Expert: Paul Henneman - 3/18/2007

Question
I'm a single female, in my mid 40's, own house, have 403b, Roth, other retirement plans through my job which due to penalties I won't touch. I would like to invest to make immediate spendable money. I have no investment experience. I attended an Investools.com seminar this past week which a co-worker recommended. This training requires quite a bit of money upfront (for me it's a lot right now).  If you know of this company, do you think it would be worth the money? Are there other less expensive but worthwhile courses? I see from your other responses that you recommended "Investing for Dummies" which I plan to buy- is that enough for me to get started? Should I just go to a broker?  Any and all suggestions or feedback would be greatly appreciated.  

Answer
Sonia,
 Thank you for your question! Unfortunately I do not know much about Investools. I am familiar with the company, but have never taken their courses or looked at their materials. However, I am always very suspicious of expensive courses. They are almost never worth it. Investools could of course be an exception, but chances are it is a waste of money. At least this is my opinion.
 In general I don't know how much help I can be. My approach to investing is long term. The way interest compounds over time, it is possible to build a very significant investment portfolio over a few decades. However, it appears that you are after some short term spending money. There is one hard and fast rule that applies to all investing: The higher the returns you are after, the more risk you must take. Short term investing to create spending money means you must take high risk in your investments, greatly increasing the chances you will actually lose money rather than make any. It is possible, some people do it. Just realize most lose money in this.
   Brokers are also generally a poor way to manage your money. Brokers are interested in getting more clients, not fully researching your needs and investment ideas. They generally spend 90 percent of their time with clients, and 10 percent of their time actually researching what investments their clients should be in. Of course there are exceptions and I am sure there are some good brokers out there. But be careful, and also realize that they charge fees thereby further reducing your returns.
   There is a very general area of investing called 'technical analysis'. This type of approach is oriented towards shorter term gains. I do not necessarily endorse it, but from your question I think you may want to research it a bit. The Investing for Dummies touches upon this type of analysis. Once you get that basic background reading in, I would suggest any of the books by William O'Neil. He is the founder of Investors Business Daily (IBD), one of the best know and well respected publications on technical investing. He has an entire strategy and approach that he outlines in his book. While not simple, with a few months of reading and careful research, just about anyone could implement this approach.
   Of course read it with a critical eye. If it is not for you, feel confident in your reaction and move on. On the other hand, if it does appeal to you, begin slowly. Track your ideas without any money invested at first, http://yahoo.finance.com allows you to set up and track stock ideas in a test portfolio at no cost. If you are successful in your practice, begin with small amounts, and work your way up.
   Diversity is a good thing for investors. Never put it all in one place, if something unexpected happens (such as Enron or WorldCom), you could lose everything. Think in terms of a portfolio of stocks or mutual funds, not single investments.
   One final thing. Think in terms of a single investment of $10,000: If you earn a very good 30% return (this would be a very good year, most years would be less), it would give you $3,000 additional spending money in that year. However, if you invested $10,000, earned an average of a much more realistic 20% per year, after twenty years you would have nearly $400,000! If you contributed just $100 a month additional to the original $10,000, in 20 years you would have almost $800,000!
   There is a great calculator at the below website where you can enter your own numbers, how long the investments will work, and the returns you think you can get to see how much your investments will be worth in the period of time you put in:

http://www.ici.org/cgi-bin/calcs/SAV14.cgi/investment_company_institute

   Investing does little in the short term, but very big things in the long term. Warren Buffet, one of the richest people in the world, made his money this way. Over decades of careful investing, not by very large short term gains. He would be the first to tell you that is too risky.
   I hope that this gets you started. Please do not hesitate to follow up with me if I can be of any further service, and I wish you the very best!

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com