How to make money from stock investment Part 5

Return on Investment (roi) is the key for all investment. On average, stock market gives 10-15% roi for any year. My personal goal is 50% roi for any given year. Did i achieve that first time? Answer is no. I couldn’t make it, in fact my first investment year, it was 2001, was massive distress. I lost almost $6,000 on one stock and total lost was almost $12,000. I used Las Vegas roulette style to make money from stock market, result is big lost of money. I was novice at that time. But i never quit, until today i invest some portion of my money into some investment, i never ever accumulate money in saving account.

I believe each one is different, making money from investment depends on one’s personality. If someone is pessimist in nature, how can he/she make money from stock investment? For those, real estate is good option. If someone is optimist and flexible then stock market is cash cow for them. As i said, always remember nuclear war can only make stock market to disappear, in that case, we won’t survive either.

What worked well for me after bad start, DIVERSIFICATION. Diversification is the single success element. Here i’m going to separate case by case, basic investment options,

Case 1: $10,000 Start, Goal 15-25%
For those who want to start with $10,000 for investment at 15-25% roi, Mutual Fund is best option. I believe, we need at least $25,000 to start stock investment. I used INGDirect for mutual fund investment, their international fund was really awesome and US small cap also great. But there are many mutual funds available, just carefully review hidden cost. Vanguard also good but i don’t know about service and hidden charges. But INGDirect no service and hidden charges.

http://www.ingdirect.com/
http://www.vangurad.com/
http://www.morningstar.com/ (Mutual fund research/analysis site)

Case 2: $25,000 Start, Goal 40-50%
5k per stock for 5 stocks. The stock selection is really important. Diversification is key. I started with stocks, but i did feel that stock is not working as per our [single investor] expectation. The main reason is hedge fund’s aggressiveness. I switched over to ETF and it is really good, already well diverse and same or better roi as stocks.
For current scenario, i think following are good diversify portfolio.

1. Walmart (WMT) – Second round stimulus package talk already started and upcoming holiday season.
2. Energy Conversion Device (ENER) – Renewable energy – i think this one is coming down to 55-60 good bet to take position.
3. Apple (AAPL) – I don’t want to tell anything about it. I can see $200 near future.
4. Chardan South China (APWR) – again an energy company. I might add ENER or APWR. APWR has added advantage that it is US based and China market concentrated.
5. Central Euro Distribution Corporation (CEDC) – alcoholic, sin stock but no emotions. Good balance sheet and long term growth is good [my stock subscription keep on sending this one to buy] but wait for little downward.
6. GE/MO/PM – I might choose one stock from this blue chip line up, these provides high dividend. I might go with GE because i don’t want to add one more sin stock.
7. SIRI – I want to take some risk on this stock. Anticipating upcoming holiday season, merger with XM and upcoming football season.
8. Qualcomm Inc (QCOM) – one of my fav. stock and price now good for take charge. 53-50 is good entry point. Choose either Apple or QCOM.
9. AMR – Airline, risk either AMR or SIRI.

So i added 2 multinational companies with bellwether US retail and energy stock with 2 risk taker stock. I stay away from oil and defense, more US based stocks for now.

Case 3: ESPP
One of the main kicker of my portfolio is my previous 2 company’s ESPP stocks. The point to remember is, ESPP stock already discounted for 15% before delivered to us. I always invested full allowable salary deduction to ESPP stock options.

Case 4: Real Estate investment
Even though, i’m always lean towards new school thoughts, some time my dad’s old school thought also makes lot of sense. Home, sweet home, everybody should own a home. Home is not a wanted rather it is needy thing. The second home can consider as investment, if we are able to pay at least 50% down payment. Based on my research, i bought my second home at Bangalore India 3 years ago, with 100% down payment[pay as build model, ofcourse i sold all 100% ESPP, 100% mutual funds and 50% of Stock/ETFs]. My first inherit home is on my home town NagerCoil, India [I love that place]. I have no words to say the growth of India’s real estate market.

I used all 4 cases and invested $10,000 mutual funds, $25,000 stocks/ETF, and 15% of my salary to ESPP. Last 6 years, my average roi is 50-60% [excluding real estate] consistent.

At this time, i want to talk about US real estate market. US real estate market is saturated. We have lot of time to own a home here. Who is smart? Paying $2200 for mortgage [property tax + PMI + high utility cost] or paying $1100 for rent, almost same location and same space?

Enjoy, use my guide and let me know if you have any questions. I will help all of you to beat inflation and make you rich or richer [for those who are already rich] or richest (for those who are already richer!!!).

Recession -Prepare for worst and hope for best.

Whether or not we are in recession now or will be in coming months, we have to prepare for worst and hope for best. This time main culprit for economy downtrend is real estate collapse and sky high gasoline price and credit card debt. Last time when I came to US within a year, tech burst happened and economy fall in recession, which was worst for Silicon Valley companies. Most companies in Silicon Valley went through several rounds of lay offs. But this time most of the IT companies sitting in huge cash pile so they don't need to go through lay off, may be some hiring freeze. We have to thank offshore and outsourcing model now, because most of IT companies saving lot of money because of offshoring, and helping US employees to keep there job now. Specially IT companies will not affect by this recession, may be some banks and real estate related companies going to affect.

By the way, playoff matches are over, as per my wish New York Giants and San Diego are in conference final. After several failures in last years, this year we are going to see some new competitions.

Real Estate burst or natural phenomenon.

The way of life should be includes homeownership. Homeownership is each individual’s dream and must have one. But the current trend thinks me twice to make home buying decision. The matter of fact is already 69% American household are homeowners so we have 31% potential buyers out there to join this American dream. But last week I did read an article in Chicago Tribune that 38 Million American living insecure food intake range, which means, 38 Million American living very low income and they are a generation away to join homeownership club. If you subtract this 38 Million people from potential buyer list then we have only 20% of potential buyers.The future house market will be driven by upgrades, like town home owner moves into single family house and single family house owner will move into some bigger house. So on and so forth…..Here now real winner is whoever already sold house at higher prices in last year peak.