Safe Investing

Many companies nowadays are letting employees control their 401K plans. For example, if a company uses Charles Schwab as their plan administrator, the employees can buy individual stocks under a Personal Choice Retirement Plan. We also have popular online brokers where individuals can set up trading accounts. TDAmeritrade and Scottrade are two of these places.

I have accounts with all three of these brokers. It is great to have the power to control your own destiny in the stock market, but an inexperienced investor will lose a lot of money fast if he or she does not have a good game plan. I recommend watching CNBC to learn about the stock market along with making SeekingAlpha.com one of your favorite investing information websites. You can also buy investing books.

As for a good diversification plan, I believe that investors of all ages should have at least 1/3 of their money invested in bonds. This can be in U.S. Treasury bonds or bond ETFs that trade like stocks. Two ETFs that I like are RCS and JNK. They both pay around 8% annually, and you are paid a portion of that each month.

The other 67% of your money should be invested in several different stocks in different sectors. For example, AGNC is a real estate investment trust that pays around 19% annually through quarterly dividend payouts. This stock would be a buy and hold as long as they continue to pay a double-digit dividend. I recommend putting 15% of your money in this stock.

That leaves us with 52% left to invest. This should be divided equally into four 13% sections. Since it is difficult to always pick good stocks, the safest plan is to invest in four strong ETFs (exchange traded funds) such as ERX, DGP, UDOW, and TNA. This provides good diversification for your money.

ERX is a triple bull fund involving energy, primarily oil. DGP is a double gold fund. UDOW is a triple Dow stocks ETF. TNA is a triple small cap fund.

You must do some homework before you buy these four ETFs because you may be buying at the top and selling for a loss if you are not careful. You will need to buy these stocks only when the Dow has been down for a few weeks. Then, you must quickly sell them whenever you are up 20 to 25%. This means that the money you spend for these stocks may be sitting in cash for half the year. That is great, though, as long as you make a profit each time you buy at a stock market bottom.

This is a plan that will safely work for double-digit returns each year on average. Please do your own diligence for buying and selling at the right times.