Who Can You Help?

I took a friend to lunch Friday and discovered that she has not the slightest idea how to start investing in the stock market. She is 22, single, part time student and works part time. Her family never talked about money and since she is a waitress, she has never been exposed to 401-k’s. She is not the lone ranger; think about how many people may opt out of working for corporations after graduation-we could have a lost generation of investors because no one mentored them. This is where all Personal Financial Bloggers can help-You have heard of the day once a year called Take Your Child to Work? I propose we take a friend to Scottrade or whatever firm you feel comfortable with!

So, this week I’m taking my friend to lunch and then to Scottrade to show her the ropes. Think about this: if you have never had any exposure to the financail world you may have many questions such as:

• How much money do I need to start with
• Does the firm accept cash
• How do I make subsequent deposits
• Should I have my boyfriend/girlfriend on the account with me
• What documents are needed to open an account
• What’s best, stocks, mutual funds, ETF’s or options

The whole process can be very overwhelming and extremely intimidating. I feel obligated to pay it forward and show someone my world and the financial riches that it can bring down the road.

I hope you’ll join me in this effort and take some one under your wing and expost them to a very confusing and potentially very rewarding world.

Do you have additional suggestions on how we can help our friends?

There was an article in Strategy+Business that asked an interesting question: What percentage of dot-com start-ups have failed? Many people typically guess that 90 percent of dot-com companies failed-they would be wrong. The facts are that a random sampling of all dot-Com’s that received venture capital financing in 1999 showed that about half (48 percent) were still in business five years later. The two authors of this study, Tim Laseter and David Kirsch also had an interesting observation: “Upon reflection, the fact that so many companies survived suggest that the first wave of the dot-com revolution suffered from too little entry, and not too much,” they write!
I can’t help but remember a dot-com that made me a ton of money. The symbol is CMGI. Back in 1999 it was around $20 a share and it gave us a great ride to $160 a share in 2000-2001! Fortunately, I took my profit and ran because it went from $160+ to $2.38 a share today!!
So take heart all you would be entrepreneurs-there is always room for your great ideas! Good luck! Sorry for my lack of posts: I’ll get back in the grove.

Steve Mertz

I love the short money interview that Deborah Solomon did of Suze Orman titled She’s So Money. As regular readers know I’ve never been a fan of Ormans. I’ve found her information to be very condescending and simple! She is a great marketing machine and I do applaud her entrepreneurial skills.

I am a huge believer in always asking financial advisers how they invest their money and that’s why I really enjoyed the Solomon interview. When she asked Orman how she invested her money, Orman replied: “Save it and build it in municipal bonds. I buy zero-coupon municipal bonds, and all the bonds I buy are triple-A-rated and insured so that even if the city goes under, I get my money. I take a little lower interest rate to make sure my bonds are 100 percent safe and sound. “

What about the stock market: “I have a million dollars in the stock market, because if I lose a million dollars, I don’t personally care. ” Interesting comments! You can learn a lot about hiring a potential financial advisor by asking good questions. Wouldn’t you feel funny if your financial advisor invested all her money in real estate and was advising you to invest all your money in the stock market? Ask good questions before you commit to an advisor or guru!!

Steve Mertz
Suze Likes the AMT Tax!

Mark Hulbert follow the advice of newsletters given to investors. He notes this morning that the Monday before the big sell off the investor sentiment was 62.4%-this was the recommended exposure to stocks from the newsletters. The investor sentiment index as of last Monday’s close was at 22.8%
He argues that the average recommended exposure to the stock market has now fallen by nearly 40%. Something you never see see at the top of a stock market rally. Now may be the time to get bargain hunting and pick up some of your favorite mutual funds and stocks that have been battered!
His current report is Newsletter editors have beaten a fairly hasty retreat to the sidelines.

Steve Mertz
Asset Allocation Revisited!