happens, there IS a good bit of overlap in my opinion, but let's sort them out, shall we?

And by the way, this isn't just "The Philosophy of Investing" by BananaRama; deciding into which camp YOU fall, is going to help you choose where you want to place your money and WHEN to buy.

Let's compare:

Growth investors look for superior companies (like your blue chips) no matter what the price may be. For example, let's say Google is at $400/share. That's quite expensive, and a peak price at that (meaning that's the highest price that stock has ever been). Now, is Google a good company? Sure. Loads of innovation, and it will probably stay at the forefront of the market for some time. This company WILL grow, even from $400/share. So.... do you buy.........?

A growth investor would say yes. No matter the price, it's a good stock! Buy! Sounds fair.

A value investor would say no.

Value investors look to wring every drop of profit from every dollar invested that they possibly can. That means that no matter how good Google is, a value investor is going to wait until the price drops for some reason. Maybe a recession, maybe the CEO was found in bed with a prostitue, or maybe Microsoft puts out "Bing," that new search engine. ONLY when the price is rock bottom, will a value investor step in. Let's say the price for a share drops to $200... the value investor says to herself, "Well, I KNOW it's a good company, and I know it will be back to $400 in no time flat... so NOW I'll buy."

$200 is a better price than $400, right? *I* think so!!

Value investors can also be called "Contrarians," because they buy at what the market considers the ABSOLUTE WORST time... that is, the bottom of the market, or when the stock has gone down. The reasoning being, "if they stock is going DOWN, why are you BUYING it?" You're contrarian; you're going against the mass hysteria of the market and stepping in when others are bowing out.

So, why isn't everyone a value investor? Well, for one thing, if I saw Google at $30, and I said to myself, "Well, fuck that shit, I'll wait until it's down to $2!" well.... it's probably not GOING back to $2 again, and by waiting, I'm losing out on a good investing opportunity. The price goes up... up... up.... and I'm not making any money. So, should I jump in NOW and pay, or wait until something hits.....?

Frankly, the latest trend among a lot of people is Contrarian (or Value) investing. I'm a contrarian, and yes, right now it's costing me. Today the market went down, and I probably lost a few hundred dollars. However, my stock portfolio has doubled since I started writing these articles. Am I pissed that I lost money today? OF COURSE! But I bought at the general bottom of the market, and I know that over time the market will go up.

I started with about $200, and every month I added a little more to my account. When the recession hit, I lost some, but not as much as I'm making now.

Now, part of your investment strategy IS going to depend on where you are in the market.

......am I giving you a headache yet?...........

A nice time to buy!!

If you look at the NASDAQ over the course of a year, you'll see that the market tends to drop after Christmas and before New Year's. That's because heavy-duty investors are selling off stocks. Why? Because when everyone else sells of stocks, your stock value lowers... if it lowers enough, you can sell it, claim a loss on your taxes, and pay lower taxes for that year. Then, at the new year, they buy their stocks back.

Tricky. And, technically, unethical. Still, it's done.

Also, about once every five years, we have a mini-recession, or a bubble bursts. Sometimes it's three years, sometimes it's 6, but around every 5 years, the market takes a hit. Why? Who the hell knows. People, especially investors, are lemmings. The important thing to remember is that the market works in cycles. If you're seriously thinking about getting into investing, consider one of these time periods.... lucky for you, we're in a recession right now, so it's not a bad time to buy.

Fees are like termites on your money, if it was made of wood

Let's say you're awesome. Let's just say it for now, both because it makes me a happy banana to think that I have awesome friends, but also because we're assuming you are far and away ABOVE average intelligence. You are so awesome.

In fact, you're so superfantasticawesomeamazing, that you have read all my financial articles, have taken all my advice, and you've begun to invest in the stock market. Not only that, but you're making a KILLING! You are so awesome.

On an "average" year in the market (aka "gangbang central") you can expect a good return of, say, 10% or 12%. THAT is pretty darn good. THAT is above average. Mazal tov!! OMG, for every $100 you invested, you just made $110 cash, right! AWESOME!

Only not.

You ever go to a restaurant, and a waiter asks you if you'd like bread at the table, and you're all, "HELLS YEAH! I LOVE ME SOME SIMPLE CARBS!!" so they bring you the bread, and you toss it back, have your meal, and then ask for the check. Then, when the check comes, it says that you ordered bread. WHAT?!?! You say. You thought the bread was FREE!!! Well man, nothing's free. Not even money.

Fees, also sometimes called LOADS, are eating away at you slowly. Let's say you do your trades online. You go to a GREAT internet trading site and buy your stocks, your bonds, your whatevers. For every trade, let's say it's $20. Well, that's not so bad, right!! TWENTY BUCKS! So you buy a stock ($20), and then after a while, you sell your stock ($20). Now, no matter how much money you made, you ARE out $40, so deduct that from your intelligent investment.

Then there's inflation! I guess that's not really a fee per se, but you can't escape it. So, assuming that inflation rises at around 3% per year, which it may or may not do, your profit of 10% on your investment is now down to 7%. Not terrible, but it's NOT 10%. Oh, minus those load fees, of course.

Then taxes... don't forget taxes! That's, what? 30% of your realized gain, or how much cash you actually have in hand after you finish selling. Oh, and if you had a money manager on top of everything else, she or he may charge an ADDITIONAL fee.

The point I'm trying to make here is that being a savvy investor ISN'T just about making money, it's about keeping the money you make. All these little fees add up, and you have to be smart about who you let touch your money.

There are tax-sheltered accounts, there are Treasury Inflation Protected Securities, there are ways of creating a steady growth that can cut many of your fees right out of the equation. No, you probably won't get rich over night. In fact, you may never be RICH, but what you CAN do is help provide for your family and for their future. You can create investments that take advantage of the financial vehicles out there... but to do that, you have to first educate yourself.

You have to take the time to learn what you can do to keep as much of YOUR money as you can. Feel brave enough to walk into some of those big name financial and brokerage offices, and ask them questions. Yes, they're going to pressure you into investing with THEM, but who the hell are they? It's YOUR money. You just want some info.

The thing is, if you never take the time to learn, then you never know what opportunities you're missing. Will it cost you time, and yes, some money? Absolutely. You get nothing for nothing in this life, but as my mom always says, "if you think education is expensive, try ignorance."

The woman has a point.

The "Market" is less of a market and more of a gang-bang

There are all sorts of things you can buy when you're just starting out in investing, and if you walk by ANY investing office, Fidelity, JPMorgan, AXA, etc, they will have LOADS of free papers that you can take home and look at until your eyes glaze over and you start chewing on your own tongue.

All of this info will have ideas on WHAT you should buy, and WHEN you should buy.....  but not how. Well, here's the important thing: never buy more than you have cash to spend. Is this confusing? Let me backtrack...

Buying in the market is a lot like buying anywhere else; they will accept multiple forms of payment. You can pay with cash, which is just a regular purchase, or you can buy "on margin."

DO. NOT. EVER. BUY. ON. MARGIN.

I don't care if your drunk uncle Phil who has made a BUNDLE in the market comes up to you one Christmas and tells you all his secrets and gives you the hottest stock tip of all time. Do. Not. Do. It.

Why? Because buying on margin is a lot like using your credit card: you have SOME money, but not enough right now to buy what you want. So, why not? You'll put up part of the price, and the bank puts up the other part. Easy-peasy, and then you pay them back, right? I mean, it's so much easier than having to pay the WHOLE price by yourself.

But see, here's how life actually works; you want stock A. Stock A costs $2 a share, and you want 100 shares. That's $200 that you would need to buy all those shares, right? Well, you only have $100. You decide to buy on margin because, what the hell, this is the one stock that's going to make you rick quick! You contact your broker, and he/she/it says, "Done deal, my friend!" $200 suddenly appears in your online account, and you buy the stock.

Then you get fired from your job because you spend all your time writing financial articles on PNN instead of doing that damn PowerPoint template. Damn! Well, that's ok! You still have stock A!

Then the market takes a dip. Now, the price of the stock goes from $2 a share, to 50cents. You've lost $1.50 per share. NOW the bank comes a'callin. You need to cover your loss, because the price of the stock has dipped below your original purchasing price (your price being the original $1/share you put in). They want that extra 50cents per share back. If you purchased 100 shares, and the bank wants the 50cents they've lost on the deal back immediately, that means you owe the bank $50. Following me? (You put up $1, they put up $1, and then the price fell below that $1 mark so they want their money.)

So, now you have no job, you have bills to pay, maybe a family to feed, AND the bank has come calling. Unlike with credit cards, they CAN make you pay immediately. How? Collateral. Hope you didn't like that house or car too much, because they're taking it. The bank can call in your debt at any time, and they're never going to do it when your investment is doing well and making everyone money; they're going to do it when the market goes down, because they want to make sure you can cover your debts, and that they don't lose too much money.

NEVER BUY MORE THAN YOU CAN PAY FOR IN CASH, AND NEVER PAY MORE THAN YOU CAN COMFORTABLY AFFORD TO LOSE.

Historical Problems - Extra credit reading

Maybe you've heard of the Great Crash of 1929.... maybe not. I've mentioned before that the market moves based on two emotional extremes; Fear and Elation. What happens is that someone somewhere panics. That asshols panics all the other lemming assholes, and everyone starts to freak out. Usually, this is based on something minor (hence the name "assholes"), and people just over react. In 1929, some major changes in the market took place, but nothing to freak out over.

But, of course, they freaked.

At the time, heaps of people had purchased their investments on margin. Why not? New York, the financial center of the country was growing by leaps and bounds. Our horizons were blue and endless, and American ingenuity was boundless.

And then.... someone freaked.

A tidal wave of people selling off stocks and trying to get out of the market as fast as they could send the economy tumbling.

A major problem was that, since so many people had bought SO MUCH on margin, they didn't have the cash to cover their investments on such short notice. Property was seized by banks (sound familiar?), which in turn lost astronomical sums of money in the process. People were bankrupted in a matter of hours. Investors flug their bodies out of windows or shot themselves in the head.

I don't say all this to scare you, but to make you aware of how quickly the tide can turn. Never buy more than you can afford, and never rely on the money of a bank. Cover your investments with your OWN money, or don't buy at all.

Never trust experts. Including me. ESPECIALLY me.

If you've gone on to Yahoo.com/Finance (COME ON! How long do I have to nag?!?!), then you've probably read at least one article with lots of jargon and impressive sounding statements that you have to read twice before you can be absolutely SURE that you have no fucking clue what's going on.

I call assholes who write and publish long diatribes that are nothing more than an exercise in mastabatory self-love: assholes. Also known as "experts." NEVER trust an expert. NEVER NEVER NEVER, not if you can avoid it.

Here's the problem with "experts:" everyone has an agenda, and their agenda may not be to help YOU make money. Some authors on financial blogs push financial vehicles like stocks or funds because they have friends who manage them or have significant shares. Technically, this is unethical, to promote anything to which you may have ties... but if everyone abided by the law in both letter and spirit, then no one would have ever heard of Enron.

What I want you to get out of this post is that everyone has an envelope to push, and that envelope doesn't always have your best interests sealed inside of it. Experts are great; they sometimes have insights that you or I might not have come up with, and they can be good to read. However, it's important that YOU USE YOUR BRAIN. You can't just think, "Oh, Bob says I should buy this stock!" Fuck Bob. What do YOU think? Have you heard of the company? Is it good? Is it stable? What research have you done on their historical prices, and what sets them apart from their competitors? This is what I mean by not trusting; opinions are great, but YOU are responsible for making sure that you know what is going on with your money, and where you put it.

Eventually, we all come to the point where we have to trust someone else. When I bought a house, as much research as *I* did, eventually I had to turn to my lawyer and say, "Can you please use your education in law to look this over and see if there are any loopholes that I couldn't find?" I am not a lawyer; I had to trust his expertise. That being said, I DID learn as much about home-buying and the current laws as I could.

You can never learn everything, you just can't, but you CAN learn enough to protect yourself MUCH better than the average person, who, to be fair, does VERY LITTLE to protect their finances.

Think about how much time you spend on PNN. Now think about how much you would know if you took half that time, and did your own research. I love PNN, too, but unless they're paying you to be on here, this is recreation. Making money? Now THAT can be fun!

How to make money: Stocks

I think it's really clear that I have a bias towards stocks; that's just because I know them the best, so that's where we're going to start.

By this time, I'm HOPING that you've at least looked at www.yahoo.com/finance, if only because you don't want me coming over to your house and beating you to death with my laptop. Sure, I've pretty much written most of these posts for myself, what's your point? I hope YOU'VE gotten something out of it, too!

DISCLAIMER: I'm going to recommend that if you try out any of my advice, give it a go on the free Yahoo.com/finance portfolios where they let you track investments. You can set one up and pretend that you put real money in it, and then see how your investments would have played out.

So, now that you know the basic jargon, and you have an idea of what investing IS, let's talk about the practical tips of how to do it, and what your investing STRATEGY should be.

Easy-peasy, let's narrow this down by age, and position in life.

Why age matters:

Now, when you're younger, single maybe, no kids, if you lose $10k in the market, well, that sucks but you're young enough to work at your career and make it back. Not so if retirement is right over the horizon. At that point, you want to be more cautious about where you put your money, and your investing strategy. When you're younger, your strategy may be more focused on MAKING money, whereas when you're older, it should be more focused on KEEPING it.

So, older = more conservative investing strategy/ younger = more aggressive investing strategy.

Are these laws written in stone? No. Nothing is. I'm just showing you what's typically done. This age-based method though is usually a good rule of thumb, though.

A Healthy Portfolio:

You actually know more about where you want to put your money than you think you do! Nobody can tell you EXACTLY what your perfect portfolio looks like; that's just something you need to figure out for yourself. However, here are some general rules I go by -

1. Never invest more than you're comfortable losing. It may happen eventually, and you can't be left in the lurch.

2. Have a cushion of AT LEAST 3 months salary in a savings account. DO NOT TOUCH THAT MONEY FOR INVESTING. THAT IS SACRED.

3. Take 10% of your annual income; that is the MAXIMUM you're allowed to use to invest. If you use $5,000 and you grow that to $10,000, THEN you can consider re-investing any of the dividends (or cash paid to you as a result of the growth in value of the stock). DO NOT TAKE MORE THAN 10%. Why? See rule 1.

4. Diversify. Eventually, you may get to the point where you know the market, and one industry so well, that you can put ALL your money into that one area of the market, and be totally confident. Warren Buffet does it. I don't. I have confidence in certain stocks right now, so I have more money in them than in others. However, I would never put ALL my money into one stock, or even one sector. Even Warren Buffet makes mistakes.

5. Patience. This is harder than it sounds. Someone is going to have a "good tip" for you, and you're going to want to jump at it. I've lost money that way. Take your time to do your research. Is the company a leader in its field? Who are its competitors, and why is it better? You should be able to answer AT LEAST these questions before you buy. Again, this info is easy to find on Yahoo.com/finance, or where ever you prefer.

 Got it? Good. Let's move on to how you pick your stocks.

Padding Your Nest:

When I first bought stocks.... lo those many years ago, I started out with a few simple buys. These were my Blue Chips: Coca-Cola, GE, and Goldman-Saches. Ever heard of them? Sure you have! Johnson & Johnson is another popular choice. These are stocks that are steady. They won't make HUGE growth, so you won't get rich quick, but they are also steady enough that you won't lose your shirt.

These are a strong base for any portfolio. How do you find them? Walk through your supermarket. Pick up a product you and your friends love. Who makes it? That's your buy. Name brands in supermarkets are also often blue chips in the market.

Congratulations! You just made your first investment strategy! You figured out what to buy! Just, don't buy the whole supermarket!

So, you've picked 2, maybe three blue chips (you want more if you're older, and around 2 if you're younger). We'll talk about the details of trading later, but for now, write down your stock choices, or put them into your Yahoo portfolio!

Here's where it gets trickier: what to buy now?

What To Buy:

I'm actually going to tell you what I own, and explain why I own them. You can choose to buy, or not to buy. I am not encouraging you to buy these stocks in particular, nor am I trying to pull you away from other stocks. I am just telling you why I like certain things. If you buy them, and lose money, DO NOT BLAME ME, because I will be pissed off too, so I REALLY won't give a rat's ass.

Fannie Mae -  You're probably thinking, "Hannah! Are you fucking retarded?! They almost went bankrupt!!" Yeah? Almost don't count. The government isn't about to let Fannie Mae go out of business, because they hold SO much of the American personal debt. If the government let them go under, it would have collapsed the economy. Sure, we have a recession, but by floating Fannie, they prevented a potential DEPRESSION. Now, that means that when the stock went down to about 5cents, you could look at the company and think, "Well, the government went let them go under, which means eventually they're going to come back. With a high of $100 per share, and the cost being 5cents per share, what would be my investment if I bought 1,000 shares?" For an initial $50, your eventual profit (if it hits $100/share again) is..... approx. $100,000.

Yeah.

You won't make that overnight, but you COULD make it. It's not unreasonable.

Freddie Mac - See Fannie Mae. It's not making as much, and we can debate WHY, but if I have Fannie Mae, then I have Freddie Mac, too.

Finally (because I want you to see WHY I chose them, and not just buy what I buy): J. Crew - This is where your real strategy comes in.

In a declining market, people are going to scale back on the little things they buy. They'll get the free office coffee over the Starbucks, they shop at Walmart instead of J. Crew. Walmart was a good buy when our economy was going down, but now people are getting comfortable again. They want their coffee, and they want their Italian cashmere sweaters.

A lot of the market is actually Psychology. You have to look at the "vibes" that the market is putting out, and think, "How are people going to react to this?" The market moves on Fear & Elation, and nothing in between. Now people are happy, because the market is recovering. They want to take what little money they may have now, and make themselves feel good about it.

Look at some of your middle-of-the-road luxury goods. Prada, Coach, and Gucci may not be good choices, because people work their way up to them, but they start off with something to perk up their every-day.

So, this was HUGELY long, but maybe it made sense, and helped you see what a strategy is, and how to start forming yours. I like SOME banks right now, because the government is bailing them out, and that means they'll make a comeback. Which also means that a low stock price is an invitation to buy.

I also like moderate luxury goods, but that's me. There are a LOT of opportunities out there right now for a good investor. If you have some ideas, let's talk them over!!!

"Good Debt," or, "Why you should buy Hannah a car."

Some of you have heard of "Good Debt" versus "Bad Debt." Despite what I used to think when I was a kid and my mom was trying to explain finances to me, BAD debt isn't some dude name "Det" who got your neighbor pregnant and then ran out on her, though that would be a dick move. Clearly not the sharpest lead-painted toy in kindergarden. I mean, I didn't know there were people who weren't Jewish, and we always used to pass this big giant house with a huge stone lower-case "T" on it, and I totally spent at least a month looking for the other houses with the other letters on it, thinking there were people out there who loved the alphabet WAAAAAAAAAAAAY more than Sesame Street and I did. In case you're confused: it was a church. Well! When you're Jewish and you've never heard of Jesus, what would YOU think it was?!?!

I digress. More interesting childhood stories later.

Good Debt vs. Bad Debt.

Here's what I want you to get out of this: "Good" or "Bad" is based ENTIRELY on what you get out of spending your money. Are you getting good "value" for every dollar that you spend, and what "return" are you getting for your money? If you spend $1 now, and get $10 return on your investment later, that's good. If you spend $1 now, and end up oweing $50 later, that's bad. Good gets you stuff in the long run, bad just sucks you dry. And leaves you with herpes. Ok, it may not leave you with herpes, but it WILL date-rape your mom. Be prepared.

Now, to understand debt, we have to understand the value of a thing. For example, most people know that a NEW car can lose up to half its value just by driving it off the lot. That is; the second you buy it, before it does ANYTHING, the price drops by half because now it's "used," or "pre-owned."

You just paid twice as much for the same product than if you bought it next year.

Consider that you're probably not going to be able to pay for your new car in cash. Most people don't walk onto the lot with over $20k in cash in their pockets. You'll get a loan. So, you're asking the bank to lend you money for a product that is going to lose half its price in the next 20 minutes. That's bad debt, in a nutshell: it sucks your money, without giving you an INCREASE in value in return. It's like that bad boyfriend in college: take. take. take. Asshole!

Now consider good debt: going to school. Let's say you go to a university, and they have a degree that can really help advance your career. Well, you can't afford to pay cash, but you CAN get a student loan.

Do it. Here's why:

For one, the interest you pay over time on your loan can be tax-deductable, so you're ALREADY getting some of that money back. Secondly, by going into debt to get this degree, you will (hopefully) advance your career and either make more money, or be fulfilled in some other aspect. So, the money you put down on your degree actually has a return on your investment that equals a (again; HOPEFULLY!) happy life.

Compare that to credit cards, which not only support out of control spending habits, but they also charge you a monthly fee to use the card. That fee is NOT tax deductable. Now, you're spending more money, because you're paying fees.

Now, are credit cards the worst thing to ever hit the planet? No. You need it in case you run out of cash, or for sudden, large expenditures that you can't pay for immediately. However, the goal is to pay them off at the end of the month, if you can, so that you don't get hit with those fees.

Ok. Good Credit = spending money to MAKE money, or in some way use it as a tool to a better life.

Bad Credit = spending money that gives you little to no value, like buying $100 sweaters from J.Crew, when you can wait for the sale and pay $40.

Some good resources to help you learn what Good Credit and Bad Credit can do to you:

http://money.cnn.com/magazines/moneymag/money101/lesson9/index2.htm

http://moneycentral.msn.com/content/Savinganddebt/Managedebt/P150813.asp

What the hell am I looking at?!

I'm going to storm on ahead, and assume that anyone reading this has taken my FANTASTIC advice, and has either purchased or borrowed one of the "Dummies" books.

Ok, so you know what a stock, or a "share" is; you're giving the company cash, or "liquid assets," for them to use now, and they promise that if they make a profit, so will you.

You also know that to track your snail-racing company, you will probably look at the DOW, or the DOW Jones Industrial Average (DJIA) to track the performance of your stock. But, what do all those crazy numbers mean?! Let's take an example: http://finance.yahoo.com/q?s=GOOG. This is your performance summary for Google stock. Each company has what's called a "Ticker Symbol," which is how you locate your company. Domino's Pizza symbol is different from Domino's Sugar symbol, so one of the first things you have to do when you're thinking about buying a stock is to locate the symbol. It's usually pretty easy to do; I just google it.

So, you have that summary in front of you, and it says the NASDAQ symbol is "GOOG." Perfect. Below that, you'll see something that says, "Pre-Market Real Time," and then has some numbers after it.

It is VERY important for you to know that the AMERICAN stock market operates approximately between 9:30am EST, and 4:30pm EST. At 4:30pm AMERICAN trading closes. However, you still have all of Europe, Asia, Africa, and all those other places that I should have learned about in school but was probably busy making out with Sebastian at the back of the room. Thank you private school education!

Anyway, all these people are still trading your stocks. They're still buying and selling. So, let's say that at the end of the day, each snail-racing stock is $1. You wake up the next morning, go down to Wall Street, and as the market opens, your stock is now $1.25. That's because Europe and Asia and Africa suddenly had a run on snail-racing, and it's the next big thing. Everyone wants to race snails, and so the price of the stock went up while you were sleeping! YAY! You just made money in bed! WITHOUT being a hooker and getting herpes! YAY!!

Now, as we go down the left column, you'll see: "Last Trade," "Trade Time," "Change," "Prev Close," "Open," "Bid," "Ask," and "1y Target Est."  These are so easy, that I bet you already know most of them. Look how freaking smart you are! I bet you thought this was going to be hard, too! Nope!

"Last trade" is the price of each share of your company. For Google, right now, it's 460.41. That means that for each share, you would pay $460.41. That is a VERY FUCKING EXPENSIVE stock. Now, because, as I'm writing this, the market is not yet open (10 minutes), that price is going to change throughout the day. That price only tells me what the AMERICAN stock exchange valued the stock at when it closed yesterday. But remember, there has been activity last night.

"Trade time." Duh. The last time at which the stock was traded. Yesterday. Easy-peasy.

"Change." Well, since the American market was closed last night, there is NO change. Once the American market opens though, this number will go up (and will often be in GREEN when up) or go down (at which point it will be highlighted in RED). I could go on about this, but I really think that if you watch one or two stocks for a few days, you'll get the idea.

"Prev Close." When the market closed yesterday, this was the value of snail-racing. A stock's value is determined by the end-of-day value, so this numer is important. Snail racing may go up or down during the day, but if when everything closes it's $1 higher than yesterday's close, then you're doing well.

"Open." Remember how I said things change over night? When the American market opens, the price will be different from last night's close. The difference between last night's close and this morning's open is.... actually, not very important to you right now. It just tells you what other markets think of this stock. Do you care? No, me neither. Fuck 'em.

"Bid" and "Ask." Ok, these ARE important. Are you ready?: "Brokers," or the people who actually DO the buying and selling of your stock (these are the middle men) take a percentage of the purchase. It's their commission. So, let's say you want to buy Google stock. Well hey! The last trade was $460.41, and you have exactly $460.41 in your pocket! A match made in heaven!! Oh, and there has been NO CHANGE over night in the price of the stock. SOOOOO perfect. Only not. The stock is $460.41, but the BID (which means the purchasing price) is $462.40. WHAA?! Well, this can either be due to changes in foreign markets over night, but it ALSO may include commission fees for the people on the floor who are actually doing the trading. Which is really bullshit, because MOST of this is done electronically now, and they're greedy bastards. Whatever. It makes me want to slap a broker. I have issues.

So, your BID is the price at which you want to buy the stock. Now, those bastards aren't going to just SELL you the stock. I mean, they're BASTARDS, they can't just make it easy, cuz that's bad for their rep. So they say, "Ok, you wanna spend $462.40.." and you're like, "Well, actually, I wanted to spend $460.41, but you raised the price, you bastard," and they're all, "Whatever. You want to spend $462.40, but see, *I* want to make money, so I'll SELL you the share at $463.02."

OMG. That's such bullshit, I hate it. Then, a broker representing you, and a broker representing Google pretty much take their clothes off, get into the mud-wrestling ring, and fight it out, and one of them wins. Usually the BID, but sometimes the ASK, if it's a really strong (good - likely to make a lot of money) stock. So, now you've purchased your stock!!! MAZAL TOV!!

"1y Est." Pretty easy, right? This is where the "experts" (read: guys who paid a lot of money to go and get a financial degree that does pretty much NOTHING except intimidate people who DON'T have their degree) estimate the stock will be at the end of the year. I don't know exactly how they come up with this, but I PROMISE you that almost NOBODY'S 1y estimate for Lehman Brothers showed them going broke. So take that with a grain of salt. More than anything, it's just some dude saying, "I think..." Well, your opinion is just as good, so do the thinking yourself.

I don't know if anyone is reading this, but frankly, I'm enjoying writing it, so there you go. If anyone has questions, my office hours are on my door.

Also, just to keep it real: llama balls. Yeah. Good times.

Your jargon cheat sheet

My mom said one thing over and over again when I was growing up and learning about finance: You can work hard for your money, or you can make your money work hard for you. In other words, while working every day will get you cash, it may never produce the kind of return that knowledge and experience in investing can do for you.

Of course, you can also lose your shirt. But hey, that's why I'm here! We approve of shirted folks here in Banana-land.

I realize that as I'm writing about this, I may use terms with which not everyone is familiar. So, instead of working through everything from A-Stock to Zombie Corps, let's hit the jargon you're going to hear most often.

Stock: When people start out investing, they usually start with stocks. It's easy to say, "Well, I think Google is a good company, I'll buy their stock!" rather than saying, "Gosh, I don't know much about investing. I think I'll start with commodities!"

Fail.

When you buy stock, you're actually sort of loan-sharking with the company. The company came to you all poor as shit and needing cash NOW. They're all like, "You got money! Help a dude out!" And you're all, "No way, man! What am I going to get for it?!" So the company is all, "Ok, well, for every dollar that you lend me that I put into my business, you get to make 10cents on the dollar for every dollar in profit!" So, if dude takes your dollar, and doubles his money, he's saying that you get your original buck back, plus a dime. That's kinda sweet, except you can't really do shit with a dime nowadays, but whatev.

The down side of course is that he could LOSE your dollar by, say, investing in snail racing. Well, now you're out a dollar, and he doesn't really have to pay you back.

So a "stock" is like a loan to the company where they give you a sort of IOU that IF they make a profit, you get a share of that profit, but if they LOSE money, so do you. Stocks can also be referred to as SHARES, as in, you're buying a share of the company, and you get a return on that share, which you will hopefully share with me. Because I'm awesome.

Bond: If you ever listen to commentators on tv, sometimes they talk about "stocks and bonds." The reason why is because stocks and bonds are similar concepts.

With a stock, you're agreeing to the risk of losing your money. You could make a shitload if that snail racing really takes off, or you could lose your entire investment. With bonds, you're handing over your money to either a corporation or the government, and the government agrees to pay you back your money, PLUS a certain percentage in interest after a certain period of time. NICE DEAL, HUH?! Guaranteed money for the most part! And bonds aren't a bad shake, but the problem is that the interest rates on most bonds are low. Lower than an educated person in the market can get by investing in other opportunities. So, the lower your interest rate on a bond, the less additional cash you make at the end of the term. 

These are great for turbulent times. If you want to store your cash away for, say, 7 years with a promised interest rate, then it's a great option. Also really good if you want to grow money without the risk of stocks. This is more of a "SAFE" option, and would be a larger part of a healthy portfolio for an older person, but we'll talk about what your portfolio should look like later.

Mutual Funds: Is this getting boring? I'm sorry. But think of how smart you'll sound throwing around these words at a party!

Ok, let's say you and three- or four-hundred of your closest friends get together every Friday night, and talk finance, as one does. And you all sit there and say to each other, "I bet if we all went into buying shares/stocks in the same 10 companies, we could get a bulk discount!" WELL NOW YOU CAN!

Mutual funds are pretty much a bunch of people getting together and deciding that they want to own the same stocks, and investing together. Now, these funds usually have someone running them and making the actual trades, but you just sorta hand your money over to a middle-man who buys the shares for you.

Sound scary? It should.

Mutual funds often hold stocks in the same "sector" or area of the market. So, for example, there are mutual funds with all of their money in domestic banks. Imagine if you had bough stock in a mutual fund with a big holding in Enron. Yeah. There are ways to hedge your bets on these, but this post is getting long-ish.

So, mutual funds are like the costco of investing: bulk discounts, but you better like that pickled herring, cause you're getting a LOT of it.

FINALLY........... (*drum roll!*).....................

The NASDAQ, S&P500, and the DOW JONES (or "DOW Jones Industrial Average"): Ok, I'm going to go into some details about these, but here's really what I want you to get out of this section: these three terms refer to how you're going to tell if the market is "going up," or "down."

(That can also be termed "bullish" [think of a raging bull rampaging and.... I don't know, I guess pooping money. I really don't know where this term came from, but think of the bull pooping money], or "bearish," which means slugging along, maybe not doing well, and certainly not pooping very much money. Bullish is an active market, bearish is slow. I got off track.)

The NASDAQ, S&P, and DJ are just different ways of looking at the market. That's it.

Pretty much every type of business you can think of is represented in the stock market. Everything from potash for farming, to microchips for computers, and all the many bits in between.

So, how do you measure a good day in the market? What if potash goes up, but the microchips are down? What if they're BOTH down, but Starbucks goes up? YOU'RE SCREWED!!!!

HA! No, you're not. The NASDAQ looks at the 5,000 most actively traded stocks. These are companies you've heard of: Coca-Cola, Google, Citibank, and so on. If all 5,000 are going up, then it gives investors a pretty good idea of what's going on in the smaller companies of the market. This is how pundits can tell you that the "market was up," or "down." They're basing it off of these sample of 5,000 companies.

Your S&P500 is a little different. These are the "strongest" (according to some) of the market. The best of the best, you could say. These are also "blue-chips," or stocks that are not likely to take any major nose-dives any time in, oh, say the next 20 years. They're actually kinda like bonds: pretty stable, but not a huge return on your investment.

DOW Jones, "the DOW," or "DJIA" is based off of just 30 companies. Seriously. JUST 30. Out of more than 5,000. These are your super-troopers.

These are referred to as "indexes," but they're not alone. You can find an index of just tech stocks, or just medical stocks, or just farming-related stocks. If you can think of it, then someone else already has, and has indexed it for you. How sweet of them!

Ok, in the hopes of NOT overwhelming you, that's some of the major jargon you're going to hear. I hope that was clear. If not, please don't hesitate to ask. I LOOOOOOOOVE finance, and totally would have gone into it as a career, but I really hate people in finance. I know. It's weird.  

Because no one starts out knowing everything...

Confused about the economy? Not sure what the hell an "ETF" is, nor why you should think about investing in it? Freaking out over the state of your retirement fund?

Well, aside from being one crazy banana-headed girl, I also have about 25 years experience in finance. "HOW?!" you may ask? Well, both my mom and her best friend were heavily into finance, and raised me in the industry. My mom's friend, Myrna, was one of the first women on the trading floor on Wall Street.

Besides, if you don't like my advice, you don't have to take it! See? Either way, you win!

So let's start off with something easy; resources.

I always encourage women to be the captains of their own financial ships. Even if your husband/partner is the one who actually pays the bills out of the shared account, YOU should know how to step in and what to do. To that end, it's vital that you stay current on the happenings in our economy.

This actually sounds more overwhelming than it is. A great and easy way to start learning about the financial state of our country is www.yahoo.com/finance. Honestly, Yahoo's finance page is one of the best I've read. It's clear, concise, and frequently has updated news sooner than most other financial blogs. That, and a LOT of it is written for us lay-folks, not day-traders. Another great advantage of Yahoo Finance? You can create a fake stock portfolio on there, and play around with "fake" money. A REALLY good way to see how your interpretations may pay off.

www.Investopedia.com - This is my go-to site when I don't recognize an acronym or concept. Type in "ETF" and it'll not only explain what an "Exchange Traded Fund" is, but it'll also give examples that even *I* can understand. Yes. Even me. I look up almost everything on investopedia. Even stuff you think you know, you can always learn something new.

Turned off your cable and internet to save money during these tough times? Then HOW THE HELL ARE YOU READING THIS BLOG?! Eh. Maybe you're at the library, which is good! While you're there, look around for the book, "Investing For Dummies." I was raised in the company of financial analysts, but I LOVE this book. I seriously heart it so hard, that I think the cover is almost falling off. If you're not into sitting in front of the computer for hours and hours (I'm going blind, thankyou), then pick up this book. You don't have to buy it; your local library may have a copy, but beware missing pages or scratched out words. This book is a fantastic resource.

Along the same lines, try out "Personal Finance For Dummies." These are so easy, they're practically beach reads. The concepts are thoroughly explained, and additional resources like links and other books are provided where applicable. Plus, the yellow on the cover makes me happy, which I think they did on purpose as a psychological trick to make me buy the books. It worked. Bastards!

Anyway, between all of that, I think anyone would have a pretty good jumping-off point.

If you have any questions, I would love to hear them! Otherwise, I'll just keep posting random (hopefully HELPFUL) bits of info here for folks.

I'll try to keep my deep love of zombies and llama balls to the other pages in my blog!  :)