Thursday, January 22, 2009

2009 Investment Plan

Today earnings seasons starts for me, with reports and analyst conferences scheduled for AMD and Intuitive Surgical. This column will be mainly comments on company reports and forecasts for the next couple of months. Before that starts I want to get this column in on my investment strategy.

Like most investors I took a bath in 2008, but for me it was not too bad. I wasted my youth writing vampire novels that did not sell, so I only recently grew up and became an investor. My main asset is my house. It still has a mortgage, but I have been diligently paying it off for years now, and that has been my best investment. I have a fair amount of cash in CDs, which is a necessity because I work freelance and my wife's PeacefulJewelry business has irregular cash flow too.

But I own some stocks and in 2008 I bought more. Almost all the stocks I own have lost value (if I had to sell them at today's auction rate) since I bought them, the notable exception being biotechnology stocks like Gilead and Biogen. But I believe that the current auction market on stocks has vastly underpriced good companies.

So in 2009 I intend, when I have cash to spare, to continue to buy stocks at bargain prices as long as they last. It is tempting to buy real estate too, at these prices and interest rates, but that is a bigger commitment.

I see no reason to buy bonds at these high prices. I think the risk that the U.S. Government won't be able to pay its obligations has become roughly equivalent to the risk of a serious depression. It is a small risk, so I also don't see bond prices going any higher. So with bonds you won't make money from dividends, and you won't make money on the pricing either.

The next time stocks are high and bonds are low (because interest rates are high) I plan to make a foray into bonds. After that I will maintain a balanced portfolio of stocks and bonds.

If you follow this blog, you know what I like in a stock: good technology, good management, and a commitment to bringing in the cash. I might acquire more of the stocks I have, I'll probably add a few new ones in 2009. I won't add too many because doing good research for a large portfolio is time-consuming.

What is right for me may not be right for you. Every stock is different, just like every real-estate indvestment is different. Often general advice turns out to be bad advice for a specific investment.

Spend less than you make (personal financial tipping point 1), and you really can't go wrong.

And keep diversified!

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