Do you want to make some money? Part 3

In the past two blogs, you have seen what I am doing with my IRA. One of the smartest money moves a young person can make is to invest in a Roth IRA. Follow the rules and any money you put into one of these retirement-savings accounts grows absolutely tax free. You won't owe Federal Taxes at all even when you cash out in retirement. This is how I am able to use the Mathematical rules of 72, doubling my money and 115, tripling my money. When I am in retirement, I will be able to withdraw money tax free.


Plus, a Roth IRA is more flexible than a 401(k) from your employer and from other retirement plans because you can invest it in almost whatever you want, from stocks and mutual funds to bonds and real estate. This is why this type of Account is ideal for investing in discounted corporate bonds.


I did not always have the money to start an IRA. I got my first chance to start an IRA in 1982. If you don’t have a Roth IRA and you are working, open one now. You have until your tax return deadline April 15, 2011 to set up and make contributions for the previous tax year 2010. The government sets a limit on how much you can contribute to a Roth IRA. That limit was $5,000 for 2009 and also for 2010. That means if you act before April 15, 2011 you can invest up to $5,000 for the tax year 2010, giving you a solid start to your savings. You have until April 15, 2012 tax deadline for tax year 2011 to hopefully invest up to $5,000 for year 2011.


I am sure you are saying that you don’t have $5,000 to save every year. Most people don’t but many can plan to save and build an IRA. The trick is to start early. Let’s say that you bring home $600 twice a month and your mate does the same. That is $1,200 two times a month. Open two IRA accounts with you being the beneficiary for your mate’s and your mate’s being a beneficiary on your account. From each account that you and your mate open at your bank or Credit Union, you automatically deposit 10% of your checks into the two IRAs. Your employers or your banker can help you set automatic deposits from your pay checks. That is $600 times 10% equals $60 each. You both are paid 24 times a year giving $1,440 for each IRA Account. Over 10 years, that is $14,400 in each account or $28,800 for both.


Once over $5,000 in your bank Roth IRA, you want to start transferring money over into a new Roth IRA at the online brokerage firm that I mentioned in Part 1. Open one for you and one for your mate. Every few years, you want to transfer money from your bank IRA to your online brokerage account. At that time you want to invest in discounted corporate bonds as was discussed in Part 1 and Part 2.


If you invest $1,440 per year for 10 years at a rate of 10% for 40 years, you will have $440,508.07. If both of you follow the same investment strategy, that is $440,508.07 times 2 or $881,016.14. See figures below. I am only talking about starting January 1, 2011 and stopping on December 31, 2020. You will have $440,508.07 or $881,016.14 in the year 2050.


If you get paid every two weeks and invest $60 per pay, you will have $835,962.52 for one account and $1,671,925.04 for both accounts. Pennsylvania State workers are paid every two weeks.


I already showed you that making 10% or more per year is very easy with discounted corporate bonds. To do this, all it takes is time, a little strategy, making your objectives, and $60 every 15 day or two week pay from both of your paychecks for 10 years. I showed you how to do it with no strings attached. If you have the will, you will make the money!

Starting with $60 twice a month on January 1, 2011

End of 2011 investment, you will have $65,173.33 making 10% per year until January 1, 2050.
End of 2012 investment, you will have $59,248.48 making 10% per year until January 1, 2050.
End of 2013 investment, you will have $53,862.25 making 10% per year until January 1, 2050.
End of 2014 investment, you will have $48,965.69 making 10% per year until January 1, 2050.
End of 2015 investment, you will have $44,514.26 making 10% per year until January 1, 2050.
End of 2016 investment, you will have $40,467.51 making 10% per year until January 1, 2050.
End of 2017 investment, you will have $36,788.64 making 10% per year until January 1, 2050.
End of 2018 investment, you will have $33,444.22 making 10% per year until January 1, 2050.
End of 2019 investment, you will have $30403.84 making 10% per year until January 1, 2050.
End of 2020 investment, you will have $27,639.85 making 10% per year until January 1, 2050.


All 10 years total $440,508.07 in the year 2050.


You and your mate invest $60 each every 15 days or twice a month, it comes to $881,016.14!

Do you want to make money? Part 2

In the first part, I gave you two online brokers to use for your bond investments. We talked about how to look up bonds to buy in your account. We reviewed the rule of 72, when your investments will double its money and the rule of 115, when your investment will triple its money. The idea is to make as much money as you can, as safe as you can. In this blog, let’s go over a trade that I recently made from one of these websites.

I made a trade in my IRA account on June 22, 2010. The Trade Settlement Date was June 25, 2010. I bought ten (10) United Refinery Company Senior Notes with a coupon of 10.5%, maturing on Aug. 15, 2012. The company will pay me interest semi-annually on August 15 and February 15 until and including Aug. 15, 2012.

The bond can be called by the company on Aug. 15, 2010 at $1,000 per bond, giving a Yield to Maturity of 14.48%. I had bonds called early on me before. If this happens, I will cry all the way to the bank. If I want to know more about the call provisions, I can look this information up or call my online broker for more information.

Moody’s rates them as “B3” and Standard and Poor’s rates them as “B.” Both rating services rates United Refinery Company as noninvestment grade corporate bonds.

I paid $927.50 per bond meaning that my principal amount was $9,275.00 for all 10 bonds. I had to pay the bond seller $379.00 because the bonds accrue interest daily paying them from February 15, 2010 to the settlement date, June 25, 2010. I will get that money back on August 15, 2010 when I receive my first interest payment. Each payment will be $52.50 per bond or $525.00 for all 10 bonds.

My commission for this transaction was $10.95 and I had to have $9,665.12 in my IRA account for this transaction to take place. The following is what I expect to get out of my 26 month investment.

The year 2010 – Interest from seller, $379.17 plus $145.83 in additional interest.
The year 2011 – Interest of $525 in February and $525 in August.
The year 2012 – Interest of $525 in February and $525 in August plus $10,000 in bond principal.

I hope to make a total of $3,350 ($2,625 Interest + $725 in principal) from a $9,275 investment over 26 months. I expect to have a return of 36.12% from my original investment over 26 months.

The interest and Principal from this investment will be reinvested into future bond investments. I did not always have the money to invest in my IRA.

Next we will see how to create and build an IRA account for your retirement when you don’t want to work or can’t work any longer.

Do you want to make money? Part 1

I learned the basics of the investment business when I was growing up. No, they don’t teach this in most public schools or colleges. I hung out at brokerage firms with old retired steelworkers while my friends hung out in the streets. The old Steelworkers thought I was young and funny, a Black novelty among a bunch of old White men. They loved to tell me their investment secrets and I did not mind taking notes.

The trick to making money in the market is to chase dividends and interest. It is not in chasing growth. I talked about that many times before. In the bond market, you want to do the following;

First, pick a brokerage firm that will not charge you a lot of money to buy your investments. That leaves out most full brokerage firms. They charge to hold your hand. If you follow my articles then you know, I don’t believe in hand holding. Two brokerage firms come to mind but they are not the only firms that fit the bill.

1) Zions Direct: https://www.zionsdirect.com/
2) Optionsxpress: http://www.optionsxpress.com/

Second, both these firms allow you to buy and sell stocks and bonds online. They have sections where you can look up investments based on interest (yield to Maturity). With stock, you want to look at the dividend yield. When you are ready to invest, bring up these websites and check them out. Look up bonds by yield or “Yield to Maturity”. Use the “Rule of 72” to figure out when your investment will double.

My investment doubles in (n) years = 72 / original investment yield in percentage.
72 / 8% = 9 years.

“Rule of 115” gives you when your investment will triple.

My investment triples in (n) years = 115 / original investment yield in percentage.
115 / 8% = 14.375 years.

Third, pick your bonds based on the following criteria.

1) The amount of money that you have to invest per transaction.
2) The credit rating of the company from “Standard and Poor’s”(S&P) or Moody’s. That is provided for you in the website. With discounted corporate bonds, I like S&P ratings starting with “BBB” to a low “B”.
3) The amount of “Yield to Maturity” that you want.

I stay away from Real Estate and Gambling Industry bonds. Outside of these two industries, I don’t care what the company does to make money.

This is how I double my money in 6 years and triple my money in 9.6 years. These are the better years, doubling in 3 years. In the bad years doubling in 8 years.

It is this simple. It is not rocket science.