With the market beaten down pretty bad, we figure now is a perfect time for us to buy some individual stock with a little “play money”.

We took $1,000 out of savings and opened an E*TRADE stock trading account. My wife and I have had our eyes on a few stocks, but ended up choosing Toyota Motor Corporation (ticker TM) because we feel it is a strong company and will likely recover nicely when the economy turns around. We purchased 15 shares of Toyota on Thursday for $63.71/share. In the last month, it dropped from right around $90/share to its current price of $67.10/share. 12 months ago, it was at around $114/share.

We’ll see where it goes from here. With the volitliy of the market, I’m sure it will shoot above and below our purchase price. We hope to take some profits if it works its way back up to $90/share.

My post regarding my friend who pulled $100,000 out of his investments when the Dow plummeted last week received a lot of comments. Therefore, I felt an update was warranted.

I spoke with my friend yesterday and it turns out that he reinvested the money almost immediately. He might have lost a few bucks, but the bulk of the money is back in the stock market. Obviously, I was really happy that he made that decision. We ended up having a pretty good talk about money. I appologized for butting my head into his business, but he understood that I’m just trying to help and he said he appricated it. I reminded him that having this much invested at his age puts him ahead of the curve and that it’s going to be worth a boatload when he needs it for retirement in 20-30 years.

Thanks to everyone that commented on the original post. As always, I appreciate the input and feedback.

My best friend inherited $100,000 when we were in college over 10 years ago. He blew through the money quickly and ended up with nothing to show for it. A couple of years ago, he received a 2nd inheritance of ~$160,000 and swore not to make the same mistakes. He immediately worked with a financial planner, investing $100,000 and depositing the remainder into a savings account.

During our conversations over the past couple of years, I got the impression that he was slowly spending the money in his savings account. Since he is in between jobs and will not likely receive another inheritance, I was worried, but knew that he at least had the $100K invested in a diversified portfolio. Whenever we spoke about money, I reminded him that, if he leaves his investments alone, he will be set when he retires.

Last week, he called to let me know after the Dow plummeted, he freaked out and pulled all of the money out of his investments. I explained to him that it was only a paper loss until he pulled the money out and that with his timeframe to retirement (25-30 years) it doesn’t matter what the market does short term.

It’s tough to see a good friend make such a huge mistake. I’m half convinced that he is going to deposit the money into his savings account and slowly bleed it dry. Because he’s like family, I’ve got to talk some sense into him. I’m going to call him back this week to encourage him to reinvest the money and leave it alone (no matter what the market does short term).

The company I work for split into two companies a couple of years ago and both are still privately owned by the same person. Since the split, the Owner has hinted that some key people in management may receive stock options down the road.

My company has provided stock options in the past, but not while I have been with them. The recent splitting of the organization resulted in a new Board of Directors and a fresh look at offering a stock option plan. I found out last week that seven of us received a stock options package that will go into effect next September.

I was provided a large packet explaining how the program works and that I can exercise the option to buy up to 16 shares a year (beginning 9/1/09) for 5 years at $1/share. The current value of each share is $500. So, I can obtain up to $8,000 worth of stock each year for only $16.

Historically, when shareholders have left the organization, the company has bought out their shares at the current book value. There’s even been a couple of cases of existing employees selling shares back to the company at a slight discount to get access to the money. In fact, my old GM sold back almost $200K of his shares last year because he wanted to remold his home.

I’m really happy that my company included me on this opportunity, not only for the financial gain, but also because it’s nice to know my hard work is appreciated. This is another piece in the puzzle to reach our early retirement goal in ~19 years.