The Simple Rules Books

Emergency Fund BEFORE Savings

May 16, 2012 By Tracey Leave a Comment

hidden piggy banks 300x199 Emergency Fund BEFORE Savings I’ve talked about emergency funds before, but I wanted to briefly go over them again since they’ve been on my mind lately.

I’ve been reading a lot of survivalist blogs lately (no I’m not a tin hat wearing paranoid that thinks the zombie apocalypse is coming, it’s research for a story I’m writing. No really it is!).

Anyway many of the blogs don’t really cover the importance of money as a survival tactic. They cover storing a lot of food and rice under the floorboards and the many types of the scariest looking knifes I’ve ever seen in my life, but not many of them discuss money.

In an emergency or crisis having money that you can access easily should be a priority.

In most cases that means setting up an emergency fund (in a bank – not under your mattress) of around $2,000 that you can access at any automatic bank teller machine at any time of the day or night.

Stocks (while I love them for their ability to generate wealth) take days to process and so you can’t access your money quickly. They are not, and should not, be used to generate cash in emergency situations.

That’s what your emergency account is for.

But what happens if the banks DID shut down and you couldn’t access your money. What would happen then?

The most common reason for atm’s not working is due to power outages. Generally power outages don’t last for lengthy periods (and if they do, they usually don’t cover vast areas and are usually just one or two power grids).

So for that reason I DO think it’s wise to keep some cash reserves on you at all times.

I recommend that you carry around $100 in your purse or wallet and keep another $300 or $400 at home in a safe place.

That would at least cover you a few days if a worst case scenario happened and you couldn’t access your regular emergency fund from your bank account.

Generally though I don’t think keeping cash at home is a good idea (you are too vulnerable to thieves) but having a back up reserve could mean that you are able to get back in the event of a huge blackout.

So to summarise:

Having an Emergency Account is important – you should start that BEFORE you start your savings plan.
You should keep around $2,000 in an easy access bank account. If you use some of it (for an emergency right!) then you should then top it back up again straight away.
It’s also a good idea to keep $300 or $400 in the house somewhere (where the kids can’t find it) in case of power outages at your bank’s ATM. Plus another $100 in your wallet/purse for very quick access.

Then once that’s in place, you can start your savings plan.

Filed Under: Spending Detox

Diversifying Your Portfolio

May 14, 2012 By Tracey Leave a Comment

diversify 300x225 Diversifying Your Portfolio You’ve good list of stocks that have strong fundamentals and fit all the rules of what makes a good investment and now you are ready to hand over your cash.

But which one do you buy? One of them, all of them?

Obviously how many different stocks you buy will depend on how much money that you have to invest. Some people start out with just a few thousand dollars and others come into a nice windfall and want to invest that.

It really doesn’t matter how much you start with. I actually started with $1,000 when I first began investing (although I now recommend that people start with much more because with $1,000 you can usually only buy into one company which can be a risky strategy).

Buying more than one company means that even if one doesn’t work out the others can cover your losses so that you don’t lose everything. It lowers your risk.

But on the flip side, you can over-diversify and hold too many companies as well. Then your returns are diminished to just average and you never really make any great gains. Generally most people that buy stocks directly don’t have that problem though (it’s usually mutual funds that hold hundreds of different companies that happens too).

So How Many Companies Should You Buy?

As a minimum I suggest you buy into three different companies minimum and six as a maximum. I usually don’t like to hold more than six since it can be difficult to keep track of them all (and it can dilute your profits), so between three and six is my sweet spot.
If you feel you can handle it then by all means go for more, that’s just a suggestion by me not a requirement. I’ve actually held up to ten companies at one time, but I just found it too much bother to keep track of. I kept forgetting what I actually held with that many! The news financial reports would come on and a stock would rise and I’d have to think if I still owned it or not before I could break out the champagne.

So if you think you’d like to keep the number you hold to a minimum as well, but still enough to lower your risk somewhat by diversifying here is a rough guide as to how many to hold depending on how much money you have to invest:

$6,000 – 3 different companies @ $2,000 each
$10,000 – 3 different companies @ $3,300 each
$20,000 – 4 different companies @ $5,000 each
$30,000 – 5 different companies @ $6,000 each
$50,000 – 6 different companies @ $8,300 each
$100,000 – 6 different companies @ $16,600 each

What mix of companies to buy?

I like to buy companies that meet different needs so I can mix it up even more.

The first way to do this is to choose companies from different sectors. What often happens in the stock market is that one sector does particular well at one time pulling all of the stocks within that sector up with it.

But the sector that’s doing the best changes often. For that reason I like to make sure the three, four, five or six companies that I hold are from different sectors.

The second thing I always make sure to include is some high dividend stocks. I particularly like dividend stocks for three reasons. One is that you get income no matter what the market is doing (which is why investors love them in down markets), two is that it’s been proven that high dividend stocks (especially if you re-invest those dividends back into the company) generally make more profits for investors that regular stocks. And three most high yield dividends pay rates far higher than most savings accounts meaning that even if your money doesn’t increase in value you still make a high ‘interest’ rate on your money.

You could choose all dividend stocks, or just a few. But definitely make sure you include at least one in your mix to buy.

Filed Under: What Stocks To Buy

The Next Stock Market Crash Is Right Around the Corner … Really?

May 10, 2012 By Tracey Leave a Comment

falling piano 300x281 The Next Stock Market Crash Is Right Around the Corner ... Really? I was watching the news the other day (something I don’t actually do very often since it’s all rather depressing) and they had two ‘financial experts’ on telling people when the next stock market crash will be.

Apparently it’s ‘right around the corner‘.

Uh huh.

And when is that exactly?

A few days after that I was watching a morning show and they had another ‘expert’ on telling people to put all their money in stocks because the market is about to ‘go crazy’ and people can double their money.

Hmmm.

Now I’m lucky in that I ignore all of these so-called experts and test things out myself but I realised just how much people believe what they hear because my father in law is constantly telling me that we are about to have a second recession that’s worst than the first simple because he heard someone say it on TV.

And unfortunately most people tend to believe the doom and gloom ‘experts’ far more than the optimistic ‘experts’.

So who do you believe? Are we about to crash again or double our money?

Who knows! No-one, not me, not the ‘experts’ have any clue what the market is going to do tomorrow.

In January 2008 no-one correctly predicted the global financial crisis. Then you had an equal number of people telling you the market was good to those that told you the market is bad.

And it’s been that way the entire time that I’ve been investing in stocks. Some say it’s good, some say it’s bad. It’s enough to make any investor confused. So don’t listen to them. Find out for yourself.

The only thing I believe when it comes to investing is the numbers.

I believe that a good combination of strong fundamentals, stock price history and the company’s future plans are what can show us the difference between a company that will tank, and a company that is likely to make us a small fortune.

If you can do the research yourself and JUST look at the facts rather than listen to a bunch of ‘experts’ you’ll be a much stronger investor in my opinion.

So is the next stock market crash right around the corner? *shrug* can’t say. But my figures certainly aren’t indicating that.

Filed Under: 5 Simple Rules, What Stocks To Buy

Just Tell Me What Stocks To Buy: 2012 edition

January 30, 2012 By Tracey Leave a Comment

Cover 200x300 Just Tell Me What Stocks To Buy: 2012 edition My latest stock market book: Just Tell Me What Stocks To Buy is now live on Amazon. Yippee!

So what are you waiting for? Go buy a copy. I’ll be still here when you get back.

So what did you think? Will it help you? I really hope it will be useful to you in choosing some great stock investments for the future.

The idea behind it was that I got so many emails from people asking me which stocks I recommend they buy. But I wasn’t really comfortable giving specific investment advice to anyone since I’m not a qualified financial planner or anything (just a stock geek chick y’all).

So instead I thought I’d just make it easy on everyone and make a list of all the stocks in the S&P500 and All Ords that fit all my rules. I’d already told people my ‘rules’ in 5 Simple Rules so this book basically just cuts out all the research time for you.

I still don’t SPECIFICALLY tell you EXACTLY which ones to buy though – that’s still your choice as it should be, but I hope to have made the game a whole lot easier for you. Especially if you like the idea behind 5 Simple Rules but just didn’t have time to find those stocks yourself.

At least that was my goal. To do the research for you. To help you understand what makes a good stock.

The price is $4.99 which I think is a great deal considering all the research time I saved you.

I really hope you enjoy it and find it useful.

To your success!

Tracey xx

P.S. Oh and in full disclosure (hello FTC) I currently hold none of the stocks listed in this book. Yeah sucks for me (because they are some really good companies listed here) but I figured that I’d rather that than have someone accuse me of conflict of interest. So I sold up some of my stocks before I published this. Sob Sob. Don’t worry though – I’ll get back in later this year when there is absolutely no chance of anyone accusing me of conflict of interest. My loss is your gain.

Filed Under: What Stocks To Buy