Making Money Off of My Credit

When I was young and foolish, I would apply and get credit cards and make money off of them. I would buy discounted corporate bonds and have the interest from the bonds pay the interest and principal on my credit cards. I would also put up the credit card funds in a Margin account allowing me to buy more bonds giving more interest. 

When I was moving into my 30s, I was floating about a Million dollars in credit making about $27,000 per year profit. 

Darnell Preparing for a big social event

In fact, I was making money using no money of my own. This money came in  handy when Westinghouse Electric laid me off and I had to move from Pittsburgh to Harrisburg, Pa. When I moved, I moved into a new house in a White upper class community in the suburbs of Harrisburg.  

One neighbor could not understand how I got a home in the middle of an exclusive area especially at such a young age. He was bold enough to come over and ask me how I was able to afford my house. I told him that the government was trying out a new welfare program and they wanted to find out how long it would take me to trash this property. The man moved to another area in just a few weeks after talking to me.   

Darnell living in Glen Hazel in the City of Pittsburgh at age 2.

If I was 25 years old today, I would borrow $1,000 from a Visa Card, charging me 26% interest, paying it off in 12 months. I would buy a closed end high income fund like Dreyfus High Yield Strategies Fund (DHF) in a Share Builders Account buying full and fractions of shares. I would buy it around $4.25 per share giving 11.29%. I also suggest setting up the account to automatically reinvest the monthly funds dividend. The Sharebuilder's Account would be ideal for such transactions.

I would pay off the $1,000 loan over 12 months at 26% interest, paying a total of $1,293.33. With this investment I stand to have $93,548.14 by age 65. This speculation would have cost me $293.33 at age 25 years old. Instead of buying some life insurance policy, this can be my life insurance policy. If I would buy this in my IRA, I would pay no taxes on this money until I withdraw the money. My $293.33 is an investment expense and is deductible from my income tax.   

What is the risk?

We are talking here about bond funds not bonds. Bonds mature, funds do not. Your fund price can go down as well as up.That means you have market risk. The bonds purchased by the fund my not have the same interest rate as current bonds. This means that your funds yield may go down as well as up over the years. This means you have inflation as well as interest rate risk. 

In all, your return in 40 years may be less or more than $93,548.14. This is why we call this transaction speculation, not investment.
 
 

Part 11: Retirement Investment Strategy

In this 11 part series on retirement, we covered why you should start putting away money for retirement. In this series we looked at how to figure out what you have now. We talked about how to go about figuring out what you need to retire.  I told you how to go about starting your retirement account as well as what type of securities to use. Last, we looked at the type of expenses you may have to plan for in the future. 

Here are some resources that you may want to use in your own personal research;

U.S. Department of Labor

Employee Benefits Security Administration

200 Constitution Ave.,

N.W. Washington, DC 20210

Web site: www.dol.gov/ebsa

Retirement Savings Calculators:

www.aarp.org/finance

cgi.money.cnn.com/tools

www.kiplinger.com/tools/

www.choosetosave.org/calculators

www.wiserwomen.org

Retirement Planning and General Retirement Issues:

www.dol.gov/ebsa

They will send you copies of free booklets by calling 1-866-444-3272

The social Security Administration Web site has online resources to help calculate your retirement benefits and learn about survivor benefits and Medicare. 

www.socialsecurity.gov

www.aarp.org

AARP offers a wealth of information including a fact sheet on reverse mortgages and a section on “Money and Work.”  You can order; “Money Matters: Your Guide to Financial Security.”  1-888-687-2277

www.pbgc.gov

This is for people who may have worked for a company with a traditional defined benefit (DB) pension.  The Pension Benefit Guaranty Corporation can assist in locating any money still in your account.  Two books may be useful:

“Your Guaranteed Pension”

“Finding a Lost Pension”

1-800-400-7242

My Opinion About a Retirement Investment Strategy

Your investment strategy depends on what you feel comfortable with. I feel comfortable investing in Junk Bonds with what they call a “Buy and Hold” Strategy. I buy the bonds and hold them in my account until they mature. As the interest given to me builds up, I look for more bonds to buy and I buy more bonds as the money in my account reaches the amount where I can buy more bonds.  Every year, I can give my account new funds to invest in Junk Bonds.  I suggest this to people 24 years old and over.

If just starting a retirement account, you may want to start out in a new account with Zero Coupon bonds that mature in less than 6 years that give a high return. 

If you like common stock and you are in your twenties or thirties; I would suggest that you buy stock that gives high dividends. When the dividends accumulate in your account and reach the level of another purchase, buy more securities that give a high yield. 

For any age and if you can find them, buy convertible bonds as well as Convertible Junk Bonds. That way you can get an added boost in your account when the stock of that company appreciates.  

These are the strategies that I suggest for people who want money for retirement.

With these “Buy and Hold” strategies, you will be able to accumulate money for retirement quickly and relatively safely. The earlier you start the better off you will be in your 60s. Chances are your parents will not be able to help you when you reach retirement. The government is already trying to get out of helping you. You will be lucky if they are still giving you current Social Security benefits when you are ready to use them. Your company or government employer may also pull their resources away from helping their retirees. Your children will have their hands full with a job, raising a family, and keeping a place to live. They may not be in a position to help you.

It is going to be up to you to take care of yourself!     

The difference between rich people and poor people is the fact that rich people plan for as many as 25 years into the future. They work their plan. The poor plan for the next day and only work their mouth. The poor believe that they are doing something by worrying about it instead of creating a plan then working their plan. 

The poor believe that Social Security, their 401K program at work, or their company pension program is going to keep them going after retirement. They never tried to figure out how much money they will need when they retire. When they do retire, that is when they find out that they are not getting enough income. So they blame God, society, and worry.  That is why you find many people making a lot of money over the years and have nothing to show for it when they reach age 65.

Since January 2009, I have shown you how to create a portfolio inside and outside your IRA. I have shown you how to save and invest. I have done it right before your own eyes. So you have no good reason why you cannot do the same thing.

Many people in the past 35 years have said that all I talk about is theories and "pie in the sky." Since January 30, 2009, my IRA portfolio (no other investments) has increased 224.7% ending on August 22, 2012. That is 8.32% per month. At this point, I can withdraw $906.32 per month without touching my original investment. Keep in mind, I am not finished with adding funds to my IRA investment yet. When I do, I will be able to withdraw more money a month without touching my original investment funds. I will have a check larger than my monthly Social Security check. I will take that "pie in the sky" any day of the week.  

A Special Note for all my reader’s around the world!  

Hi my loyal readers around the world. I just finished making my final plans of my life. I will be retiring in a few short years and moving into my luxury retirement home. I will spend most of my time getting my seven year old grandson ready for the 2028 Olympics. I have no idea what my younger grandson is going to do. As of now, I would say it has something to do with electrical engineering because at 1 years old, he knew how to operate an IPad. But whatever it is, I will be around to lend assistance to his education.


My plans also involves my readers. I am starting an online stock club design to give my loyal readers as much as one million dollars, maybe more depending on when you start my plans. That money will be to remember me by.


Please read the blog below and follow my instructions if you want a chance to get one million dollars.

http://bondinvestments.blogspot.com/2012/06/how-would-you-like-to-have-over-one.html

The younger you are; 35 and below, the greater the chance of getting over one million dollars. If you are starting at 60 years old, chances are you will only make it to $100,000.



I started out at age 23 and spent a lot of time laid off and giving money away to my children for cars. I bought 3 homes. One home was paid off in full. The other I bought in a partnership paid in cash. All my cars since 1971 were the current year and I have not had a car note since 1983. I even gave two girlfriends a car each. That is why I don’t have a million dollars today. But if you become one of my “Greedy Friends” I am sure with my instructions, you can get that million.      

Part 10 Investing in IOUs

Some financial planners feel that investor should be speculators when they have 10 or more years to go before retirement. They should have their money totally in the stock market. I disagree with that view. Not all individuals such as me are comfortable working with stocks. I am a bond investor not a stock speculator.  With bonds, I know how much I am investing and how much I hope to receive. I know when I will get my return. I can take my interest received and buy more bonds giving me more returns, compounding my account.  With stock, you are speculating on future events that may or may not go in your favor.

Stock Sales Personnel or brokers say that bonds carry more risk than stocks. Is that why my 2.5 year old corporate bond retirement portfolio increased in value 4.743% per month? That is far better than the inflation rate.

I know people who invested in their government or company 401K programs, placing their money in stock mutual funds and received a return in the same amount of time giving them a negative 2 to 10 percent return.  These people paid for professionals to give them such losses. 

What you can do with Bonds.

A bond is an IOU issued by a corporation or a government. When you buy a bond, you are making a loan to the bond issuer.  In return, the company or the government agrees to pay a specified interest rate known as the coupon rate.  The investor will be paid a fixed amount of interest, usually twice yearly, until the bond matures, at which time the investor is paid the bond’s face value usually $1,000. The investor may pay a discount for the bonds say $850. In times of high demand, the investor may pay a premium for the bond say $1,060. Some time, the market place may demand par or $1,000 to buy the bond. 

Still bonds are not riskless securities. They carry interest rate risk as well as business risk. If the company files for bankruptcy, you may not get your money back. Plus the bond market thrives when interest rates fall. For example, a bond paying 8% that was issued last year will be worth more this year if new bonds are only paying 6%. Meaning if you paid $1,000 for the bond, you could probably sell the bond for about $1,300. 

Here is the rub.

When interest rates rise, bond values drop and if you happen to be holding some of these bonds, you can lose money if you had to sell.  This is why you are buying these bonds in your retirement account. You know when you will need the money so you buy bonds that mature on or before the date that you need the money.  If you are speculating in bonds and you bought an 8% bond for $1,000 and the going rate for new bonds jumped to 9%, your bond would be worth only about $890. But you will still earn 8% and if you hold the bond to maturity, price swings don’t matter.  You still receive full value when it comes due.

Brokers do not like me because they make very little money off of me. My commissions to buy my bonds are only $10.95 per transaction and I hardly ever sell so they get very few return commissions. That is called keeping your expenses down. 

As with stock, there are several major categories of bonds that you can buy.  We will not cover Municipal Bonds because they are already tax sheltered and you will have to pay taxes on the interest if you put them into your retirement account.   

U.S. Treasuries are the safest bonds to buy. When they mature in two to ten years, they are known as Treasury notes.  Treasury bonds are 10 to 30 years. They are backed by the full faith and credit of the federal government. Interest is paid semiannually.  Notes and bonds are sold starting at $1,000 and sell in $1,000 increments. U.S. Treasures are state tax exempt. But here, you have a high degree of interest rate and inflation risk.     

 

Corporate Bonds are backed by the company that issued them. They are riskier than government securities so they pay higher than government securities. The safest bonds are those given the highest ratings from agencies such as Standard  and Poor’s Corp. (www.standardandpoors.com) and Moody’s Investors Service (www.moodys.com).  Bonds issued by the strongest corporations get an “AAA” rating. Bonds with the weakest financial ratings get lowest ratings such as “CCC” to “D” or no rating at all. Junk bonds are bonds with a rating of “BBB” to “D”. They pay the highest returns because the investor is taking a higher risk. Here is the area where I invest because as compare to “AAA” bonds that are not as safe but compared to stock, they are very safe. For my retirement account, I normally stay between “BBB” and “B-“ratings when investing.  They normally sell for $1,000 with increments of $1,000. They usually pay twice a year.   

 

Convertible bonds are bonds that participate in the movement of the company’s stock.  These bonds can give you the investor an added return if you sell the bond at a premium due to the company’s stock movement.  You still receive your interest so the investor really has a floor on the downside of the bond market.  Convertible bonds are harder for small investors to buy because of the large demand for them and the small supply in the market place.  

Zero Coupon Bonds known as Zeros, pay interest only when the bond matures. At that point the investor gets all the accumulated interest. For example, you buy a $1,000 bond for $235 over 20 years. You get an interest rate of 7.5%. In twenty years the company will give you $1,000. With Zeros you know just how much you the investor is going to get on the maturity date. They are good for buying when just starting out in your retirement account. I would not buy them outside a retirement account for tax reasons. With Zeros, you will not be able to compound your interest like you can with regular bonds.

 

Foreign Bonds just like foreign stock offers opportunities beyond U.S. borders. They may pay higher rates because you are taking on more risk such as currency risk.  

Mortgaged Back Securities are not really bonds. They are pools of home mortgages that have been made by lenders around the country. Owners of these securities receive payments of both interest and principal through out its life on these mortgages. These securities carry a higher risk and pay a higher return than bonds. The rate of return may change if homeowners refinance their mortgages.

I hold mortgage bonds on oil tankers in my IRA. Since they are first to be paid in times of bankruptcy and they pay me 8.04%, I consider them as being very safe and profitable.
             

A Special Note for all my reader’s around the world!  

Hi my loyal readers around the world. I just finished making my final plans of my life. I will be retiring in a few short years and moving into my luxury retirement home. I will spend most of my time getting my seven year old grandson ready for the 2028 Olympics. I have no idea what my younger grandson is going to do. As of now, I would say it has something to do with electrical engineering because at 1 years old, he knew how to operate an IPad. But whatever it is, I will be around to lend assistance to his education.


My plans also involves my readers. I am starting an online stock club design to give my loyal readers as much as one million dollars, maybe more depending on when you start my plans. That money will be to remember me by.


Please read the blog below and follow my instructions if you want a chance to get one million dollars.

http://bondinvestments.blogspot.com/2012/06/how-would-you-like-to-have-over-one.html

The younger you are; 35 and below, the greater the chance of getting over one million dollars. If you are starting at 60 years old, chances are you will only make it to $100,000.



I started out at age 23 and spent a lot of time laid off and giving money away to my children for cars. I bought 3 homes. One home was paid off in full. The other I bought in a partnership paid in cash. All my cars since 1971 were the current year and I have not had a car note since 1983. I even gave two girlfriends a car each. That is why I don’t have a million dollars today. But if you become one of my “Greedy Friends” I am sure with my instructions, you can get that million.

Part 9 Using Stock as your Vehicle

Stock Market Figures

The argument that security sales people like to use to get people to purchase stocks is true. However that does not mean that it will be successful for you or anyone else.  They claim that the single best place to invest for long term for retirement is in the stock market. They say in the long run stocks outperformed all other investment options by a big margin over almost any time period you choose.  Since 1926, a basket of large-company stocks has shown an average annual gain of more than 10%. Small company stocks which tend to grow faster but with more risk, have produced an average annual gain of nearly 13% since the 1920s.

I know you heard about 1929 where speculators and investors lost their shirts? How about 1989 or 2002? Can you think back to 2008 when people again lost their shirts and most retirement programs turned into “Out House Dirt?” Yes, if you take out the times that the stock market failed to give a good return, they did outperform everyone else.  But the bell does not ring when the stock market drops nor does it care when you should have cashed in for retirement.  

The term “stock” usually refers to Common Stock, which represents an ownership share in a corporation that issued it.  Common Stock may or may not pay a dividend which is from corporate profits. You can look up the stock “on line” and get the stock yield paid out to investors. That is dividing the current annual dividend rate by the share price and you get the stock’s yield. Buying stocks that give high yields is a good way to stay ahead of inflation and greatly increase your return. However keep in mind, stock is speculative. Personally, I stay away from most stocks.

Stock Market Board Room

Let’s look at the six basic Common Stock categories that you may want to consider.

Growth Stocks are so named because they have good prospects for growing faster than the economy or the stock market in general. The risk varies from moderate to high.   

Blue-Chip Stocks are generally industry-leading companies with high financial credentials. They pay decent, steadily rising dividends. They generate some growth or appreciation. They are low to moderate risk securities.  Because of the raising dividends, if you are in your late twenties or thirties, these stocks are good for forming the bases of your retirement portfolio.     

 Income Stocks pay out a much larger portion of their profits in the form of quarterly dividends than do other stocks. They sometime pay out as much as 50% to 100% of their earnings to stock speculators. These stocks tend to be slower growing companies. These high dividends make these shares less risky to speculators.  Accumulation of these dividends into new shares of income stock will give your account a compounding affect.        

Small Company Stocks are typically newer, fast-growing companies. Shares in these companies are riskier than blue-chip or income stocks. They average a higher return than income stocks or blue-chips. Small Company Stocks are more volatile than most other stocks.

Foreign Stocks help diversify your retirement account. The two key benefits of adding an international flavor to your retirement account are diversification and performance. However, you as a speculator opened yourself up to currency risk as well as foreign stock market risk.

Personally, for the most part, I stick with junk bonds for income and income compounding. But that is me and it take all kinds of people to make a market!

        

A Special Note for all my reader’s around the world!  

Hi my loyal readers around the world. I just finished making my final plans of my life. I will be retiring in a few short years and moving into my luxury retirement home. I will spend most of my time getting my seven year old grandson ready for the 2028 Olympics. I have no idea what my younger grandson is going to do. As of now, I would say it has something to do with electrical engineering because at 1 years old, he knew how to operate an IPad. But whatever it is, I will be around to lend assistance to his education.


My plans also involves my readers. I am starting an online stock club design to give my loyal readers as much as one million dollars, maybe more depending on when you start my plans. That money will be to remember me by.


Please read the blog below and follow my instructions if you want a chance to get one million dollars.

http://bondinvestments.blogspot.com/2012/06/how-would-you-like-to-have-over-one.html

The younger you are; 35 and below, the greater the chance of getting over one million dollars. If you are starting at 60 years old, chances are you will only make it to $100,000.



I started out at age 23 and spent a lot of time laid off and giving money away to my children for cars. I bought 3 homes. One home was paid off in full. The other I bought in a partnership paid in cash. All my cars since 1971 were the current year and I have not had a car note since 1983. I even gave two girlfriends a car each. That is why I don’t have a million dollars today. But if you become one of my “Greedy Friends” I am sure with my instructions, you can get that million.

Part 8: More on Investment Vehicles

In the early 1950s, my mother and father decided to buy some property near Pittsburgh Pa. and build a three bedroom house with an internal garage and basement. My father convinced my mother that they can build it themselves. All they needed was to get a loan to purchase the materials needed. By the end of 1954, the house was complete, spending about $8,000.  If they would have hired a general contractor to build that house, the general contractor would have hired several contractors to do the brick, electrical, plumbing, yard, and etc.  So instead of the house costing $8,000, my parents would have spent about $36,000. Why, because they would have had more levels of management and more laborers in the equation. When dealing with investments, we are talking about the cost of building your account. The more people in the equation, the more the management of your investments will cost.

Here is the reason why I am for using online brokerage firms instead of full service brokerage firms. You pay for the service with full service brokers even when you don’t use them. I don’t like using mutual funds because someone must manage the funds and you pay for that by way of fees. Most of these fees you never see. I am sure if you work for a company or government that allows you to have a 401K; they give you a choice of mutual funds. These funds may not be free as advertised. They just have hidden fees that you pay for by way of fewer returns by the fund. That is why I say, if your 401k does not give you matching funds, don’t use it. Instead open an IRA with an online brokerage firm and buy discount corporate bonds or stocks that give high yields. 

Most investment experts try to sell you on mutual funds based on what they did in the late 20^th Century. But finance like the economy goes in cycles. From the 1930s to 1950, stocks went no place. From 1954 to 1970, stocks made big gains.  From 1970 to 1980, the stock market stayed in a trading range. From 1980 to 2007 the stock market went to the stratosphere. In 2008, the stock market crashed just like in 1929.

So investing in the stock market is speculative at best. Do you really want to take chances with your retirement money? If you are young, maybe, but if you are in your 40’s, 50’s, or 60’s think twice before you do.

As I said, some of you are in company and government 401K programs so we are going to go over classes of mutual funds.

Aggressive-Growth Funds seek big profits by investing in small to medium-size companies, developing industries, or other securities that show rapid growth and strong increases in stock value. This type of fund seldom pays dividends. These funds carry high risk compared to other funds. Management of this type of  funds does a lot of buying and selling. That involves paying commissions.

Long Term Growth Stock Funds seek long term capital gains, usually by investing in larger companies than most aggressive growth funds. These funds are supposed to keep up with inflation over the long term. However portfolio managers are not concerned with dividends.

Growth and Income Funds emphasize growth, but are more conservative than long term growth funds. They invest mainly in established companies, many of which pay dividends. This type of fund seems to be less volatile than most other stocks funds.

International and Global Stock Funds buy stock in companies that are based outside the U.S., giving investors a chance to take advantage of growth opportunities in other parts of the world. Global funds sometimes include U.S. stocks but they vary in just how much they keep invested in the U.S. These funds have risks such as foreign political upheaval, looser regulatory environments, and currency risk. 

Socially Conscious Funds make their investment choices with an eye toward environmental awareness, or non-polluting companies. Others avoid investing in weapon makers, cigarette companies, nuclear-energy production and etc. Some look for conservative or Christian values.  

Sector Funds concentrate their holdings in a single industry sector such as transportation, energy, healthcare, or precious metals. As a result, these funds are more volatile than diversified funds. They are for people who want to speculate and trade funds instead of investing in them.   

 

High Grade Corporate Bond Funds invest mainly in bonds issued by top rated companies. Some specialize in short term bonds, some in intermediate bonds, yet some invest in long term bonds. Some funds invest in Zero Coupon Bonds. Look for the phrase “target maturity” in the name of the fund.  High Grade Bond Funds are safer and less volatile than most funds but your return may be less than inflation in low inflationary times.  

U.S. Government Bond Funds buy U.S, Treasuries and other types of bonds issued by the federal government or its agencies. They specialize in short, intermediate and long term securities. Traditionally, these funds do not keep up with inflation but are the safest funds that you can invest in.   

 Mortgage Back Securities Funds are more commonly known as Ginnie Mae funds. They invest in securities issued by the Government National Mortgage Association or GNMA. However they do buy other bonds from other government organizations. Mortgage funds are more volatile than bonds funds because of the movement of interest rates and homeowner refinancing. 

Index Funds are design to do just as well as the market that it is design to match such as the Standard and Poor’s 500 Stock Index, Small Company and International Stock Indexes, the Bond Index, and etc. Index funds are conservative in relation to stock investing because it matches the markets exactly.  

 High Yield Bond Funds are funds that invest in corporate bonds with a Standard and Poor’s Rating of “BBB”, “BB”, “B”, “CCC” and below. In other words, they invest in low grade securities. This means that the fund has a higher risk than High-Grade Corporate Bond Funds but you get paid well to take the risk. They pay a high dividend. This is the type of fund that could be used to accumulate high returns over time, far better than inflation.     

A Special Note for all my reader’s around the world!  

Hi my loyal readers around the world. I just finished making my final plans of my life. I will be retiring in a few short years and moving into my luxury retirement home. I will spend most of my time getting my seven year old grandson ready for the 2028 Olympics. I have no idea what my younger grandson is going to do. As of now, I would say it has something to do with electrical engineering because at 1 years old, he knew how to operate an IPad. But whatever it is, I will be around to lend assistance to his education.


My plans also involves my readers. I am starting an online stock club design to give my loyal readers as much as one million dollars, maybe more depending on when you start my plans. That money will be to remember me by.


Please read the blog below and follow my instructions if you want a chance to get one million dollars.

http://bondinvestments.blogspot.com/2012/06/how-would-you-like-to-have-over-one.html

The younger you are; 35 and below, the greater the chance of getting over one million dollars. If you are starting at 60 years old, chances are you will only make it to $100,000.



I started out at age 23 and spent a lot of time laid off and giving money away to my children for cars. I bought 3 homes. One home was paid off in full. The other I bought in a partnership paid in cash. All my cars since 1971 were the current year and I have not had a car note since 1983. I even gave two girlfriends a car each. That is why I don’t have a million dollars today. But if you become one of my “Greedy Friends” I am sure with my instructions, you can get that million.