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**bsteadman1** · 02-15-2017, 05:58 PM

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CHAPTER 3

Reinvest in the Nutrition of Your Own Body

The word, 'NUTRITION', as contained in this chapter's title, really should encompass far more than just the usual mix of proteins, carbohydrates, fats, vitamins, etc.

The human body is a marvelously complex biochemical factory. However, very importantly, the body is intimately joined to the psyche. If, during a meal, you are nervous, worried, or are unhappy with your surroundings or company, you may develop indigestion and your body may not properly process even the most delicious and chemically nutritious of foods. That is, your marvelously complex biochemical 'factory' may go on strike for a while if your psyche is not concentrating on enjoying your meal.

Similarly, if you are in a happy mood, for example, but then sit down to a meal that is tasteless or otherwise unappetizing, your previously happy mood will likely turn a bit sour for a while.

Assuming that the many other non-food related areas of your life are contributing, with the help of the RIDDLE Principle in some important areas, to a HAPPY PSYCHE, let's now focus our attention on what foods SHOULD you consider consuming on a routine, daily basis to maximize your opportunities for good health?

I've had excellent, long-term results with 'The South Beach Diet'. The following excerpts are from two statements appearing on the back cover dust jacket of the hardcover book that I own, authored by Arthur Agatston, M.D., copyright 2003 :

"The South Beach Diet isn't complicated, and it doesn't require that you go hungry. You'll enjoy normal-size helpings of meat, poultry, and fish. You'll also eat eggs, cheese, nuts, and vegetables. Snacks are required. You'll learn to avoid the bad carbs, like white flour, white sugar, and baked potatoes."

"This is a book about health and well-being. Dr. Agatston does an outstanding job of explaining the importance of the types of food we eat and its impact on preventing illnesses, such as coronary heart disease and diabetes. Not only will you feel better if you follow his diet, but you will look and live better." - Randolph P. Martin, M.D., director of noninvasive cardiology at Emory University Hospital in Atlanta

So, how does the RIDDLE dividend reinvestment principle work in the area of nutrition?

Well, if you find and stick to a properly constructed diet that is suitable long-term for you, you will very likely be happier, healthier and more productive. Your body can be thought of as a 'investment' not all that different from a corporation in which you own stock. Let's call your investment. ReadersBody, Inc. It pays you daily 'dividends' in good health and happiness that likely will contribute greatly to your productivity over a lifetime. You likely will earn more in your employment and spend considerably less money on junk food.

The RIDDLE Principle suggests that you routinely reinvest some of those converted health/happiness dividends back into financially funding and psychologically maintaining that great diet you have been following successfully.

EPILOG

I'm sure that readers can think of many additional examples of RIDDLE appropriate activities.

THE RIDDLE PHILOSOPHY: In the interest of encouraging WIDESPREAD DISSEMINATION of the topic, I give full permission to anyone who wishes to PUBLISH either this complete document or lengthy excerpts as long as they credit me (Bruce L. Steadman) in writing for all quotes. Neither notification nor any payment to me is required for properly attributed quotes.

Updated: February 14, 2017

**bsteadman1** · 02-15-2017, 06:05 PM

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Microfinance investing can allow you to earn interest while helping others.

The concept of 'microfinance' is very simple. Extend very small loans to very poor people and help them create or improve their own very small businesses. The technique is being successfully used to help fight poverty all over the world. The Calvert Foundation (www.calvertfoundation.org), for example, has a division that specializes in making microloans to needy individuals while paying you a small rate of interest on your invested capital. Remember, the RIDDLE principal involves 'giving back' whenever possible. Microfinance investing is a good example of an action that 'drives life's enhancements' for others and yourself simultaneously.
CHAPTER 2

Reinvest in Your Physical Fitness and Health

REGULAR physical fitness exercise is an excellent example of the RIDDLE principle in action.

One does not ordinarily think of daily physical exercises as 'dividends' to be reinvested but they certainly qualify under the expanded RIDDLE definition. Think of your body as being a biological 'brokerage account' that holds deposits of energy and strength instead of stocks and bonds. Depending on your inherited traits and current physical condition, you own more or less of these assets than other people in your age group. Regardless of what assets you currently possess, they will lose value if you don't replenish and build upon them regularly.

Some people think that committing a major portion of their time to strenuous physical activity is the best way of maintaining physical fitness, and that is fine if they have the time and persistence to do it regularly. However, in accordance with the RIDDLE principle, I maintain that relatively SMALL exercise 'dividends' reinvested REGULARLY is the better plan for most people, especially as they get older.

Professionally designed and constructed exercise equipment is not required in order to obtain satisfactory results. However, appropriate equipment can be employed effectively, if desired, to improve results in specific areas of the body needing special attention.

It is much easier to COMMIT oneself to exercising for 10 to 15 minutes EVERY DAY, for example, than it is to TRY to exercise for 30 to 60 minutes whenever you get the chance. Most people are busy and it's often hard to find either the time or the will to devote to a lengthy, strenuous exercise program.

In other words, I believe most people will be more successful LONG-TERM in conducting physical activities that are short, frequent and fun than they will be in pursuing activities that are prolonged, sporadic, and arduous.

I recommend doing about 10 to 15 minutes daily of a program somewhat similar to the following routine, assuming one is in appropriate physical condition for the exercise.

- 10 toe touches with straight legs, conducted from a standing position
- 10 deep knee bends
- 10 quick, forceful punches with each fist
- 10 twists (180 degree) of the upper body, with arms swinging vigorously
- 10 jumping jacks
- 10 push ups
- 10 sit ups
- 10 high kicks to the front and rear with each leg
- 375 high, running, double steps (left and right foot) around the room. This is done in 5 blocks of 75 double steps, with each block separated by 10 'change of pace' low double foot shifts from front to back. The arms are flapped, bent, stretched, etc. during the entire running phase of the exercise.

Most folks will want to supplement the above routine, as time and conditions permit, with their own favorite fun exercises such as bicycle riding, tennis, golf, walking, running, swimming, etc.

Quick, fun, easy, and regular! That's what the RIDDLE physical fitness dividend reinvestment plan is all about!

In order to meet YOUR physical fitness goals, you will need to develop a dividend reinvestment exercise plan of your own that is appropriate to your interests, abilities and age.

Continued in the following reply

**bsteadman1** · 02-15-2017, 06:08 PM

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DIVIDEND REINVESTMENT - Unlike the two previously discussed 'market timing' techniques, here's a method that is relatively easy to use and that can produce reasonable profits for the average investor over a lifetime.

Dividend reinvestment in its various different forms combined with long term holding in a diversified portfolio is probably the best method for most people to make significant profits in the stock market. The preferred method of holding these investments is in a retirement account such as an IRA or 401k to minimize taxes and reporting requirements. The technique relies on the miracle of interest compounding to slowly build wealth over an investment lifetime. It uses the principle of 'dollar cost averaging' to buy more shares at lower prices during 'down' markets and fewer shares at higher prices during 'up' markets.

Financial advisors and the Wall Street brokerage companies don't want you to get too enthusiastic about dividend reinvestment because it is an automatic process on which they earn no commission and exert no influence.

Traditional Dividend Reinvestment (RIDDLE Method 1) involves buying and holding high dividend paying Stocks, Mutual Funds, ETFs, or Closed End Funds in an account with the dividends being automatically reinvested periodically and used to purchase additional shares. The account grows in value by accumulation of the reinvested dividends and, hopefully, also by some capital appreciation.

Stocks or funds that can consistently pay a dividend, and especially those that can consistently increase their dividends over the years, are generally good investments. Also, stocks that pay a reasonably large dividend are somewhat protected against excessive price drops during market downturns since the resulting increased yield tends to attract new buyers of the stock. If a company can pay you hard cash on a periodic basis, you know they are not just manipulating the numbers but are actually making money that they are willing to share with you.

Stocks or stock funds that can consistently increase their dividends over time have a significant advantage over bonds due to the principle of increased 'yield on cost'. Whereas the interest paid on a bond remains fixed over the bond's life, the dividend from a stock or stock fund can increase and start paying the holder a yield significantly higher than the initial yield. For example, a stock or stock fund that increases its dividend by 10% each year over a ten year period, actually pays a yield in the 10th year that is over 2.5 times the yield paid in the 1st year. Don't get discouraged if the stock or stock fund drops in value during a downtrend. The reinvested dividends will automatically buy you more shares at the cheaper price.

One method involving dividend reinvestment that I particularly like for long term investment involves the purchase of one or more high quality, actively managed 'BALANCED MUTUAL FUNDS' that contain roughly 70% stocks and 30% bonds. The bond portion of the fund supplies most of the dividend cash used for the reinvestment, which is supplemented by the reinvestment of the capital gains and any small dividends paid by the stock portion of the fund. It is very important to purchase HIGH QUALITY FUNDS, of course, in order to take advantage of the stock and bond expertise of the fund managers. Companies such as 'Morningstar' can be very helpful in providing quality/performance ratings on mutual funds.

A technique I call 'Pseudo Dividend Reinvestment' (RIDDLE Method 2) involves the automatic, fee-free purchasing of small quantities of a broad, low expense index fund such as the S&P 500 on a monthly basis over long time periods in an IRA or 401k. The fund itself may not pay a significant dividend, but the repeated monthly purchase of small quantities of the fund at various prices over a period of many years can produce a result somewhat similar to traditional dividend reinvestment in an account due to 'dollar cost averaging'.

You might consider that the invested 'dividends' used in this method came from your monthly salary contributions to your retirement fund. Don't get discouraged if the stock or stock fund drops in value during a downtrend. The invested 'dividends' will automatically buy you more shares at the cheaper price. I don't think the profit potential of this method is as good as that of Method 1 explained above, but it's not too bad and may be the only practical investment choice for some folks.

Investors in an IRA or 401k may be able to use a combination of Methods 1 and 2, described above, since this can maximize performance over time. In other words, they arrange to automatically purchase, on a monthly basis, small quantities of stocks or stock mutual funds that pay relatively high dividends and to also reinvest the dividends. This technique makes the best use of both 'dividend reinvestment' and 'dollar cost averaging'.

Continued in the following reply

**bsteadman1** · 02-15-2017, 06:10 PM

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The market can be very tricky, and it is easy to either get 'sucked in' or 'faked out' unless one understands the psychology involved. Most people have a tendency to get excited and buy stocks when the market nears a top. Newspaper headlines, magazine covers, and TV financial new programs all report that stock prices are hitting a new all-time high. Furthermore, they report that stocks have gained some very large percentage during the last few years. The implication is that the trend will continue and that the stock prices will continue their upward climb.

However, this is often the exact time that the 'smart money' decides to sell their stocks to the unknowing public, leaving them 'holding the bag' as the market drops precipitously. A similar pattern often occurs at market bottoms, only in reverse. The media reports nothing but gloom and doom in the economy and the stock market. Stocks have been going 'nowhere' for years and many people will assume that this trend will continue for the foreseeable future. They get discouraged and sell out in disgust. This time, the 'smart money' is ready and eager to buy stocks from the public in anticipation of the next bull market.

It is important to remember that the stock market typically anticipates economic conditions by 6 to 12 months. Thus, it is usually foolish to purchase stocks based solely on their price performance during the previous year. Likewise, it is usually unwise to buy stocks based on news that is appearing on the front page of the paper or that is featured on popular magazine covers. By the time the news becomes widely known, the significant money has already been made on that stock or market sector and it is probably time to sell.

Many financial magazines devote page after page to covering the price performance of stocks, mutual funds, etc. during the pervious year, but reading this information is largely a waste of time. Making investment decisions based on a stock's historical price performance is like driving a car while looking in the rear view mirror! One needs to accurately anticipate conditions in order to time the market successfully and this is usually extremely difficult.

In general, if the sophisticated investor is interested in long term capital gains and is willing to devote the time and effort, he or she should buy growth stocks whose 'story' makes sense and at a price that represents good value. A stock should normally only be sold when a majority of the conditions supporting its original purchase cease to exist or when it is realized that a mistake in judgment was made concerning those conditions. It usually does not make sense to sell the stock just because its price either rises or falls more than expected over a short period of time.

It's not wise to hold money in stocks that will be needed anytime during the next 3 to 5 years. If a temporary market downturn occurs, you may be forced to sell those good stocks at depressed prices in order to raise needed cash.

MARKET TIMING - Let’s look at two market timing methods that relatively sophisticated investors can use to make money over a period of years in the stock market.

Caution: When speculating, it’s helpful to remember the adage often attributed to either John Maynard Keynes or A. Gary Shilling - "Markets can remain irrational longer than you can remain solvent."

One of the best ways to make significant amounts of money long term in the market is to identify and ride major uptrends in select market sectors. However, the technique involves many difficult challenges and is not recommended for the casual investor. The market sector involved must be identified correctly at a time reasonably close to the beginning of its uptrend. A substantial amount of money must be invested in the sector in order to realize significant profits from the effort. The money must be kept invested through many short term minor uptrends and downtrends in the sector for a period of years.

The ultimate end of the uptrend in the sector must be identified at a time reasonably close to its occurrence so the investor's position can be sold profitably. All these stages require understanding of the fundamentals involved. The entry and exit stages require that important decisions be made in a timely manner. A sector 'bull' will do everything it can to confuse investors and throw them off its back. The current 'precious metals and commodities' multi-year bull market that started in the year 2000 is cited as an example. 'Timing' the market can be extremely challenging and is probably best left to the professionals or to those individuals who have the time and inclination to acquire in-depth knowledge about specific market sectors and follow them closely. Maintaining subscription to one or more newsletters covering both the fundamentals and the technical movements in the market sectors of interest is often advantageous to individuals interested in timing the market.

One broad market timing technique that seems to work reasonably well and that is fairly simple to employ is to use the crossover point of the 50 day moving average and the 200 day moving average on price to either buy or sell a broad stock index such as the S&P 500 (Exchange traded fund 'SPY').

The index is bought whenever the 50 day moving average (DMA) crosses above the 200 DMA. The index is sold when the 50 DMA crosses down through the 200 DMA. Use of this technique can allow one to realize most of the big gains in bull markets while avoiding most of the big losses in bear markets.

The technique usually does not work very well for timing individual market sectors or individual stocks due to their inherent high volatility. Even when used on a broad index, the technique requires patience and attention to market movements and is not recommended for the casual market participant. The technique also requires one to have access to stock market price charts that show a daily plot of the broad stock index together with the 50 and 200 DMAs. Stock charts of this type are readily available on the internet. The technique utilizes the wisdom embodied in the market adage, "The trend is your friend."

Continued in the following reply

**bsteadman1** · 02-15-2017, 06:11 PM

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This is certainly not one of those 'get rich quick in five easy steps' type of presentation. It simply gives a practical outline that can help most folks achieve a slow and reliable accumulation of happiness and moderate wealth over a lifetime.

This treatise is admittedly a 'mile wide and only an inch deep'. It generally presents a view from 30,000 feet, with occasional dives down to treetop level. However, with such a broad area of coverage, how could it be otherwise? Details on how to accomplish various specific financial reinvestment tasks, for example, are widely available in specialized books, the internet and elsewhere and I leave it to others more qualified than I to provide them.

Most importantly, this treatise is itself a reinvested dividend from me to you, deposited in escrow in partial payment for the blessings in life I have received! I hope you will choose to incorporate its concepts into your own life's plan and then pass it on to others!

Finally, I must emphatically state that I have been only partially successful in employing the RIDDLE principle to the many areas of my own life. Life is full of competing philosophies, challenges and distractions. I will say that in areas where I have been able to incorporate the RIDDLE principle, I have generally been the happiest and most successful.

CHAPTER 1

Financial Dividend Reinvestment

Countless millions of pages have been written over the years concerning various aspects of money management. The internet and other mass media daily present overwhelming amounts of background information and investment advice concerning stocks, bonds, commodities, real estate, currencies, and other financial topics. Economists and government agencies routinely present statistics, conclusions and predictions concerning the financial health of the USA and the rest of the world. The large Wall Street financial houses, mutual fund companies, banks, and publicly owned businesses constantly bombard investors with advertisements seeking investment money. In my opinion, much of this is just confusing noise to the average investor!

The subject is complex and the serious novice investor is probably best served by first gaining a sound understanding of basic principles and then consulting a certified financial planner or investment counselor to help determine the best course of action to fit his or her own needs.

Unfortunately, it may be difficult to find a financial professional who truly understands the big picture regarding the current state of the economy and the actions of the Federal Reserve. It's important that this professional is also knowledgeable concerning stock and bond valuations, that appreciates the importance of business cycles and their effect on interest rates and market sector performance, and that is also competent on handling the details of portfolio management.

When faced with all the complexity inherent in the financial markets, what should the ordinary investor do in order to help generate a significant, long term gain on his or her financial investments?

Before attempting to answer the above question, please allow me to first insert the following legal disclaimer:

This is a broad PHILOSOPYICAL TREATISE and most certainly NOT a specific investment guideline. Readers should seek independent financial advice prior to making any investment decision and no information contained in this book shall constitute general or specific investment, legal, tax or accounting advice of any kind.

That being said, history has repeatedly shown that that the technique of FINANCIAL DIVIDEND REINVESTMENT has generated significant long term gains for many investors under a wide variety of conditions. I will give some reasons why this has occurred toward the end of this chapter.

First, let's consider some basic financial facts and principles related to investing in stocks and bonds.

All financial investments carry some risk. However, simply holding cash also carries risk since one is likely to lose value long term due to the hidden, insidious effects of inflation. Usually, but not always, the lower the risk on an investment, the lower the potential return. Conversely, higher risk investments usually, but not always, are capable of delivering a higher return on the investment. Generally speaking and under normal market conditions, ranked from lowest to highest on the risk scale, are (1) treasury money market funds, (2) short term treasury bonds, (3) conventional money market funds, (4) intermediate and long term treasury bonds, (4) municipal bonds, from shortest term up to longest term, (5) high quality corporate bonds, from shortest term up to longest term (6) high quality stocks, from largest capitalization down to smallest capitalization, (7) low quality (junk) corporate bonds, from largest capitalization down to smallest capitalization and from shortest term up to longest term, and (8) low quality stocks, from largest capitalization down to smallest capitalization. There is definitely some overlap in the above categories and no hard and fast rules exist that can be relied upon under all circumstances.

Companies often borrow money (e.g. issue bonds) in the capital market to allow their businesses to grow and make a profit. They eventually return the borrowed money, with interest, to the bondholders using a portion of the profits realized. Therefore, reflecting the above scenario, an individual investor is usually able to make more money in the stock market than in the bond market since they are part owners of the companies. However, the volatility of stock prices can be high. Returns from the stock market are often extremely variable since they depend on business conditions and many other factors. If a company declares bankruptcy, stockholders usually lose their entire investment.

Holders of high quality bonds usually realize a steady and reliable income from interest paid as long as the bonds are held to maturity. However, if bonds are sold prior to maturity, their prices can vary significantly. The volatility of long term bond prices is much higher than that of short term bonds. When current interest rates increase in the overall economy, the prices of the bonds in an investor's portfolio decrease proportionately. Conversely, when overall interest rates in the economy decrease, the bond prices in the investor's portfolio increase. If a company declares bankruptcy, bondholders usually receive at least some money back on their investment.

Based on the inherent characteristics of stocks and bonds, as outlined above, portfolio managers generally recommend that an investor hold a mixture of both stocks and bonds. A typical portfolio recommendation might be 70% stocks and 30% bonds, for example, to derive the higher potential profits from the stocks while incorporating the greater safety and lower volatility from the bonds. Generally speaking, portfolio managers recommend a higher percentage of stocks in a portfolio for younger investors than they do for older investors. Some mutual funds are available that automatically change the stock/bond ratio in the fund as the investor gets older and eventually approaches retirement.

It often seems that the market does whatever it needs to do in order to impoverish the maximum number of investors. It's been said that, "Everyone is a genius in a bull market" but, over time, a lot of people end up losing money on stock investments. Contrary to what the enthusiastic, 'cheerleaders' in the financial media frequently tell you, the market can sometimes remain in a down or sidewise pattern for long periods. For example, an individual who put money in the stock market at its peak in 1929 did not break even until 1954, 25 years later, and this does not even take inflation into consideration. Similar patterns occurred during the 14 year period between 1968 and 1982 and in the 8 year plus (?) period following the market drop in 2000. Clearly, one needs to do more than just "buy and hold" in order to reliably profit in stocks.

Continued in the following reply

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'RIDDLE' - A Useful, No-Strings-Attached Theory of Everything

'RIDDLE' - A Useful, No-Strings-Attached Theory of Everything

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