#ChronicFinance
Disclaimer - The following is my thoughts, and my thoughts alone, regarding investing. I am not a trained or experienced financial planner. My education does consist of a degree in Accounting with multiple courses in Finance but that doesn’t mean I’m qualified. This post is solely based on my experience investing my own money as a fellow chronic patient. I’m just telling more of my own story.
#ChronicFinance
Most of you are probably rolling your eyes in absolute confusion right now. #ChronicFinance as a chronic patient usually means deciding between buying dinner or buying meds for the day. To often #ChronicFinance is choosing between paying rent or paying for your next appointment. Investing for the future or retirement seems about as likely as winning a $100 million Powerball lottery, I get that!
I’ve been a chronic patient without health insurance, I’ve begged for payment plans and have brought down hospital bills through being smarter and more motivated than the facility was. This post is by NO means meant to make anyone feel bad or cause any deep seeded hatred for life. The only reason I am writing this post today is because as we all know, life can change in an heartbeat. For me it did, that heartbeat was my dad dying way to young from multiple strokes and heart disease.
As many of you know, dad pasted away in January. He was a highly successful Air Force pilot who rose to the rank of 1-Star General before retirement. Unfortunately for him, the military life doesn’t reward success quite like Wall Street does for example. That said, dad’s estate can be described as solidly middle-class. Since dad died at 76, he still had most of his savings and property left which means my brother and I are going to inherit his finances. Thank you dad, even in death you are still being a good father!
Now, under no circumstances will I give you exact dollar amounts that my brother and I are inheriting. That is no ones business but ours. In an attempt to illustrate the math and concepts better, I will be using figures that will hopefully make this post easier to understand and follow. Math is a hard concept for many so I don’t want to lose those readers. Personally, I’m still running the numbers on my inheritance in order to determine my own personal risk and investment strategy. The following is a walk through of what I’m doing in my private financial world.
How much money do I invest?
This is always the toughest question to answer. Investing, even for math and finance geniuses, for which I am not, is still very much a gamble. One can factor in variables like who the President is, whether or not the Fed will raise interest rates (the stock market HATES talk of raising interest rates) or not, to does the American consumer have any free money to be buying toys with but that does not matter at all if say the North Korean leader decides to start a nuclear war on Tuesday. Worse yet, an unexpected hurricane or whatever a “bomb cyclone” is can cause the markets to go crazy too. Money, when tied to world events, can make even the most steely nerved investor shake. Please understand that when deciding how much to invest of your own money.
For the purpose of this post, I’ve decided to invest $10,000.00. For a chronic patient, an extra $10g’s (is that how the kids say it?) is life changing money. It could do away with the choice of paying rent or eating dinner tonight for months, could be a down payment on a surgery that would significantly raise someones quality of life, or allow a chronic patient to take a much deserved and earned vacation. It’s life changing money for the chronic world. However, for Wall Street and the markets, $10,000.00 is nothing. It would probably cost Warren Buffet more than $10 grand to stop and pick up that much cash if it were laying on the ground in front of his house. That is not a joke either, I just read that Mr. Buffett has something like $160 BILLION to spend in the market right now.
Personally, I’m a huge fan of John Bogle of Vanguard Investments. I would highly recommend you take some time and read one or two of his investment books. His investment strategy is based on the idea that stocks are riskier than bonds so you want to have a percentage of both. For example, if you are a single, 20 year old looking to invest for the first time, you can afford to have 90% of your money in stocks and 10% in bonds. The idea being you still have at least 45 more productive years before retirement which means you can recover from a market crash. This ratio does not take into account a chronic investors investment opportunity time frame though. For example, as of today, I have no doubt that I won’t be able to work full-time for much longer. Unless something changes for me health wise, my pain will force me to part-time work at best within the next 5 years if I’m lucky.
Currently, I’m a 43 year old single male who can still work full-time in a stressful job. I do own my house and my car is paid for. Outside of my student loans, I have almost no debt. Due to my rock climbing accident and rheumatoid arthritis, I’ve lost about 10 years of active investing time trying to put my body put back together after the fall and keeping my disease under control. So instead of having a 80% to 20% stock to bond ratio as Mr. Bogle might advise me, I’m going to invest the entire $10,000.00 into stocks.
The reason I’m going to take so much risk is because my job invests money for my retirement into Idaho’s PERSI. I’m now fully vested in PERSI which means I already have a solid retirement income stream for my future. My future retirement, through PERSI, will not be extravagant by any means though. It will take care of food, mortgage, and depending on my health at the time, most of my medical expenses. PERSI is an amazing investment tool for which I’m grateful for the opportunity to invest in. However, if I want to travel, continue to ski, or have a family I need more money than PERSI can provide me. It is time to play investment catch up.
Picking Stocks to Invest In
This is the fun and hardest part about investing I think. There are so many industries, companies, and foreign countries now that are excellent investment options that I could spend the rest of my life researching options without ever developing a game plan for my $10,000.00 investment. In addition to research opportunities, there are categories like small, mid, and large cap stocks that are typically defined by their market caps that I should probably understand. Also, stocks pay dividends which is basically free money but does that mean a stock that does not pay a dividend a bad investment? There is also 2 schools of thought regarding stocks. The “traditional thought” being that owning stock is owning a piece of that company. Many professionals believe in a “nontraditional” theory that stocks are actually products themselves not tied to the same market forces the company it comes from are. You have a headache yet because I do.
Mr. Bogle, along with many other “professional” tv type investment experts, believe I can have a “diversified” portfolio with 5 stocks. I need to pick 5 stocks from 5 different, non related industries in order to spread my investment risk out equally. To put it another way, diversified basically means that if one stock takes a dive chances are another stock in my portfolio is raising so I come out a push. It spreads out my risk instead of just investing the entire $10,000.00 in say Apple simply because I’m creating this post on my MacBook Pro.
That said, there is a reason I’m using a MacBook Pro instead of a Dell or HP laptop, I strongly believe in Apple’s product. Observing and analyzing products in your own life is a great way to start picking stocks. Another example, I come to Starbucks almost daily for my caffeine and headache prevention drink. It’s almost automatic for me. I drive by several other coffee shops just so I can get my Starbuck’s fix. Despite what my mother tells me, I’m not unique so that probably means that there are millions of other Starbucks customers who drive by other shops on their way to get their daily fix. This means a continued income stream for Starbucks which means its probably going to be a profitable company for some time. Starbucks will be one of my companies.
Next, I’m sitting in Starbucks wearing a North Face pullover. I love North Face sweaters, coats, pants, shirts, and everything else that company produces. North Face was also one of the first quality ski apparel companies to jump into the big and tall market for which I’m a member of. Their gear is simply the best in the market as far as this retired ski instructor believes. The North Face will be the second company that I will invest in.
I’ve been with U.S. Bank since I was 18. If I remember right they were called West One at that point in time, sorry I’m taking a trip down memory lane. My family has all banked with U.S. Bank at one point in their lives. Dad’s mortgage is through U.S. Bank. I’m not sure I’ve even looked at whether or not other banks have better products or not because I’ve never felt the need to shop around. That has to be because of the financial stability of U.S. Bank. I will make my bank the 3rd company that I invest in.
Over the course of my disease, I’ve used multiple drugs from Pfizer. Due to my particular body, most of my disease medications only work for awhile then I build up a tolerance as my quality of life declines. That said, I have had quality of life increases due to Pfizer, even if they were only temporary. Plus, big Pharma has more cash then even their hearts can imagine, chances are they are paying a dividend to their stockholders with all that cash. Another way of looking at it is that by investing in Pfizer I will now have the opportunity to win some of my money back that I’ve spent on their medications. Pfizer will be my fourth company.
I need one more company to invest in. My home internet is through CenturyLink. It use to come from Cable One but they quit broadcasting Comedy Central which was a deal breaker for me. I need my Tosh.O, The Daily Show, and The Jim Jefferies Show, they are a must while I’m taking my Percocet and icing down my neck. Outside of CenturyLink providing me my internet, I don’t know anything else about the company. This will probably be my most “risky” investment because of my lack of personal knowledge.
One final thought before its time for numbers. I know most of my fellow chronic patients are advocates in every sense of the word. We don’t just advocate for better healthcare, we are into politics, disability and civil rights, fundraising, and nonprofit work. I’m the same way. That said, given my relatively small investment I can’t afford to play politics with my money yet. Yes, I will never invest in big oil, most anything Republican, or guns just to name a few. If I had more money I would put most of it into solar power, fresh food, and space travel. Until my current investments make millions, I’m going to have to settle for investing in my future, not the future of the planet. I hope that makes sense to everyone.
Time for Numbers
Since my time frame for this investment will be at least a year, I want to keep my stock allocation simple. I’m going to purchase shares based on the market cap of each company. For example, 58.83% of my $10,000.00 will be for U.S. Bank Stock. Despite my love of Starbucks, I’m only going to invest 9.63% of my money into it.
Since this post is turning into a term paper in length, I’m going to say goodbye for now. My investment will be a 2-part feature. I still need to research dividend information for each company, costs of purchasing stock, and read up on news of each company. I’m still in the planning phase remember. Also, giving myself a week will allow me to see what the market does with these 5 companies.
Stay tuned for Part 2!!!!