This is where I want to talk about the best ways to invest money.. Specifically I want to talk about what I learned from Ken Roberts a $50 million dollar man several years ago. He may be worth much more now.
World’s Most Powerful Money Manual
Ken Roberts wrote a powerful money manual 20 years ago (?). It was about commodity investing. I tried it for a short time. Commodity markets move very fast. You can make money fast. You can also lose it fast. Most people lose money.
My experience was that I used one particular strategy. That was to trade only the narrow sideways channel. This is when a commodity has traded in a very narrow range for a long time. I set it up with a broker that I would buy at a certain price ( a breakout) out side of the narrow range. I traded sugar first. It worked beautifully. I had a profit of $800 within 3 days.
The problem was I did not take my profits then. I waited and the profits disappeared. My strategy worked but my inexperience and a little greed caused me to make a mistake by waiting.
My advice based on my own experience is:
1.Don’t try this unless your tolerance for risk is high.
2. Don’t try this unless you can do your investing any time the markets are open. If you have a full time job you don’t have time for this.
3. My advice is the same for trading options. This is less risky than trading futures, but it still moves too fast for me.
4. Don’t invest money you can’t afford to lose.
5. Subscribe to a service that guides you in what to buy, and when to buy or sell.
I bought some books by Chuck Hughes world champion investor 7 years in a row. His people advised me not to do the options investing since I was still working. There was not time to watch everything.as closely as neceassary.
How to Always Make Money
Ken taught me that there is a way to always make money in inesting. That way is to always be in stocks, bonds and gold. At leaset one of those is going UP all the time. This is very important information.
When the economy is good stocks go up. When there is recession bonds go up. If there is a crisis or high inflation gold will go up.
Advantages of Mutual Fund Investing
1. it gives you automatic diversification. You might be invested in a hundred companies instead of one or two. This reduces the risk if something unfortunate happens to one company. You can’t lose everything. You will be protected from disaster.
2. You can own a small piece of the best companies in America.
3. You do not have to watch closely the daily movements of your stocks etc.
4. You can invest a little at a time. That way you will not be hurt as much by a sudden drop in the value of your stocks, bonds, or gold.
Dollar Cost Averaging
Dollar Cost averaging is where you buy stocks at as little as $50 per month every month. Dollar cost averaging has the advantage of allowing you to buy at a lower than average cost. I will demontrate that ihere.
In this example you invest $1000 each month for 4 months.
Price Shares Total
Jan 1 $20 50 $1,000
Feb 1 $15 66.66 $1,000
Mar 1 $10 100 $1,000
Apr. 1 $18 55.55 $1,000
The total number of shares bought is 272.21. You have spent $4.000 total. But at $18 a share your holdings are worth $4,900. So you show a profit of $900 even though the price is lower than the price you started with. Yahoo! This is exciting , right?
Dollar Value Averaging
Dollar value averaging is where you invest a fixed amount of value every month. This also has the advantage of investing at a lower than avarage cost but it goes one step better.
So suppose you are investing $1,000 in value every month. So when the value goes uo one month you will invest less so that you reach yout target value without going over.. Here is an illustration.
Suppose you want to have $7,000 at the end of the year. That means you are adding $583 in value every month. If it goes down to $400 you will have to add $766. That is $583 plus $183 to bring the past months up tp to $583.
If the value goes up the next month to $766 then you will only add $400.
The advantage of this is that you are buying at lower cost AND you are buying more when the cost is lower.
It is not as simple as dollar cost averaging. You also may run out of money to invest if there is a long drawn out downturn.
Summary and Conclusion
My favorite strategy is dollar cost averaging. The benefit is buying at lower cost. The other big benefit is the simplicity. The is the best option for most people.
Dollar value averaging is my second favorite strategy. It helps buy at even lower cost than DCA and it helps you buy more at lower cost. This is the second best strategy for most people.
What is your favorite strategy? Have you used any of these? What kind of results did you get? Was this helpful?
Please comment below. I will answer as soon as possible. Thanks.