Investment Tips While Incarcerated

Well, as you know by now the First Step Act has passed and is now law. The most common question is when will the good time be recalculated? According to one staff member at my institution, he was told that it would begin January 9th. Nothing is for certain yet on how they will do this or even if that is when they will, but it’s the most I’ve got to go on so far. The rest of the implementations, will take up to seven months to develop, possibly up to six months to implement and then the BOP has up to two years to begin the program development. So this will not be a fast process by any means.

Last week, I had mentioned that if you only put aside $50 per month for 10 years (which obviously I didn’t include the good time), you could save $6,000 for your release. Granted, I know this is not possible for everybody and therefore I am writing this post more towards those who could probably do it. Now, if you worked in UNICOR, this would not be a problem either though.

This week, I am going to talk about some ways you could invest that money for your release. Before I go any farther, I want to make it clear that I am not a financial advisor and the information I am sharing is just general information that I have learned on my own over the years. Do not construe this as telling you what to do, but only making some recommendations.

One of the safest investments is government bonds. Why? Well, you are guaranteed the interest rate. It will not fluctuate. The simplest of these is savings bonds. Before I came to prison, once a month, my mom would go to her bank website and purchase a $100 EE savings bond. EE bonds are sold for half of their face value. Thus, she was only paying $50. The downside to this, is that there is a pretty long wait to redeem them. It is usually twenty years. But, if you either had a long sentence or could spare the money every month, you could invest that $50 and twenty years down the road, could have double the amount you invested.

I have contacted that same bank through the mail and they sent me the paperwork to purchase the bonds. So if you have a local bank branch you have dealt with in the past, contact them and ask if they can provide you paperwork to purchase savings bonds through the mail.

A second option is one I actually came across while reading an inmate publication. I believe the author was in a California State prison and as part of a class, was able to purchase several individual stocks and watched them grow (and shrink) over several years. The problem with this is normally, a company will not let you purchase a stock unless you already own at least one share, unless you use a broker. This is hard for many people in prison because of company regulations.

One company who does offer these services is called Temper of the Times/The Money Paper. According to the initial paperwork I received, they say “The transactions are handled by Temper of the Times Investor Services, Inc. (Temper) is a broker/dealer registered with the SEC and a member of FINRA. The sole purpose of this brokerage is provide the initial share(s) required by companies in order for an investor to join the plan.”

What Temper does is you pay them and they purchase the initial share and then transfer it to you. Therefore, you now have a stock listed under your name. However, purchasing just one share is really not recommended. It is your responsibility to continue to invest and purchase additional shares that will eventually add up over time.

The main advantage in this is that they offer what are called DRIPs (dividend reinvestment plans). When a company makes a profit, they have the option (though not required) to pay a small amount called a dividend. Normally, this is not much at all. In fact, an entire year may only be $1.60 (or $0.40 per quarter). With a DRIP though, those dividends are automatically reinvested and more shares are purchased. Just because a share is listed at say $20.00 a share, you can actually purchase portions of a share normally. If you know anything about interest, specifically compounding interest, you will know that it can add up very quickly.

Just a few of the companies that offer DRIPs include 3M Company, Johnson and Johnson, Pepsi and Casey’s General Store. Three are hundreds of companies that offer these DRIPs and most are actually without any additional fees. Temper works by taking the fifty-two week high stock price and adding a “cushion” to it plus their fee. This can be anywhere between $30-$60 depending on if you become a member with their company. This fee is not the same as any fees from the actual company whose stock you purchase. What this is about is if the fifty-two week high is say $50.00 and they add a 20% cushion, you would pay $60.00 + $60.00 in fees (if you don’t become a member). When Temper goes to purchase the stock (which is usually done only once a month), any excess amount of the purchase price (minus the $60 fee) will be refunded back to you as long as its $25 or more.

This is a great way to get a foot in the door and begin investing. Stocks are usually the most risky investment you can have, but they also have the greatest rate of return. This past year, the stock market reached it’s highest level on record, but now, the Dow Jones Industrial Average is around 21,000 points, down from a high of around 26,000. The economy is on the downhill slide and many economists say we are what is called a correction. When the market begins to go up faster than it should, it automatically begins to correct itself and thus many stocks tumble. As you’ve probably heard, buy low, sell high. This is the perfect time to do this as I can almost guarantee that the economy will recoil and in the next year, you could see returns as high as 30-40% possibly according to some investors (though again we hold no personal claim to this).

Being in prison doesn’t always mean you have to sit and suffer. You can begin learning about all types of investment opportunities even while incarcerated. Read financial publications such as the Wall Street Journal, Forbes magazine or the Economist magazine. You will be surprised at how easy some of these things can be.

If you would like more information on Temper of the Times, contact them at the address below and tell them you would like to receive information on their DRIP program.

Temper of the Times
PO Box 451
Rye, NY 10580
(800) 388-9993
www.directinvesting.com
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