Is Dave's investing system sound?

Dear Dave,
Considering that the current economic situation is nearing a calamity, do you feel that your Total Money Makeover investment strategies are still sound?
Anthony

Dear Anthony,
First, let's review the investment strategies in The Total Money Makeover. Pay cash for real estate so that you own it free and clear. Invest with a long-term mentality in America's best and brightest companies. Put your money into good, growth stock mutual funds - so that you can be well-diversified - with companies that have very long and successful track records.

I always have - and always will - consider these to be very sound investment strategies! I think you're being a little dramatic when you refer to the stock market situation as "nearing calamity." You can live in fear and concentrate on all the negative opinions circulating out there, or you can choose not to live in fear. I'm not talking about some Pollyanna view of things. Use logic, a little reason, and some careful observation of the facts. The truth is that the stock market has gone up about 30 percent since March 9. As an investor, you're in K-Mart and the blue light is on! That sounds like a good thing to me!
- Dave

How multi-level works

Dear Dave,
I've been approached about becoming part of a telecom business opportunity that some of my friends say is a multi-level operation. I've heard good and bad things about these companies, but I'm still not sure what they are or how they work. Could you explain?
Brent

Dear Brent,
If you recruit people and get paid on the basis of what they make, then you're talking about a multi-level operation. These companies have both good and bad reputations that have been well-earned. Basically you're not going to be paid for being in the telecom business, you're going to be paid for recruiting and motivating large numbers of people who will go out and recruit other people themselves. You may make a little bit by actually selling the company's products and services, but most of the money will come from your building a sales force which then builds a sales force, ad infinitum..

You could make good money if you have the talent and ability to hire and train lots of people over a long period of time, assuming you got in early when the pool of potential new hires was still big. The bad thing is that these operations take on a cult-like level of devotion and enthusiasm. People dive in head-first, and before you know it they sound like cheerleaders and look at everyone in their lives as potential recruits. And remember, each succeeding level has to be bigger than the one above it in order for anyone to come out ahead.

Some folks get so cranked up over the company, that they start "exaggerating" the possibilities. Sorry, but you're not going to work a couple of hours a day and make $100,000 a year! If you make six or seven figures a year, it'll be because you worked your tail off and brought in a bunch of bodies.

Don't kid yourself into believing you've found the answer to easy money. It just doesn't happen that way!
- Dave

* For more financial advice, plus special offers to our readers, please visit www.davesays.org.