Josiah Mackenzie

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!

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?

Today I purchased my first stocks. For months I had been preparing and planning for this day: reading books, scanning the Wall Street Journal and websites for market trends, and playing stock simulators.

I Had To Just Do It
Part of the time I spent in preparation for today was worthwhile. I learned a lot - information that will hopefully earn me money in the future. But part of that time was procrastination. I kept making excuses to myself: “I’ll probably just loose money”…”What 18-year-old trades stocks?”… “Investing a small amount won’t make a difference”. Some of my concerns were legitimate — and were overcome by learning - but the root problem was fear. I had to put the fear behind me, and step forward.

The Internet Makes Trading Easy
Once I made the decision to step forward in the world of investing, I found it easier than I expected. The internet provides beginning investors with a wealth of information. After reading several articles on choosing an online broker, I chose two firms: Sharebuilder and Firstrade.

Sharebuilder Simplifies Scheduled Investing
Though Sharebuilder is a full-service broker, they specialize in “investment plans” - which enable you to automatically purchase $X worth of X stocks every X days. In addition to this being a no-hassle method of investing, it’s also a sophisticated technique called Dollar Cost Averaging. The big advantage of using Sharebuilder’s “investing plans” is that you can buy a portion of a large stock you can’t afford. For example, a share of Warren Buffet’s legendary Berkshire-Hathaway company costs around $80,000. I don’t have that amount, but want to take advantage of Buffet’s expertise. Before Sharebuilder came around, all I could do is wait until I had $80,000. But using an “investment plan,” I can invest $50 and have it grow at the same rate. The only disadvantage to Sharebuilder is that they charge $15 per trade of “real stock”. This isn’t a big deal when you trade hundreds of stocks at a time, but when you’re trading one stock at a time, it is. For example, let’s say you buy YHOO at $35. It jumps $5 and you want to sell. Wait a minute! Remember you paid $15 to buy YHOO and you’ll pay another $15 to sell it.

Firstrade Charges Low Commissions
As of this writing, Firstrade charges only $6.95 per trade. Using the previous YHOO example, you’ll see how this can greatly benefit a small investor like me. The other great feature is that there is no minimum balance to open an account. Other brokers I looked at required $500, $1,000, and even $10,000 to open an account. I like to buy stocks when I see value - not because I have $X amount of dollars to “use up”.

My Buy and Hold Strategy
The reason people lose money in the stock market is because they sell too quickly. They hear of a possible financial downturn, then quickly sell of their portfolio at a loss. If you don’t sell, you won’t lose money. A good way to show this is to look at a chart of the stock market over the last 50-75 years. Sure, there have been depressions. But if a person at any point in that time bought an index fund and held it for 25 years, they would have made a profit. Now, of course, the future may not replicate the past. But I’m guessing that it will. That’s why I’ve decided to keep my stocks over the long term: 5, 10, 25, or more years. I am going to ignore the financial experts when they talk about the market being “up” or “down”. As long as I have the funds, I plan to invest the same amount of money in the stock market regardless of the condition it is in. When everyone is selling at low prices, I’ll be able to get more stock for my money - and then I can sell it back to them when the market turns up again!

Start Investing Today
I hope this has encouraged you to start investing. It doesn’t have to be a large sum of money. Ten dollars is better than nothing. And with careful personal budgeting, I suspect you can invest even more.

7 Easy Ways to Save Money for Investing

• Shop with a list - and stick to it
• Drink water (don’t laugh - this can save you $30 a month or more!)
• Look for free entertainment - it’s often better
• Cut down bills if you can (examples: I could probably downgrade my “unlimited minutes” cell phone plan; you could use a broadband phone company for long-distance calls)
• Keep a “change jar” for that loose change in your pocket
• Invest that pay raise or tax return - you’ll thank yourself later
• Pay yourself first - set aside a dollar a day

Links
Sharebuilder
Firstrade
Yahoo! Finance