Josiah Mackenzie

For the past 6 months, everyone seems to be talking about the economy. Are we in a recession? Is the market crashing? Are we headed into a depression?

Who cares? Instead of reacting to the current environment, I believe in proactively creating my own reality.

“Not being able to govern events, I govern myself.” — Michel de Montaigne

In Business

Building a business in a sluggish economy will only prepare me for greater success when it’s over. It forces me to improve my selling ability. It requires me to cut costs and watch cashflow. If I can learn to succeed now, I’ll be the better for it later.

For the past year, my profits have nearly doubled by focusing on a few high-value clients and building systems to handle the extra work. I’m confident this trend will continue in the future.

In Investing

I’m not a stock market genius, but using basic financial analysis I’ve built a portfolio of undervalued companies that has beat the market by 3-8% over the past 6 months. A market downturn means stocks are on sale - so now is a time to snap up companies at bargain prices.

For more on value investing, read Value Investing 101 by Motley Fool.
In Personal Finance

As an entrepreneur, my income and job security is not tied to the economy. By making some changes to my sales strategy, my income has more than doubled from last year. I’ve taken the advice of David Bach in The Automatic Millionaire and automated my savings and investments. Also, I’ve made some major lifestyle changes and am aggressively paying off debt. By boosting my job and investments income while living frugally, I’m applying the fundamental law of wealth building:

Live on less than you make, and invest the difference

The “don’t have it, don’t spend it” philosophy is unpopular with many young entrepreneurs, including myself in the past. It’s easy to overspend now, hoping you’ll make it big . While your business may become very profitable in several years, it’s the habits you form now that will impact you in the future. In my view, it’s better to develop a financial position now that doesn’t require a future windfall. That way, you can do what you love and not be tied to making decisions for the money.

As JD from Get Rich Slowly advises, it’s best to return to the basics if the going gets tough. After all, the #1 impact on your investments is you.

So please, stop complaining and take more responsibility for your life!

This article first appeared in my Young Wealth Weekly ezine. Make sure you’re signed up!

Bootstrapping means to start and grow a business using as little cash as possible. For many young entrepreneurs, cash is scarce — making bootstrapping an essential skill. It allows you to be free from the unneeded pressure of outside investors.

Here are some tips to keep in mind when starting a web-based business.

Tip 1: Know a little bit of everything

• Know the basics of programming. At the very least, you should be able to edit your own HTML webpages. Bonus points if you understand more advanced languages such as Javascript and PHP. Even if you end up hiring someone else to do the programming, you’ll be able to converse intelligently on what needs to be done.
• Know the basics of graphic design. Creating basic images, buttons, and banner ads isn’t really that hard. And with many graphic designers charging upwards of $75/hour, it’s a skill you need to know as a bootstrapper.
• Know the basics of website development. Be able to assemble an HTML webpage and basic website. Understand the fundamentals of page linking, site structure, and publishing your pages to the web.
• Know the fundamentals of web promotion and internet marketing. There’s a ton of free information on the internet that will teach you core marketing principles — things like pagerank, linking, keyword placement, and generating traffic. All it takes is a time commitment on your part to learn it.

You can always call in the experts when you have a large, time-consuming task, but you can save loads of money by doing the little things yourself. In Benjamin Franklin’s words, “A penny saved is a penny earned.”

Tip 2: Take advantage of internet-only free (or low cost) advertising
In many respects, entrepreneurs on the web have a big advantage in marketing over their brick and mortar counterparts. There are so many free or low cost marketing options available that there’s usually no need to spend massive dollars in an expensive campaign.

Some examples?

• Niche. I know you’ve heard it so many times before, but are you really doing it? Concentrated marketing to a very specific niche can save you lots of time and money. From what I know, it’s much easier to position yourself as a small niche expert on the web. By reaching a global audience, you can afford to have a very narrow focus.
• Blog. Maintaining an informative blog brings new visitors to your website, encourages linkbacks, and most importantly, positions yourself as an expert in the market. People buy from those who have helped and taught them.
• Linking. Ideally, your content will be so interesting that hundreds of people will voluntarily place one-way links to your website. But that’s quite rare, and most likely you’ll have to spend some time contacting other websites yourself. The best type of linkback you can get is from a website in a complimentary industry — such as a graphic designer linking to a printing company. Not only will that type of link increase your search engine position, it will also reach your target audience of potential customers.
• Articles. Writing articles and submitting them to databases such as eZineArticles can drive massive amounts of traffic to your site when others re-publish them with links to your website. Again, I’ve found that article distribution is much faster and easier on the web than with print publications.
• Viral Marketing. On the web, it’s relatively simple to set up a system where your customers can tell others about what you do. If done correctly, this method of marketing can increase your site traffic exponentially.

Tip 3: Joint venture with others
Making joint venture deals on the web is easy. You can discover, contact, and negotiate with people quickly through emails and web searches. Most likely, you’ll be able to find someone you can exchange skills with. Need a fresh website design for your consulting firm? Find a graphic artist in need of your marketing services, and you’re all set. No money is spent, and everyone wins.

Tip 4: Use freelance websites to locate independent contractors
Sites such as Guru.com and Elance.com can be a great resource while you’re bootstrapping. The service providers are usually talented and reliable, and the cost you pay is generally a fraction of what you’d pay elsewhere. In some of my past projects, I’ve only had to pay 1/4 of the price for programming and graphic design that my competitors were paying. As with any independent contractor, be sure to check their testamonials and work portfolio before proceeding. Unwary entrepreneurs can loose time and money by selecting the wrong person for the job.

By using the web to launch your business, you already have the advantage of low overhead costs. Exploit that by using the tips above, and you’ll be able to keep costs very low.

Since my first visit to Wall Street six months ago, I’ve learned alot about the stock market, and achieved a decent paper profit of 25%.

But My Favorite Company Isn’t Publicly Traded
The most valuable stock I own is issued by Josiah Mackenzie & Company, future NYSE symbol JMCO.

My Corporation Outperforms the S&P 500
When investing in stocks, I try to beat the S&P 500 index, which averages about 10% per year. Investments I make into my company routinely give a 200% (or more) return within weeks. One of my ventures gave me a 10,000% return on my money within four months. People are in love with Google because it doubled. I smile.

My Hypothesis
I believe that it is far more profitable for the entrepreneur to invest money into his business, rather than stocks. An entrepreneur has direct control over how profitable his company is. A stock investor is not. If you’re a savvy businessperson, you’ll do well. No guessing is needed.

A Radical Plan for Retirement
One of the major reasons people invest in stocks and mutual funds is so they will have enough money for retirement. I don’t agree with that. My plan is to build such a flow of residual income so that I don’t need a retirement account. Whether it be through real estate investing, network marketing, or licensing, it is possible to create enough channels of residual income to last far beyond your lifetime.

That’s what I’m working towards. To be a successful entrepreneur, you must lose the employee mindset.

Chipotle will go public tomorrow, with shares opening between $18-$22.

I would encourage you to read an article written by my friend Joe Urgo on this IPO: Chipotle Mexican Grill IPO

I don’t understand people when they say the stock market is risky. In addition to carefully analyzing your stock picks, there are things you can do to prevent losses. One of these is the Stop-Loss Order. Basically, this says, “If my stock drops below X price, sell it.” You can set this just below the price you paid for it, or a small percentage below to allow for market fluctuations. The nice thing is that you are only charged a commission when the stock sells, so it’s like a free insurance policy!

Last August, I purchased Google’s stock at $287. It was the highest priced stock I had purchased to date, so I wanted to make sure I didn’t lose money on it. I placed a stop-loss order on it. Fortunately, the stock climbed considerably after that, so I modified the sell price frequently.

Yesterday, Google started a steep slide that would continue into today. My stop-loss order was executed, and I sold off without losing excessive amounts of money.

I would encourage you to place stop-loss orders on all your stocks. It is the free insurance policy that can save you thousands of dollars!

The process of becoming wealthy begins with small descisions. One of those is developing the habit of saving and investing those savings. If you put some of this down on paper, the results are amazing.

To show you how amazing, I’ll illustrate using common expenses a young twenty-something encounters. For the illustrations, our savings will be put into an S&P index fund, which has historically averaged a return exceeding 10% over the past 70 years.

Case 1: College Texbooks
If you’re in college, you know how expensive textbooks are. It is easy to spend $500 on them each semester. Let’s say you bought all your textbooks used from other students, and saved $400 each semester, or $800 annually. (This is very possible — I do it routinely.) After investing the money you save each year, you will have over $3,800 when you graduate. But you didn’t miss that money during college, did you? So you decide to keep the savings in the stock market for the next 40 years. By the time you retire, you will have over $171,000 socked away! Amazing accomplishment from making one smart decision in college.

Case 2: The Cell Phone
Cell phones are great. They allow you to communicate with anyone, anywhere. But they can also be expensive. Let’s pretend that you were able to do without a cell phone and saved $100 for the phone and $50 a month for a 2-year contract. If you put that intial $100 into a stock account, then added $50 per month during the next 2 years, you would end up with $1,454.37 (assuming you would get the S&P average return of 10%). That’s a nice amount. But let’s continue our saving mentality. If you would keep that amount in your 10%-earning index fund for the next 40 years without touching it, you would have over $65,000 saved for retirement. So before you sign that cell phone contract, remember that it could be costing you $65,000 in future wealth!

Case 3: The Car
A car is one of the biggest purchases most people make. But it is also an opportunity for tremendous savings and future wealth. For example, instead of buying the average $25,000 new sedan, you could buy a car like the 2002 Chevrolet Impala on eBay for about $5,000 and invest the other $20,000. This time we don’t want to wait 40 years. We’ll just keep in the money in our investment fund for 25 years — until we’re 45. At the end of that time, we have over $216,000 — enough to buy a brand new Lamborghini and a gently used Ferrari on eBay!

And of course, we wouldn’t have to burn up all the money on flashy cars. We could leave it in our retirement fund, and withdraw over $905,000 at the end of 40 years.

Life presents many opportunities for saving. Whether you save by purchasing clothes on clearance racks or buying electronics used on eBay, the important thing to remember is invest the money you save. If you save money, then waste it on something else, the purpose is lost.

Train yourself now to save and invest. You’ll thank yourself later.

For the most part, I haven’t really been involved in the stock market for the last four months. I was involved in the Cedarville University Stock Challenge — so I stayed up to date on trends — but I have not used my own money recently.

Today, because of some Sharebuilder incentives (commision free trade), I made three additions to my portfolio:

Sirius Satellite Radio (SIRI) — I believe satellite radio will be huge in the future, and this value priced stock has nowhere to go but up. I’ve been wanting to purchase this for a while, and finally went ahead and bought a sizable number of shares.

New Dragon Asia (NWD) — Even though this stock has lost alot of money recently, I believe their core business — rice and noodle products — will do well in the future. From what I’ve learned, the company has a good distribution network and capable management team.

American Eagle Outfitters (AEOS) — AE looks like a value stock to me. It has dropped $10 this year, but they have a good eye for fashion trends, and should do well in 2006.

Google’s stock has been challenging my buy-and-hold philosophy lately. After purchasing at $287, the stock’s value has climbed to the $420+ in just a few months. Impressive growth, but I’m beginning to worry that it is overvalued. If I place a stop-loss order in the $400 range, it could easily sell with me getting a nice profit. But what are Google’s long-term prospects? Will it bounce back with even higher prices? Something to think about….

In order to build a network of like-minded people here at Cedarville University, I’ve started a contest.

As you’ll see on that page, the prize package includes several valuable resources with a retail value of over $125. Also, I hope to meet with the contestants at Vecinos several times during the semester. Hopefully those times will be a good learning experience for us all, as we talk strategy and exchange hot tips.

So, if you’re a Cedarville University student (or faculty!), sign up now!

After I wrote my last blog entry, I was thinking how I could motivate you, my blog reader, to get started in the stock market. I know how easy it is to read a blog and say, “Wow! Isn’t that a great idea!” — but then move on to another website.

But I want you to take action — for your own sake. The biggest step in doing anything is the first one.

So what would motivate you to take that crucial first step? How about $25 free money to invest?

You heard that right! Sharebuilder is running a special promotion were existing members can invite their friends to sign up, and both of us win:
You get - $25 to invest in stocks
I get - 5 free trades
(I mention this because some bloggers will endorse things to make a huge profit. As you can see, you’re the one getting the deal here!)

So right now shoot me an email with the subject “Sharebuilder”: venture@josiahmackenzie.com. I’ll get you set up with a stock trading account with $25 you can spend as you wish. I’ll even guide you through the steps and give you a sure-fire stock to buy if you need help.

What are you waiting for? Do you want that $25 dollars or not?