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Playing it safe characterizes most investors like Robert Williams, 41, and his wife, Therrie, 40. But the couple, who have been investing in the stock market for more than 13 years, have taken their first hesitant steps toward assuming more risk to boost their returns.
For example, the Chicago couple recently plunked down $1,500 in a private placement done back in October 1997 by an inventor who is looking to mass produce a fiber-optic Christmas tree, due to hit the market by year-end. After attending a few formal meetings and reviewing a prospectus, the Williamses decided it was a viable business opportunity.
Although the Williamses realize they may not be “jingling” all the way to the bank with newfound riches from this highly speculative venture, the investment is an attempt to maximize their capital, they say.
Seeking to take advantage of more aggressive growth vehicles, Robert is also reorganizing the portfolio he holds in his company’s 401(k) plan, currently valued at more than $50,000. A distribution coordinator for Fujisawa Healthcare, a pharmaceutical company in Bensenville, Illinois, Robert is fully vested. He contributes 15% of his salary, with the company matching 6%. About 70% of his portfolio is invested in stock funds and 30% in bond funds. Up until a year ago, Robert had his money only in the safest vehicles-money market and fixed-income funds-which were offering him lower returns.
Besides the 401(k) plan and shares in the fiber-optics company, the Williams family doesn’t have any other investments and $1,500 in savings. Another financial challenge for the couple is a small business that absorbs a great deal of their leftover capital.
Therrie quit working five years ago after giving birth to daughter Angelica. Looking for a way to be a stay-at-home mom yet generate some income, she decided to launch a business, borrowing about $3,000 from Robert’s 401(k) plan. The former manager with the Catholic Office of the Deaf, part of the Archdiocese in Chicago, Therrie started out with a day-care service that generated very little capital. To offset the business’ expenses, Therrie started selling school supplies.
This eventually led to Therrie founding Y’s Choice. Today, the company provides basic educational supplies such as pencils, crayons, construction paper, writing tablets, furniture and hard-to-find items to Chicago’s public schools. The business is generating annual sales of about $60,000, but Robert and Therrie have yet to see a profit. Every dime they make is put back into the business.
This presents a problem for the couple, who are now seeking to build an education fund for their daughter. The Williamses sent their older children, sons Frederick, 22, and Robert Jr., 19, to private high schools, and had planned to spend the same amount of money they contributed to their sons’ secondary education on their college expenses.
Fortunately, “both of our boys received merit scholarships, which offset the majority of the costs,” says Williams. When they were growing up, “we didn’t know about investing in the market like we do now. As we got older, we realized that if our kids