Invest To Make Money, Not To Get Rich

The technology boom of the '90s romanticized the "rags-to-riches" ideal that all of us dream about when investing. For those that invested $1000 in Dell at $5 during 1990, held through the seven splits, then sold in March 2000 at $59, the dream was a reality. That investment would have returned an amazing $1,132,800! Image making over $1 million for every thousand dollars invested. Beyond Dell, companies like EBay, Amazon.com, and many others made their investors very wealthy.

Unfortunately, the '90s provided a different investment environment than we are use to. We experienced the birth of a new technology and it required new companies, jobs and consumers to fill the needs of the industry. Immediately, our economy had a new demand with limited supply. This led to the feeding-frenzy stock purchasing that we all witnessed.

Once reality settled in, too many companies were heavily leveraged, over-extended in equity, and/or did not have revenues to support their business models. The sudden collapse of mega-companies like Webvan, the online grocer that wasted over $750 million, became highly responsible for the economic problems that we faced earlier this century.

Moral of this story: Invest to make money, not to get rich.

One lessoned learned during the '90s was the importance of due diligence; researching company financial records, management philosophies, growth strategies, etc. Doing so allows investors to find strong investment opportunities and minimize the risk of purchasing a bankrupt company.

Investing to make money stresses the need to evaluate financial goals and taking steps, not leaps, to get there. The oil boom of the year has brought about several high return stocks; doubling or tripling in a matter of months. Taking advantage of one of these stocks is a giant leap, but finding a 200% gain might require 7-8 25% losses. Ultimately, an investor could lose more than gained.

With solid research, finding companies capable of returning 10-20% growth per year has a high probability. While not as romantic as a single high-return investment, five 20% gains equals the return of a single 100% gain. This is the meaning of taking steps. Settle for solid returns and repeat the process as many times possible. While not every stock will produce 20%, selecting strong companies will limit your risk for large losses.

DPB Financial - http://www.dpbfinancial.com

Watch for our next article, coming soon. A continuation of this topic, we will address the "how to" of analyzing your financial needs, setting goals and building and investment strategy to meet those goals.

*The information within this article is for educational purposes only and is not being provided as investment advice. DPB Financial recommends that investors do their own due diligence or solicit the advice of an investment professional.*

Merck Investors Can Sleep Easier (Not Easy) DailyFinance By Brian Orelli, The Motley Fool Posted 3:34PM 02/06/12 Investing Merck (NYS: MRK) said today that its insomnia drug suvorexant had passed two phase 3 trials, putting it on track for an FDA filing this year. But that doesn't mean investors can sleep ... and more »

Investments for Income Lovers Motley Fool With interest rates at historical lows, folks are having a hard time squeezing any meaningful income out of their investments. While you don't want to go out too far on a limb in search of higher yields, there are some steps you can take to boost your ... and more »

Your Most Important Investing Decision of the Next 10 Years TheStreet.com And these are some of the most boring companies you can think of -- real-state investment trusts (REITs), pipeline operators and cigarette makers. But they all have one thing in common. As the chief investment strategist behind High-Yield Investing, ... and more »

Ask the Experts: What looks attractive for investors? Kansas City Star By CLAUDIA BUCK With the economy starting to perk up, investors are wondering where they should be looking next. Here with some recommendations is Glenn Kenes, managing director of investments with Barber-Kenes Capital Management Group in Auburn, ... and more »

J.D. Power and Associates Recognizes Merrill Edge(R) Call Centers for Customer ... MarketWatch (press release) For customers who prefer to invest on their own, Merrill Edge provides an online self-directed investing platform, with robust tools and resources to help them make informed investment decisions. "This designation acknowledges the strong commitment ... and more »

Investing mistakes even the pros make Sydney Morning Herald The best investors learn from their mistakes over time. And because I've made plenty of mistakes during my career, I'll optimistically say that means I've had lots of room for personal growth. Lucky you, then, for being able to learn from some of the ... and more »

TD Ameritrade Investor Poll: Younger Investors More Likely to Invest "More" in ... MarketWatch (press release) OMAHA, Neb., Feb 06, 2012 (BUSINESS WIRE) -- The European debt crisis, US unemployment, the housing market, and political uncertainty - a laundry list of issues that may be causing investors to think more cautiously about their financial futures. and more »

3 Dow Stocks That Jumped in a Down Market DailyFinance By Dan Caplinger, The Motley Fool Posted 7:06PM 02/06/12 Investing The stock market may have been down today, but things could have been worse. After falling nearly 70 points in early trading, the Dow Jones Industrials (INDEX: ^DJI) recovered to finish ... Investing In The Dogs Of The DowSeeking Alpha all 12 news articles »

Stockopedia

Are your investments at risk? 3 useful Red Flags: Altman, Beneish and Piotroski Stockopedia Warren Buffett's rule #1 of investing is “Don't Lose Money" while rule #2 is “Don't forget rule #1.” As with most Buffet aphorisms, though, the devil is in the detail of implementation. Clearly, though, one important way to prevent yourself losing ... and more »

Freedom Investing 2012 Forbes I've been discussing foreign freedom investing for a decade now. In the spring of 2010, I used the term “Ring-of-Fire” to describe countries with a high debt and deficit and suggested avoiding them. A year later, I revisited that advice and counseled ... and more »