BILL CHERRY'S GREATEST DALLAS PARK CITIES REAL ESTATE BLOG: DADDY'S 7 RULES FOR SECURING YOUR FINANCIAL FUTURE - PART 3

In the Preface of this 7-part series of blogs, I explained that my daddy was always a salaried employee, yet by following seven rules he went from being recently out of college to a millionaire-plus twenty-five years later. My mom never worked, and they fully-funded the education of their two sons. He passed away in 1980.

I suggested that with the 2010 ready to begin, this would be the perfect time for each of us to initiate Daddy's 7 Rules for Securing Your Financial Future.

Here, stated again, are the rules:

•·     Save at least 10% of your gross income

•·     Know about, understand, and use the principal of Dollar Cost Averaging

•·     Intellectually know that you don't have a profit or a loss in an investment until you sell it.

•·     Secure your family's well-being and your retirement income stream with life insurance annuities

•·     Pay off the mortgage on your home as quickly as you can

•·     Accumulate a portfolio of income producing real estate

•·     Diversify

DOLLAR COST AVERAGING

One of the easiest and most consistently successful investing strategies is called Dollar Cost Averaging.

The idea is to pick a particular vehicle for your investment, say it's a growth mutual fund or Hewlett Packard.  Next you pick a day of the month that you will purchase stock in your investment choice, and finally you decide the amount of money or the amount of shares you'll buy each time.

For an example, I decide that on the 5^th day of every month, I will buy one hundred shares of Playboy International, Inc. common stock.  So let's say the stock on January 5^th is quoted at $3.50 per share.  So I put in my buy order for $350 plus brokerage fees.  I do this every month...100 shares whether the price of the stock is more or less than my original investment per share price of $3.50 per share.

What happens is that over a period of time, you have an average price that you've paid per share, taking in the high prices, the low prices and everything in between. So you've accumulated shares by regularly increasing your investment each month, and since you've bought at many prices, your opportunity for appreciation has increased, and your chance of loss has decreased.

People who invest in mutual funds and who do not contemporaneously practice Dollar Cost Averaging will get seriously diminished results.

My grammar school principal, H. McKee Andrus had learned how to build houses.  So throughout the year he bought a subdivision lot, then accumulated the materials he would need to build a small rent house.  When June rolled around, he and the school janitor built that house. 

So Mr. Andrus was Dollar Cost Averaging real estate.  And when he retired, all of his rent houses were mortgage free, rented out, and in addition to having built quite an estate, he and Mrs. Andrus had an extraordinary income in their retirement years.

Dollar Cost Averaging goes a long way in solving the average guy's delimma: "I always seemed to buy when the stock is at its highest, so I don't invest in stock."

Try Dollar Cost Averaging, even if it's adding $50 bucks to your bank savings account on the same day of every month.

Tomorrow, we'll investigate the third of Daddy's Rules: Intellectually know that you don't have a profit or a loss until you sell.

BILL CHERRY, REALTORS

DALLAS - HIGHLAND PARK

Our 45th Year

214 503-8563

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