Monday, October 18, 2010

What To Do With $1000 (updated)

From CNN Money. Done in gallery format. In my opinion, these are the only three items in the whole gallery worth mentioning.

Stock up on cotton items and coffee:

"A disastrous cotton crop, due in part to floods in Pakistan and droughts in China, leads retail analyst Marshal Cohen at the NPD Group to predict that prices for goods made of the stuff will rise as much as 10% by early 2011. So buy cotton items your family will need next year -- shirts, jeans, towels, and bedding, for example -- now.

Thrift store items aren't going to suffer the meteoric rise that new items will. Take your time with this one if you shop at a thrift store.

With the rest of the $1,000, stock up on coffee beans (that's why you have a basement freezer, right?): Commodities experts say that weak coffee harvests plus strong demand point to higher java prices, too."

Do what I did and switch to tea. Iced tea with Sam's Club gallon-sized tea bags is less than .20/gallon.

Invest in a DRIP plan for emergencies and college (a chart is included in this gallery pick #10):

"Looking to give $1,000 to a child? Skip a savings bond, which pays 1.4%, and buy shares in a blue-chip stock directly from the company via a plan that reinvests dividends (a.k.a. a DRIP).

The four at the right (see chart--entry #10) yield more than 2% and have minimums of $500 or less. And because they're companies kids know, they're a good introduction to the world of investing."

More on DRIP investing. Higher yields can be found with the Dogs of the Dow list. Combine Dogs of the Dow with DRIP plans (if possible), and make yourself a dynamic recession-resistant long-term savings plan--just be sure to change your stocks annually, as the Dogs of the Dow change every year. Make sure your DOGS have a corresponding DRIP plan to go with them.

Enhance curb appeal (I've been telling you to invest extra money in your home--when the market DOES recover, you'll be able to sell quickly for top dollar).

"Is your home taking forever to sell? Make your entry more memorable by upgrading to a new steel door.

According to the latest Remodeling magazine survey, doing so costs just a bit over $1,000 (the average is $1,172), but you'll recoup 129% of the cost when you unload the place."

I got a steel-clad door from Home Depot, and paid less than half of that for the door + installation. It was a vast improvement over the original 60's wood door that swelled in the frame, and you could only open with a linebacker rushing into it, not to mention it was a potential fire hazard. What the suggestion DOESN'T take into account is that metals conduct heat and cold, which makes YOUR HOUSE hotter or colder. With a steel-clad door, you've got a wooden core to break conductivity.

UPDATE: About matching the Dogs of the Dow with DRIP plans, the following Dogs have DRIP (dividend reinvestment purchases available directly from the company--this means little to no commissions) plans or DSP (direct stock purchase--no commissions beyond your first share) plans for them:

AT&T--DRIP plan
Verizon--DRIP plan
DuPont--DRIP plan
Kraft--DRIP plan
Merck--DSP plan
Chevron--DSP plan
Mickey D's--DSP plan
Pfizer--DSP plan
Home Depot--DSP plan
Boeing--DRIP plan

Nothing says you have to buy all of these--in fact, the Motley Fool formed an investment strategy called The Foolish Four (latest version), where you choose the top 5 highest-yielding, lowest-priced Dogs (after some calculations are done--see latest Foolish Four incarnation link), then toss out #1 and double-down on #2, then buy #3 and #4 as normal. The calculations determine who's in what ranking AFTER certain other calculations are done--the charts don't tell you this at a glance.

No matter what method you choose, I suggest you keep an eye on the portfolios--the better the Dow does, the lower the yields get (and the stock price goes higher). At that point, it's time to sell (or hold) and wait until the next downturn to buy again--just like frugal economics. Buy low and sell high, or hold high if saving for a long-term goal.


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