I recently brought up the topic of money management with two of my longtime friends. It was early June and we were ensconced in winter parkas aboard my 17-foot aluminum fishing boat, enjoying the late winter weather. Due to our very cold “spring,” the water was still in the low 40s and the fishing was slow. I figured a spirited discussion about investing might heat things up a bit. Boy was I wrong.

It turned out these two gents were so conservative they thought CDs (Certificates of Deposit) were a high-risk play. When I mentioned stocks, the response was basically “someone" told them that "retired people should not have their money in the stock market.”

Yikes! Why is it that otherwise smart people are so dumb about managing their hard-earned savings? One explanation is the parents of baby boomers seldom talked about money. I learned more about my parents’ investments after they died than I ever knew when they were alive. The sad thing is, they were very successful money managers. Yes they had some CDs, but they also were invested in the stock market.

My experience with money management began back in the late 1980s when I opened my first IRA. Mutual funds were new to the marketplace and I got sucked in along with many others. I say “sucked in” because most "managed" mutual funds suck. As reported by Consumer Reports back in March 1998, of the 2,029 funds they studied “… fewer than 6 percent have matched or beat the returns of the S&P 500." And in the last 20 years, nothing has changed. If you still want to buy a mutual fund, I highly recommend an index fund.

Before I go any further, let me make one thing very clear: I am not a professional money manager. What you are reading is my experience and my opinions. One last thing about mutual funds — I think the stock market is due for a major “correction” (sell-off). Getting in right now may well turn out to be “buying high” — never a good thing.

So, sick of low performing mutual funds, I eventually paid several “wealth managers” to help me improve the return on my investments (after all, you cannot have Golden Years without the gold!). I know there are good professional money managers out there, but finding them is not easy. I had several bad experiences before I found a small local company (“SLC”) that was a good fit with my expectations.

Over the years, with the help of SLC, I developed an investing “system” that has worked reasonably well for me. My system is pretty simple: 1) Buy stocks in companies I know something about. Maine companies are my preference. 2) Stay away from companies with high price to earnings ratios (P/E). I like stocks with a P/E under 20. 3) Select stocks that pay a good dividend. Generally I want a yield of 3 percent or better. 4) Pay attention. Bad news often leads to an opportunity to buy stock in good companies cheap. Here are a few examples of stocks I picked using my system:

Athenahealth: I bought a couple hundred shares of Athena shortly after they opened their Belfast office. As it turns out, I should have bought a lot more! The stock was cheap ($20/share) and I knew some of the people who worked at the Belfast facility — they were the same people who made MBNA very profitable! Today the stock price is well over $100. Home run.

Camden National Bank: I bought Camden in 2008 at $25. I knew folks on their board and in senior management. Good people. Today the stock is over $40, not too shabby considering I paid $25, but Camden also pays a nice dividend, which is really why I bought it.

As you may know, when publicly traded companies make money, they often return part of that profit to stockholders in the form of a dividend. Camden’s annual dividend is usually around one dollar a share.

One word of caution, dividends are not a sure thing; they tend to rise and fall in sync with company profits. Also, I bought Camden with post-tax dollars and dividends are pretax dollars. In other words, after taxes, that $1 dividend may only put 75 cents in your pocket. Not a home run, but a solid base hit.

Ford: Remember back in 2008 when all the car companies were in big financial trouble? To me that looked like a rare opportunity to buy a good company really cheap. Ford’s stock was under $2/share! While there was talk of bankruptcy, to me, that risk (and thus the low price), was well worth the potential reward. I jumped in in a big way.

Today Ford is trading at about $11 and is paying a great dividend. When you can own a blue chip stock with a yield of over 5 percent, it makes putting your money in a CD at 1 percent seem pretty dumb. And $11 is still a buy price if you ask me. Why? Tesla, a car builder that has never turned a profit, is trading at over $350/share! If Tesla is worth anything close to that insane price, Ford stock must be a steal! In any case, for me, Ford was another home run.

British Petroleum (BP): There are rules about investing that one may want to pay more attention to than I do. One such rule is “never try to catch a falling knife.” After the oil rig explosion and subsequent massive oil spill in the Gulf of Mexico, BP’s stock was crashing — the “falling knife.” I tried to “catch” it at the bottom of that fall — and missed. And then I tried again a few days later — and missed. After the dust settled I owned a bunch of BP at an average cost of $43/share and the stock was trading at about $25 — ouch!

Seven years later the price has recovered to $35/share, but that is not the whole story. Despite its financial difficulties, BP has continued to pay a handsome dividend of about $2/share. So, in seven years, I have collected about $14/share in dividends. That makes me about even. Important note: I strongly believe older investors should take all dividends in cash, rather than automatically using the dividend to buy more shares of the same stock. Call my BP play a “fielder’s choice” (for non-baseball fans, that means I should have been “out” but reached first base due to lucky circumstances).

Verso: Here, I ignored my system and it bit me hard. Yes, Verso was a local company, populated by good people (at least in Bucksport). Yes, the stock price was cheap. But Verso paid no dividend and the P/E was sky high. I decided to roll the dice and bought a bunch of shares at around $2. Today they are absolutely worthless. It is very rare for a legitimate company to crater so completely that stockholders get left with nothing. Consider this play a strike out.

My final investment batting line: Five plate appearances, 3 for 4 with a fielder’s choice and two home runs! That certainly beats the heck out of the meager return from a CD. Hard to have Golden Years without some gold!

Randall Poulton lives in Winterport. He writes a monthly column for The Republican Journal.