One of the major components of Phil Town’s book Payback Time is telling you to ditch your Mutual Funds. He provides a few great points about how these funds make money regardless of if you make money and that they HAVE to make money even in a decreasing stock market. All valid points in my mind and someone with a stronger investing background may be able to argue his points. However, this got me thinking that I need to analyze my Mutual fund performance….
Note: The numbers below are not the actual numbers but rather a percentage which shows the performance of the mutual funds. This is to protect myself (from what I’m not exactly sure).
The market value as of yesterday (Feb 1st, 2011) the value was $50,217. The book value of the mutual fund is $50,000. This works out to an interest rate of 0.4% over the past 4-5 years. How horrible is that? I realize that it’s been a down market and we are regaining, however, if I could have invested in GIC and had a much higher value.
These are the risks that I accept when investing in a mutual fund and I realize that. However, I wonder what I would have as an interest rate had I committed to rule 1 trading (investing). Luckily, I’m still young and can afford this sort of learning experience.
This provides the ‘kick-in-the-ass’ that I need to get in gear and to find some Rule 1 stocks to start investing and stockpiling. Stay tuned for my analysis and stock-picking ways.
Phil Town released his second ‘financial freedom’ book in early 2010 named Payback Time. This book is basically a continuation of the Rule #1 book. In general, I thought this book was really good. As with Rule #1 it provides simpler explanation of concepts that are barely discussed or discussed in complex detail. The simpler explanations and real-world example (as in Rule #1) makes this a book that most people can relate to and use.
Unfortunately, you need to read Rule #1 prior to reading Payback time. As well, at times, I felt that this could have just been added to Rule #1 since it is referenced many times. Therefore, if you are considering this book than buy both Rule #1 and Payback time and read away.
The basic premises of the book is to “stockpile” stocks by buying when the market is low and selling when they are overvalued (high). Although this sounds like the same thing as Rule #1 this book concentrates on investing rather than trading. Rule #1 teaches you how to jump in and out of the stocks based on the trends using a great company as your basis. This book teaches you to buy a great company as if you were going to own it forever and keep on buying it at whatever price as long as it meets your “stockpile price”.
As with many investing and self-help books a large part is selling you on their system. This is no different with Payback time, however, Phil does back up his advice with numbers and provides an alternative (index funds) if you’re not going to follow his advice. Chapter 2 breaks down why Mutual funds are a terrible idea and how you should consider moving your money elsewhere.
The gold of the book is Chapters 3-6 so I will provide a brief review of each chapter.
Chapter 3 is a higher level review of Rule #1. This is quick refresher and does not provide the same detail with the numbers.
Chapter 4 introduces the Sticker price and Payback time. Both of these concepts are pivotal to successful investing with this strategy and can’t hurt learning for future reference.
Chapter 5 provides the steps required to start investing with the Payback time method.
Chapter 6 provides a quick guide to using floors and ceilings to have an idea when to enter the market.
Overall, this book provided simple explanations, a method that works and made me consider my investing future. If nothing else a book like this allows you to reconsider how and where you are investing your money and if this is the best option.
My recommendation: Read it!
I was just over at Phil Town’s website reading some old posts… ie: catching up to where I should be.
Anyway, he has a really interesting post on October 9th, 2009 named where is the market heading. Basically he’s saying that where at a point right now where the people who were scared of the market aren’t scared anymore and are starting to invest. This means that the market is at the price that it should be… ie: when we should be looking to sell or when WE are fearful.
It’s really an interesting read. Check it out.
On December 4th, 2009 I sold my 4 shares of Apple (AAPL). I was watching the indicators ever since it broke through the $200 threshold. I had this as my target price for a while and have been watching and waiting. Then on December 2nd it started to go down and I watched closely to ensure I wasn’t getting out too soon or too late.
The indicators I used to get out were the 20 day moving average, 50 day moving average and the MACD. I also was watching two versions of the charts the 3-month view and the 1-yr view. I’ve noticed that they provide different information and I like to have as much information as possible. I saw the 20 day moving average break through the price around November 30th, then the 50 day on Dec 3rd / 4th. The MACD was trending downward and hadn’t quite crossed but was about to. Anyway, I sold at $193.
Bought 4 shares @ 129.10 = $516.40 (February 29th, 2008)
Sold 4 shares @ $193.00 = $772
Profit = $255.60
Looking back at the trends over the past 1.5 years (chart below) I noticed that I should have sold my stocks original in July 08. Then I should have waited until March 09 to buy again. This would have been a correct Rule 1 trade, however, I wasn’t following things closely enough and missed out. This teaches a good lesson that watching the stocks does only take 15 minutes per day and you can profit greatly if you know what you’re looking for.
I am now in search of another set of companies to purchase. However, as my Rule 1 knowledge is a bit foggy I am going to re-read the book and refresh my knowledge so that I’m ready for my next set of winning trades!
A big part of the Rule 1 method is learning when to buy and sell the company. I haven’t traded much in the past 1.5 years and haven’t been watching the signals. Well, I stared again around late august and have been monitoring my AAPL and CWTR stocks off and on. I looked into the state of my stocks today and saw a 14.21% drop in the price of the stock. Wow! that sucks. But what can I learn from this?
I should have already been out!
Looking at the signals of the stock (which I’ve included below) I can see that the MACD says less people are buying then selling on Sept 28th, 2009 (according to Google) and October 16th (according to Yahoo). Then on October 16th the 50 day moving average cuts above the stock price. Those are the two indicators that I’ve been using and really like their pattern. And based on those signals I should have got out on the 16th or 19th of October for around $7.57 for a profit of $41.75. (woulda, shoulda, coulda doesn’t get you very far in the stock market though!)
That all being said, why am I still in Cold Water Creek (CWTR)? Good question. Mainly because I wasn’t monitoring my share / companies properly. It only takes 15 minutes a day which is completely true but I just stopped monitoring. Lesson learned and luckily it’s only a $41.75 lesson (so far). I will onto my stocks for now and wait to see what happens. Now I’m going to be monitoring my AAPL stocks so I don’t make the same mistake twice!
As I mentioned back in Feb 29th I bought the apple stock (AAPL) at $129.10. It’s now sitting at $204 which is a good amount of ROI so now I’m watching the signals and looking for my ‘out’ point.
I will start updating the site again as I have a feeling I’m going to be selling this position soon and will be looking for more companies to buy into soon. I’ll keep everyone updated with my progress.
Sorry for the long delay in posting. I realize that I started this blog all gung-ho spent all my money then had to wait. That’s the tough part about rule one investing, waiting. Waiting for the indicators to turn the ‘correct’ direction be it up or down.
Now I’m back to posting. Interestingly enough I’ve actually missed quite a bit while I was gone. This ranges from apple’s stock going up (and a bit back down), acceleware’s stock moving to $1.00 (and back down) and coldwater creek’s stock taking a little rollercoaster.
Anyway, I’ll try and provide at least a ‘tri’ weekly post on this blog. So without further ado we’ll have blog posts here eventually.