Financial Freedom on $5 a Day: A Step-By-Step Strategy for Small Investors

212 Pages·1994·17.706 MB·English

by  Chuck Chakrapani

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FINANCIAL FREEDOM ON A DAY
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Digitized by the Internet Archive
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http://archive.org/details/financialfreedomOOchuc
FINANCIAL FREEDOM ON A DAY
$5
A
step-by-step strategy for small investors
Chuck Chakrapani, M.Sc, Ph.D., C.I.M.
Self-Counsel Press
(a division of)
International Self-Counsel Press Ltd.
©
Copyright 1983, 1994 by StandardResearch Systems Inc.
380-26 Soho Street, Toronto, OntarioM5T 1Z7
All rights reserved.
No part of—this book may be reproduced or trans—mitted in anyform by
any means graphic, electronic, ormechanical withoutpermission
in writingfrom thepublisher, except bya reviewerwho mayquotebrief
passages in a review.
Printed in Canada
First edition:March, 1983
Second edition: February, 1994
Third edition:January, 1986; Reprinted: September, 1986
Fourth edition:March, 1989
Fifth edition:April, 1991; Reprinted:July, 1991;May, 1992;
September, 1993
Sixth edition: December, 1994
Canadian Cataloguing in Publication Data
Chakrapani, Chuck
Financial freedom on $5 a day
(Self-counselbusiness series)
ISBN 0-88908-794-6
ISSN 0827-2522
— —
1. Investments Periodicals. 2. Speculation Periodicals.
I. Title. II. Series.
HG4527.C428 332.678 C84-031650-X
Coverphotography by Lonnie Duka/Tony StoneImages
Self-Counsel Press
{a division of)
International Self-Counsel Press Ltd.
Head Office
1481 Charlotte Road
North Vancouver, BritishColumbia V7J 1H1
U.S. Address
1704 N. State Street
Bellingham, Washington 98225
CONTENTS
PREFACE
xiii
PART YOU CAN ACHIEVE
I:
FINANCIAL FREEDOM
1
FINANCIAL FREEDOM:
YOU CAN ACHIEVE IT 3
a. Even small investors can achieve
financial freedom 3
b. Why aren't most people
financially independent? 5
c. What it takes to achieve financial freedom 6
d. Dream merchants: do you want to pay them? 7
e. Getting rich slowlybut surely 9
f. Is it still $5 a day? 10
g. Five dollars a day gets you started 11
WHAT MAKES YOU WEALTHY?
12
a. What is financial freedom anyway? 12
b. How do I get there from here? 13
c. Three powerful principles 13
1. The magic ofcompounding 13
2. Dollar cost averaging 14
3. Diversification 16
d. Use the program to monitor your investments 16
PART HOW TO GET MONEY TO INVEST
II: 17
HOW TO GET MONEY TO INVEST
19
a. Pay yourselffirst 19
.
b. Three simple ways to save 20
1. The Minus Ten technique 20
2. The Plus Ten technique 21
3. Day's Due technique 21
c. Aim to save at least 10% ofyour income 22
d. Six ways to raise additional money
for investing 23
1. Liberate the lemons 23
2. Slash your major expenses 23
3. Squeeze your budget 24
4. Reduce your taxes 24
5. Increase your return without risk 24
6. Adopt friction-free investing 24
7. Watch those windfalls 25
e. Building an investment pyramid 25
f Rules of success for the small investor 27
1. Save regularly 27
2. Invest for maximum return 28
3. Minimize your commissions 29
PART HI: HOW TO INVEST: PROFIT 31
4 GETTING STARTED 33
a. Doublejeopardy 33
b. Investments with clout 34
c. Taking responsibility 34
d. A note on specific information 35
1. Names and addresses 35
2. Tax implications 35
3. Canada and the United States 36
How
e. to start investing 36
VI
..
HOW TO GET HIGH INTEREST 38
How
a. large investors get
higher interest rates 38
b. How to get high interest rates 39
c. How tojoin a money market fund 40
d. No-load mutual funds 40
e. U.S. money market funds 40
f Canadian moneymarket funds 41
g. When to use money market funds 41
h. How to evaluate the performance
ofyour fund 42
HOW TO INVEST IN STOCKS 43
a. What are shares? 43
How
b. are shares traded? 44
c. How to buy and sell shares 44
How
d. to find a stockbroker 44
e. How to place orders with yourbroker 45
f What else you should know 45
g. What are OTC stocks? 46
How
h. to read the financial page 46
i. What is a stop-loss order? 47
How
to minimize the risk 47
j.
1. Buy stocks with low price earnings
(PE) ratio 47
2. Buy stocks with highbook values 47
k. Commissions: how to reduce them 48
1. Why direct investment may not be suitable
for the small investor 49
m. How you canparticipate in the stock market 50
How
n. to choose a fund 53
vn
.
HOW TO BUY STOCKS AT A DISCOUNT
7 55
a. Dividend reinvestment investment plans
(DRIPs) 55
b. The advantages ofjoining a DRIP 55
c. Information on DRIP companies 56
1. Canada 56
2. United States 56
d. How tojoin a DRIP 57
e. What else should you know? 57
8 HOW TO INVEST IN BONDS 58
a. What are bonds? 58
b. Bond prices 58
c. When to buy bonds 59
d. Bonds and debentures 60
e. How to buy 60
f Bond and mortgage funds 60
g. Strips and zeros 61
h. Convertible bonds 63
1. What to look for in convertible bonds 64
2. When to buy convertible bonds 64
How
3. is the gain taxed? 65
9 HOW TO INVEST IN PREFERRED STOCKS 66
a. What is a preferred stock? 66
Why
b. invest in a preferred stock? 66
c. Different kinds ofpreferred stocks 67
d. Preferred stock prices 68
e. When to buy preferred stocks 68
f. How to buy/sell preferred stocks 68
g. Using mutual funds to buy preferred stocks 68
Vlll