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Tuesday, October 9, 2007

How I Lost it All in the stock Market

This is a reprint of a letter sent to us in 2003. Its as relevant today as it was then.

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February 2, 2003

To: investingforincome.com

From: DRG

Finally someone agrees with me or better me with them!

I have been playing around in the marked for more than 25 years. I made some I lost some . I lost my whole house on a stock (Abacus) of a company who was building the Edmonton shopping mall. At the recommendation of my broker who was very friendly to me (he bought me coffee quiet often) I borrowed as much money as I could to buy the said stock.

Now, he worked for a reputable brokerage house, so I felt fairly good about my investment. I had 2000 shares @5.00 a piece. Thats what my house was worth in the early 70's. My broker told me he knows the people who were running the company, don't worry. Well the stock kept sinking and sinking. I questioned him (over another cup of coffee) what is the meaning of all of this. O, all stocks fluctuate up and down, he said. I figured, he should know, he is the "professional", and I don't know anything. When they dropped to 40 cents I asked him: "Don't you think I should buy some more, after all that is a excellent stock , is it not"? He hesitated and said, "well, I think, you got enough, lets not become greedy". I got him to buy me another 3,000 @ 45 cents, anyway. What a good average I had achieved, I was so proud of myself.

A little while after that, I turned on the TV and I heard the word Abacus.-- Close to bankrupt.-- I was sick, and yes I lost the whole works. I paid my house off a second time and left the market alone until 15 years later. In time the broker had been ?invited to court?, but left the country instead.

O'how I missed my coffee. I had to think of retirement and managed to get a couple houses to rent out. A friend told me about income producing stocks (units). I have never looked back since. I borrowed again from the bank, a house worth. As of today my holdings are $ 250,690 and I got paid at for January 2003 a total of $3,470. That is twice as good as getting rent, even after paying almost a $1,000 to the bank, and the interest to the bank is deductible. No houses to fix up, no painting, no complaints.

Sure I still have some property, diversification is good, but as far as income is concerned, you can't beat the income funds. When I got your e-mail (from a friend) about the different recommendations I was glad to see that those were exactly my choices for the last three years. It feels good to see that I finally got paid back from the school of hard knocks. I hope it lasts for a while.

DRG

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