Expert: Paul Henneman - 8/22/2003

Question
Dear Mr. Henneman,

First, I live in Los Angeles and would like to purchase some tech stocks as a long term investment. I can afford to begin with ten thousand dollars. I would like advice in this area, but initially it would make me feel more comfortable knowing how the transactions work, i.e. brokers...where do I begin? Ugh...my research has my head spining with all the options. Can I invest on line and keep a close eye/control on my investments? Do I have control over my stop loss percentage? Initially, I'd like a better understanding of the basic tool sets, then more info regarding strategy etc. I'm not in a rush to make millions or anything...this is for my future. Lastly, I would feel much more comfortable speaking with someone about all this in person (lunch is on me)...any suggestions?

Thank you for your time.
Sincerely,
Rich Ostella

Answer
Rich,
  Thank you for your questions! Big topics, but I have some suggestions to get things under control and hopefully give you direction.
  I believe that it is best for you to officially divide your research and concerns into two categories: 1. finding a trading service and way to execute your investment decisions  2. research and decision making on what exactly to invest in.

1.   I recommend taking a close look at foliofn.  This service offers virtually unlimited trading for only fifteen dollars a month. If you hire a broker or go with a traditional online service, trading costs will eat up your returns. With a service like FOLIOfn (BuyandHold is another) you can execute trades, change your mind, or correct mistakes with no big costs. Just $15 a month for all of your costs to get into the market.  Click here for more information;

http://www.foliofn.com/wsjsp/lp/fnphil_lp.jsp?id=VALURS00010717N

2. How to find stocks: fine if you want to concentrate on technology stocks. But never, never put all of your eggs in one basket. Had you made this decision several years ago, you would have lost everything! It will take investors who were heavily invested in technology a decade or more to get back to where they were, much less increase the size of their portfolio. While this is an extreme example, it shows how we just can't really tell exactly what will happen. Ok to specialize in technology, but never allocate more than forty percent of your portfolio to one industry. You can play with that percentage as you see fit, my belief is forty percent.
Stock selection: a huge topic. For my views, I recommend going to my companies website, www.ValuEngine.com There is absolutely no reason to register or pay for anything, just visit the 'about our models', 'benchmark portfolios', and 'backtesting' links to see how a specialty research firm goes about stock selection research. Also, download the free report from the popup, this goes even more into depth on how we do it. Again take this as just an example (we like to think a very successful one).

I hope this gets us started! Unfortunately I am located in Miami and while I do travel frequently on business, no near time trips scheduled to your area.  More than willing to get together if our paths ever do cross. Please feel free to follow up through expertadvice.com, or email me directly at paul@valuengine.com   I'd be happy to keep the dialogue going!

Sincerely,
Paul Henneman
President
ValuEngine, Inc.