DREAM BELIEVERS; INVESTORS TURN MODEST PORTFOLIOS INTO FULL-TIME JOBS.

Byline: Deborah Adamson Daily News Staff Writer

It was the tombstone that did it.

After years as a production accountant, 35-year-old Hala Gabriel remembers walking into her office one day and seeing a vision of a tombstone on her desk.

``It was the death of my creative spirit,'' she said. ``I realized that I can be comfortably uncomfortable or I need to make a drastic change in my life.''

She chose drastic change. Ignoring the concerns of her friends, Gabriel left her well-paying but boring job in 1996 to manage her stocks full time out of her home. She hasn't looked back.

And an amazing thing happened. As she poured her energies into managing her money for a living, her portfolio grew at least sevenfold. She ditched her 15-year-old Honda and bought a Mercedes. She enrolled in writing classes, one step closer to her goal of writing and directing movies.

``Life is good. I can't complain,'' Gabriel said.

The long-running bull market has certainly made princes out of many peasants - and vice versa. Among the winners are small but growing numbers of people who make a living solely by their investments. Many of them aren't retirees. Indeed, they may be in their 20s, 30s and 40s. They tend to have little or no debt, manageable living expenses and healthy savings accounts.

Some are disenchanted by the rat race, raise questions about the quality of their lives and courageously - some might say foolishly - take the plunge. They give up a steady paycheck, health benefits and a career ladder. For what? Less stress. To do what they've always wanted to do while they're still young. To make enough money and have fun. To stay at home and spend more time with family.

``It's what everybody dreams of - taking early retirement and living off your portfolio; that's everybody's goal,'' said Doug Gerlach, author of ``The Complete Idiot's Guide To Online Investing.''

Numbers growing

Analysts and the Securities and Exchange Commission say it is almost impossible to know how many investors live off their trades. The titans of Wall Street - from J.P. Morgan to Warren Buffett - have always been easy to track. But who can keep track of thousands of small investors turning thousand-dollar trades every few days into comfortable incomes?

Still, anecdotal evidence indicates the trend is growing. Many are day traders, but more and more are investing for a longer horizon. Maybe they hold onto a block of shares for three days, maybe for three months or a year. Regardless, they trade too infrequently to be day traders and in blocks too small to be noticed on Wall Street.

Gerlach, the author, said that investors can make a living managing their money full time if they have discipline and the right attitude and outlook. For example, a $1 million portfolio invested at 8 percent yields a comfortable $80,000 a year.

Nerves needed

Of course, it's not easy to build a big portfolio. And a declining market can wreak havoc on even the most well-planned account. Indeed, market volatility in recent weeks has made Gabriel nervous when her portfolio dropped by as much as one-third. But since it's a decline on paper, she'll ride out the ups and downs.

Others aren't as fortunate.

Day traders hooked to the excitement of the market could very well lose their entire investment.

``Trading in the stock market can be just like gambling,'' said Keith White, executive director of the National Council on Problem Gambling in Washington, D.C. ``Some people can be addicted to it. We're worried about day traders.''

As easily as investors can make $5,000, they can lose it. People who trade on margin - with borrowed money from the broker - magnify their losses as well as their wins, White said. For some folks, it's the same as gambling.

Some just gamblers

The difference between an investor and a gambler is not that the investor has a plan. White said most gamblers have a scheme, or a game, to beat the house. But they invariably fail because they like to chase a losing position. When they lose money, they risk more in the belief that it will take just one more dice toss - or one more trade - to recoup their losses. But it's a risky endeavor.

``Vegas wasn't built on winners,'' White observed wryly.

In the stock market, an extended downturn could cut out 30 percent of a portfolio's value. That's a scary ride for a 30-year-old looking at another 50 years to live off investments, Gerlach said.

``Nobody knows when the next bear market will happen,'' he said. ``Young investors don't remember a serious bear market.''

Gabriel isn't worried about a downturn. She considers herself a buy-and-hold investor who doesn't trade each day.

She began investing almost 10 years ago. After she got a tax refund, her mother took her to Charles Schwab where she bought Dell and other investments on a broker's recommendation. For two years, her portfolio went nowhere.

But in the third year, Dell suddenly took off. Gabriel paid $4 a share for Dell, after adjusting for splits. It was trading in the mid-$30s last week.

``When Dell exploded, it opened my eyes,'' she said. She began educating herself about the market.

Now she sums up her investment strategy in one word: vision. If she understands and believes in a company's vision, she'll buy its stock.

Developed a plan

It's no surprise that she, as a meticulous researcher of stocks, carefully created a plan of action before she quit her job.

She got rid of her debt and saved one year's worth of living expenses, which eventually grew seven-fold.

She chose not to buy a house but instead to rent a two-bedroom, two-level apartment in Glendale. Gabriel would rather invest the money in the market.

``A house needs constant maintenance, constant cash flow,'' she said.

She meets $3,000 in monthly living expenses mainly by borrowing money from her broker. It's cheaper for her to do so than to sell stocks earning 10 percent to 200 percent a year. By doing so, she avoids paying capital gains taxes.

In the government's eyes, Gabriel is not self-employed so she doesn't trigger any related taxes. If she lives on borrowed money, those loans aren't taxed, said accountant George Simpson of Triple Check in Saugus. She's also exempt from paying Social Security, Medicare and state disability taxes.

But John Trollinger, spokesman for the Social Security Administration, said one danger for people who stop paying into Social Security are reduced payouts when they retire or become disabled.

It's a trade-off Gabriel doesn't mind.

``Am I happy? No question,'' she said. ``It was the right thing for me.''

She's not alone.

Tired of commuting

Two months ago, Trix Abriol of Canoga Park said goodbye to her computer consulting practice to manage her investments at home. In her 40s, Abriol tired of stressful commuting on crowded freeways.

After four years of buy-and-hold investing, she was ready to take the plunge. Adding to her confidence were no mortgage payments, monthly expenses of $1,500 including insurance, no debt and a healthy savings account. She looks at her investments not as a hobby but as a business. She tries to make enough profits to pay for her expenses and add to savings.

How hard is it to make enough money? Abriol doesn't want people to think that the stock market is an easy route to riches, but it's possible to make a modest, if unsteady, living. Recently, Abriol made close to $1,600 in six days - enough for one month's expenses. She bought 100 shares of AOL for $123.125 each and sold at them at $139 through ETrade. Commissions were $14.95 per trade.

At one time, she thought about buying a house instead of investing her savings in the market. But she remembered her wealthy uncle's advice: Take care of business before spending on assets such as homes.

``That thing stuck in my mind,'' Abriol said.

Analyzed housing costs

She analyzed the cost of renting an apartment vs. buying a home and found out that it's a lot more expensive to have a house. Property taxes, utilities, constant upkeep and mortgage payments would drive up her living costs.

As a single woman, she's in no hurry to buy, anyway. Abriol would rather put her money into stocks now, let it compound and maybe pay cash for a home later.

Michael Waters has been living on his stock profits for the past eight months. When the former marketing analyst from Charlotte, N.C., quit his job in November, he discovered Internet stocks. Trying his hand at trading, he found he likes the action. His first few trades were a disaster, but eventually he learned to invest well enough to make a modest living.

``The attraction is this big beautiful thing called Internet stock trading,'' said Waters, who admits that ``it's like gambling'' for him.

His parents ``think I'm going through a phase,'' Waters said.

He manages a self-directed IRA worth $26,000 and plays with $10,000 of savings. When he makes a profit on his savings, he skims the money for living expenses but reinvests the $10,000 base back into the market.

No fear of loss

The 33-year-old is not scared of losing all of his savings: ``I'm very young - and very confident, which comes with being young.''

Internet stocks are his preference because they make wild moves up or down. Dow industrial stocks are slower moving and it would take more capital to make big profits. His two favorite stocks are CMGI and Ciena because he knows their moves and generally can sense which direction they're headed.

Waters eventually hopes to rejoin the work force, not for the money but for the social interaction. But when? He's been planning to find a job since November.

``Sometimes I wish I would lose everything and it would force me to get a job,'' he said. ``Someone needs to light a fire under me.''

Melissa Smith of Simi Valley still works but is carefully preparing her leap into full-time investing. In fact, Melissa Smith is a pseudonym for a 43-year-old customer-service representative who fears possible repercussions if her bosses find out she's planning to invest full time.

Anxious to quit job

She's itching to leave her job because her work isn't challenging and interesting. Playing the market is her passion.

Right now, she's negotiating for a home equity line of credit for emergencies. If all goes well, she'll quit next summer.

Smith believes she can make it happen. Recently, she made a quick $1,500 by buying 100 shares of eBay at $155 and unloading it for $170 in less than a week. That's half of her monthly expenses.

But she's understandably scared. Her biggest concern is health insurance, which will cost several hundred dollars each month. Even without credit card bills or car payments, she's got a home mortgage, although her roommate helps defray the cost.

``I'm very apprehensive about it,'' Smith said.

So why quit at all? ``I think if I go full time in investing, I can make more money than in my regular job,'' she said.

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Photo illustration by John McCoy and Lori Valesko/Daily News