To grow any “nest egg” you must begin at the beginning - with both an egg and a nest in which it resides. The egg will be your initial investment of some dollar amount that you are willing to set aside purely for investing. The nest is a checking or money market account seperate from the account you use for your personal income and expenses. To help keep it seperate, open this account at a different bank from your present one, using the account name “Your Name, Investment Account”.
If you’re 20 years old, open the account with $100, and add $100 more each month. If you’re in your 30’s, begin with $200, and add $200 each month. Better yet, open the account with $1,000-$5,000 and add $100-$300 a month without fail. Whatever sum you begin with or add monthly, it must be disposable income that you do not need for personal expenses.
Growing your nest egg at a 15% per rate will require you to be actively involved - on a daily basis - in your investments. The investments you will utilize to achieve 15% growth are common stocks in highly rated, stable U.S. companies and real estate in the form of raw land. Your objective will always be to “Buy low - sell high!”
Richard Bach, in his book “Illusions” offers some excellent marching orders to help you understand the path to wealth you are about to undertake. He says:
“You are never given a wish,
Without also being given the power to make it so.
You may have to work for it, however.
The “work” you will do is to educate yourself, one day at a time, on two subjects: stock market investing and real estate. This is not overnight knowledge you will acquire, but a combination of constant reading coupled with experience gained in both topics over a lifetime. Forget the lottery and your fantasy inheritance. It is your commitment to your own financial well-being that matters most. It will come to you - provided you are willing to commit to both increased knowledge and ACTION!
Once you have $1,000-$5,000 in your investment account, open an Internet stock account with one of the online brokerage firms, such as TDAmeritrade, E-Trade or Scottrade. Deposit one-half of the funds from your investment account into your stock account. These online accounts offer you the ability to track, chart, buy, and sell specific companies such as Lowes, GE, or Apple Computer.
Begin your stock investments by watching the charts for 3-5 (and NO MORE) well-known, domestic companies with a high S&P (Standard & Poors) rating. Choose those companies that have the greatest movement in price - both up and down. This movement is what brings you the opportunity to trade. Chart these stocks daily until you begin to recognize their trading patterns. Because your objective is to “Buy low-sell high”, you must learn when these companies are at their “low” point before making a purchase. Regardless of what you purchase, resell it (at a profit), and don’t ever get emotionally attached to it.
The same strategy will be implemented for buying raw land. Raw land is unimproved land of some size, i.e. 3, 13, or 213 acres. You may begin with just a building lot, until your funds allow a larger purchase. Before buying land, you must thoroughly research current asking prices, and even more importantly selling prices.
Pick a precise area of no more than 2-5 square miles. Find every property that has sold in the past 3 years in that area, and make notes about the selling price, financing terms, and the pros and cons of the property. Was the property attractively maintained, or in run-down condition? Is the surrounding neighborhood appealing?
Next, open a local real estate company website and see whther they show all properties that are listed for sale locally - not just their properties. Research all active properties and note their ASKING prices, locations etc. Visit each one to determine its marketability.
Having completed your research, narrow your search for property based on the funds you have available. You should be most interested in the ones that have the lowest asking prices,with the most potential for growth in value. If they appear run-down, uncared-for, decide what inexpensive improvements you could add to raise their value, i.e. a white rail fence across the front of the property.
The greatest profit potential resides with the one that may appear to be least desirable, provided the asking price matches the condition. With some simple cosmetic improvements, buyers will be attracted to its beauty and your ability to price it below all the others will cinch the sale.
In my next article, “Owner Financing + Raw Land = Profit!”, I’ll discuss financing methods to increase your profits even more when investing in land.
