Investing 102

[Sieg]

I stuck my head in the sand June 19th and just pulled it out today. Did something happen?


If I was in a good cash position to make some buys.....Monday had potential. :secret:

[GregWeld]

OK so the "stop investing" is referring to the gamblers not the investors I guess...



No that's not what I was trying to say. What I was saying is that the RETAIL investor -- mom and pop folks -- that contribute to 401K's etc -- tend to (as a group) stop investing or contributions or cut back on their contributions... in down markets. Doing exactly the opposite of what they should do.

The individual investor/trader (they're all the same - except for the holding period)... does the same. They buy on up days and sell on down days. The opposite of what they should do.

[GregWeld]

I stuck my head in the sand June 19th and just pulled it out today. Did something happen?


If I was in a good cash position to make some buys.....Monday had potential. :secret:




Yes you missed it -- WE all made a million bucks during that time frame.

[GregWeld]

Knowing when to SELL is far harder than when to buy.... I use the same resistance in selling as I do buying --- I sell slowly... because it never fails that the day after you sell -- the market goes up.

The hardest part to selling is to question why you bought in the first place.

Here's the deal... if you look at the chart of the stock -- and you check it's total return over a long period of time.... Are you selling because it's down this quarter? Are you selling because you have too large of a gain? Or is it just portfolio rebalancing?

Today --- I asked my broker to sell ALL my BONDS.... Why? Because I have nice gains in them --- I just got the June interest payment... and I'm relatively certain that going forward my gain is going to turn into a loss as interest rates rise. I'll probably be wrong - but nobody ever went broke taking a gain (profit). I've owned them all longer than one year and a day -- so will be taxed at long term capital gains... So this is purely a "plan" -- and the trade off is I will loose the TAX FREE income.... but most of this laddered bond portfolio is out 2 - 3 and 4 years from now... I'd rather NOT loose the capital appreciation and have to hold the lower interest rate return for that time period.

IF -- big IF -- The economy is doing as I feel it is -- which is MUCH better than the unemployment numbers tell -- then we'll have a good XMAS selling period for retailers -- housing is making huge gains -- cars are selling like hot cakes etc.... so I'd rather chase that than hold tax free munis at 4 and 5%. I've started to build a position in FORD (F) etc.... I'm late to that party but I think they're just getting started on the road to recovery. So I'll position accordingly.





Sometimes a guy just manages to get it right......


That post was dated JUNE 5th....




http://www.usatoday.com/story/money/markets/2013/06/26/bond-investors-flee-funds/2460831/

[HAULNSS]

Does anyone have any wisdom on the Sprint merger?

Shareholders are expected to receive approximately $7.65 per share (or an option to convert their current Sprint stock holdings to "New Sprint common stock"), part of a $16.64 billion pie. Softbank already owns a 70 percent stake in Sprint, which it purchased earlier this year for approximately $20.1 billion. Should this merger go through as it's expected to next month, Softbank and Sprint will become one.

My wife has had a few shares for awhile and now needs to decide if she wants to hold it or sell it. I haven't had much time to dig into the history or the 'word on the street' to know if the "post merger" company has any promise.

:headscratch:



The company I work for just went public today and had the big IPO day at NASDAQ. Hopefully, there will be stock options for employees next year. :popcorn2:

Randy

[GregWeld]

Randy --- Your decision is simple....

Do you think SPRINT is a viable cellular provider going forward. Or not.

If not -- then cash out and use the money to invest in something you think has more potential going forward.

If yes -- then let them exchange the shares for the new ones...


Here's my personal view.... or how you might find an answer. Go around to every friend you have and ask them who their cellular provider is...

[WSSix]

Actually --- the "RETAIL INVESTOR" which is what we are called in the industry - DO STOP investing in down markets....

Good call. I honestly didn't even think about those type of investors when I made my comment. I guess that's a good thing from the stand point of being programmed not to sell at the first sign of a hiccup. I was referring to the people that do know there are options and or methods of investments that will make them money or set them up for the rebound during a down period.

[GregWeld]

I woke up this morning thinking about what "investing" really is...

To most it's trying to game the system. Trying to buy "stocks" etc at one price and hope that when they want to sell - they're higher.

Here's what an INVESTOR should be focused on.

When you buy shares of a company - you are now a PARTNER in that company. Many of you own and operate your own small companies. You've not only invested your money - but you've also invested a great deal of your TIME. Maybe 15 or 20 years... You've been thru good times and bad and managed to survive and even prosper. STOCK investing is the same. Before you buy - ask yourself if you'd like to be a part owner (which is what you're going to be!) in this company. Do you like the products etc. Before you'd become a partner in a business - you'd hopefully understand what they do as well.... You'd never just blindly give someone your money because they asked you to "invest" --- hell no! You'd pester them with all kinds of questions. Cramer calls this "doing your work". When you do a modest amount of "work" beforehand - you'll feel better about your investments.

But here's the important part. When you think of yourself as a PART OWNER rather than "I'll buy some stocks"... you'll become a far better investor, and you'll be more likely to really enjoy the process thru the good and the bad.

You wouldn't put your money in your own company and then have a bad week or a bad month - and then just decide "I'm outta here" would ya? You'd only do that if you didn't really believe in the value of the company to begin with.... So don't become a partner in something you don't believe in to start with!

This reminds me of a friend in Seattle. We're both "boaters" and belong to the same club etc. We'd occasionally hook up on the water -- and the kids were the same ages etc. Eventually talk would turn to business and eventually that turned into a possible business deal. We were going to buy a city block - tear down the 1 story buildings - and put up a 4 story "mixed use" building - retail on the street level and apartments above. One day at lunch as we're getting into the "partnership" details (I was the bank - 51% - he was the managing partner - 49%) - he asked me. "Do you like pride of ownership or the depreciation and tax advantages of a building"? I said --- Pride of ownership. He said -- then our partnership wouldn't work out very well because I just want to cash flow buildings and then dump them within 10 years. He was right on! We wouldn't have made good partners at all! We had a nice lunch and that was that. Had we done the deal - I would have driven by and thought the building needed to be painted.... he would have let the paint peel off as long as we had full occupancy. I'd have gone crazy... I want to drive by and point the building out and say "I own that bad boy" and be proud of it (and make some money off it). We were polar opposites. We're still friends. I understand the way he wants to do business and he's quite well off... his method works for HIM. My guts would have been churning daily had we done the deal and I'd have been looking for a buyer for my "investment" and probably taken a loss.

Does that make sense to you guys.

[glassman]

That right there is true maturity not drivin by greed but savoy business practice. Most people in that arena would of tried to "work something out", when in fact, IT DOESN"T WORK!!.

Ya wouldn't of still been friends 5 to 10 years later, i've been told this many times in business "its just business", when i'm thinking, "ah, no, its just your greedy mismanaged bullsh!#".

Hard work continues to teach us lessons, I tell my employees when they "fail", ya didn't fail, you worked hard at something and the results were'nt what we wanted, but you learned from it, and education isn't free....

Hard work always produces results, just sometimes not what we expected.

Kinda off topic here, but i tell my clients and coworkers, "you don't go into Walmart and buy a reputation, you earn one, bad or good, they both come earned"

[GregWeld]

This morning I'm (as usual) watching the talking heads on CNBC... and again they're always blabbering about the same stocks... BLACKBERRY (BBRY) is one they just can't seem to forget... So as usual -- I decide to pull up the stock on Google Finance website just so I can "confirm" why I wouldn't be interested in listening to whatever they're talking about.

5 plus years ago all of my working professional friends had Blackberry phones - in fact - we jokingly called them Crackberries. If you were a lawyer etc -- you had one. But I noticed -- because that's the way my brain is wired (to pay attention to small details) that one by one - these folks were switching and their new phones were mostly iPhone - but the point is - they were buying anything but another Blackberry.

The chart is just awful --- regardless of what period you stretch it out to... so unless you bought it at it's IPO -- you're underwater in a major way.

Year to date you'd be DOWN 13% in a market that's UP 13% --- so your "loss" is even more dramatic - because while owning a loser you've also missed a gain in some other name.

I'm posting this -- not because it's so informational -- but to once again ask that as "investors" -- to pay attention to what you see and or feel about some business - or product - regardless of what it is. If you're a carpenter and notice that everyone used to use Makita -- and now all the saws and tools are Black and Decker... or vice versa -- those things (trends) can make you -- or loose you (if you're invested in the WRONG one!) money.

Let's say you own Home Depot or Costco or Wal Mart or Nordstrom or (pick a name/brand/product).... and you find yourself not going there anymore... Then you need to check your ownership - because you just might be part of a trend that you need to pay attention to.

Let's just pick on Apple because it's so obvious that there has been a major trend towards their products... if you looked around this Christmas and nobody got a new "iWhatever"... that would raise the hair on the back of my neck if I owned the shares. Or if you owned Faceybook -- and you notice there are fewer of your buddies posting and they've switched to using Instagram (I'm pulling these out of my you know what because I use neither). Just saying -- use your own "sense" for what's going on.

[toy71camaro]

This morning I'm (as usual) watching the talking heads on CNBC... and again they're always blabbering about the same stocks... BLACKBERRY (BBRY) is one they just can't seem to forget... So as usual -- I decide to pull up the stock on Google Finance website just so I can "confirm" why I wouldn't be interested in listening to whatever they're talking about.

5 plus years ago all of my working professional friends had Blackberry phones - in fact - we jokingly called them Crackberries. If you were a lawyer etc -- you had one. But I noticed -- because that's the way my brain is wired (to pay attention to small details) that one by one - these folks were switching and their new phones were mostly iPhone - but the point is - they were buying anything but another Blackberry.

The chart is just awful --- regardless of what period you stretch it out to... so unless you bought it at it's IPO -- you're underwater in a major way.

Year to date you'd be DOWN 13% in a market that's UP 13% --- so your "loss" is even more dramatic - because while owning a loser you've also missed a gain in some other name.

I'm posting this -- not because it's so informational -- but to once again ask that as "investors" -- to pay attention to what you see and or feel about some business - or product - regardless of what it is. If you're a carpenter and notice that everyone used to use Makita -- and now all the saws and tools are Black and Decker... or vice versa -- those things (trends) can make you -- or loose you (if you're invested in the WRONG one!) money.

Let's say you own Home Depot or Costco or Wal Mart or Nordstrom or (pick a name/brand/product).... and you find yourself not going there anymore... Then you need to check your ownership - because you just might be part of a trend that you need to pay attention to.

Let's just pick on Apple because it's so obvious that there has been a major trend towards their products... if you looked around this Christmas and nobody got a new "iWhatever"... that would raise the hair on the back of my neck if I owned the shares. Or if you owned Faceybook -- and you notice there are fewer of your buddies posting and they've switched to using Instagram (I'm pulling these out of my you know what because I use neither). Just saying -- use your own "sense" for what's going on.

I did this/seen this with Apple. I knew it was "right around teh corner".. I knew they were going to take a hit. I own like $100 worth of apple from a purchase of about 6 years ago. I didnt sell it, really isnt worth the trouble at that price. But when Apple was pushing $700 I chuckled inside. I just knew it was only a short time before the wind left its sails. How did i know this? because *I* was tired of apple myself. It got "boring". No "ground breaking technology". They just keep polishing the same old turd. And I left Apple. I still have some of their stuff, its not bad stuff, it "always works". But, i need something more interesting. :)

[Tony_SS]

How is Lowes doing? It seems like they do great in this area, and there aren't many Home Depot's at all. That is the trend here anyway.

[GregWeld]

I did this/seen this with Apple. I knew it was "right around teh corner".. I knew they were going to take a hit. I own like $100 worth of apple from a purchase of about 6 years ago. I didnt sell it, really isnt worth the trouble at that price. But when Apple was pushing $700 I chuckled inside. I just knew it was only a short time before the wind left its sails. How did i know this? because *I* was tired of apple myself. It got "boring". No "ground breaking technology". They just keep polishing the same old turd. And I left Apple. I still have some of their stuff, its not bad stuff, it "always works". But, i need something more interesting. :)



I get this "judgement" from my kids.... they're the "out front" leading edge of what's hot or not in tech... and they still LOVE Apple. I don't own the shares. They're too expensive - just dollar wise - with too small of a dividend for MY portfolio.

[GregWeld]

How is Lowes doing? It seems like they do great in this area, and there aren't many Home Depot's at all. That is the trend here anyway.



That's a question you'd have to research for yourself... and for me -- since I shop at both... if I want "housewares" I might go to Lowe's -- if I want hardware or lumber I go to Home Depot. I own neither stock. I think as a "guy" I prefer Home Depot... but I seem to make more trips to Lowe's. Go figure.




As a stock --- Home Depot (HD) is killin' Lowe's (LOW) in the share appreciation department on a YEAR TO DATE basis... the only place they have any parity is ONE YEAR - otherwise HD has been the place to be invested.

[WSSix]

That's a question you'd have to research for yourself... and for me -- since I shop at both... if I want "housewares" I might go to Lowe's -- if I want hardware or lumber I go to Home Depot. I own neither stock. I think as a "guy" I prefer Home Depot... but I seem to make more trips to Lowe's. Go figure.


Research has shown this is how it breaks down. Women shop at Lowes. Men shop at Home Depot. The stores, while similar, have a different feel to them on the inside. I personally shop at which ever has the cheaper price. Well, I used to anyway. Back in Georgia, they were across the street from one another. Here, I only have a Home Depot 65 miles away. I shop on Amazon now :D

[GregWeld]

I wish I had some words of wisdom to add to this thread.... but what I really hope is that some of you actually INVESTED and are now seeing what that's all about, and are happy that you did.

[takid455]

Had a WIN today.

Selected 2 stocks that I have been watching and used the low bid technique.
Picked up the one yesterday but then it went down so that was a bust. About even today. The other I put in must have came through after hours and automatically was up 0.70/share. An even + increase = WIN! Plus both have dividends! :headspin:

Lets hope they stay in the green...

[toy71camaro]

Had a WIN today.

Selected 2 stocks that I have been watching and used the low bid technique.
Picked up the one yesterday but then it went down so that was a bust. About even today. The other I put in must have came through after hours and automatically was up 0.70/share. An even + increase = WIN! Plus both have dividends! :headspin:

Lets hope they stay in the green...

Don't get caught thinking to short term. This is LONG TERM INVESTING. not day trading. Those two stocks will have their good/bad days. But what matters is where they will be 10 years from now, 20 years, etc. In fact, in the short term, you WANT them in the red. Then your getting a discounted purchase from your dividend payments.

On a good note, the market has picked up again (for my bunch). I'm back at +7% overall since Feb. :)

[WSSix]

I wish I had some words of wisdom to add to this thread.... but what I really hope is that some of you actually INVESTED and are now seeing what that's all about, and are happy that you did.

I am and I hope others are as well! Right now, I'm just biding my time and watching the changes the account is going through. I'm still thinking of adding more stocks to a different account with money I have in savings. We'll see.

[GregWeld]

I'm laying in my hotel room this morning looking out at Victoria harbor (B.C.). I drove the '32 up (and then took the ferry) for Deuce Days.... should be a good car show and there are 957 entrants... with the cut off date at 1951.

So as usual I'm reading anything "market related" and came across a decent piece on TESLA. Since it's both CAR and "Investing" related --- I thought it was worthy of a link.

I've been asked about investing in TESLA. My response has been -- I love the idea and the product.... but a guy sometimes has to interject abject business math -- with some stock market mindset and try to come up with an "investment". For me - the answer is no... but I'm the same guy that has never bought a share of Google either... it was too high priced at $400/500/600.... now that it's almost $1000. So obviously the market thinks better than I do. My point being -- sometimes you gamble and win -- sometimes you gamble and lose. With TESLA.... Who knows. We don't have a crystal ball. I tend to agree with the comment in the article that once the rich "green" / uber cool guys have bought their car.... there's not a market after that UNLESS ---- YES the "unless" ---- Tesla manages to come out with a more affordable version.... etc. Who knows. I don't.

Remember my "priced to perfection" posts... in order for a stock to maintain a price point that is super high... the company has to do everything spectacularly. One hiccup and you get slaughtered. The "fast money" shifts very quickly!

But ---- The car is spectacular (IMHO) which tells me that this company is quality. And people can make HUGE money by being "early" and catching a 1000's fold return.

http://www.thedetroitbureau.com/2013/07/tesla-shares-drop-after-negative-analyst-report/


EH!!

[Vegas69]

I don't know if it's been covered but I thought I'd post it either way.

Taking stock in your personal finances is key to investing. Where is the money going? I've had a spreadsheet with hard costs for quite some time but recently I broke it down and spend every penny before it comes through the door. The hardest part is the discretionary spending. Look at your bank statements over the last 6 months and it will make you sick. Allocate a specific monthly budget for misc. and blow money AFTER your hard cost including future expenditures like car maintenance, car replacement, home maintenance, etc.. I'm able to track my approximate monthly net worth gain from savings, retirement contributions, and principal reductions. This is a great way to keep yourself accountable and really dissect your finances. It's also a great way to lay out a path to financial freedom. You'll now know how much discretionary income you have left over. I'm increasing my retirement contributions and mortgage principal reductions with some of the excess. I'm commission so I use the average over a 6 month or 12 month period for my income. I've also combined Kelli and I's numbers so it's a WE deal.

Bottom line, a major key to investing is additional money to allocate to that avenue. Until you get a real grasp on your expenditures, you aren't maximizing your investments. I don't care if you have three nickels to rub together or if you are filthy rich. It's just as important.

[Code510]

I don't know if it's been covered but I thought I'd post it either way.

Taking stock in your personal finances is key to investing. Where is the money going? I've had a spreadsheet with hard costs for quite some time but recently I broke it down and spend every penny before it comes through the door. The hardest part is the discretionary spending. Look at your bank statements over the last 6 months and it will make you sick. Allocate a specific monthly budget for misc. and blow money AFTER your hard cost including future expenditures like car maintenance, car replacement, home maintenance, etc.. I'm able to track my approximate monthly net worth gain from savings, retirement contributions, and principal reductions. This is a great way to keep yourself accountable and really dissect your finances. It's also a great way to lay out a path to financial freedom. You'll now know how much discretionary income you have left over. I'm increasing my retirement contributions and mortgage principal reductions with some of the excess. I'm commission so I use the average over a 6 month or 12 month period for my income. I've also combined Kelli and I's numbers so it's a WE deal.

Bottom line, a major key to investing is additional money to allocate to that avenue. Until you get a real grasp on your expenditures, you aren't maximizing your investments. I don't care if you have three nickels to rub together or if you are filthy rich. It's just as important.

Todd,

I always enjoy reading your posts, either here or in the Health threads. Always inspirational.



This year my life somewhat settled down for me. I have always been really good with money and finances and never in debt. Between school, a period between school and finding a job, getting married, moving, buying a house and a few other expenses, I had acquired more debt than I ever thought I would have. Again, I've always been smart financially, so my goal was always to pay off all my debt. This year things finally settled down for me and I was able to start knocking things off. I took the Dave Ramsey Total Money Makeover approach and knocked them off a list, smallest to largest. I'm over halfway through and it feels amazing. Luckily my wife is on the exact same track as myself. Every single day she goes over the finances, looks at where money is coming in and where its going out. This sucks for my car habit, but I don't complain. Its nice to see my debt going down and my play money going up. My goal is to be 100% debt free, my house and everything. I know that's a few years off, but I still don't see any reason I can't make that happen over the next 15 years instead of 30.

[Tony_SS]

Getting out of debt is very liberating. However, I believe in 'good debt'. For example, You have $25k and need to buy a car. Are you going to use your liquid cash when you can use the bank's money at 1.9%? This is probably the only example of good debt that I can think of. It seems that even your mortgage is not an investment anymore. Property values in our county fell 4% last year! One of the biggest drops ever. And to think there was a day when your own property was a good investment.

[sik68]

Getting out of debt is very liberating. However, I believe in 'good debt'. For example, You have $25k and need to buy a car. Are you going to use your liquid cash when you can use the bank's money at 1.9%? This is probably the only example of good debt that I can think of. It seems that even your mortgage is not an investment anymore. Property values in our county fell 4% last year! One of the biggest drops ever. And to think there was a day when your own property was a good investment.

In my eyes, that 1.9% financing cost gets added to the depreciation cost of the car as well. If you finance a car at 1.9% that depreciates at 10%, your $25k needs to make like 11.9% per year just to keep up (this is not official math, just for demonstration). So for a depreciating asset, it may be best pay cash.

[carbuff]

In my eyes, that 1.9% financing cost gets added to the depreciation cost of the car as well. If you finance a car at 1.9% that depreciates at 10%, your $25k needs to make like 11.9% per year just to keep up (this is not official math, just for demonstration). So for a depreciating asset, it may be best pay cash.

You're going to have to educate me on this...

If I choose to keep the car forever, then how does the depreciation factor into the investment equation?

But even if I don't, let's say I sell it in 3 years, I don't get any more or less money for the car at that point (all else being equal) whether I financed it or not.

But if I invested the $25k for those 3 years, then I've made money on that, and hopefully more than the 1.9% that the money cost me. If I put all $25k into the car, I have no possibility to make any return on that $25k.

So how does the depreciation factor into how you want to pay for it?

:confused18:

[sik68]

You're going to have to educate me on this...

If I choose to keep the car forever, then how does the depreciation factor into the investment equation?

But even if I don't, let's say I sell it in 3 years, I don't get any more or less money for the car at that point (all else being equal) whether I financed it or not.

:confused18:

Don't mistake me for a pro! I should say that it isn't so much how much it's depreciating, but that it does depreciate is why I (philosophically) hesitate to finance. You're borrowing money that loses value.

And more specifically depreciation rate does matter if/when you decide to sell your car while owing more than it's worth.




But if I invested the $25k for those 3 years, then I've made money on that, and hopefully more than the 1.9% that the money cost me. If I put all $25k into the car, I have no possibility to make any return on that $25k.

So how does the depreciation factor into how you want to pay for it?

:confused18:


I am assuming that you have a monthly income stream besides this $25k. So with the income stream, you can either

1) Finance the car/Invest $25k for 3 years.
$714 per month pays down the loan in 36 months. Total payments = $25,704
Earn 5% per year on $25k. Account Balance = $28,941
Car value = $18225
Balance Sheet: 28941 + 18225 = $47166

2) Cash for the Car/Invest Mo. Payment for 3 years
$714 invested per month at 5%/year for 36 months. Account Balance = $27785
Car value = $18225
Balance Sheet: 27785 + 18225 = $46010

So in this case, yes if you pay down the loan in 3 years, you will come out ahead under option 1). But you can also see that if you play with the rates, duration etc. that you can lose money by financing a car vs paying cash. When rates are low and the time duration is short, the results are no fun and don't explain much. Drag out the loan longer and that's when you feel it in your pocketbook.

[Vegas69]

Todd,

I always enjoy reading your posts, either here or in the Health threads. Always inspirational.



This year my life somewhat settled down for me. I have always been really good with money and finances and never in debt. Between school, a period between school and finding a job, getting married, moving, buying a house and a few other expenses, I had acquired more debt than I ever thought I would have. Again, I've always been smart financially, so my goal was always to pay off all my debt. This year things finally settled down for me and I was able to start knocking things off. I took the Dave Ramsey Total Money Makeover approach and knocked them off a list, smallest to largest. I'm over halfway through and it feels amazing. Luckily my wife is on the exact same track as myself. Every single day she goes over the finances, looks at where money is coming in and where its going out. This sucks for my car habit, but I don't complain. Its nice to see my debt going down and my play money going up. My goal is to be 100% debt free, my house and everything. I know that's a few years off, but I still don't see any reason I can't make that happen over the next 15 years instead of 30.

Thanks for the kind words.

I'm one of Dave's ElP's. I like his philosophy on getting debt free and recently read the total money makeover.

Personally, I'll take debt free all day including Sunday. The turtle wins the race.

[GregWeld]

Sorry Steven ---- Even I will finance a car at 1.9% -- or even 2.9%....


The very reason you state -- depreciation -- is the reason why... and the #1 reason is -- it takes way more effort to gather up the 25K ---- than it does to make the payment from monthly cash flow. The 25K should be MAKING you money -- and capital -- so in 4 years you should have 35K.... Where as the 25K car is going down in value -- so in 4 years it's only worth half.

Think of CHEAP car payments as rental... you're just paying for the amount you used along the way.

I just bought a Land Rover for our Idaho dump.... they're relatively expensive... I was trading (getting rid of) my pick up -- 2oK trade in -- and the gal says to me -- you sure you don't want to make payments --- HELL NO! I don't make payments..... But! She says... It's only 1.9% interest rate. I said -- how much down do I need then? She says -- just your pick up....

OKAY -- I wrote a check for ZERO and left with a new car... Payment? $1200 a month. Cash saved? 70+ Grand.... the 70K makes 5%.... and should have a total return of maybe 20%....

Neither of these scenarios changes the depreciation. Either way - the auto depreciates. But if I'm making 5% and paying 1.9%.... then I'm ahead. And I have the cash too!


I could buy 5,800 shares of Annaly Capital Management (NLY) at $12 a share -- and get paid $9,000 a year in dividends. That covers most of my payment -- which by the way is a LOT of principal reduction and not much in actual interest cost! So in 4 years I'd pick up 36K in cash payments -- I would have the Land Rover paid for -- so if it's worth half --- it's worth say 35K..... So I'd have 70 in cash (that I didn't put out of pocket) -- I'd have received 36K in dividends - and I'd still own a truck worth 35K...


If I paid all cash -- I'd have 35K.


Does that make sense??


BY THE WAY ---- I didn't do any of the math in order for it to have any validity.... I was just writing to make a point. The numbers would have to all be worked out. But either way -- the POINT is made.

[Vegas69]

I'll make the argument that 95% of Americans with their financial position and knowledge are better off debt free than borrowing money and investing.

[GregWeld]

I'll make the argument that 95% of Americans with their financial position and knowledge are better off debt free than borrowing money and investing.

May be.... but then again.... they're not the ones reading this thread. And we're trying to change that. It's like fat people are fat because they don't exercise and eat right....

Normal people don't know how to invest - or how to manage money. Doesn't mean they can't read and educate themselves and try to do better.

[Vegas69]

I think they are reading this thread, just not posting. One thing I've learned from my real estate newsletter that I've been sending out for over 5 years is the fact that even if they read it, they don't completely understand the details. Don't take your knowledge for granted. It's a very simple game for you at this stage of your life.

I like the plan to buy a 4-5 year old car from an old lady that only drove it on Sunday cash, and invest the car payment into the market every month. :D When you don't have debts, you can dip your toe in all kinds of buckets.

I met with my advisor this week to discuss my game plan and additional contributions. One thing we discussed was TAXES. I'm 36, and it's logical to assume that taxes will be much higher when I'm 65. Ten thousand citizens are turning 65 every day in this country and a majority are living on social security, ONLY. It's not a pretty picture... I picked 65 because that's around the time I'll start drawing on SEP, ROTH, and life insurance. I really like the tax advantages of the Roth and life insurance policies at retirement age due to the huge shelter they create down the road. Let's say you have a great year and don't want to bump up into the next tax bracket, you have the option to draw off your roth or life insurance policy to enjoy some tax free income.

[Flash68]

Opportunity Cost is the name of the game in this whole Finance vs Pay Cash for car deal.... by paying cash you give up the opportunity to make that 3% spread on the 1.9% loan vs a conservative 5% return on the cash invested. I do not currently have any car loans but would not hesitate to and plan to in the future.

Another thing here on the whole "debt free" deal that is somewhat common is the strategy of not paying off your 2nd mortgage (HELOC) entirely because you can throw all kinds of purchases/expenditures (remodel, cars, anything) on there without any questions and the interest is tax deductible. Used responsibly it can be a very good tool or option to have.

My retired neighbor does it (former IRS employee) and puts all his vehicle purchases on there and I know for a fact he has done the math and pencils out in his case. Your results may vary. :)

[glassman]

And yes, you do need to change that avatar. Its freaky.

From your friend in the tri valley you haven't met yet:)

Mike

[Vegas69]

Opportunity Cost is the name of the game in this whole Finance vs Pay Cash for car deal.... by paying cash you give up the opportunity to make that 3% spread on the 1.9% loan vs a conservative 5% return on the cash invested. I do not currently have any car loans but would not hesitate to and plan to in the future.

Another thing here on the whole "debt free" deal that is somewhat common is the strategy of not paying off your 2nd mortgage (HELOC) entirely because you can throw all kinds of purchases/expenditures (remodel, cars, anything) on there without any questions and the interest is tax deductible. Used responsibly it can be a very good tool or option to have.

My retired neighbor does it (former IRS employee) and puts all his vehicle purchases on there and I know for a fact he has done the math and pencils out in his case. Your results may vary. :)

Don't forget about capital gains tax on your gain. Also, 1.9% is for a new car or dealer purchase normally. Used car loans may not be so attractive. Especially, private party. I sleep great at night with the title in my safe and no chance of losing money on my investment AND having a car payment. We all have different tolerance for risk. My point is that 95% of Americans have no business taking these risks.

[WSSix]

Well, today is a good day. I checked in on my company match 401k and I'm now fully vested. That's a nice 5% pay raise every year that's now all mine from here on out. Fidelity is doing a good job at managing it too based on the returns it's earning. Combine that with my ESPP which allows me to buy company stock at a 10% discount, a stock that also pays a dividend, and I'm more than happy. I've never had this much money before and while it's only a small percentage of what I need/want to retire, I finally feel like I'm on the right path and actually making progress towards my long term financial goals. Today is a good day.

[ErikLS2]

Greg you have made many excellent points in this thread but I got to agree with Todd on this one. Most people when they finance a car do so by asking "how low of a payment can I get?" usually never considering the interest rate, term, etc. They look at that low interest rate and figure out how much cash they'll have left over to buy more, yep, STUFF!. If they did it your way, sure, a great move, but teaching them that discipline is the challenge. I guess you're both right!

I love this thread and all it's points about investing. It wouldn't hurt to add to the discussion some tips on how to buy stuff, finance it if needed, as wisely as possible. I've always said one of the easiest ways to make money is to not lose it in the first place (or spend it foolishly). :G-Dub:

[GregWeld]

The entire key to this thread is about how to better manage your money. Save. Invest. Earn a return on your investments thru the good markets AND the bad.

There is little point in accepting that everyone must be so stupid that they can't make good decisions --- or that with some help in understanding their options... that they can't think through what is a better more reasonable way of doing things.

To me it's like telling someone that they shouldn't buy anything -- and should ONLY concern themselves with saving money for retirement. Pure BS!

How does a guy buy rental property?? The smart money puts down enough to make the payment be low enough that the rental income covers most if not all of it. You do that by taking on debt. It's leverage. The difference is that you hope the value of the property goes UP over time... and, of course, someone else is making your mortgage payment for you.

This thread is about how to THINK... it's never been about WHAT YOU SHOULD DO. Like our cars -- you take a little info from a variety of sources and do with it what you will. To say one is wrong and one is right is just crazy. But the INFO is what you should be gathering and thinking about. Some guys can only live by being debt free... okay... I'm good with that. Some people can manage debt and use it to make themselves even more money. Some people will just plain fail at all of it. The key is to be able to think your way through all the scenarios and take a little from here and a little from there and make a plan that fits YOU, whatever that is.

[WSSix]

In regards to buying vehicles, Clark Howard, who is a consumer advocate out of ATL, has always said that if you buy used, keep it for at least five years. If you buy new, keep it for at least 10 years. Doing it this way means the depreciation hit no longer matters. Combine that with what's been mentioned involving loans and interest rates and you can help yourself in the long term not lose money on a vehicle purchase. Especially, one that is a daily commuter and not something with sentimental value such as our project cars.

I intend to only buy used and pay cash. I'm also not buying anything expensive. I came out of pocket just under $5000 for my 01 Sierra. I don't like making payments on anything or being in debt for something like a vehicle. So, for me, it works that way. I doubt that will change as I get older and have a family involved but we will see. In the meantime, I've got my credit in order to help ensure I can get favorable rates when I do need to borrow money. I'm just focused on the long term which is what this thread is geared towards.

When we get new guys in at work, I do my best to convince them to think long term as well and take advantage of the company matched 401k and ESPP. It's not easy to convince guys in the early 20s to put money away when they are making 50k + a year. I usually phrase it in the terms of them getting a raise every year when all they have to do is simply agree to put money away each month. It's still not easy and some of them are eager to do what it takes to get a raise or promotion. Many of them are too hooked on being consumers. I guess the marketing folks in this country are doing their jobs well.

[glassman]

In regards to buying vehicles, Clark Howard, who is a consumer advocate out of ATL, has always said that if you buy used, keep it for at least five years. If you buy new, keep it for at least 10 years. Doing it this way means the depreciation hit no longer matters. Combine that with what's been mentioned involving loans and interest rates and you can help yourself in the long term not lose money on a vehicle purchase. Especially, one that is a daily commuter and not something with sentimental value such as our project cars.

I intend to only buy used and pay cash. I'm also not buying anything expensive. I came out of pocket just under $5000 for my 01 Sierra. I don't like making payments on anything or being in debt for something like a vehicle. So, for me, it works that way. I doubt that will change as I get older and have a family involved but we will see. In the meantime, I've got my credit in order to help ensure I can get favorable rates when I do need to borrow money. I'm just focused on the long term which is what this thread is geared towards.

When we get new guys in at work, I do my best to convince them to think long term as well and take advantage of the company matched 401k and ESPP. It's not easy to convince guys in the early 20s to put money away when they are making 50k + a year. I usually phrase it in the terms of them getting a raise every year when all they have to do is simply agree to put money away each month. It's still not easy and some of them are eager to do what it takes to get a raise or promotion. Many of them are too hooked on being consumers. I guess the marketing folks in this country are doing their jobs well.

Yep, they are doing a great job of turning most into completely consumer driven society, one of which can't stand. We need jobs back, growth, bringing back blue collar, here in the states.

I am looking more at foreign markets now, but i like investing in what i know....

[Flash68]

And yes, you do need to change that avatar. Its freaky.

From your friend in the tri valley you haven't met yet:)

Mike

Freaky is/was the goal. Guess I succeeded. :D

Don't forget about capital gains tax on your gain. Also, 1.9% is for a new car or dealer purchase normally. Used car loans may not be so attractive. Especially, private party. I sleep great at night with the title in my safe and no chance of losing money on my investment AND having a car payment. We all have different tolerance for risk. My point is that 95% of Americans have no business taking these risks.

True. Agree with Greg though that well managed debt (leverage) is a powerful tool when part of overall sound financial management.

[Vegas69]

You know I agree with those ideals if the self discipline exists. You just have to make sure the risk is worth the reward. I'm in no way saying it's a bad play if your head is in the right place. I've just seen the personal finances of to many people.

[Code510]

You know I agree with those ideals if the self discipline exists. You just have to make sure the risk is worth the reward. I'm in no way saying it's a bad play if your head is in the right place. I've just seen the personal finances of to many people.

And in today's society we need instant gratification. The "McDonalds Effect" has taken over everything. We don't like waiting for anything. Combine that with credit cards and its no wonder so many people are drowning financially. But long as they look like they are well off.

I heard something awhile back, don't know if its true, but said something to the effect that if you are 100% debt free, and have $10 dollars in your pocket, you are actually richer than 80% of the people in the world. Don't know if that's true, but when you think about it, it probably is.

[Code510]

I just saw this video:

http://finance.yahoo.com/video/playlist/financially-fit/retired-30-144216321.html

Pretty interesting but it's everything I've already been trying to do. Live within my means, don't buy crap I don't need, have zero debt and some sort of investments. He's just doing the basics and making it work! :G-Dub:

[Vegas69]

What he's done is great and 180 degrees from the "normal" American. Kudos to him. I really don't think his assets are large enough to sustain retirement with inflation and a family. What about health care and college to name a couple majors. He should keep earning while he's young.

Personally, my desire is to live with more lifestyle. To have the freedom to travel, eat out, and pursue new desires. I do plan to have similar ideals with no debt and waste but much greater income.

I've lived the new cars, boats, motorcycles, etc... I'd rather cement lifestyle a this point in my life.

[Tony_SS]

I just saw this video:


I was about to share that after his 'hair on fire' comment because I thought of Greg. lol

It's all about priorities, some people are happy doing the simple things in life, some want more. Nothing wrong with either. But the principle of saving more and spending less is lost on too many, myself included.

We aren't really taught money management in public school, and like Trey said, the marketing industry does their job well, so this is the case. We work all our life and hope we can survive on SS when we need to retire, all while beyond our means.

At 39yrs old I started turning that boat around late in life, but I'm getting there, paying off medical debt, a little left on one car loan and a student loan, then I'll be left with just my mortgage, which will be a great feeling. Next year I'll be debt free and ready to get serious with investing.

I still remember selling my dream Suburban, which we all loved as a family, a classic 91 GMC square body, near perfect shape. Some guy in Chicago had to have it. I made the choice to sell high, made some $ and paid off the last credit card. It was bittersweet, but I'm happy I did it in the end.

[glassman]

when all of us begin investing or saving, in the beginning there are always sacrifices. It sort of changes our frame of mind, to live within our means. Which is always "have" cause we live here in the land of opportunity, but it still takes sacrifice, work, discipline and hard work. Sha'll we have it any other way?

[Vegas69]

I certainly wouldn't... The pain of discipline weighs ounces, while the pain of regret weighs tons. While I've increased my income and decreased my outlay, I'm living more frugally. I've grown to enjoy the simple things in life. Having REAL financial goals and a REAL financial plan in WRITING is the key. Without tracking your money today, investing enough money every month, and projecting your required income at your desired retirement age, you are just a boat in the lake with no sail.

Philosopher out...:lol:

[Vegas69]

Just happened to run across this gem...
D8v3Eivk71Y

[GregWeld]

I can only add to this discussion about saving and not saving and the consequences.... by saying that I've been poor... and I've also lived a "normal" life of making car payments / VISA payments etc... and I've been fortunate to have done a few things right and been lucky at the same time.. leading to 20+ years of being relatively "rich". Rich to me is different than "wealthy". Wealthy is private jets - and 100 foot yachts.... Rich is just being able to not have to question what you want to do or which car you want to write a check for... having a second home... being able to live life pretty much free of financial worries.

I think if you asked 100 "rich" people how they got rich... 98 of them would tell you they earned it. All of them would NOT described themselves as "rich". More likely they'd say they are "well off"... or something similar. But here's my real point in the post.


You can not SPEND yourself to wealth.


So the choices you're all discussing.... need to be measured by pretty much a single point in time. RETIREMENT. And how you'd like to live for about a THIRD of your life. Living hand to mouth... or being able to really finally enjoy the fruits of your labor/education etc by being able to take a cruise once a year... or go to Hawaii.... or being able to pay for your daughters wedding.

A MODEST amount of "less" (if that's what you have to do) NOW will pay off in spades later with far MORE.... even if that more is relatively simple peace of mind.

To do all of this -- you not only need to save -- but you need to make your money work for you and grow. That takes some work -- some effort -- some risk -- but what it really takes is a plan.... which is what Todd is saying and he's 100% right.

[Code510]

You can not SPEND yourself to wealth.




I think that's what a lot of people feel. If they have a house, new cars, new TVs and new clothes, they feel wealthy. Yet they are poor! And I agree with you talking about retirement as well. If you spend the first half of your life doing the right things, then all the wealth and retirement will come.

One of the stories I always talk about is one of my Dad's best friends. Every time I talk to him, he talks about the importance of retirement. Well now he's 58ish and retired from the City Water Department. Makes more on retirement than when he was working. But what I don't like is that he has zero equity in his house, just bought a 200K diesel pusher motorhome along with a new Toyota truck to tow behind it.

So yes, he has retirement and is bringing in a full paycheck...but he's swimming in debt. I just think that's crazy. What if the retirement fund goes bankrupt in 10 years? He will have to go back to work. I would be very uneasy if it was me.

[CRCRFT78]

I just read through the last 10 pages after being away for awhile and its so refreshing to see the thoughts and insight from all of you. I have been neglecting my accounts, although they have been making money, due to a lack of funds. However, I just paid off my motorcycle and will apply that extra $300 towards my savings and investments. The comments about purchasing new cars and such makes me cringe. Having to make monthly payments on something I see as a luxury and not a necessity has changed my perspective on buying "new" from dealerships. As much as I would love a newer vehicle I believe that monthly payment is better spent towards accruing future income that will help improve my lifestyle and not the portrayal of a lifestyle I wish to have by riding around in something new.

I guess what I'm trying to say is that I am glad to have eliminated some debt and look forward to adding to my investment income. Like Todd mentioned when Greg questioned our lack of participation in this thread. For once I have decided not to disrupt the class and actually listen to what is being taught. Thank you to all that educate us in this thread.

[preston]

And don't forget our collective blind spot - I've always paid cash for cars and haven't had debt in 20 years and save pretty good. But I've also spent well over $100k on my car project over the last 12 years and all I have to show for it is a project car that *might* fetch $20k if I'm lucky. Would I change that path if I could go back ? Yes, I would.

[toy71camaro]

Still check this multiple times a day. Although I dont post much. Glad to see a few other names in here chatting it up. :)

I agree with the "good debt" as long as you understand it and use it to your advantage. Which, unfortunately, a lot of people dont understand it and it hurts them more than they realize.

[Vegas69]

Great discussion guys...

I doubled my retirement contribution today. :thumbsup: It's 11% of my NET income. The only reason it's not 15% is due to my goal to acquire 1 more property in the next 5-7 months. Once I have a tenant in that property, I plan to increase my investments and work on paying off my primary in under 15 years. Hoping no later than age 50 to have 3 free and clear rentals and primary residence. My long term goals include 2 more rentals for a total of 5 free and clear investment properties by 55. That should create 6k in monthly income based on today's numbers which will accommodate financial independence with no debt. At age 65, I can start drawing on my Roth, SEP, Life Insurance, and Social Security. I anticipate a 1031 exchange on my properties in that ball park to a new market or a commercial interest. Time will tell..... Kelli has a government pension and is investing around 15% of her gross income into a Roth IRA and Life Insurance product on top of her existing 403b. We are very diversified. The rentals and the pension reduce the dependency on timing the stock market at retirement age. The Roth/Life Insurance, allow us to pull on them in our high income years to decrease our tax bill.

One of the major lessons to be learned from that video I posted is the fact that it doesn't matter how much money you make. If you invest 15% of your gross income into investments and curb your spending, you can achieve financial independence at an early age. I can tell you for a fact after reviewing countless financial worksheets that it doesn't matter how much money someone makes, they'll spend more. Take control of your finances today, so you can live like a King later.

[toy71camaro]

Great discussion guys...

I doubled my retirement contribution today. :thumbsup: It's 11% of my NET income. The only reason it's not 15% is due to my goal to acquire 1 more property in the next 5-7 months. Once I have a tenant in that property, I plan to increase my investments and work on paying off my primary in under 15 years. Hoping no later than age 50 to have 3 free and clear rentals and primary residence. My long term goals include 2 more rentals for a total of 5 free and clear investment properties by 55. That should create 6k in monthly income based on today's numbers which will accommodate financial independence with no debt. At age 65, I can start drawing on my Roth, SEP, Life Insurance, and Social Security. I anticipate a 1031 exchange on my properties in that ball park to a new market or a commercial interest. Time will tell..... Kelli has a government pension and is investing around 15% of her gross income into a Roth IRA and Life Insurance product on top of her existing 403b. We are very diversified. The rentals and the pension reduce the dependency on timing the stock market at retirement age. The Roth/Life Insurance, allow us to pull on them in our high income years to decrease our tax bill.

One of the major lessons to be learned from that video I posted is the fact that it doesn't matter how much money you make. If you invest 15% of your gross income into investments and curb your spending, you can achieve financial independence at an early age. I can tell you for a fact after reviewing countless financial worksheets that it doesn't matter how much money someone makes, they'll spend more. Take control of your finances today, so you can live like a King later.

AWESOME! Great plan too.

[GregWeld]

Well..... looks like you believers in Faceybook (FB) might finally be getting it right. Big day for them yesterday. That might just be the inflection point where people come back to the stock.

+++++++++++++++++++++++++++++++++++++++


On another note:


Rodger Lee (Ironworks) was up here (Bellevue, WA) so he and I could take a three day rally driving school called DirtFish. That fact has nothing to do with investing except that we discussed the difference in cost of real estate between Bakersfield and Bellevue. He was taken back by the high cost of houses and land here. To which I said "here's what drives that market".... "we" have a huge number of very large companies that pay (on average) large salaries --- which drives the price of housing. THAT got me going down a list of who's in the great Pacific NorthWET.

BOEING
MICROSOFT
AMAZON
STARBUCKS
NORDSTROM
PACCAR (Kenworth and Peterbuilt trucks)
EXPEDIA
T-MOBILE
COSTCO --- probably the lowest average pay by far
NINTENDO
ALASKA AIRLINES
HOLLAND AMERICA LINES
ZILLOW
WEYERHAEUSER
PEMCO
DENDREON
ZYMOGENETICS

These are just the ones I could think of offhand.... and for the most part -- they're located in the greater Seattle area. That's a pretty powerful group of companies for a "smallish" town/state. And I'm certain I'm missing some names!

Now to another point.... there's about a half a gazillion companies up here (mostly tech but certainly not all) that began life here ---- and managed to go public and make a lot of people a lot of money.

[64G-lark]

Hi Greg, First this is a great thread with some good advise. I ran across it and have been reading for days. I have not read every post but enough to know I am ready to make some changes.
Im new to stocks and tired of my companies 401k plan that invest in mutual funds that I do not even know what companies they contain. I have done some investigating and I have the option of opening a self directed brokerage account within the plan that allows me to purchase stocks of my choice. I have been looking at various stocks and looking at the long term trends. The part I dont follow completly is how to tell the dividends they pay and the frequency. Can you explain more on this?
I would also like to understand more on order types. The options are Market, Limit, Stop, Stop Limit, Fill or Kill, etc. I know these are probably some basic questions but you always seem to have a way of putting things in laymens terms.
Im ready to redirect some of my investments and put them to work for me. Thanks in advance for your help.

[GregWeld]

Hi Greg, First this is a great thread with some good advise. I ran across it and have been reading for days. I have not read every post but enough to know I am ready to make some changes.
Im new to stocks and tired of my companies 401k plan that invest in mutual funds that I do not even know what companies they contain. I have done some investigating and I have the option of opening a self directed brokerage account within the plan that allows me to purchase stocks of my choice. I have been looking at various stocks and looking at the long term trends. The part I dont follow completly is how to tell the dividends they pay and the frequency. Can you explain more on this?
I would also like to understand more on order types. The options are Market, Limit, Stop, Stop Limit, Fill or Kill, etc. I know these are probably some basic questions but you always seem to have a way of putting things in laymens terms.
Im ready to redirect some of my investments and put them to work for me. Thanks in advance for your help.




#1 -- If you go to GOOGLE FINANCE.... and put in a search for an individual stock... it will pull up a chart and top left promently display the current "quoted" price and whether it's up or down... if you follow across the top of the chart to your right -- you will see a bunch of info as below




Range 83.16 - 84.75 ------ This is the DAYS trading range in price
52 week 74.76 - 92.99 ------ this is the 52 week trading range
Open 84.46 ----- where it opened for trading today
Vol / Avg. 1.16M/1.49M ------ how many shares change hands on average
Mkt cap 31.72B ---- The number of shares outstanding X's the price -- ='s companies total market value.
P/E 38.86 ----- This the current stock price divided by it's earnings per share over the last 12 months... a higher number is telling you that you're paying a lot for those earnings -- lower number means you're paying less. This is just a relative number and I place very little meaning on it.
Div/yield 1.32/6.34 --- this is where you see the ANNUAL dividend and the PERCENTAGE of the current price in "yield" (think "interest rate".
EPS 2.14 ---- EARNINGS PER SHARE (used to calculate the P/E ratio (above)
Shares 380.84M ---- how many shares there are issued
Beta 0.38 ----- think of this as volatility measurement against the "market" as a whole. Another relatively useless measurement IMHO
Inst. own 16% --- What percentage of the outstanding shares are "institutionally" owned. I like a higher number here -- which means that less "retail investors" own the stock (you are a retail investor). What I like about this number is that the "BIG MONEY" likes the stock. Other than that - it's useless.



DIVIDENDS are "generally" paid per quarter... but some stocks or ETF's (exchange traded funds - which are similar to mutual funds - but hold specific stocks or bonds) pay monthly.... some pay semi-annually.

Easiest way to see this for a stock you're interested in ---- go to the CHART in GOOGLE FINANCE -- for the name you're looking at -- and expand that chart to "1 yr" ---- or "5 year" ---- and you'd see a "block" with a D in it. If you hover on that block it will give you the date and payment info. Obviously if they pay 4 times per year -- then the dividend is paid quarterly.

Companies operate in FISCAL years - not calendar years.... so it depends on when they begin and end their year... so not all companies begin on Jan 1st and end on Dec 31st. In fact - I'd say most of them don't.... you have to look at the dates they pay on an individual basis name by name.


If you want to see what an ETF looks like --- Google Finance -- JNK or HYG. These are ETF's tied to a specific bond type (one is JUNK BONDS and one is just Corporate bonds). Bonds are what companies issue -- when they don't want to borrow from the bank. They can issue a bond and pay interest on it.. but not we're getting complicated. :lol:

[GregWeld]

A separate reply to the buying terms you asked about.




A "market order" is an order that says you'll just pay whatever the seller is asking for. Kinda like going to the store and just buying stuff --- you don't dicker for the price -- you just pay whatever the seller wants. MOST people use a market order... because unless you're buying lots and lots of shares -- it really doesn't make much difference if you pay a penny or two "more or less".


A "limit order" is what I prefer to use. I buy shares 5,000 or 10,000 or 20,000 at a time. A few pennies on orders like this adds up. So ------ when you place an order -- the question will come up (in a box) what type of order you want to place. If you place a LIMIT ORDER then you must fill in the MAXIUM price you are willing to pay per share. You can match to current ask -- or you might chose to "bid" a penny or 2 -- or even 10 cents less!

Now -- you can modify your limit order with "good for day" or "fill or kill".... so if you use good for day then your bid is "open" until the market closes.... and you might sit all day -- and then 10 seconds left in the trading session and some seller decides he's going to accept your offer and fill your order (maybe only partly or in whole).

The FILL OR KILL --- means you have a very short fuse and are willing to only accept a FULL order fulfillment and it must be filled RIGHT NOW no waiting for the end of the day crap.... and if not - you want the order killed.




The above is very basic..... so if you really want to dig into the nuances of trading (I do not recommend trading -- I like to INVEST).... you can find good detailed answers to just about any market info here:



http://www.investopedia.com

[CRCRFT78]

Nice little write-up Greg. Tutorials like this help to keep the spark lit and turn it into a flame again.

[sik68]

To follow up on the topic of "financing a depreciating asset" from a few days ago, I came across this really good financial blog tailored towards medical professionals. http://whitecoatinvestor.com/

Here is an excerpt that does a good job summarizing the issue.

The problem I have with people financing depreciating assets like cars isn’t so much a math issue as a behavior issue. As you mention, financing $10K at 1% for a year is only going to cost you $100 in interest plus a few hundred dollars in fees (and perhaps a few hundred dollars that you could have knocked off the price by paying cash.) Given your salary, it’s peanuts. Even Suze Orman would agree you can afford to finance this.

The issue I have with it is the habit. First it’s the car, then the house, then some nice vacations, then private college for the kids and before you know it you’re that 65 year old doc still working 15 shifts a month because he has to who seems to detest his patients, has no tolerance for new nurses and overall seems to hate his life. Financing a depreciating asset is by definition living beyond your means. It’s a slippery slope. Knowing you, I doubt you’ll go far enough down that slope to matter, but it’s worth at least recognizing what you’re doing.

- See more at: http://whitecoatinvestor.com/may-i-please-finance-my-car-friday-qa/#sthash.nMh0VmCa.dpuf



Another good article. Cheap financing is just leading people to finance longer, borrowing money for the wrong reasons. 10 Year car loan anyone? (http://www.autoblog.com/2013/07/25/more-car-buyers-favoring-longer-term-loans-up-to-10-years-w-po/)


I know we already closed the loop on this, but it's more food for thought.

[64G-lark]

Thanks Greg for taking the time to answer my questions. I will probably have more once I get my feet wet.

[GregWeld]

We've probably never covered SHORTING stocks.... mainly because that's not an INVESTMENT tool.... it's a "trader" tool. Personally -- I never short stocks because I'm not that smart... and there's something fundamentally wrong (to me) to bet that a company is going to do poorly. I'd far prefer to try to buy great companies that I like -- and if the stock hiccups a bit -- buy even more... but we've covered that about half a gazillion pages worth!


SHORTING is borrowing the stock from the brokerage --- selling shares you do not have --- which gives you the cash to your account --- BUT!!! BIG BUTT --- you OWE the shares... so it's called a NAKED SHORT. Now --- if you SOLD the shares at $10 ----- and can buy them down the road for $8... and repay the shares you borrowed... you made a nice profit on the trade. BUT!!! Always the big butt --- if they go UP from where you sold... eventually you're going to have to pay them back... so you could end up buying the shares for $15 and losing your sorry little (or big) butt in the process.

Here's my thing about this. #1 I don't want to go around betting that company X is going to suck. I don't have time to investigate and do all the homework that takes.

#2 -- about the time you think something sucks -- so does everyone else -- and the PROS on Wall Street have all bet the farm shorting the name... Now all of a sudden -- everyone is short --- and something happens and they're all buying like crazy to cover their short position. Guess what happens when everyone is buying.... RIGHT! The shares go UP not down.

Now --- a naked short has unlimited loss potential. In other words there's no stopping the price going UP.... so you're wide open to "whatever". At least if you just outright buy a position ---- and it goes to ZERO for a loss -- you're loss is capped at 100% --- YES -- HUGE loss -- but it's still capped at what you paid.

Below is an article --- on a very smart guy --- that has bet ONE BILLION DOLLARS on a short... and so far he's 100% wrong and his loss can go far higher provided the stock continues to go up. OUCH!

http://www.forbes.com/sites/nathanvardi/2013/07/30/bill-ackmans-herbalife-nightmare-gets-100-percent-worse/



Now -- there's another way to do a short -- and that's called SHORTING AGAINST THE BOX....

If you OWN the shares already --- and decide to sell some or all of the position "short".... you at least have your short covered because you already own the shares to replace them (basically borrowing from yourself). That's a far better way to go if you decide to be a big shot shorter. LOL

[XLexusTech]

Profit on FB today /.// Holy cow.. in the Green on FB.////:king:

[GregWeld]

Profit on FB today /.// Holy cow.. in the Green on FB.////:king:





What a ride.....:drowninga:




Now.... it's still priced for perfection. So you now have to hope that it's on a roll and can keep up the revenues and growth.


I'm not trying to talk anyone into -- or out of -- a holding. But I know that companies like this can be "been there done that" in an instant. When or if the "kids" decide something else is kooler. Poof! They move on like a Chevrolet heartbeat. That's the big challenge with investing in this kind of stuff.


In the meantime -- a guy can hit a home run.... So who knows!

[GregWeld]

Here's a website everyone should be using..... be wary of being "sold" on some stock or another on sites like this.... but many sites have great "tools" which a guy can use from time to time.


This will show you the POWER of DRIP (dividend reinvestment) investing... so if you put in a symbol --- and just choose a time frame (say --- 2003 start and 2013 ending - which is a 10 year period) --- and this will come up with TWO CHARTS.... one (the top) showing you DRIP investing..... the bottom will show you without reinvesting the dividend.

IF you are still 10+ years from retirement..... I'd suggest you check the box that says to reinvest the dividends!



http://www.dividendchannel.com/drip-returns-calculator/

[toy71camaro]

That's quite a nifty little tool.

MO being one of my holdings, i just threw that in there from 2000 to now...

On 10k, with drip = $162k. W/o drip = $69k. Wow. Granted, it doesnt tell you how much cash you accumulated during that time. but still. (unless i missed it)

Good thing i Drip all mine already. :)

[GregWeld]

That's quite a nifty little tool.

MO being one of my holdings, i just threw that in there from 2000 to now...

On 10k, with drip = $162k. W/o drip = $69k. Wow. Granted, it doesnt tell you how much cash you accumulated during that time. but still. (unless i missed it)

Good thing i Drip all mine already. :)




You wouldn't accumulate any cash -- because all the dividend payout would be used to purchase additional shares.

The key to that is it's an accelerating vehicle... the more shares bought... the more dividend collected...buying more shares... paying more dividend and on and on. That's why it works!

[toy71camaro]

You wouldn't accumulate any cash -- because all the dividend payout would be used to purchase additional shares.

The key to that is it's an accelerating vehicle... the more shares bought... the more dividend collected...buying more shares... paying more dividend and on and on. That's why it works!

I mean with Drip turned off.. you'd have the dividend payments sitting on the sidelines collecting dust each quarter.

With drip turned on, yes, we're taking the quarterly div payment and buying more shares at the current rate (helping our dollar cost average)..

Now, I wrote that for the general public. I know you know what drip on/off is.. lol

[GregWeld]

I mean with Drip turned off.. you'd have the dividend payments sitting on the sidelines collecting dust each quarter.

With drip turned on, yes, we're taking the quarterly div payment and buying more shares at the current rate (helping our dollar cost average)..

Now, I wrote that for the general public. I know you know what drip on/off is.. lol




Yeah..... pretty much....



DRIP investing is a great way to really kick a portfolio in the bee hind.... It will automatically purchase shares for you... so dollar cost averaging is working (buying more shares when the price is low and fewer shares when the price is high).. but it's really the COMPOUNDING affect that works the magic!

[GregWeld]

It ceases to amaze me how many people are willing to look past the old "too good to be true" statement and hand their hard earned money over to some charlatan they've never met... all based on their own personal greed. Too greedy to think correctly and say "nah -- this sounds like a scam".




http://www.forbes.com/sites/jordanmaglich/2013/08/07/court-green-lights-bitcoin-lawsuit-rules-investments-constitute-securities/

[WSSix]

I think it stems partly from the belief by so many people that you have to be lucky or some how out smart the system to really make it in this world. Not only that but people's belief that having a lot of stuff means you're rich. Gone, for the most part, is the belief in hard work and saving.

[Vortech404]

I read most of these pages and come to the conclusion that the funds I have been contributing to for the last 8 years kind of suck.

Unfortunatly though my UPS/Teamster 401k plans all the plans are really safe. S&P 400, S&P 500, Russel 2000, etc. I contribute the FUND which has pre selected stocks/bonds in the fund. I'm not able to select one stock per say. I purchase UPS stock and a discount of 5% on the lowest quarter.I put 12% or 10k into the fund a year pre tax. I just started a Roth, not much in there. I'm thinking my 401k plan stinks with too many bonds.

Should I stop my current 401k plan with the teamsters and open another one that I can select better perfoming stocks"more control of where my money goes"? Could I still purchase these stocks pre tax to lower my income for tax purposes? Say I put $200/week into these stocks, say I pick 6 or 7 stocks I like. Are you guy's holding onto the for say 20 years or are you constantly buyiong selling. I don't know much about the market and wanted kind of set it and forget it approach or is that dumb.

Thanks guy's
John

[toy71camaro]

I read most of these pages and come to the conclusion that the funds I have been contributing to for the last 8 years kind of suck.

Unfortunatly though my UPS/Teamster 401k plans all the plans are really safe. S&P 400, S&P 500, Russel 2000, etc. I contribute the FUND which has pre selected stocks/bonds in the fund. I'm not able to select one stock per say. I purchase UPS stock and a discount of 5% on the lowest quarter.I put 12% or 10k into the fund a year pre tax. I just started a Roth, not much in there. I'm thinking my 401k plan stinks with too many bonds.

Should I stop my current 401k plan with the teamsters and open another one that I can select better perfoming stocks"more control of where my money goes"? Could I still purchase these stocks pre tax to lower my income for tax purposes? Say I put $200/week into these stocks, say I pick 6 or 7 stocks I like. Are you guy's holding onto the for say 20 years or are you constantly buyiong selling. I don't know much about the market and wanted kind of set it and forget it approach or is that dumb.

Thanks guy's
John

A lot of that is going to rely on some "personal" data (income levels, tax levels, company match policy, etc etc). This is a question probably best left to an accountant/trusted financial adviser. Check into an "ELP" from Dave Ramsey. They're supposed to "teach" you the best path, not just sell you some other fund for their cut of the pie.

there are also financial advisers that work with you specifically to answer this sort of stuff rather than sell you retirement options. Check into a NAPFA or Garret Network fee only fiduciary. (i think i got that right. lol)

[bdahlg68]

I read most of these pages and come to the conclusion that the funds I have been contributing to for the last 8 years kind of suck.

Unfortunatly though my UPS/Teamster 401k plans all the plans are really safe. S&P 400, S&P 500, Russel 2000, etc. I contribute the FUND which has pre selected stocks/bonds in the fund. I'm not able to select one stock per say. I purchase UPS stock and a discount of 5% on the lowest quarter.I put 12% or 10k into the fund a year pre tax. I just started a Roth, not much in there. I'm thinking my 401k plan stinks with too many bonds.

Should I stop my current 401k plan with the teamsters and open another one that I can select better perfoming stocks"more control of where my money goes"? Could I still purchase these stocks pre tax to lower my income for tax purposes? Say I put $200/week into these stocks, say I pick 6 or 7 stocks I like. Are you guy's holding onto the for say 20 years or are you constantly buyiong selling. I don't know much about the market and wanted kind of set it and forget it approach or is that dumb.

Thanks guy's
John

Don't stop the 401k. What brokerage is it thru? Fidelity has an option called Brokeragelink that will let you buy stocks. If. You are really limited than consider only enough to maximize the matching.

[Vortech404]

Thanks guys. My company doesn't match. My account
Is through Prudential

Thanks
John

[bdahlg68]

No match? I guess that is because of the discount on the UPS stock? Hmmm....

Anyway, what you may want to check into is called one of the following:

brokerage window
self-directed" 401(k)
self-directed brokerage account

Fidelity and Schwab have them but your employer (the plan "sponsor") decides whether your plan offers a brokerage window, and what proportion of your contributions you can invest through it. Your employer can also determine the range of investments permissible through a brokerage window. Some might restrict you to mutual funds, while others might permit a broader range of choices.

[Vortech404]

Thanks Brian I will look into that.
The reason UPS doesn't match is probably because of my
Pension.

[GregWeld]

I had asked Vortech to discuss these options with his Personnel office. They will have all manor of info for him as well as someone that he could speak with directly to answer questions of this nature.

Now ---- Here's a better/bigger question EVERYONE should be asking themselves.

What investments can I make -- and what style of investor am I -- and how much EFFORT am I willing to put in NOW -- in order to retire "decently" later.

That's a far more fundamental question!

Regardless of your available options ---- and the minuscule tax differences (before or after tax contributions).... what really counts is where you can put your money to work NOW... and have it double and triple or more over the years.


My personal belief #1 --- Mutual Fund "investing" (the forget it style of investing) will prove to be sadly disappointing in total return. This style of investing is fine --- until you get to where you have 50 or 100 grand..... and even then I wouldn't recommend it.... because you're just not taking responsibility for how you intend to live down the road.


My personal belief #2 --- BONDS are no place for ANYONE to be invested in for a retirement account unless you have a couple million bucks! Then MAYBE you could have half a million in super safe bonds. But ask yourself something.... are BONDS really more safe than say --- Exxon or Home Depot or Wal Mart or some other big cap company?

Now -- if BOND interest rates (we're talking Tax free munis here) get to be 10% ---- I'd be a buyer... BUT NOBODY SHOULD BE IN TAX FREE ANYTHING IN A RETIREMENT ACCOUNT that is already tax free (ROTH) or tax deferred (IRA/401). Why would you accept a FAR FAR lower rate of return -- to garner tax free status -- on something that is either tax free or tax deferred in the first place? And the difference in compounded growth over 20 or 30 years is just unbelievable!


Here's just one real quick google search I came up with!


Over the long term, stocks do better. Since 1926, large stocks have returned an average of 9.8% per year; long-term government bonds have returned between 5% and 6%, according to investment researcher Ibbotson Associates.


Do the math on 100K -- at 9.8% compounded over 20 years vs 6% (the higher number even!) and see what you have to retire on....


Note the difference between 5% and 8% is DOUBLE!! Multiply these numbers by ten to get the amount on 100k!!! and it's astounding!


Initial
Amount Years Compounding Return



$10,000 25 5% 3 $33,860
$10,000 25 8% 6.85 $68,500
$10,000 25 10% 10.8 $108,350
$10,000 25 12% 17.00 $170,000
$10,000 25 15% 32.92 $329,200
$10,000 25 18% 62.67 $626,700

[Vortech404]

Thanks Greg.
Looks like have work to do.

Those numbers get me really excited.
At least you know you have somebody else watching this
thread.

John

[68 stang]

Greg, what do you think about all the talk surrounding Tesla Motors. I know that they are a growth play. I knew Tesla might have something when I kept seeing their sedans around.

[toy71camaro]

We've discussed them a bit a while back..

They were on par with the likes of Apple.. they are a "perfect" company... as in. If they arent "perfect" their stock's gonna dive. lol.

More along the line of a gamble versus a long term hold. Thats my thoughts anyway. I've seen it swing both ways with them, and I'm personally not comfortable with that.

Now if I had some "play money" leaking out my back pocket, I might toss it that way. But I would then be OK with losing it. lol

[GregWeld]

Greg, what do you think about all the talk surrounding Tesla Motors. I know that they are a growth play. I knew Tesla might have something when I kept seeing their sedans around.




With companies like this you just never know.... I think their current sedan is fantastic... their first car - not so much....


IF -- and only IF -- you have money you can afford to loose --- then I'd buy some. Why not if you like the products and think they're a winner. I think they're winning right now.... but I ONLY buy dividend paying stocks -- so won't play that game. But if I was still a gambling man - I'd be a buyer.

Remember that it's not "investing" -- it's gambling.... and we've covered all that here many times. Nothing wrong with gambling if you can afford it IMHO.

[GregWeld]

Ah...... July...... Seems the buyers have all fled the market -- and you all are probably asking yourself why you're invested. HA!! I've been telling you for months --- remember these good days where the market seems to go up every day!

It's summer.... summer always sucks. It usually begins in May -- but this year it started later. People just seem to be doing everything other than "the market". It's a good time to pick away at putting some employees to work -- just know that after you buy - the stock will take a dollar dump the next day.

My guess is -- we continue the death of a 1000 cuts -- thru August. I know personally -- I'm doing a bunch of fun stuff rather than looking outside and seeing the rain fall and buying stocks. The market goes up when more people are buying than selling.... the market falls when, even if people aren't really selling in earnest -- but there's nobody around to bid 'em up. Learn the difference of a market sell off ---- and a period when there's just no interest in buying. They're markedly different.

[GregWeld]

So I know you guys are probably all tired of me harping about dividends...


But today is another day that reinforces why I like them over a similar name to invest in that does NOT pay a dividend.... in other words ---- why choose to put money in a stock that doesn't pay a dividend -- when there is probably a very similar stock that DOES pay one? Oh sure --- when the market is humming along and going up every day -- you're making money regardless! I like that too.... but after about 20 plus years of doing this (daily) I KNOW that the market doesn't always just hum along churning out daily gains in price. Some times you might be 2 and 3 YEARS running at a loss. If you're getting a dividend --- at least you're getting paid to sit on your hands (sounds like a union job huh? === Sorry Union guys!)


I write this today because -- the market sucks -- it's down almost 200 points this morning - and was down yesterday --- BUT --- I looked at one of my accounts and I got a check yesterday from Kinder Morgan Partners (KMP) for $13,200 -- That's real cash I can spend. Do I care what the market is doing today?? Not really (okay sure I do)... because I can pay my bills with the CASH the dividends give me.

If you're re-investing (DRIP - Dividend re-investment plan) then it's great that the market is DOWN during a dividend payout -- because your dividend will buy more shares (or parts of a share - whatever)... so it's to your BENEFIT!!

[WSSix]

I'm also quite alright with it dropping a little lower right now. I'm getting ready to dump some money into stocks. Nothing major but I'll take any little amount I can.:G-Dub:

[sik68]

Maybe this is obvious to everyone else, but I just caught on so I am hoping to make some sense of it...In my Schwab, stocks set for "reinvest dividends" the dividend payouts add to the cost basis of the stock, and are not counted as gains.

For example, say you bought 10 shares of MCD @ $100. 3 months later say the share price is still $100, but you've been paid a div. 10x$0.80 = $8. In your "Gains / Loss" tab, the report will show a ZERO gain, but changes your cost basis to $1008.

This is the case with all my stocks...but I want to see my total return (share price delta + dividends)! So I emailed Schwab, and their response was murky: "for tax purposes, dividend payouts are added to the cost basis of the stock, and are not included in the unrealized gains of the holding."

Any tips for using the Schwab site to show my actual total return? Or am I going to have to track my buys and total return manually in a spreadsheet?!

Thanks guys.

[WSSix]

With Vanguard, I simply do the math because it's the same way. Reinvested dividends are counted as a cost. I understand why it's listed that way but for me, I like to do the same thing you're doing and count it as a return. With Vanguard, it's line itemized though so it's very easy math.

[GregWeld]

Life -- according to Schwab....



Average cost basis is one method to determine the cost of mutual fund shares at the time the shares are sold or redeemed. Schwab uses the single-category method, which simply divides the total dollar amount invested in a particular fund position by the number of shares held prior to the sale trade date. Reinvested dividends are considered actual fund purchases and are included in the cost basis.


In other words -- you'll have to do the work yourself. But remember this.... There's the IRS rules of engagement -- and Schwabs way of calculating for it's retail customers... and only your accountant can tell you (once you have a real actual realized gain/loss) what is correct. Most people just use an "average cost" to determine their cost basis. Because for many folks -- their stocks are held in IRA's etc for LONG periods of time -- and the thing gets so jumbled up that it doesn't pay to have an accountant try to determine the actual cost for stocks you bought 30 years ago - and have been receiving dividends (re-invested) all these years.

It makes no difference for accounting purposes NOW -- other than YOU want to know.... IF your shares are held in tax deferred accounts.... because there's no capital gains taxes to calculate until after you start to withdraw. Then - because this money (IRA/401k's) was "TAX DEFERRED" it is assumed that you now owe taxes on all of it at the current income tax rate. The old "Gotcha".

[GregWeld]

Steven ---


Have you tried using "Portfolio Performance"


That will give you some info - but it's based on your total portfolio rather than broken out by stock. It will show you contributions -- and total gain/loss etc for various periods.

[sik68]

I see, thanks guys. Things are pretty simple for me right now...in most cases, just 1 purchase per stock; but I can see where actual cost basis gets a bit more cumbersome to track over the long haul.

Well I better create a spreadsheet; just another excuse to practice my Excel-fu.

Thanks for the 'Portfolio Performance' tip Greg; the summary table helps.

[GregWeld]

I just assumed this was known by everyone..... But here it is for Investing 102


So get out there and bang away my friends!!!



http://www.nbcnews.com/business/earn-more-money-when-you-have-more-sex-study-says-6C10945740

[GregWeld]

I get a shocking amount of PM's asking about investing. Most of which I can't really answer - because they're asking "what should I buy". As you all know - I don't recommend what to buy - and this thread is not about what to buy or what to sell.... it's about YOU GUYS learning some basics so that you're comfortable making these decisions on your own.

But the tickle for this post was the usual --- "with the market down.. shouldn't I wait to add more to my 401K?"

I think most are shocked when I respond -- HELL NO! ADD MORE!

Is this a "contrarian" view? No. It's a long term view with history on my side... and the knowledge that the market will go higher and if you buy "now" (whenever that is) 10 years from now it will be higher.

So the last month or so has been real poopie.... and this always gets people wanting to coast or back off the market. The exact wrong thing to do! Think of a period like this as suddenly seeing that '69 Camaro you always wanted that the guy was asking 100K for -- is now 70K.... do you wait for the guy to drop to 65? Chances are - someone smarter than you snaps it up and you miss out. The stock market is that way. The prices drop -- drop some more -- and you wait for ever better prices..... only to miss the day or two where the market snaps back and runs 5% -- then everyone feels good and piles in. Don't be "that guy". Save your dough -- and plow ahead... let your IRA/401 keep investing. And if you're saving on your own - set a date or amount - and every first of the month -- or every $500 -- INVEST IT. High or low. You'll buy more shares when it's low - and fewer when it's high... so your AVERAGE cost will smooth out over time.

Wealthy people get even more wealthy because they step in front of that moving train -- they'll buy buildings or businesses - or make investments - at bargain prices. When things turn around - they make even more money. Be like the wealthy and you'll be glad you did.

[WSSix]

So I got tired of my savings account only earning 0.8% and have moved some money from there to another brokerage account. This account is outside of my Roth IRA so I'll have to pay capital gains taxes on it but I am paying taxes on my savings too. I won't be invested in any MLP's though with this account. I didn't move enough money from savings over to hurt me should I lose it all. I'm also simply going to be following the long term path I've started.

With that said, I was looking at this link http://dripinvesting.org/tools/tools.asp in order to check out different companies that pay dividends. What I haven't noticed before but did after going through the list is apparently some companies charge a fee in order to be in a DRiP. Can someone explain this to me? Is it something I should be concerned about? An example would be Verizon, VZ. According to that list, there's a fee. How are they able to charge me a fee to invest in their company and why?

EDIT: Further investigating on my part shows that a number of the companies I am already invested in a charging a fee. I'm guessing this fee isn't that big of a deal then. I just want to make sure I get the dividend I should and don't end up getting smacked with fees.


Thanks

[glassman]

Hey Greg, which underwear stock should i buy?

Seriously though, since i've opened up my Schwab acct, everything has just gone RED and so have my eyes. Its kinda funny, like the little man (with the top hat? is it the monopoly guy?) comes in just to mess with us....

But, where in the thread, or can u explain/elaborate on "priced for perfection"?

thanx, Mike

[WSSix]

A "numbers miss" ---

Having said that -- the miss is a miss of ESTIMATES... which has always driven me crazy. Some guys sit around and GUESS what kind of sales and profit a company is going to do.. and if the company DOESN'T (or does) make those numbers people get all crazy and sell etc.

For a company like this -- a big drop in the share price is probably a "gift" and will allow a nice entry point to a stock that should continue to do very well. They signaled nothing wrong.. sales are good... profit is good...the products are fabulous.

But this is a glimpse into the market when stocks are priced to perfection... if everything isn't PERFECT - they get a huge haircuts in a hurry.

If I had a million in cash today - I'd be a buyer. But since I just bought into another apartment complex... I'll just sit on my hands and watch. :woot:

Here's one of the replies regarding priced to perfection, Mike.

[glassman]

Makes "perfect" sense, i remember reading that awile back. And if i had the chance, id buy or build an apartment complex right now, primarily cause i know real estate more than companies...

thanx

[96z28ss]

woohoo!

Altria Group, Inc. (MO) declares $0.48/share quarterly dividend, 9.1% increase from prior dividend of $0.44.
Forward yield 5.66%
Payable Oct. 10; for shareholders of record Sept. 16; ex-div Sept. 12

[GregWeld]

woohoo!

Altria Group, Inc. (MO) declares $0.48/share quarterly dividend, 9.1% increase from prior dividend of $0.44.
Forward yield 5.66%
Payable Oct. 10; for shareholders of record Sept. 16; ex-div Sept. 12




Ya got to love getting a raise don't ya!


EEEEEEEHHHHHHHAAAAAAAAAAA




I own 20,000 shares -- so that's --- 20,000 X's .04 = $800 per quarter increase X's 4 quarters ='s $3,200 per year * 12 ='s $266 per month for doing absolutely NOTHING....


Tell me what's wrong with that dividend ownership???

[WSSix]

I'm ok with those numbers :yes:

[toy71camaro]

Works for me!!! thats my 2nd increase with MO. First was 7% now 9%. I'm happy. :D :D

[GregWeld]

Works for me!!! thats my 2nd increase with MO. First was 7% now 9%. I'm happy. :D :D



Eventually you could be like Warren Buffet == where he gets in DIVIDEND what his initial investment was in Coke (KO). Wouldn't that be sweet! Now that's a return on investment!!

[WSSix]

Well, as I mentioned a couple posts back, I put some money from savings into another brokerage account I had. I put in my orders today. Since I am dealing with lower dollar amounts as I work on being diversified, I pay attention to the actual stock price and not just the dividend payout. I picked up a water utility, Verizon, General Mills, and Hasbro. They all pay a decent dividend and aren't expensive to purchase so I feel I actually bought a good amount and should get good dividend payments. I did buy some KMB. I only bought a few shares since they were "expensive". I need to count all my stocks and get them ordered by sector but I believe I'm about ready to start adding to them this next go around instead of buying different stocks. We will see but I'm positive I'll earn more than the 0.8% I was earning on that money that was in savings. :D

I will say one thing, pipeline and oil and gas MPLs pay a crap ton in dividends. I just didn't want to deal with the tax implications since this brokerage account is free standing and not under my Roth IRA umbrella.

[GregWeld]

Someone I know -- Mister Bobby B -- owns Sturm Ruger stock (yes folks - the gun maker) .... President Obama is the greatest gun salesman in the universe. Gun sales are off the charts - and like "terbacky" and liquor - you might as well make money off it!




Here's an article on Seeking Alpha about them.



http://seekingalpha.com/article/1655892-sturm-ruger-the-best-small-cap-dividend-ive-ever-seen-is-driving-70-upside?source=email_investing_income&ifp=0

[GregWeld]

Our very own Vegas69 seems to be smart and lucky at the same time! Having seemingly bought at the bottom of the real estate market! I just read that home prices in Las Vegas are up 24.9% (on an annual basis).

Way to go Todd!


I know that home sales in the greater Seattle area are just off the charts... multiple bids - homes selling for more than asking price - waivers of inspections and many all cash deals being done.

I had dinner last night with our broker here in Sun Valley who said sales had cooled here recently - and that they had "thought" things were going to really take off but that it had stalled. I would also say that the builders are begging for our business... all the while trying to post up a good front that they're "busy". They are "busy" but it's mostly because of a lack of qualified skilled craftsman which have moved from the area after such a long dry spell. Not necessarily because so many new homes are in the pipeline.

[sik68]

My friend is a RE agent here in San Francisco, and for the last 12-15 months, he has also seen the incredible trend of all-cash buyers. Specifically, Chinese all-cash buyers. After doing more research, he said the housing market in certain markets is being heavily driven by the new EB-5 Immigrant Investor program. It's a way to buy your Visa into the country so you can send your kids to college here, etc. etc.

Here is a good article on it. http://money.cnn.com/2013/07/08/real_estate/chinese-homebuyers/index.html?hpt=hp_t5

The more I sit here and think about it, the more I stew...are we kidding ourselves into thinking housing is on the rebound, only because we are selling off our market to other countries? Or is there a healthier perspective out there?

(BTW this is not to negate kudos to Todd...Todd's smart and is doing it for positive cash flow and long term appreciation. I am talking about the rapid short-term appreciations we're seeing).

[GregWeld]

Real estate is a game of LOCATION LOCATION LOCATION.... which means more than what street address you have... it's what STATE --- WHAT CITY --- What's the employment picture look like.

Here's the way I look at these things you mentioned. There's NOTHING you can do about the larger picture (selling to Chinese or Asians or Russians).... WHAT CAN YOU DO TO MAKE MONEY FROM THE SITUATION?


Also -- Buying "CHEAP" property in a town or state because it's cheap --- will lead to poor return on investment. A house in a town that sells for 100K -- that was 90K 10 years ago... is a big ho hum. Buy a 1 million dollar house in a hot market that sells for 1.5 million 3 years later -- that's a win!

[GregWeld]

I read this article today -- thinking that there was going to be something of interest - something we could learn from - some lick of a hope that there was some light at the end of the tunnel for folks that have found themselves in a bad spot.

Let me preface also by saying -- I've been BROKE... dead broke... and I've been rich a couple of times... THERE IS NOTHING WORSE THAN BEING DEAD BROKE. No question about it... it's a terrible feeling. Money might not buy "everything" but it buys what you need -- and when you need things and can't buy the basics. LlFE SUCKS.

Okay....

So here's my take away from this story....

The family that I wanted to feel sorry for --- was nothing more than your typical American family -- they used their house as an ATM... refi over and over to pull money OUT to live the American dream. Buying stuff and living large. The dude makes 160K a year -- has a Mercedes -- a swimming pool -- an RV -- "bikes and quads for the kids".... all of which was on borrowed money (the house ATM).

Sorry guys -- I don't feel sorry for them one friggin' bit. What did they think they were going to need financially when their FOUR kids wanted to go to college? How about when the roof needed replacing... or any of the other basics of unexpected costs come up. Magically refi the house AGAIN....


The banks were and are most of the problem -- they ALLOWED for people to live the dream as if it would never end.... but you MUST TAKE RESPONSIBILITY FOR YOUR OWN ACTIONS! Period. They dangled the bait -- but you don't have to take it! You're supposed to have a brain! Just because there's coke out there on the street doesn't mean you have to do it!

BEFORE these folks blew thru their "savings" - they should have sold the quads and the RV -- then the Mercedes... and THEN dipped into the savings and in the meantime PRIDE probably kept them from doing any of that.... or getting that second job etc.


http://www.nbcnews.com/business/family-foreclosure-housing-unemployment-8C11036099

[WSSix]

That's basically why I have not spent much money on my TA. I just don't feel that I have enough of a savings cushion or retirement started. At times I believe I'm wrong and can easily afford to do what I want to the car. Maybe I'm a little scared too as I've never had the kind of money I have now to spend. When I was younger and just day dreaming, spending all this money on a car was nothing. Now that I'm working through the labor day weekend(I'll be up at 3am tomorrow) to earn the money I make, I'm not so interested in spending it quickly. I never want to find myself questioning if I'll be able to keep the house I'm living in. Hopefully, I'm not taking it too far and not living life at the same time but that's for a different thread.

[glassman]

I read this article today -- thinking that there was going to be something of interest - something we could learn from - some lick of a hope that there was some light at the end of the tunnel for folks that have found themselves in a bad spot.

Let me preface also by saying -- I've been BROKE... dead broke... and I've been rich a couple of times... THERE IS NOTHING WORSE THAN BEING DEAD BROKE. No question about it... it's a terrible feeling. Money might not buy "everything" but it buys what you need -- and when you need things and can't buy the basics. LlFE SUCKS.

Okay....

So here's my take away from this story....

The family that I wanted to feel sorry for --- was nothing more than your typical American family -- they used their house as an ATM... refi over and over to pull money OUT to live the American dream. Buying stuff and living large. The dude makes 160K a year -- has a Mercedes -- a swimming pool -- an RV -- "bikes and quads for the kids".... all of which was on borrowed money (the house ATM).

Sorry guys -- I don't feel sorry for them one friggin' bit. What did they think they were going to need financially when their FOUR kids wanted to go to college? How about when the roof needed replacing... or any of the other basics of unexpected costs come up. Magically refi the house AGAIN....


The banks were and are most of the problem -- they ALLOWED for people to live the dream as if it would never end.... but you MUST TAKE RESPONSIBILITY FOR YOUR OWN ACTIONS! Period. They dangled the bait -- but you don't have to take it! You're supposed to have a brain! Just because there's coke out there on the street doesn't mean you have to do it!

BEFORE these folks blew thru their "savings" - they should have sold the quads and the RV -- then the Mercedes... and THEN dipped into the savings and in the meantime PRIDE probably kept them from doing any of that.... or getting that second job etc.


http://www.nbcnews.com/business/family-foreclosure-housing-unemployment-8C11036099

I especially love it when people have to sell their liquid assets (like their cars for example) and say 'I have over $$$$ invested" when it was never an investment to begin with,99% of the time it was a deprecatory item....common sense... but i too have made these mistakes in the past, some of us learn from the history we've made, some of us don't...

[GregWeld]

That's basically why I have not spent much money on my TA. I just don't feel that I have enough of a savings cushion or retirement started. At times I believe I'm wrong and can easily afford to do what I want to the car. Maybe I'm a little scared too as I've never had the kind of money I have now to spend. When I was younger and just day dreaming, spending all this money on a car was nothing. Now that I'm working through the labor day weekend(I'll be up at 3am tomorrow) to earn the money I make, I'm not so interested in spending it quickly. I never want to find myself questioning if I'll be able to keep the house I'm living in. Hopefully, I'm not taking it too far and not living life at the same time but that's for a different thread.



Life does have to be lived -- but there's this thing called LIFE AFTER YOU NO LONGER WORK --- that seems to be getting stretched out longer and longer. I don't want to be 82 and working at McDonalds -- I want McDonalds to send me a dividend check!


What happens to ALL OF US -- is that we tend to SPEND early -- and Save too late.... and what we need to do is SAVE EARLY so we can spend later and be able to do that at a far higher rate!

[mdprovee]

What happens to ALL OF US -- is that we tend to SPEND early -- and Save too late.... and what we need to do is SAVE EARLY so we can spend later and be able to do that at a far higher rate![/QUOTE]

That is a mouthful, and the key to latter success. And stay away from credit cards.

[GregWeld]

And stay away from credit cards.




Credit cards are the worst thing to ever happen to "money management". The fact that we can "charge" things -- does not mean that we can afford them. It just means that we've successfully managed to defer paying for them. Usually that means then that we charge more than we can actually afford to pay for - which contributes to LESS cash flow each month which leads to more charging!

A very vicious cycle even for rich folks! Rich folk that I know have 100K limits on their cards --- rather than 10K or 1K for the less fortunate... and I know people that have maxed out 100K cards. OMG -- really!! 100K at 18%....

THEY, of course, don't think they're broke because... after all... they're rich. Dude -- if you're rich!?!?! Then pay your balance each month. Otherwise you're IN DEBT.

"Affording something" is being able to pay for it. Right now - all in all done. Don't kid yourself otherwise. Paying "CASH" -- but using the house credit line -- is not PAYING CASH... You're just full of crap and kidding yourself if you think that's paying cash.

I do, however, think that payments and leases are fine --- IF you're saving a large percentage of dough each month at the same time, i.e., You lease a car but you're also contributing $500 or $600 a month to your 401/IRA/ROTH account. Then it's just cash management --- but if you aren't saving money then you're just stalling the debt.

[glassman]

I personally believe they teach (or don't) the law of exponential math at a far too early age, you should have too take it in junior high, then high school, then again in college to ram it into your brain...to quote "cool hand luke", "some folks you just cant reach..."

[WSSix]

Personally, I love my credit card. I use it for everything I can. I get 1% bonus points for each dollar. I pay it off each month. They owe me $600 for using their card :G-Dub:

[GregWeld]

Personally, I love my credit card. I use it for everything I can. I get 1% bonus points for each dollar. I pay it off each month. They owe me $600 for using their card :G-Dub:




Nobody burns the plastic better than I do... but it's a convenience that's used in place of carrying around cash. We travel a LOT... and I can wear the stripe off that bad boy. But like you - the bill is paid - and frankly - because I'm so anal - before it's due. I see the bill climbing during the month (thanks to on line banking) I transfer some money to it. For whatever reason the big balance bothers me.

[hifi875]

I pay my credit card off everymonth and have never paid a dime of interest or a annual fee. I like getting the cash back bonus and use the money to buy tires etc for my cars. Stuff that you need but don't necessarily get excited about.

[Vegas69]

I've almost completely stopped using credit cards. I pay with cash or my debit card. I spent years buying on plastic and paying off the bill every month. I just find that the immediate weight of the purchase makes you debate whether it's really worth spending the money or not vs. the surprise in the mail box every month. What really woke me up was looking back over my bank statements for 6 months and seeing what I now consider reckless spending and waste on credit card bills. Every dollar counts as it can be used for investing and ensuring your freedom at a predetermined age.

Americans have been programmed to be in debt over the last 50 years by the banks. To buy the biggest house, a new car every 3 years, student loans, 5 credit cards with balances, you name it. I've never liked debt but I'm at the point now where I hate debt. Live well within you means and invest wisely and you can be very wealthy and weave the lifestyle you desire.

[WSSix]

I've almost completely stopped using credit cards. I pay with cash or my debit card. I spent years buying on plastic and paying off the bill every month. I just find that the immediate weight of the purchase makes you debate whether it's really worth spending the money or not vs. the surprise in the mail box every month. What really woke me up was looking back over my bank statements for 6 months and seeing what I now consider reckless spending and waste on credit card bills. Every dollar counts as it can be used for investing and ensuring your freedom at a predetermined age.

Americans have been programmed to be in debt over the last 50 years by the banks. To buy the biggest house, a new car every 3 years, student loans, 5 credit cards with balances, you name it. I've never liked debt but I'm at the point now where I hate debt. Live well within you means and invest wisely and you can be very wealthy and weave the lifestyle you desire.

Agreed. You do have to be careful with what you spend your money on when using a CC since it's not immediately coming out of your wallet. I'm too busy right now to do much more than spend my money on the basic necessities in life so I'm not getting crazy with the CC that's for sure.

You're also right about the way we're programmed. The marketing folks in this country are doing a great job. Luckily, their BS doesn't work on me though I am fascinated by it.

[XLexusTech]

Anyone have a thought on what this Vodaphone separation will mean? I have some of it and am a bit on edge...

[96z28ss]

I use a credit card for everything. I don't carry a balance. It's paid off every month. I only use credit cards that give back something.
I used to have a GM card while I worked at Bose. We got the supplier discount plus any incentives plus the GM points I used to get my vehicles at a pretty damn good deal.
Now I use an Alaska Airlines card for everything except for gas. Gas I use a US Airways card, with those two cards I can transfer miles to just about any airline.
I'm flying to the Dominican Republic in January and used my miles only cost me $100.
If your going to use a card get some sort of benefit that you know you'll use.

[GregWeld]

Okay -- SUMMER is OVER on WALL STREET....


Now that the kids are back in school and wall street is back to work -- it will be INTERESTING to see what happens to the market.

[Sieg]

First peak up 111. Looks like Wall Street is glad to see the kids back in school........win win for me too! :D

[GregWeld]

So... My sister and brother in law came over to our Sun Valley dump after doing a hot rod show in Walla Walla. Cute little town that has re-invented itself as a "wine" and dine area.


She says to me -- "why do I have 10K in cash in my 401 and what should I do with it - is it good to have some cash available?"


The reason for this post is because --- once again --- it shows me how "detached" people seem to be from these kinds of accounts! It's just wrong, wrong, wrong, to be so ambivalent (uncaring) about this most important source of retirement funds!


So we open her account --- and the cash pile is from dividends that have been piling up --- RATHER THAN --- being re-invested! OMG -- She's missed 10K in buying -- and who knows how many quarters of payments that could have been buying more shares which pay more dividends which buy more shares! Just shoot me! This is MY sister! If anyone should know this stuff it's her!

Okay -- so it took a minute or two to find the correct check box (she uses Fidelity) to have all the dividends re-invested from now on.

NEXT UP was the question --- "isn't it good to have some cash available?"



NO NO NO NO NO NO! This is a retirement account -- not a checking account! There is nothing available to someone that isn't the proper retirement age. PERIOD. So then why have cash sitting around not earning anything - dividends or growth or anything. They pay you NOTHING for cash in a 401 type account. UGH!


Okay --- rant over.....

[toy71camaro]

Ouch. thats a hefty little "learning curve" fee. :(

[toy71camaro]

Have to say, I'm so happy (lucky?) I was shown this thread over here (from Mike/SolarGuy, hope your doin ok buddy).

I was dabbling in the market with my ROTH IRA with a lot of similar values/concepts displayed here, but not with a great deal of understanding. This thread and the help (whether it be questions or answers) from each of you have been a huge plus.

I'm happy to report after a year and a half of my "investing 102" strategy, and about 7 months after finally getting the balls to totally re-do my entire 401k account based on methods learned here, that I'm sitting on a +10% portfolio, PLUS all my dividends. With 30+ years to go, i've got a lot of hills to climb up and down, but, I'm confident I'll make it to retirement a little better off than most my peers due to the help here.

Thanks Guys!

:thankyou:

[WSSix]

Good job and congrats, Albert!

[96z28ss]

Best thing to happen to me, from this message board is, this investing thread it really open my eyes, many thanks thanks to Greg Weld, I consider him a good friend.

[GregWeld]

Did I tell you guys that I get 10% commission upon each of your retirement date??


HAHAHAHAHAHA



I'm really glad Trey started this thread.... and I'm seriously happy to impart some of what I've learned over the years..... But no matter who says what --- you need to thank yourselves for DOING AND MAKING CHOICES... and not just doing lip service.

It's funny how we'll research a car part to the ends of the earth -- and then be so haphazard about retirement - which is probably going to last 25 to 30 years AFTER we quit working!

[glassman]

Agreed ^^^^, agreed ^^^, agreed^^, and once again, thank you Mr Weld, cause ya dont have to give a sh.....

I've learned a bunch through this, i've listened to investment talk radio, CNBC and the like, talk radio, and different "financial" planners overr the years and it was all justt over my head, till we can splain it in simple terms.......

[GregWeld]

You guys have all heard me say "priced for perfection".... With that in mind -- just look at Apple (AAPL).... their business is FINE... their profits are FINE... their stock? Down 35% in one year. OUCH. The reason -- people aren't impressed with their latest offerings... and when a stock is priced for perfection - it gets KILLED by stuff like this. You always need to be aware of this phenomena.

The hard part is to know when that is happening. For me - it's just a pure judgement call. Kinda like I've reminded people "when the grocery clerk is telling you about the money they made on "X" --- RUN! Well --- stocks are like that... when the TV is talking about the stock -- and the guy on the corner -- and the gas station guy.... RUN (SELL!).

It's fun as hell if you bought low -- and ride the wave to the crest... but most of us never are that clever. We don't discover the stock until it's near the crest... and that's when you get your ass handed to you. So just LIVE AND LEARN is all I'm sayin'. It's always so tempting to jump in because something is "hot".

I've learned to walk away from "hot" (flipping houses anyone?).... because I figure I'm just joe average and by the time I've figured out it's hot - it's too late - the smart money has already come and gone.

[toy71camaro]

Lol... yeah.. i had a feeling when i personally was bored with their progress earlier this year.. and i watched it tumble.

I was smart tho, quite a few years ago (kinda). My AAPL stock I bought is currently up 225%. Not bad huh? it was up almost twice that earlier this year. Did i sell? Nah. I wasnt that smart. I only invested $25 in it originally. It was my first stock i bought when i first opened my account a number of years ago. It's no worth a whopping $90, which is +225%. But, its going to cost me $10 to sell it. Thus, taking a large chunk of my "gain" and then having to deal with taxes on it. So I didnt bother. Its not enough for the hassle. lol.

And i was "kinda" smart cuz i bought it. BUT i didnt have enough money to be "really smart" and buy a bunch of it. lol

[bdahlg68]

Today, my friends, is not one of those days to be on the sidelines! :popcorn2: :popcorn2: :headspin: :headspin: :excited: :excited: :G-Dub: :G-Dub:

up 2% TODAY!

[toy71camaro]

Today, my friends, is not one of those days to be on the sidelines! :popcorn2: :popcorn2: :headspin: :headspin: :excited: :excited: :G-Dub: :G-Dub:

up 2% TODAY!

WOohoo! I'm about +1.5% on my Investing 102 stocks. :D


Question.. Anyone else here a numbers/spreadsheet whore like me? LOL. I have a spreadsheet (Google docs, actually) that i keep a tab on EACH of my stocks. the Original Purchase, later purchases, all the dividend payouts, etc. Well, ive been keeping track of each of them since i started this whole thing. I keep track every couple months of my "total return", "yield on cost" etc (since it was a manual and bit more tedious project). BUT, I ran into a feature today where i can pull in Google Finance Stock bits from "live" from the web. So using this, I've made a "Summary View" tab where it auto calculates my current stock +/- for the day, my TOTAL RETURN, by Yield On Cost and also the Current Yield of the stock, etc. Totally cool!

So now I can see realtime (well, 20 minute delay from the market) my vitals and my total return (which, i may add, is GREAT!).

Its the "=GoogleFinance" function. :)

[GregWeld]

You guys don't even want to know what my gain was today in DOLLAR terms....
HAHAHAHAHA



The take-away for investing 102 --- you just never can afford to be out of the market -- or trying to "game" the market. Your biggest gains will be made on very few days during the entire year... and if you happen to be out on those days -- you can't catch up.

This is what I've learned over the years doing this -- just stick to your good companies --- invest regularly -- and don't be in and out. Sometimes that SUCKS.... but long term you'll be way way ahead and that is the goal.


Note too -- McDonalds gave us a 5% raise on the dividend today.

[camcojb]

The market sure loves the Fed................ :lol:

[GregWeld]

The market sure loves the Fed................ :lol:





No --- the Market LOVES low interest rates....


Oldest market saying is one worth learning:


When interest rates rise the stock market dies


Give me 7% tax free muni rates and I'll be out of the market in a heartbeat! But as long as you can't make any returns with interest bearing investments you HAVE to be long the stock market. Not to mention that the low rates help companies make profits. When they start having to pay out more for borrowing (overhead) -- and inflation starts creeping in -- WATCH OUT....


But for now --- let's drink the tea!

[camcojb]

So the Fed and QE are keeping the interest rates low. The market was down this morning in advance of the Fed meeting, and as soon as they said no tapering it's off to the races. Every time there's talk of cutting back by the Fed the market seems to stumble a bit, and as soon as they squash that talk it takes off again. I don't think the market is as related to the economy as it once was.No --- the Market LOVES low interest rates....


Oldest market saying is one worth learning:


When interest rates rise the stock market dies


Give me 7% tax free muni rates and I'll be out of the market in a heartbeat! But as long as you can't make any returns with interest bearing investments you HAVE to be long the stock market. Not to mention that the low rates help companies make profits. When they start having to pay out more for borrowing (overhead) -- and inflation starts creeping in -- WATCH OUT....


But for now --- let's drink the tea!

[GregWeld]

So the Fed and QE are keeping the interest rates low. The market was down this morning in advance of the Fed meeting, and as soon as they said no tapering it's off to the races. Every time there's talk of cutting back by the Fed the market seems to stumble a bit, and as soon as they squash that talk it takes off again. I don't think the market is as related to the economy as it once was.




Well -- the FED is between a rock and a hard place. They've driven into the corner so deep that lifting is going to cause issues. Interest rates are artificially low -- so the minute they "lift" (back off buying bonds) interest rates are going to rise and they'll rise quickly. So much is based off these low rates -- that anything UP from here will seem like a shock. Obviously -- home mortgage rates at 5% should be seen as a gift from heaven --- but when people get used to 3.5% --- 5% will be shockingly high. It takes time for businesses and people to adjust. They will --- and they can --- but it doesn't lessen the shock value.

The market is related to the economy --- but more so to individual businesses and their profits and GOING FORWARD what they have to say. Now everyone that has a brain can figure out that if interest rates rise --- that will come straight out of the bottom line... no different than a house payment that rises... and wall street is all about profits. It will take time for businesses to adjust to higher costs --- and then the suppliers will raise prices because they have higher costs --- and then the next guy and the next guy --- and we WILL have an inflation problem.

When I was in the importing biz in NYC --- during the late 70's and early 80's --- we couldn't raise prices as fast as our costs rose... and we ended up with "surcharges" for freight costs etc. It was cheap to rubber stamp a surcharge on an invoice vs reprinting the price list monthly! Everyone was doing it. I can tell you that is a very toxic business environment.... and it's what all the economists have been warning about.

This is why you've seen anything that is interest rate sensitive - getting hammered. I warned about this months ago! I sold all my bond portfolio (for a nice gain) well in advance --- and sure enough --- muni bonds have been getting hammered in face value as the "thought" the FED might ease (buy less bonds than the current 85 BILLION per month).

We have a free market --- except that we've had one player creating all the rules! The minute the rule maker stops making up the rules -- we'll go back to a free market... and the problem with that is nobody wants that to happen -- even though they really don't want the FED loading up the balance sheet with debt so it's a real double edged sword.

Think about it this way --- real simple..... everyone was grousing about the cost of cars SOARING on Barrett Jackass..... 150K for "clone" cars. REMEMBER? It was crazy --- but people also LOVED it because it made them feel good about their "investment" (in their own car). So it was fun -- and people bitched because they were being priced out of the market -- but it also meant they could sell their average '69 Camaro for 75K so they were happy too. THEN THE REAL MARKET CAME BACK - and suddenly the 75K they could have gotten was back to normal and they would be lucky to get 40.... Now they hate the world and everything in it.... yet it also brought down the stupid money prices being paid --- so really --- it's almost an even exchange. What people want is to borrow for a house at 3% and earn interest at the bank of 6% --- but it just doesn't work that way does it.

[Vegas69]

I finally decided to wade in with some individual stocks. I bought first thing this morning so my timing was alright. ha ha I took your advice and bought 4 big cap stocks. I'm playing with chump change at this point but I'll keep learning, buying, to give my portfolio another branch.

[GregWeld]

I finally decided to wade in with some individual stocks. I bought first thing this morning so my timing was alright. ha ha I took your advice and bought 4 big cap stocks. I'm playing with chump change at this point but I'll keep learning, buying, to give my portfolio another branch.



Oh great! Tomorrow we'll be down 300 points.....


The key to INVESTING --- is patience.... and understanding... "timing" makes it fun because it makes you feel better.... but over the years it's just not very important. You've heard me preach enough -- just buy good stuff -- that pay dividends - re-invest the dividends (if you're not living off them like I do) and kick back. Not really much different than buying a nice house in a good neighborhood and letting the renter pay the mortgage for you. Sure - they'll be poo days - like when the renter calls and says "X" is leaking --- or the bad tenant that moves out in the middle of the night.... The market has those same poo times... but eventually things go your way.

As you know - I have real estate holdings - residential and commercial... stocks... mortgage backed paper.... So I'm all for being diversified. :relax:

[Vegas69]

Yes sir, definitely a long term play for me. Just another way to put my money to work vs. sit in my bank account with mold growing on it. What motivated me is investing 15% of my gross income every year. I needed another avenue on top of the traditional retirement accounts. I do like the fact that stocks are liquid. Retirement accounts are off limits and real estate is far from liquid. I am following Dave Ramsey's baby steps as I'm one of his ELP's and have enjoyed his books. http://www.daveramsey.com/new/baby-steps/ It's a solid foundation to become financially independent.

I still have aspirations to pick up a few more properties but the market is changing and the timing isn't right to pick up number 3. It's looking like 6-12months. I'll keep saving and start whacking down the principal on my primary and investment properties.

[GregWeld]

I'll keep saving and start whacking down the principal on my primary and investment properties.




This is one step that most miss in retirement planning... and it's a super important step! It's not just how much you have for retirement -- it's about how much you NEED to retire... and if all you have to do is buy groceries and pay the light bill -- then you don't need much.

Now -- couple "lowering the needs" --- and RAISING the cash flow (paid off rental income property) and now you can go racin'! And take the misses to Hawaii... and that's what we're shootin' for!!



Healthy lifestyle --- and financial health!

[Vegas69]

I've been adding enough principal to the payments on the investments to pay them off in 18 or less. (All funded by the tenant:hapdance: ) I've also been adding a small amount to the primary for quite some time. I want to step it up and have it free and clear by 50 or sooner.

That's my goal, not to owe anybody a dime. I'm definitely the tortoise and don't have the cojones to play the stock market vs. free and clear property. I'll have plenty to play with in the market when I don't have debts. :thumbsup:

[GregWeld]

I've been adding enough principal to the payments on the investments to pay them off in 18 or less. (All funded by the tenant:hapdance: ) I've also been adding a small amount to the primary for quite some time. I want to step it up and have it free and clear by 50 or sooner.

That's my goal, not to owe anybody a dime. I'm definitely the tortoise and don't have the cojones to play the stock market vs. free and clear property. I'll have plenty to play with in the market when I don't have debts. :thumbsup:

I get that..... but just use this "visualization" to help you get your head around the differences. BTW -- I've used my earnings/profits from STOCKS to invest/diversify into real estate not the other way around. Just say'n'.



http://i919.photobucket.com/albums/ad33/gregweld/Fun%20Fotos/file-43.jpg (http://s919.photobucket.com/user/gregweld/media/Fun%20Fotos/file-43.jpg.html)

[toy71camaro]

Boo... The "little man on Wall Street" seen your buy yesterday. and i think i even heard him yell out this morning "bring the market down boys! I dont think this guys got the guts to stick it out!"

:poke: :poke:

[Vegas69]

Having trouble making any sense of that graph. Land bought for $100 in 1928 would be worth a whole big enchilada today. I've seen land in Vegas bought for 5k in the 70's that is worth over $500,000.

[GregWeld]

I can't defend the chart ---- I just googled "Real estate vs stocks" and that's what came up. I know that stocks have always been ahead of both real estate and bonds.... Housing is usually quoted as a 4% annualized gain -- Stocks usually are around 9% ---- and those differences over time are just gigantic.


Either way --- as long as a guy is salting away dough that is earning him money ---- I'm good with it!

[GregWeld]

So as usual --- here's the way the market works.


The minute I posted about Apple (AAPL) being in suck territory year to date.... it's been up every day since. :tiptoe: :D


Adrienne (23 years old) is in line somewhere at an Apple store in Minneapolis as we speak... our family has 4 iPhones and 2 of them are available for upgrading... so you know we're ordering 2 "RIGHT NOW" --- > Mom and Adrienne! Dad can go suck wind. :smiley_smack:

[Woody]

Having trouble making any sense of that graph. Land bought for $100 in 1928 would be worth a whole big enchilada today. I've seen land in Vegas bought for 5k in the 70's that is worth over $500,000.

I think the chart represents the average of the asset class as a whole. If you cherry pick one example of a piece of real estate that you know had a higher return, there are also examples of stocks that have had much higher returns than indicated on the chart.

A few years back I had done some research on long terms returns for stocks vs. real estate. The data that I found at that time indicated real estate and stocks have had pretty similar returns over the long term, with real estate having a slight edge. The figures I remember were close to 9% to 10% per year.

[GregWeld]

REASONS WHY STOCKS ARE BETTER THAN REAL ESTATE

1) Higher rate of return. Stocks have historically returned ~8% a year compared to 2-4% for real estate over the past 60 years. You can also go on margin to boost your returns, however, I don’t recommend this strategy given your brokerage account will force you to liquidate holdings to come up with cash when things go the other way. Your bank can’t force you to come up with cash or move out so long as you are paying your mortgage.

2) Much more liquid. If you don’t like a stock or need immediate cash, you can easily sell your stock holdings. If you need to cash out of real estate you could potentially take out a home equity line of credit, but it’s costly and takes at least a month.

3) Lower transaction costs. Online transaction costs are under $10 a trade no matter how much you have to buy or sell. The real estate industry is still an oligopoly which still fixes commissions at a ridiculously high level of 5-6%. You would think Zillow or Trulia would lower transaction costs, but unfortunately they’ve done very little to help lower expenses. They are in cahoots with the National Association of Realtors. This is part of the reason why I don’t trust Zillow.

4) Less work. Real estate takes constant managing due to maintenance, conflicts with neighbors, and tenant rotation. Stocks can literally be left alone forever and pay out dividends to investors. Without maintenance you’re able to focus your attention elsewhere such as spending time with family, your business, or traveling the world. You can easily pay a mutual fund manager 0.5% a year to pick stocks for you or hire a financial advisor at 1% a year.

5) More variety. Unless you are super rich, you can’t own properties in Honolulu, San Francisco, Rio, Amsterdam and all the other great cities of the world. With stocks you can not only invest in different countries, you can also invest in various sectors. A well diversified stock portfolio could very well be less volatile than a property portfolio.

6) Invest in what you use. One of the most fun aspects about the stock market is that you can invest in what you use. Let’s say you are a huge fan of Apple products, McDonald’s cheeseburgers, and Lululemon yoga pants. You can simply buy AAPL, MCD, and LULU. It’s a great feeling to not only use the products you invest in, but make money off your investments.

7) Tax benefits. Long term capital gains and dividend income are taxed at lower rates than the top three W2 income rates (28%, 33%, 35%). If you can build your financial nut large enough so that the majority of your income comes from dividends, you could lower your marginal tax rate by as much as 20% or so, depending on the current legislation.

[GregWeld]

REASONS WHY REAL ESTATE IS BETTER THAN STOCKS

1) You are more in control. Every physical real estate investment you make puts you in charge as CEO. As CEO, you are able to make improvements, cut costs (refinance your mortgage), raise rents, and market accordingly. Of course you are still at the mercy of the economic cycle, but overall you have much more leeway in making wealth optimizing decisions. When you invest in a public or private company, you are a minority investor who puts his or her faith in management. Sometimes managers commit fraud or blow their companies to smithereens. Nobody cares more about your investment than you.

2) Leverage with other people’s money. Leverage in a rising market is a wonderful thing. Even if real estate only tracks inflation over the long run, a 3% increase on a 20% downpayment is a 15% return. In five years you will have more than doubled your equity at this rate. Leverage also kills on the way down, but real estate is very difficult to trade so you will most likely stay put unless things get really dire.

3) Tax advantageous. Not only can you deduct the interest on up to $1.1 million in mortgage indebtedness on your primary home, you can also sell your primary home for tax free profits up to $250,000 for singles and $500,000 for married couples if you live in the home for the last two of a five year period. If you are in the 28% or higher tax bracket, it behooves you to own property. All expenses associated with managing your rental properties are also deductible towards your income. Income limits do apply however, so make sure you don’t make much more than ~$166,000 a year total.

4) Tangible asset. Real estate is something you can see, feel, and utilize. Stocks aren’t event pieces of paper anymore, but ticker symbols and numbers. When the world comes to an end, you can seek shelter in your property. Real estate is one of the three pillars for survival, the other two being food and shelter.

5) Easier to analyze and quantify If you can calculate realistic expenses and rental income that’s all you really need when it comes down to valuing a piece of property. If you can borrow at 4% and rent out for a 6% yield, you’ve likely found yourself a winner. Real estate is immediately arbitrageable if you have the financial means to invest. There’s not only the cash flow component but the underlying equity component that helps investors build wealth. Stocks require you to trust what the company reports. There are countless ways for companies to massage their numbers to make things look better than they really are e.g. adjusting accounts receivables, adding one off gains, and using various amortization or depreciation strategies to name a few.

6) Less visible volatility. Your house value could be tanking and you would never know it since there isn’t a daily ticker symbol. During bad times, the utility of your home really helps soften the blow as you enjoy your home and create great memories. During the 2008-2009 downturn, I still got to enjoy my vacation property in Lake Tahoe 15-20 days a year even though values were plunging. Meanwhile, looking at the TV or computer screen just made me mad. When your investment is less volatile, it’s much easier to stay the course and not sell at the bottom.

7) A source of pride. Making money for money’s sake is a pretty empty feeling. Every time I drive by my rental properties I feel proud to have made the purchases years ago. I know that my money is working as hard as possible so I don’t have to. Real estate is a constant reminder that taking calculated risks over time pays off. There is an indescribable feeling nobody tells you once you’ve closed on your property. Even though the bank probably owns most of it in the beginning, you literally feel like the King or Queen of your castle. When you die, you can pass on your pride to your children or closest companions to let them create their own memories.

8) More insulated. Real estate is local. If you’ve made a good decision to buy in an economically strong region, you will be more insulated from the national economy or the global economy. Spain blowing up is likely not going to affect the rent you can charge. Look at prices in superstar cities such as Manhattan, Hong Kong, Singapore, London, Paris, and San Francisco. They fall the least, recover the soonest and gain the most. Of course, industries in your area could suddenly disappear and leave you broken as well.

9) The government is on your side. Not only do you get generous mortgage interest tax deductions and tax free profits, you get bailouts if you can’t pay your mortgage. The government also aggressively went after banks to force them to extend loan modifications to bad and good creditors. I even got a free loan mod recently to my surprise. Programs such as HARP 1.0 and HARP 2.0 are allowing folks without hefty downpayments to get in on the action. There are plenty of non-recourse states such as California and Nevada which don’t go after your other assets if you decide to stop paying your mortgage and squat for months. When was the last time the government bailed individual investors out of their stock investments?

[GregWeld]

So just do like I do --- Invest in both if you possibly can.


IMHO --- Stocks will "allow you" to invest in real estate... because you can make gains and be more liquid in "the market"... and real estate is illiquid and can actually need to be subsidized up front for 2 to 5 years.

I invested seven figures in a new apartment complex last year --- I will see ZERO return until next year some time due to us upgrading all of the units etc. SO the cash flow that would be going to pay out to investors - is being used to improve our investment in order to contribute a higher ROI (Return on Investment) down the road. But in the meantime -- I've lost the income on a million bucks -- AND -- it's totally illiquid for a number of years.

The key to this entire thread however -- is to do SOMETHING!

[Vegas69]

I think the chart represents the average of the asset class as a whole. If you cherry pick one example of a piece of real estate that you know had a higher return, there are also examples of stocks that have had much higher returns than indicated on the chart.

A few years back I had done some research on long terms returns for stocks vs. real estate. The data that I found at that time indicated real estate and stocks have had pretty similar returns over the long term, with real estate having a slight edge. The figures I remember were close to 9% to 10% per year.

My point is the chart is inaccurate. The median home price in America is $212,000.

Now, if you calculate $100 over 80 years with compound interest at 9%. It's right at $100,000.

Where I think they meant to go with the chart is that same $100 invested in real estate wouldn't have grown at the same rate. Not even close.

In my opinion the median home price in 1928 vs. today would be a better example. Then you have to factor in costs over the years and it gets tricky. Is it an investment covering it's own cost for the most part or primary residence. etc...

The average home price in 1930 was $7800.

With the $7,800 and $212,000 in mind, there is no doubt the $100 in the stock market is superior.

Just for fun let's factor a free and clear property after say 30 years that generates income for 50 years. At only $500 a month for rent over 50 years, that's $300,000. Then you add the appreciation of $204,200 for a total of $504,200.

To put the nail in the coffin, if you would've invested the same $7,800 in the stock market in 1928, you would have over $7,000,000 today.

Case closed....:lol:

[GregWeld]

I've never read anything that ever created a case for real estate being a better investment NUMBERS WISE than the stock market over time....


Having said that --- I'm a firm believer in investment in INCOME producing real estate... the first part of REAL estate is that it's REAL. It's a good investment over time and while there are offsetting arguments -- none of them really hold up. If you buy an INCOME producing property -- it will pay off handsomely down the road. PERIOD.


STOCKS are easier. PERIOD. You can't (now days anyway --- LOL) buy a house with $1000... and you can buy stocks all day long every time you have $200 or $1000 to invest. They're liquid. The produce instant income (dividends)... and require very little "effort". Thus -- for most people it's just simply the best way for them to invest.

Once the investments -- or perhaps you inherit -- or win the lottery for 50 grand --- then a person would be wise to invest in some sort of real estate.

Personally I like LLC's --- where I don't have to do anything except collect the income.... but LLC investing requires minimum net worth (because of the illiquidity!).... and shares are generally 50K per share etc. So that alone requires a higher nut to crack.

[GregWeld]

Just wanted to personally thank Todd for investing in the stock market and killing us all in the process!! HAHAHAHAHAHAHAHAHA



Welcome to learning about the little man on Wall Street Todd!!

[Woody]

My point is the chart is inaccurate. The median home price in America is $212,000.

Now, if you calculate $100 over 80 years with compound interest at 9%. It's right at $100,000.

Where I think they meant to go with the chart is that same $100 invested in real estate wouldn't have grown at the same rate. Not even close.

In my opinion the median home price in 1928 vs. today would be a better example. Then you have to factor in costs over the years and it gets tricky. Is it an investment covering it's own cost for the most part or primary residence. etc...

The average home price in 1930 was $7800.

With the $7,800 and $212,000 in mind, there is no doubt the $100 in the stock market is superior.

Just for fun let's factor a free and clear property after say 30 years that generates income for 50 years. At only $500 a month for rent over 50 years, that's $300,000. Then you add the appreciation of $204,200 for a total of $504,200.

To put the nail in the coffin, if you would've invested the same $7,800 in the stock market in 1928, you would have over $7,000,000 today.

Case closed....:lol:

You have over-looked the primary benefit of investing in real estate: Leverage. If I use your numbers of $7,800 in 1930 and assume a 20% down payment, the initial investment is $1,560. If the current value is $212,000, your return would be 6.3% annualized. The dow index in 1930 was 198 and as of today is 15,484. That equates to a return of 5.6% per year. The return on the real estate assumes that on average you break even on your rental income less expenses over 80 years. I would argue that on average over an 80 year holding period you would have a substantial positive cash flow, especially after the mortgage was paid off in 30 years. I also realize there would be dividends from the stock investment as well. It is really tough to make like comparisons with all of the variables that come into play, but my point is that the returns from both investments are pretty close.

[96z28ss]

Who can live to see an investment 80 years? isn't that too long of a period to compare?? shouldn't a 50 year span be a better comparison?

[Vortech404]

I have a question?

Trying to figure out what is better. I understand buy in company's you
like and shop at buy lets use this as an example.

Lets use a $6000 dollar figure and you like all 3 but can only pick 1.

60 shares of MCD vs 150 shares of Coke vs 77 shares of HD .
The yearly dividends of MCD $194, KO $168 and $120 for HD.

Looks like the Coke would win out because of the more shares? cheaper so the dividends buy more shares.But HD
killed them on total return? How do you choose?

What is the biggest factor in narrowing down a stock?

Thanks John

[GregWeld]

I have a question?

Trying to figure out what is better. I understand buy in company's you
like and shop at buy lets use this as an example.

Lets use a $6000 dollar figure and you like all 3 but can only pick 1.

60 shares of MCD vs 150 shares of Coke vs 77 shares of HD .
The yearly dividends of MCD $194, KO $168 and $120 for HD.

Looks like the Coke would win out because of the more shares? cheaper so the dividends buy more shares.But HD
killed them on total return? How do you choose?

What is the biggest factor in narrowing down a stock?

Thanks John




Good questions John.... and here's my question for you. Why would you only have to buy ONE company? All three are great long term investments so why wouldn't you just buy $2000 of each one?


And here's the answer to your question.... Nobody can tell you which one you should buy. Which one (if you can't do all three) would you like to own?

That is also why you DIVERSIFY.... you want to own a bunch of different companies... in different sectors... i.e. industrial - financial - retail - etc.

[GregWeld]

Who can live to see an investment 80 years? isn't that too long of a period to compare?? shouldn't a 50 year span be a better comparison?



Agree.... 80 years is a pretty long time. But if you started to invest like you should have -- at 21 --- and you retired at 65 -- and you lived until you're 90... that's 69 years... so we'll split the difference between 50 and 80 year terms and stick to 69 year terms from now on. :twak: :lol:

[Vortech404]

haha Greg I knew you were going to say that.

My other stocks are PG,MO,PFE,NU,VZ and UPS. So if I do MCD,KO and HD
I hit almost all sectors. It just fells better mentally to see 150 stares of a stock vs 20, 50, 25 lol I just got to get over that.

This is in a 401k so I'm in these for the long haul.

Thanks again

[GregWeld]

haha Greg I knew you were going to say that.

My other stocks are PG,MO,PFE,NU,VZ and UPS. So if I do MCD,KO and HD
I hit almost all sectors. It just fells better mentally to see 150 stares of a stock vs 20, 50, 25 lol I just got to get over that.

This is in a 401k so I'm in these for the long haul.

Thanks again



Oh I totally get it.... I like stocks in big numbers and I tend to concentrate... but I'm not building a portfolio... I've already got it! HA!!

Okay - split the difference and buy TWO... 3K each name.

Nice portfolio by the way. You're doing really nice job.

My thoughts then on Home Depot (HD). I heard the CEO say they would only build 3 stores in the US this year --- the days of adding 500 stores is over. So this is a mature company that will do well if building is good and home sales are good.


McDonalds (MCD) -- stable -- asian growth... a history of raising the dividend payout. Did I mention stable? That's why I own it. It pays a paltry dividend - so I offset that with higher payers - but you guys shouldn't be trying to do this YET.... so just get your portfolios balanced and you'll be fine. I'd buy MCD on the dips -- it's range bound between low 90's -- and high 90's... buy when it's down 94 or so.


Coke (KO) -- The WORLD drinks Coke.... Warren Buffet gets a dividend from Coke annually that equals his original investment! Wouldn't we all like to be in that position?? Coke for me is like MikeyD's.... it's stable... and makes me sleep well at night... and I know my money is going to "be there". I like that.


Thus ---- the real question? How could you go wrong regardless of picking one - two or all three of these great companies? And if you don't buy one of them this year - buy it next year or the year after!

[Vegas69]

You have over-looked the primary benefit of investing in real estate: Leverage. If I use your numbers of $7,800 in 1930 and assume a 20% down payment, the initial investment is $1,560. If the current value is $212,000, your return would be 6.3% annualized. The dow index in 1930 was 198 and as of today is 15,484. That equates to a return of 5.6% per year. The return on the real estate assumes that on average you break even on your rental income less expenses over 80 years. I would argue that on average over an 80 year holding period you would have a substantial positive cash flow, especially after the mortgage was paid off in 30 years. I also realize there would be dividends from the stock investment as well. It is really tough to make like comparisons with all of the variables that come into play, but my point is that the returns from both investments are pretty close.

I'll give you that in an investment scenario. The big factor is compound interest with stocks. That's what makes it a landslide for stocks.

[Vegas69]

Just wanted to personally thank Todd for investing in the stock market and killing us all in the process!! HAHAHAHAHAHAHAHAHA



Welcome to learning about the little man on Wall Street Todd!!

100% Personal Responsibility.. See my healthy 101 thread for details. ha ha ha

[Vortech404]

Question about limit orders?

Are you guy's putting in the last traded price? How much below? %

Let's say I'm interested in purchasing 75 shares of KO. The last trade price was $39.40. What would you put your limit price at $38.89 because that was the after hour price?

Thanks
John

[GregWeld]

Question about limit orders?

Are you guy's putting in the last traded price? How much below? %

Let's say I'm interested in purchasing 75 shares of KO. The last trade price was $39.40. What would you put your limit price at $38.89 because that was the after hour price?

Thanks
John



Okay -- so this will not be easy to say so that you "get it" but I'll try - just don't take offense because in order to make it NICE -- would take a page of explanation.

It just doesn't make a hill of beans doing a limit order for 75 shares --- when you do the math --- if you save 10 cents --- you're talking 7.50 total on the buy.... in the long run --- that's just not what is going to make or break an investment.

I'm buying 20 to 50 THOUSAND shares --- limit orders are then "real money" when you do that 10 cent math....

Having said that --- I'll answer your question --- I put in the lowest price of the day -- and do a day only trade. So if it's not filled - I can redo it the next day.

[Vortech404]

Hey Greg,
Thanks for your reply. I know my purchases are really small compared to yours. I thought I read on another page to always use a limit order and I was curious to how people came up with what they wanted to bid.

I guess if you are buying in small quanities to just buy at market price and get the shares.

At least now I know later when I'm buying 20-50 thousand shares to use limit order with the lowest price of the day!! ;)

Thanks for all your help

[GregWeld]

Hey Greg,
Thanks for your reply. I know my purchases are really small compared to yours. I thought I read on another page to always use a limit order and I was curious to how people came up with what they wanted to bid.

I guess if you are buying in small quanities to just buy at market price and get the shares.

At least now I know later when I'm buying 20-50 thousand shares to use limit order with the lowest price of the day!! ;)

Thanks for all your help


My point wasn't to brag about the size of mine versus yours -- it was merely a reference of when a limit order is important and why they're used. There's real money to be saved when you're upping the ante a bit -- and on something in the 100 share range it's just really not very important and I feel that what IS important is just to get going and investing.... because most people don't have the time to be chasing shares daily etc. That one day - when you don't get your order filled --- and the next day the shares run a buck a piece! Now what did you "save" -- you just cost yourself a buck a share by trying to be "cute" and save 10 cents a share. Of course it goes the other way too -- but you get my point.

The other thing that people do is try to "time" the "EX" date of a dividend paying stock because the shares generally trade down the amount of the dividend being paid... thus you effectively pick up the dividend by just getting the discounted price that day ---- the problem with this is A) you have to wait for that date --- and in the meantime the shares may have run more than you're trying to "save" --- and B) once again - do you really have the time to spend chasing this small amount (in total dollars). If you're trading big blocks of shares 1000 or so per - then maybe - but not on 100 or 200 shares...

[GregWeld]

So since we were discussing real estate investing --- I view this "news" both great but also really worrying. Demand for any product - regardless of what that is - has a ripple effect.... Housing demand will make us feel good IF we already own a house... but will also lead to higher interest rates... Which is good if you're already retired... and not so good if you want to buy something with borrowed money. LOL


http://www.bloomberg.com/news/2013-09-24/home-prices-in-u-s-cities-rose-in-july-by-most-in-seven-years.html

[GregWeld]

..... And as long as we're talking about how to make some money - whether it's for retirement - or for further investing etc. Rich people DO think differently. They DO live differently. Money DOES make Money. The problem with most people is that they don't do anything with what they have. Rather - they figure they have nothing so how could they possibly ever get anywhere.

This thread started out with a couple simple questions.... and what some of us have tried to do with it is to take a little of the mystery out of "the stock market" etc.

I stumbled on to this book -- and have not read it - but have read many excerpts from it.... and what this book really is - and what I've read - is about how to THINK. That's what I've been harping on in this entire thread -- not what "I" think YOU should do - but rather - how you should think about investing... and then you need to take it from there. Whether it's rental real estate - or stocks - or starting a business.... whatever.


The book is about the DIFFERENCES in how people think -- the "rich" vs "the average person". I don't particularly like "labels".... but it is what it is. For $14 a copy it might be eye opening for THINKING about investing or seeing opportunity that might present itself.



http://www.amazon.com/Rich-People-Think-Steve-Siebold/dp/0975500341

[Vegas69]

I agree Greg. If you have $10 bucks, turn it into $12. The common philosophy is that if you don't have much, you can't become much. Most of us have to start at the bottom and work our way up the ladder. Moral of the story, if you don't make good decisions with little, you will never have a lot. And it leaks into every aspect of life, not just money.

[Tony_SS]

I turned my son from a spender into a saver. He couldn't hold onto a dollar to save his life.

I took him to the bank, opened an account, they gave him a cool green pig, and they matched his first $20 deposit, along with another $20 for his straight A's and community service. The have a cool coin counter machine he likes to work. He has over $88 and is all about "saving" and going to the bank now.. not bad for a 6 yr old who's bombarded with cool stuff to buy.

Saving, then investing, right?

[glassman]

A friend of mine (whos very monetarily wealthy btw) said if you count your pennies, the dollar's add up.

When i refer people to this thread (about 20 who are serious) I tell them "its a thread on HOW to buy, not WHAT to buy"

Be consistant.
Diversify.
Dont invest and forget (i did for 15 years, now my bottom hurts lol).
Start early.

And most of all, KISS (keep it simple stupid) *ask me how i know this one? cause i tend to overcomplicate everything in my life, ahhh, the job of an analyst...

[glassman]

I agree Greg. If you have $10 bucks, turn it into $12. The common philosophy is that if you don't have much, you can't become much. Most of us have to start at the bottom and work our way up the ladder. Moral of the story, if you don't make good decisions with little, you will never have a lot. And it leaks into every aspect of life, not just money.

And Todd, since you see this everyday in your job, is living within your means....

[sik68]

I was flipping radio stations last night on my commute home, looking for the MNF game. I couldn't believe I heard an ad for obtaining a home equity line of credit. "Bay Area housing prices are up an incredible 20% recently, call us to see if you qualify to borrow against your home to get money in your pocket!" :confused18:


I'm also happy to report I have a friend who I have HOOKED on THINKING about money and investing. He's turned the corner in a matter of a few short weeks and I know it will positively affect him for the rest of his life. Feels good to spread the knowledge!

[ErikLS2]

Another good, although kind of dull, read

http://www.amazon.com/Millionaire-Mind-Thomas-J-Stanley/dp/0740718584/ref=sr_1_3?s=books&ie=UTF8&qid=1380065261&sr=1-3&keywords=the+millionaire+next+door

[Vegas69]

And Todd, since you see this everyday in your job, is living within your means....

That is one major change I've seen over the last few years. People are more likely to buy economically today. Many have learned a few lessons or were conservative from the start. I still get the calls once in a while from someone with three nickels that thinks they should buy a home.

I was flipping radio stations last night on my commute home, looking for the MNF game. I couldn't believe I heard an ad for obtaining a home equity line of credit. "Bay Area housing prices are up an incredible 20% recently, call us to see if you qualify to borrow against your home to get money in your pocket!" :confused18:


I'm also happy to report I have a friend who I have HOOKED on THINKING about money and investing. He's turned the corner in a matter of a few short weeks and I know it will positively affect him for the rest of his life. Feels good to spread the knowledge!

History always repeats itself. :D I've already seen some noise of sub prime loans. There is always a hare waiting in the wings.

[GregWeld]

So here's why LIMIT ORDERS don't always work the way you think/want them to.


This morning I thought I'd add 3000 shares of British Petroleum Prudhoe Bay (BPT) to the 5000 shares I already own... I entered a limit order at $86.70 against an ASK of $86.96 --- last trade was showing as $86.75..... so I'm a nickel under the last trade and .26 under the ask price.

By the time I checked my order status - the shares were trading at $86.95

So had I just entered a "Market order" I might have scooped up some shares... as it was --- SO far I'm going begging and my limit order is sitting with only 100 of the shares being "filled" (bought at my limit price).

So here's my point --- there were shares trading at $86.75 (the last print) and I chose to bid under that --- and while trying to be "cute" -- the shares ran another .20

I canceled the order. Why? Because I don't buy on UP days. I'll wait.


I do this stuff EVERY DAY -- ALL DAY.... It's my first love and a hobby. I've been doing this all day every day for years... MY POINT?? You guys DON'T... and I'm buying larger amounts of shares -- you are not.... is it really worth your time to babysit the market for .20 on 100 shares (a whopping $20). And by the way -- I just showed that messing around probably cost me that $20 because the stock ran away from me.

Now --- I'll stay on top of it and I will get my shares eventually -- and before the next X date. But would you?? Or would you get busy and forget all about it -- miss the X date (thus missing a $2.00 a share dividend). This is where you need to learn about YOURSELF and how you invest.

If you're the type that would have got busy and forgot all about the shares --- thus the buy -- and you'd put in a "cute" limit order -- and now you just missed out on "A") the run and "B") the $200 dividend payment for the quarter.... was the $20 "savings" you were trying to get worth it?


Just sayin'

[GregWeld]

And Todd, since you see this everyday in your job, is living within your means....




I have to chime in here -- on the whole "living within your means".





It's FAR FAR easier to live within your means if you have plenty of "means". LOL


I've had this discussion many times with many of my friends. I've always been very open about money - money management - and discussions like this aren't and shouldn't be embarrassing. They ARE embarrassing if you are embarrassed by your own personal situation. By that I mean --- if you're one of those people that APPEAR to be doing well.... driving the new Audi - New house - out to dinner all the time - etc.... and your cards are about maxed out... and if you lost your job next week -- you couldn't make your next house payment... YEAH -- you should probably not be discussing your finances without being embarrassed. You're EGO is driving you to bankruptcy. You need help but your ego would never allow you to actually get some.


I'm saying this hypothetically -- to "America" -- not to anyone here. The people here are (I presume) working to help themselves and improve their financial situation.



I've never ever had anyone tell me their cards are maxed and they can barely make the minimum payment. EVERYONE always makes the blanket statement "I always pay my cards in full every month". While I'd really like to believe it - and really hope that it's true.... the majority of people just ARE NOT doing that. They are managing their money by keeping their PAYMENTS in check -- and in the meantime are paying 18 or more percent interest.

GUYS ---- REALLY???


To the investors here -- how many of you would L - O - V - E to be earning 18% dividend on your investments???? HOLY COW --- I'D BE RICH!!!!

[toy71camaro]

I have to chime in here -- on the whole "living within your means".





It's FAR FAR easier to live within your means if you have plenty of "means". LOL


I've had this discussion many times with many of my friends. I've always been very open about money - money management - and discussions like this aren't and shouldn't be embarrassing. They ARE embarrassing if you are embarrassed by your own personal situation. By that I mean --- if you're one of those people that APPEAR to be doing well.... driving the new Audi - New house - out to dinner all the time - etc.... and your cards are about maxed out... and if you lost your job next week -- you couldn't make your next house payment... YEAH -- you should probably not be discussing your finances without being embarrassed. You're EGO is driving you to bankruptcy. You need help but your ego would never allow you to actually get some.


I'm saying this hypothetically -- to "America" -- not to anyone here. The people here are (I presume) working to help themselves and improve their financial situation.



I've never ever had anyone tell me their cards are maxed and they can barely make the minimum payment. EVERYONE always makes the blanket statement "I always pay my cards in full every month". While I'd really like to believe it - and really hope that it's true.... the majority of people just ARE NOT doing that. They are managing their money by keeping their PAYMENTS in check -- and in the meantime are paying 18 or more percent interest.

GUYS ---- REALLY???


To the investors here -- how many of you would L - O - V - E to be earning 18% dividend on your investments???? HOLY COW --- I'D BE RICH!!!!

Yeah. I wonder the same. I listen to a lot of Dave Ramsey's radio show. Keeps my thought process in check. I've always handled money very well. Until I got married. The other half didnt handle money well at ALL. It was a big issue. Eventually we divorced, i ate a quite large CC bill on that one (that wasnt even MY stuff). But oh well. From that point forward, I've vowed to never carry a balance on my CC. 5 years later, I havent paid an interest fee yet! But, it can be a tricky game that some people can't manage. Me, i personally pay off each purchase a day or two after it hits my card. i dont wait for the bill to come at the end of the month and get surprised!

On a side note, me and my current GF (future spouse!? ;) ) have taken some of Ramsey's ideas even further and have implemented emergency funds (which first resulted in her getting herself completely out of CC Debt). Now we have monthly budgets, savings accounts, and purchased a house this year (albeit, with a mortgage, but thats OK).

We're well on our way to be financially fit, in the short term AND long term (retirement). Plus the communication level is MUCH greater than the 1st go around. LOL

[GregWeld]

First of all Albert.... AWESOME!!


Second -- there's absolutely NOTHING WRONG with a mortgage!

What people do wrong with a mortgage is to repeatedly refi - taking out equity to spend... and lengthen the time in which to pay it back!

The entire exercise should be to retire with a paid for house!! (unless you're retirement far exceeds what normal people are going to collect in those years).


The "ISSUE" is spending more than you can really afford to spend -- the CC allows this - and on a repeated basis. I think a NORMAL use of a CC is -- perhaps an emergency repair - or something unexpected -- and then a guy has to make some payments at those high interest rates.... BUT that is where you should have some dough saved for such emergencies. NOT BEING ABLE TO SAVE is the big mistake -- and that should be he first clue that someone is spending too much.

I have a buddy -- married -- old like me and retired now --- but he's a millionaire -- with a paid for house (millionaire NOT including the value of his house).... and the couple together never made 100 grand a year. He saved a 1/3rd of his income every year since he got his first job. The proverbial "pay yourself first". Called him today to come help me with the trailer --- and he can't -- why? Because they're out cruising around in his new F-250 and Airstream... ENJOYING RETIREMENT.

They spent years NOT having all the new stuff -- stayed in the same house etc -- so that he could spend years enjoying life later. GOOD FOR HIM!!!

[WSSix]

Good job, Albert.

You're very correct about CC bills and life style, Greg. Somewhere in this thread, I think I read the comment "Just because you can pay for it doesn't mean you can afford it". I like that comment. I also think most people don't get it. If it weren't for the points that I get, I wouldn't use my CC. But I like it when the CC company pays me to use their card :D

[GregWeld]

Good job, Albert.

You're very correct about CC bills and life style, Greg. Somewhere in this thread, I think I read the comment "Just because you can pay for it doesn't mean you can afford it". I like that comment. I also think most people don't get it. If it weren't for the points that I get, I wouldn't use my CC. But I like it when the CC company pays me to use their card :D



Trey - I (WE) use the hell out of the credit card... in fact we are massive chargers.... but it still gets paid off every month regardless of how astounding the balance is.


Here's the part that busts me up --- someone that makes payments on revolving charge cards --- will have a HIGHER credit score than the guy that pays it off.

To me - that's the stupidest thing EVER.

[glassman]

We'll, i have to manage my money, my wife's spending, my employee's, and i dont like managing.

Case in point, Tuesday nite my wifey and i go out to dinner at Wente (for our 25th wedn anniversary) nice dinner, $169 meal. Great stuff. my brother gave us a 150$ gift card about a year ago as a thank you for watchin his two kids while he and his wife are in New York, they do the same trip every year, and we love watchin the kids...

So i pull out my debit card to pay the $19 balance plus the tip and the card is declined, i'm embarrassed. I turn to Pam and i'm like, um honey...??? She smiles and says "oops, i forgot to go to the bank" i was forgiving as usual, plus we had 3000in checks in her purse, 700$ cash in her purse and i had like 350 cash on me....so i have to have more of an eagle eye on "our" finances....it was a good (but embarrassing) reminder for me

I had a friend of mine i worked with for years and he used to always say "i hate money" and my dad (whom we worked for) used to say, "yah, till your out of it"

We gotta manage it, and those of us with partners, we have to watch out for them as well. Money is the #1 cause of divorce in the U.S.

[Vegas69]

A buddy of mine and I have accountability meetings on the last Thursday of the month. We are wired similarly and we both benefit greatly. He tends to be financially driven to the point of out of balance. Today part of our discussion was about goals. He's a big producer at Northwestern Mutual and he mentioned some of his peers trying to influence him to set huge goals. Way beyond what is achievable in a short period in my opinion. I could tell it really had his wheels spinning seeing just how much money he could reel in.

I told him it was a bad idea. Don't sell your soul to get what you want. He has 3 young boys and a wife. His cholesterol is 220, he could use a few more work outs and better nutrition. He doesn't NEED to make more money, his energy would benefit him in other areas of his life. Franky, areas that need more work and will lead to great payoffs.

I hope he progresses in his business but not by moving the balance beam to far. Money is important but not at the cost of others. Especially your family and friends.

[GregWeld]

Totally agree Todd... it's all about BALANCE.


We all seem to struggle with balance...

[glassman]

Totally agree Todd... it's all about BALANCE.


We all seem to struggle with balance...

Ahhhh, well spoken "Danielson"...."now paint the fence" (ya gotta know this movie)

[ErikLS2]

A buddy of mine and I have accountability meetings on the last Thursday of the month. We are wired similarly and we both benefit greatly. He tends to be financially driven to the point of out of balance. Today part of our discussion was about goals. He's a big producer at Northwestern Mutual and he mentioned some of his peers trying to influence him to set huge goals. Way beyond what is achievable in a short period in my opinion. I could tell it really had his wheels spinning seeing just how much money he could reel in.

I told him it was a bad idea. Don't sell your soul to get what you want. He has 3 young boys and a wife. His cholesterol is 220, he could use a few more work outs and better nutrition. He doesn't NEED to make more money, his energy would benefit him in other areas of his life. Franky, areas that need more work and will lead to great payoffs.

I hope he progresses in his business but not by moving the balance beam to far. Money is important but not at the cost of others. Especially your family and friends.

Great point. I think it was Rockefeller who said when asked "how much is enough money?"........."just one more dollar".

[GregWeld]

Great point. I think it was Rockefeller who said when asked "how much is enough money?"........."just one more dollar".




Sadly --- somehow that old school way of thinking turned upside-down and became "can I spend just one more dollar".

My parents, and Grandparents, sole goal was to pay off their house -- and pay cash for a car. Mind you, saving for retirement didn't used to be quite so important because companies had PENSIONS and they also had Social Security which I think was larger by virtue of inflation (in other words inflation has eroded buying power and SS had NOT kept up).

Just look at governments around the world... all they do anymore is raise the debt ceiling. There's never any discussion about cutting spending to balance the books. Just spend more. There's no throttle modulation at all.

It would be nice if PEOPLE could do that. Right? Oh honey - we're out of money so we'll just increase our own credit card limit. Never having to pay the money back - just pay the interest only. No worries.

[Tony_SS]

Anyone invested in health insurance stocks? :/

http://www.infowars.com/insurance-giants-that-wrote-and-lobbied-for-health-law-cash-in/

[MattO]

This whole thread has inspired me to start taking a deeper look at my finances and spending. I'm laying out a plan to get out of debt and then take that money that WAS going into CC's and toys and starting an investment fund (after I have my emergency account setup.) Figure I'm young and dumb and it's time to wise up. Retiring when I'm my dad's age sounds like fun and if it means not building another car right now, I'm OK with that.

[toy71camaro]

This whole thread has inspired me to start taking a deeper look at my finances and spending. I'm laying out a plan to get out of debt and then take that money that WAS going into CC's and toys and starting an investment fund (after I have my emergency account setup.) Figure I'm young and dumb and it's time to wise up. Retiring when I'm my dad's age sounds like fun and if it means not building another car right now, I'm OK with that.

GREAT!!!!!!

If you need a little extra motivation, check out Dave Ramsey's book "Total Money Makeover". It's a little helpful "guide" to setting up your plan of attack to get out of debt and become money successful. I also listen to his free daily "radio show" over the internet, in the form of a "Pod Cast". You can do it from his website or from your mobile device and such. Hearing other people's pain/issues lets you know your not alone, and giving you hope that there's light at the end of that tunnel. Good luck man. its tough, but SO worth it!

[GregWeld]

This whole thread has inspired me to start taking a deeper look at my finances and spending. I'm laying out a plan to get out of debt and then take that money that WAS going into CC's and toys and starting an investment fund (after I have my emergency account setup.) Figure I'm young and dumb and it's time to wise up. Retiring when I'm my dad's age sounds like fun and if it means not building another car right now, I'm OK with that.





Just living stingy and not having anything will never work.... it's like dieting and having to only eat tomatoes for weeks on end. You'll just go right back to steak and potatoes.


So re: not building another car


Building a car is a HOBBY... but the hobby doesn't dictate you have to have a 416 Mast motor and the latest greatest suspension ever made.

Build a car - over time - maintaining the hobby aspect of the build with parts that are within YOUR budget.

Retirement isn't about having to save 60% of your annual salary.... particularly if you're relatively young. Set your savings rate with a GOAL in mind.... factoring in TIME.... and factoring in what you really think you'll need to retire in a reasonably comfortable lifestyle.

Most people don't need 100k annually to retire (just tossing a number out there - because that number needs to factor in inflation). If you strip out the things you should NOT have to pay when you're retired - house payments - new car payments - etc.... You should really just have utilities/basic living expenses/health insurance/property taxes etc.

You'll get the AARP special at Denny's when going out for dinner (just kidding here!).


My point is that retirement should not be such a daunting exercise that you need to live like a hermit for 30 years to obtain.

People that live in high cost urban areas might need to plan to sell their largest asset (the house) and move to a lower cost. If you sell a house that's paid for for 350 grand and move to a city where you can get a nicer house for half that --- that goes a long way in boosting the net cash to invest to make retirement income etc.

[MattO]

Thanks Greg

What I meant was that I'm going to take what I was going to spend building the next one and put it into investments. I have a couple cool cars now that should hold me over, but I'm going to hold off on any major builds for a while. I'm going to keep tweaking on the cars I have now though and I'm learning to do more fabrication and engineering on my own as well.

I think part of it is just proving to myself that I can. Since I was 14 I've gone from one car to the next, pouring my heart, soul, and wallet into each one and it's time to take a little break and setup my future, so I can build the cars I want the way I want.

My plans after I retire (in like 40yrs) aren't like most people's. I just want enough to be able to spend time with my family, and build some cars. If I won the lotto tomorrow, I'd put in my 2 weeks, and then build cars with my dad for the rest of my life. I don't want anything more than that.

I'm only 26 and have (hopefully) a long life ahead of me. Taking a few years off from major work on the toys might be just what I need right now.

[Vegas69]

Smart move Matt. I agree with Greg, set some financial goals and make a real plan to achieve them by a certain age. Put it in writing and make a spreadsheet. At 26, you can set yourself up BIG TIME if you start now. The only way there will come a day when you can be with family and build cars is to be financially independent vs. blowing all your money on cars for the next 30 years. I also agree with Greg that you don't have to be a hermit, invest first, spend 2nd.

I'd start with a Roth IRA and build from there.

[Tony_SS]

This whole thread has inspired me to start taking a deeper look at my finances and spending. I'm laying out a plan to get out of debt and then take that money that WAS going into CC's and toys and starting an investment fund (after I have my emergency account setup.) Figure I'm young and dumb and it's time to wise up. Retiring when I'm my dad's age sounds like fun and if it means not building another car right now, I'm OK with that.

Exactly my situation here too Matt. :thumbsup:

[GregWeld]

This thread has never been about what stock to own --- and rarely mentions specific stocks except to use them as an example. We have to have examples occasionally... but it's a real trap === and completely defeats the thread === when it turns into a "pump and dump" or stock recommendation thread -- vs -- a discussion of just general terms and more about how to think etc.

However -- in the "example" use -- I have always promoted stocks of companies that you know and use -- and places or things that you personally have some familiarity with etc. You've heard me say that I bought Apple (AAPL) stock after coming home from the mall where it was the only store that had a line of people trying to buy stuff and that we had 4 or 5 of those iPod things laying around the house.... That was back when it was $85 by the way... I was out of it at $300.

Yesterday I had some errands to run -- little Metric bolts and nuts used in the Lotus (I have stock in the shop of SS SAE nuts and bolts but nothing in metric).... so off to Tacoma Screw with a shopping list. I was hungry and there was a McDonalds on the street so in I went for some quick breakfast. Full disclosure - I own 3000 shares of MCD....

Now -- the reason I have said to buy the companies you know and like is so that you AS A CONSUMER can gauge FUNDAMENTAL CHANGE.... that is -- you're around the places you actually own -- and can be Johnny on the spot to monitor how you think they're doing -- or even how the overall economy is doing etc IF you just pay attention.

I have to say that I was pretty much appalled at the SERVICE I received during my visit - and that there was nobody in the place except 3 tables of old retired people... my food sucked. I don't eat McDonalds or that kind of food unless I'm on a road trip... so don't visit these kinds of places very often. I own Coke (KO) but don't drink it.... I own Altria (MO) but don't smoke... but I own these companies because they lend stability to my account - they pay a dividend - and the great masses do drink Coke - eat at McDonalds and smoke etc (Especially in Europe!!!).

I guess my point is this -- sometimes you don't just have to know WHEN TO BUY -- Sometimes you have to KNOW WHEN TO SELL... Knowing when to sell is far harder than buying. I've been thinking of selling McDonalds since my visit. It was just horrible food - which makes me avoid another visit.... and I wonder how many other people have had a similar experience. Spotting a trend is key to investing... and a trend isn't always UP... sometimes it's down.

[toy71camaro]

This thread has never been about what stock to own --- and rarely mentions specific stocks except to use them as an example. We have to have examples occasionally... but it's a real trap === and completely defeats the thread === when it turns into a "pump and dump" or stock recommendation thread -- vs -- a discussion of just general terms and more about how to think etc.

However -- in the "example" use -- I have always promoted stocks of companies that you know and use -- and places or things that you personally have some familiarity with etc. You've heard me say that I bought Apple (AAPL) stock after coming home from the mall where it was the only store that had a line of people trying to buy stuff and that we had 4 or 5 of those iPod things laying around the house.... That was back when it was $85 by the way... I was out of it at $300.

Yesterday I had some errands to run -- little Metric bolts and nuts used in the Lotus (I have stock in the shop of SS SAE nuts and bolts but nothing in metric).... so off to Tacoma Screw with a shopping list. I was hungry and there was a McDonalds on the street so in I went for some quick breakfast. Full disclosure - I own 3000 shares of MCD....

Now -- the reason I have said to buy the companies you know and like is so that you AS A CONSUMER can gauge FUNDAMENTAL CHANGE.... that is -- you're around the places you actually own -- and can be Johnny on the spot to monitor how you think they're doing -- or even how the overall economy is doing etc IF you just pay attention.

I have to say that I was pretty much appalled at the SERVICE I received during my visit - and that there was nobody in the place except 3 tables of old retired people... my food sucked. I don't eat McDonalds or that kind of food unless I'm on a road trip... so don't visit these kinds of places very often. I own Coke (KO) but don't drink it.... I own Altria (MO) but don't smoke... but I own these companies because they lend stability to my account - they pay a dividend - and the great masses do drink Coke - eat at McDonalds and smoke etc (Especially in Europe!!!).

I guess my point is this -- sometimes you don't just have to know WHEN TO BUY -- Sometimes you have to KNOW WHEN TO SELL... Knowing when to sell is far harder than buying. I've been thinking of selling McDonalds since my visit. It was just horrible food - which makes me avoid another visit.... and I wonder how many other people have had a similar experience. Spotting a trend is key to investing... and a trend isn't always UP... sometimes it's down.


Excellent point(s).. One thing to consider is that there are obviously tens of thousands of these places scattered across the US. The trick is to find out if your bad experience is the new "norm" or if its just that location, or just someones "off day" at that location. If its just that location, you'd obviously think twice before off loading everything. If you see it as a trend across the company, then I'd be really questioning my position in the stock.

Now, we have 3 MCD's in our town of about 70k people (4 if you include the one inside wal-mart) - Roughly 16 sq miles in size. ALL have been renovated within the past 3 years or so (except the one inside Wally, not a whole lot you can do there). Our 3 locations are generally really steadily busy. Perhaps its the "new look" that keeps people coming back? Or perhaps its the service? Not 100% sure. We eat there once or twice a month (two kids under 8, so sometimes we just need a "quick bite" on the go). And most of the time we're happy with our food/service.

Anywho, just my 2c. ;)

[Tony_SS]

The McD's here was torn down just to build a brand new version... that tells me they are doing very well. The owner owns about 5 or 6 locations all in my area. He started out working at one...a true American success story really.

I'm rural midwest where people aren't too concerned with their diet as much...so I think they do pretty well around here. We don't go to there at all though.

[JKnight]

I guess my point is this -- sometimes you don't just have to know WHEN TO BUY -- Sometimes you have to KNOW WHEN TO SELL... Knowing when to sell is far harder than buying. I've been thinking of selling McDonalds since my visit. It was just horrible food - which makes me avoid another visit.... and I wonder how many other people have had a similar experience. Spotting a trend is key to investing... and a trend isn't always UP... sometimes it's down.

In the stock analyst community they call this doing a "channel check", and it's intended to serve the exact purpose you're describing. They can get a feeling for how foot traffic might be trending or whether the shelves are looking picked over or barely touched. They can see if the clearance racks make up 1/2 of the sales floor, or just one rack way in the back. They can also tell if the food quality is suffering or if people are going crazy for the new high-margin offerings.

(GW and others that may read analyst reports probably know all this, just throwing it out there for education purposes so that you know what it is when you run across it in an article)

I much prefer my own judgement over that of 28 year old stock analysts. Largely because I don't know their ability to see the business through the eyes of the average target consumer. As a result, I would prefer to do my own "Channel Checks" and derive my own conclusions, just like Greg is describing.

[Vegas69]

People for the most part could care less about the food they eat. They want cheap and fast. MacDonalds isn't going anywhere. It should also be mentioned that they are a franchise and service likely varies greatly. My opinion is that an owner would have to completely mislead and manage a MacDonalds to fail in modern society.

[Woody]

My last experience with McDonalds food was not too good either, which had me questioning my stock ownership. However, one great thing about McDonalds that many people overlook is their real estate holdings. Most of their locations are prime retail locations that have significant value and most of the real estate is owned by the corporation.

[GregWeld]

Here we go with BitCoin again.....


http://www.washingtonpost.com/business/economy/bitcoin-industry-reeling-as-authorities-shut-down-silk-road-online-marketplace/2013/10/02/961b105a-2ba1-11e3-97a3-ff2758228523_story.html

[GregWeld]

In the stock analyst community they call this doing a "channel check", and it's intended to serve the exact purpose you're describing. They can get a feeling for how foot traffic might be trending or whether the shelves are looking picked over or barely touched. They can see if the clearance racks make up 1/2 of the sales floor, or just one rack way in the back. They can also tell if the food quality is suffering or if people are going crazy for the new high-margin offerings.

(GW and others that may read analyst reports probably know all this, just throwing it out there for education purposes so that you know what it is when you run across it in an article)

I much prefer my own judgement over that of 28 year old stock analysts. Largely because I don't know their ability to see the business through the eyes of the average target consumer. As a result, I would prefer to do my own "Channel Checks" and derive my own conclusions, just like Greg is describing.




This is exactly why I posted my post.... This thread is about learning -- and I wanted people to see what a "down side" learn might look like. They need to learn to trust their own judgement -- both UP and DOWN.... and perhaps learn to follow their own gut instincts some times.

Thanks for the input!


I always wonder if anyone reads the crap I post up.... :lol:

[Tony_SS]

Here we go with BitCoin again.....


http://www.washingtonpost.com/business/economy/bitcoin-industry-reeling-as-authorities-shut-down-silk-road-online-marketplace/2013/10/02/961b105a-2ba1-11e3-97a3-ff2758228523_story.html

I'd say there's some hyperbole in that piece. The market is hardly in "disarray". It was steady a $127 and it dropped to $111.

The failure is solely that of Silk Road's admin, not Bitcoin itself.

I'm still a big fan of the peer to peer payment system. It's not perfect, but is pretty amazing.

[GregWeld]

I like this statement -- by a guy that has just LOST 500 MILLION dollars in a short on Herbalife stock...


“I have learned that the key to long-term investing is to balance confidence with the humility to recognize when the facts are no longer consistent with one’s original investment thesis”


There's a LOT to be learned in that simple statement.

[GregWeld]

I'd say there's some hyperbole in that piece. The market is hardly in "disarray". It was steady a $127 and it dropped to $111.

The failure is solely that of Silk Road's admin, not Bitcoin itself.

I'm still a big fan of the peer to peer payment system. It's not perfect, but is pretty amazing.




It doesn't make any difference WHAT THE CAUSE IS.... when investing.... if someone has LOSSES regardless of the facts. The facts of this article is that there was at one point a 20% LOSS -- which later in the day ONLY resulted in a 10% (that's absolutely HUGE) loss.

A loss is a loss.

My point on BitCoin has been, and continues to be -- that it is NOT investing. It is GAMBLING based on the simple premise that you want to buy at one price and HOPE LIKE HELL that someone will pay you more than you paid. There is no product - there is no underlying value - other than you're hoping the price goes higher than what you paid. People aren't buying Bitcoins so they can go buy something with them. If that was the case the price would be very stable. Why would someone pay $127 for a bitcoin - to go buy something that costs $127? To top that off it's a very "thin" marketplace of people/businesses that will actually "accept" BitCoins for purchasing anything.

The "vehicle" has become nothing more than a trading platform of trying to buy low and sell high without the underlying paper trail for taxes/accountability etc.

[96z28ss]

Im really not concerned with MCD or KO.
When the economy went down, they kept growing. Not many stocks that can claim that and pay a good dividend.

Where else can you get a burger and coke for $1 each.

[Tony_SS]

It doesn't make any difference WHAT THE CAUSE IS.... when investing.... if someone has LOSSES regardless of the facts. The facts of this article is that there was at one point a 20% LOSS -- which later in the day ONLY resulted in a 10% (that's absolutely HUGE) loss.

A loss is a loss.

My point on BitCoin has been, and continues to be -- that it is NOT investing. It is GAMBLING based on the simple premise that you want to buy at one price and HOPE LIKE HELL that someone will pay you more than you paid. There is no product - there is no underlying value - other than you're hoping the price goes higher than what you paid. People aren't buying Bitcoins so they can go buy something with them. If that was the case the price would be very stable. Why would someone pay $127 for a bitcoin - to go buy something that costs $127? To top that off it's a very "thin" marketplace of people/businesses that will actually "accept" BitCoins for purchasing anything.

The "vehicle" has become nothing more than a trading platform of trying to buy low and sell high without the underlying paper trail for taxes/accountability etc.

I agree Bitcoin is NOT an investment...so any losses in that regard are moot. (BTW it's back up to $117 now) so no "disarray". One clown running a shoddy website into the ground is not going to drag down and spook out BTC users.

Its a medium of exchange and has its place, and obvious value for the service. Maybe not to you, but to a large pool of other people.

[CRCRFT78]

I saw the reports this morning about the Tesla vehicle battery fire and the reaction the market had against it. Didn't watch the whole news report but does anyone have an opinion on this and how it may or may not affect your future investment decisions. How some may handle this negatively or positively and the influence it may have on your buy/sell decisions.

I DO NOT hold a position in Tesla but based on the little bit of information I have heard about this, I may look at it as a buying opportunity if I did hold position in their company.

Any opinions?

[Vince@Meanstreets]

I read that it was a result of the car hitting a large piece of road debris that ruptured the battery compartment which started the fire.

As a long investor I believe it should not affect it much. Note, I mainly look towards dividen stock but did purchase Tesla stock a few weeks after its IPO. If you have money sitting around buy in if it's drops under $130.

[GregWeld]

I saw the reports this morning about the Tesla vehicle battery fire and the reaction the market had against it. Didn't watch the whole news report but does anyone have an opinion on this and how it may or may not affect your future investment decisions. How some may handle this negatively or positively and the influence it may have on your buy/sell decisions.

I DO NOT hold a position in Tesla but based on the little bit of information I have heard about this, I may look at it as a buying opportunity if I did hold position in their company.

Any opinions?



TESLA (TSLA) is a "priced for perfection" stock.... it's run way ahead of the actual fundamentals --- i.e., it's P/E ratio (price to earnings) is a big "DASH" -- because it has no earnings..... it might in the future - but as of this writing = it does not. It currently is valued at HALF the market value of General Motors (GM)... which has a P/E of 12.66 (so P/E Ration is the stock trades at 12.66 TIMES the current earnings).....

When a stock is priced for perfection -- a small "hiccup" can have a LARGE inversely disproportionate effect on the stock. People tend to be lemmings and they panic 'enmasse'.... They really don't "invest" in the shares as much as they gamble in the price appreciation and the first time they have an "event" -- people run for hills.


I personally don't own Tesla --- and frankly --- I'm not really sure what to make of it as a STOCK --- which is completely different than it as a company!
I like the company -- but thought their first car was an overpriced "cult" car that had relatively poor quality - and was pretty much useless.... the "S" on the other hand is very high quality -- is really a neat car -- and is selling like hot cakes.


BUT --- here's my issue with the STOCK --- is it gambling with it's pretty meteoric run up in price.... and will I get crushed if they have earnings misses or come out with a new model that doesn't sell quite like everyone "expected". OR --- Do I really believe they know what they're doing and it's all uphill from here.... So then my choice is to buy FORD which was cheap - and collect a dividend...

NOBODY KNOWS WHAT THE FUTURE IS..... your guess is every bit as good as mine -- or anyone else's that THINKS they know.

If I was younger --- and had some spare dough --- I think I'd be a buyer on the dip. I wouldn't buy much (it's ALL RELATIVE)... for me -- that might mean I'd put 100K (or maybe I'd just buy 500 shares -- something like that) into it.... someone needs to make those calls based on how much they have to invest and how much they can afford to gamble.

If you invest in a stock like this -- you're just gambling -- it's a new company -- it's new technology (the batteries) and you just don't have a crystal ball.... but you might be buying a company that just turns out to be a leader and grows like crazy and has big earnings --- and who the hell knows. Sometimes it's just FUN to own stuff like this. WTF. Nothing wrong with that. Just don't put your kids college funds into it.

[GregWeld]

BTW --- Tesla (TSLA) is UP 411% Year to date.... on big volume - but if you look at the volume as the price has risen -- the volume traded is going down (not huge but trending down) as the price has gotten up there. There could be a couple reasons for that --- over 100 a share lots of people are "priced out" of betting or trading the shares --- or that as the price has risen -- people just aren't as confident of turning a buck in the name.


I would NOT let the big run up turn me off.... LOTS of stock have lots bigger runs than that -- and do so for a number of years.... Microsoft -- Dell -- Cisco -- Apple - Oracle....

I would instead -- concentrate on how much you have to "play with" --- and go with that and just think of it as playing black jack or roulette.... you'll kick yourself if you didn't get in on the fun when you hear all the people screaming EEEEEEEHHHHHHAAAAAAA..... and you'll learn a good lesson about who you are and what kind of investor you are if you loose your ass. And maybe somewhere along the line - it doesn't go as far - but doesn't tank - and therefore you'll live to gamble again. Does that make sense?

[sik68]

I'd like to put my "train of thought" out there on WD-40 (WDFC) to show the conclusion I came to for myself.

My first instinct is that it's cool WD-40 is on the exchange, it is a gearhead stock. So emotionally I'm attached to it already, which is not always a good thing when objectively looking at investments. So to detach myself, I pretend that it's something more boring, like air freshener. That helps me remove the rose-colored glasses

Share Price
**5-year chart, it looks pretty darn impressive since '09, return of 278%.
**10-year, it looks pretty flat since '03 but is a spitting image of KO, which is one of my "standard" comparison stocks. So that's a good sign.
**20-year, it looks pretty good and solid, until you compare it head-to-head with our large cap "steady eddies". You can see that the share price is only up ~300% over 20 years...which honestly is unimpressive.

Dividends
Current dividend is 2%. However, the dividend payouts fluctuate throughout the years and used to be up over 4%. So it doesn't quite have the impressiveness of a company that has been increasing is dividend forever.

Company
Given the recent 5 year price surge, what has the company been doing in the last 5 years that it wasn't doing in the other 30+ years? This article (http://seekingalpha.com/article/1675972-wd-40-and-duct-tape-2-quick-fixes-for-long-term-returns) seems to provide a pretty good summary of what the air freshener company is doing now. They have several subsidiary brands that are expanding into more household-consumer products, and are focusing more internationally. What I like about this is that the WD-40 brand name resonates VERY well in the male demographic. Given that men do more of the household shopping and cleaning these days, I can see that guys would like to load up on more "masculine" products for the household and under-the-sink.

Conclusion
It looks like the company has recently been going in a new direction. The new direction seems to have some love on wall street. Perhaps the 5 year gains are only the beginning for this small-cap stock to become a huge global brand. I don't know that, but there are signs that WD-40 is leveraging its existing strengths and using them to grow.

I think I will dig a little deeper on WD-40. I want to know more specifics about what has changed in the last 5 years. New management? How much brand recognition they have globally?

I'll give myself a week more to learn, then pull the trigger (or not).



I'm all ears on what others see!

[GregWeld]

All good thinking Steven....


EXCEPT.



Yeah -- except that you have to remember why we invest. We invest to MAKE MONEY... We invest for TOTAL RETURN.

With an under 2% dividend -- then you're going to need some capital appreciation.. and that's been lagging in this name -- and really the "growth" is a spurt from 2009 til now. So the last 3 or 4 years accounts for most of their growth ----- and that's what you've said so good for you for recognizing that. Now what you have to get your head around is --- what's fundamentally changed -- or is that just market forces.


Personally -- I'm going backwards with a 2% dividend... because inflation is always that much.... so without the growth in share price... then ya have to ask yourself what ELSE could you invest in and do better. Remember - we always have choices.

For fun - 'cause we're car guys I compared SNAP-ON (SNA) to WD-40 (WDFC) and they were basically neck and neck... I could see no reason to own either (even though I'm a diehard Snap-On guy!).

[GregWeld]

I wish I had something to add in a constructive way --- but I will tell you all -- THIS is a more NORMAL market.

When this tread started -- and during most of it... it reminded me of the late 90's when every day there was a new IPO that tripled it's first day of trading - and or there was a split 2 for 1 and then that doubled by the next week. It was like having a money tree in the back yard.

A normal market is all about AVERAGES --- so when the market goes crazy for awhile --- then it must go flat or down for awhile to "average out". There just isn't a straight line UP. Given the fact that the market was up like 15% in the first 6 months of this year -- it was only a matter of time before we went sideways or down 5% or so. That's where we're at right now.

The good news about learning about dividends --- THOSE JUST KEEP COMING.... I got one again today - so my account has $4500 more CASH today than it had yesterday (HYG). And that my friends --- is how I go racin' and buy parts - and pay the mortgage.

End of story.

[mdprovee]

I appreciate this thread, my retirement account is going up monthly without me adding to it, and now we are concentrating on paying things off. Then we can start saving more for life later. I am learning.

[bdahlg68]

I wish I had something to add in a constructive way --- but I will tell you all -- THIS is a more NORMAL market.

When this tread started -- and during most of it... it reminded me of the late 90's when every day there was a new IPO that tripled it's first day of trading - and or there was a split 2 for 1 and then that doubled by the next week. It was like having a money tree in the back yard.

A normal market is all about AVERAGES --- so when the market goes crazy for awhile --- then it must go flat or down for awhile to "average out". There just isn't a straight line UP. Given the fact that the market was up like 15% in the first 6 months of this year -- it was only a matter of time before we went sideways or down 5% or so. That's where we're at right now.

The good news about learning about dividends --- THOSE JUST KEEP COMING.... I got one again today - so my account has $4500 more CASH today than it had yesterday (HYG). And that my friends --- is how I go racin' and buy parts - and pay the mortgage.

End of story.

HYG is commission free for Fidelity so it makes a nice parking lot for my biweekly contribution. In fact, Fidelity offers like 65 iShares ETF's commission free. When I get some more time I may look at some of them a bit closer.

[GregWeld]

I appreciate this thread, my retirement account is going up monthly without me adding to it, and now we are concentrating on paying things off. Then we can start saving more for life later. I am learning.




Good because when you get much older I want Laura to be able to have enough money to be able to hire someone to change your diapers.

[Sieg]

Good because when you get much older I want Laura to be able to have enough money to be able to hire someone to change your diapers.

Walk-off homerun to deep centerfield.........ouch!

[GregWeld]

Kenny Rogers song.....:lol: :lol: :lol:





Little boy starts home with his bat and ball.
Says, "I am the greatest, that is a fact,
But even I didn't know I could pitch like that!"
Says, "I am the greatest, that is understood,
But even I didn't know I could pitch that good!"

[mdprovee]

Good because when you get much older I want Laura to be able to have enough money to be able to hire someone to change your diapers.

OH NO!! She gets to wipe my drool....my boys get to change my diaper. I did theirs, now its their turn.

[GregWeld]

OH NO!! She gets to wipe my drool....my boys get to change my diaper. I did theirs, now its their turn.



HA! Good luck with that!


Best just to plan on hiring it done --- and with Investing 102, you'll be able to!


Cost me half a million bucks out of pocket expenses for the last 4 years my Mom was alive.... OMG! You have no idea what it takes when they get old.

[Sieg]

This article is good example and reinforcement of the fundamentals of investing 102.........IMO.


------------------

Sometimes when choosing dividend stocks to invest in, the supposedly "boring" big blue-chip companies can actually be the most exciting and lucrative way to go. For example, an investment in Exxon Mobil (XOM) made three decades ago has appreciated by more than 3000%, assuming all dividends were reinvested. One of the world's most recognizable brands, Coca-Cola (KO), is a perfect example of this. Despite a relatively modest 3% annual yield and low volatility, Coca-Cola can produce massive gains over the long run due to steady performance, reinvestment of and raises to the dividend that can rival pretty much any other strategy.

Coca-Cola in 2013

Most people know Coca-Cola for its soft drinks, but most people who don't follow the company aren't aware of just how diverse its product line has become. In addition to the Coke, Diet Coke, Sprite, and other soft drinks, the company's product portfolio also contains such brands as Powerade, Full Throttle, Dasani water, and Minute Maid juices, just to name a few.

The company also has a tremendous international presence that still has some room for growth, particularly in the emerging markets around the world. Currently, North American beverage sales account for about 45% of the company's revenue, with Europe, Asia, and Latin America each accounting for about 10% of total revenues or about $5 billion annually from each region. A relatively small presence in Africa (6% of revenues) and the company's investments in bottling operations make up the rest.

Trends in the industry have been somewhat away from the carbonated soft drinks, at least in the U.S., and Coca-Cola has taken steps to strengthen its other brands, particularly Powerade, Minute Maid and Dasani. The company has made several smaller but effective acquisitions over the past several years, including Glaceau (Vitamin Water), Great Plains (Honest Tea), and several other overseas brands of juices and teas that aren't well-known to U.S. consumers.

Historical trends, and will they continue?

Since its founding, Coca-Cola has established one of the best track records in the market of steady performance and dividend increases. While shares have just about quadrupled over the past two decades, the real story is Coca-Cola's dividend, which has risen by over 500% from 4.3 cents per share quarterly to today's 28 cent quarterly payments. Even more impressive than the overall increase is the consistency with which it occurred over time:

http://static.cdn-seekingalpha.com/uploads/2013/10/9/1633541-13813516704221375-Matthew-Frankel.png

So, throughout the past two decades, Coca-Cola raised its dividend by an average of 10% per year on an extremely consistent basis, even during the height of two recessions. Since the company's dividend represents a payout ratio of just over 50%, there should be no issue continuing raises for the foreseeable future.

Let's examine what a hypothetical investment in the company would do over a 30-year time period. It is a pretty fair assumption that the dividend raises will continue. It is also fair and reasonable to assume that the share price will continue to increase by 6.4% annually, which is the company's historical average. Assuming that all dividends are reinvested, this means that a $10,000 investment in Coca-Cola today would grow to $267,821 after a 30-year period. Not so boring anymore, is it?

Summary

Regardless of whether you employ the above strategy in your own portfolio, Coca-Cola is an excellent investment for your future. That 3% annual yield will look a lot better in a few decades after being raised each year, and you can bet that the company will continue to add shareholder value by increasing revenues and completing share buybacks. When it comes to income investing, steady and predictable wins the race, and this is an excellent addition to a portfolio with those goals in mind.

The safety and predictability of Coca-Cola, not to mention the consistent performance of the company, make it a far better alternative for the low-risk parts of your portfolio (like your retirement holdings) than trying to pick the "next big thing." Sometimes the "old" big things are just what you need!

Matthew Frankel - posted on Seeking Alpha

[GregWeld]

Good article Sieg.....



Ask "rich people" what they're invested in --- they'll start naming Coke - McDonalds - Chevron - AT&T



Ask "normal people" what they're invested in.... They say "mutual funds" or "my work IRA"...


Ask a "newb investor" what they're invested in... it's "I'm waiting for Twitter to IPO" or "I'm waiting for FaceBook to split".



On the surface a guy might think "oh sure - he's got plenty of money ---- but I've got to make mine!" Nooooooooooooo....... "the rich guy" knows that not losing money is every bit as important - if not MORE important - to creating "wealth".

[toy71camaro]

Another great day to be in the market!

Sitting at almost +2% average over all my investing 102 stocks. Woot!

[GregWeld]

These are great LEARNING DAYS ---- because a couple weeks or a month ago -- everyone is bleeding - dying the death of a 1000 cuts... market acting tired and weak.... and that's when "new" people get discouraged and sell... and then BAM! A big ass gain and then they're out and can't get that back.


Remember me telling you to please remember the good times back a few months?!?!?!? That was to give you all courage to hang in there when the days get short and dark and dreary....


Today was a perfect example of why you stick with INVESTING... buying on the darkest dreariest days if have can muster the guts....


In a "normal" market (yeah? What's that mean? I'd like to see one....) your gains are made on very few days in the year.... very few -- like 8 or 10 days out of the entire year! If you're OUT on them and trying to be cute and game the market.... then in the long run you lose.

[Sieg]

The next few days and weeks will be interesting.

I sold my shares of Dell today that I bought in '99 and have one more dog IPO of the same era to eliminate that's a negative 70% gain to dump. Also added to my position in PFE this morning.

Portfolio is at 40.5% gain........if I would have learned these tricks 20 years ago GW would be my pit assistant. :rofl:

[GregWeld]

The next few days and weeks will be interesting.

I sold my shares of Dell today that I bought in '99 and have one more dog IPO of the same era to eliminate that's a negative 70% gain to dump. Also added to my position in PFE this morning.

Portfolio is at 40.5% gain........if I would have learned these tricks 20 years ago GW would be my pit assistant. :rofl:






I did -- and I need a pit assistant!
LOL



I have three race cars in this trailer! You know how much work it is to load and unload all this crap!?!?!

[Sieg]

I did -- and I need a pit assistant!
LOL



I have three race cars in this trailer! You know how much work it is to load and unload all this crap!?!?!
Ready Sir! :captain1:

[Vegas69]

Just when I was ready to pull my money out of the market. :D

[GregWeld]

Just when I was ready to pull my money out of the market. :D




I'm going to have to beat you!!!

[Vegas69]

Ha Ha A patient man will always be wealthier than an impatient man for the simple fact that he can afford to wait.

[Sieg]

Another good read IMO:

Disclosure: I am long KO. (More...)

Warren Buffett's affection for Coca-Cola (KO) is no secret. From his reported 5 Cherry Cokes a day consumption habit to Berkshire Hathaway's (BRK.A) 400 million share stake - the pair just seems natural. And of course the reasoning is relatively straightforward. Coca-Cola is the quintessential example of what Warren would call a "wonderful" company with a sizable "economic moat." In turn, the underlying business of selling beverages has been an exceptionally rewarding one for shareholders and fans of happiness alike.

I have a similar fondness for Coca-Cola. I could go on and on about the wonders of a half century dividend increase streak or the tangible return on equity figures; however I believe a simple story from Buffett will do the trick:

Coca-Cola went public in 1919. The stock sold for $40 a share. One year later it's selling for $19. It had gone down 50% in one year. And you might think that's some kind of disaster. And you might think that sugar prices increased and the bottlers were rebellious and a whole bunch of other things, you can always find a few reasons why that wasn't the ideal moment to buy it. Years later you would have seen the great depression and you'd see World War 2, and you'd see sugar rationing, and you'd see thermal nuclear weapons, the whole thing. There's always a reason, but in the end if you'd bought 1 share for 40 bucks and reinvested the dividends it'd be worth about $5 million now ... And that factor so over rides anything else. I mean if you're right about the business, you'll make a lot of money. The timing part of it is a very tricky thing. So I don't worry about any given event if I've got a wonderful business ... You can figure out what will happen, you can't figure out when it will happen. You don't want to focus too much on when; you want to focus on what. If you're right about what, you don't have to worry about when very much.

Now admittedly I have before used this precise story here and here when describing lasting investment philosophies. It's a fantastic reminder of what partnering with excellent companies for the long-term can yield. Yet it occurred to me that as great as this sounds in theory, in actuality no individual would be able to accomplish this feat. No one would have invested $40 in 1919, diligently reinvested the dividends for nearly a century and then woke up one day to $5 million.

Obviously it's the ideology that's important, but for the literal crowd out there I thought it might be fun to examine a KO investment over a more practical timeframe. For illustrative purposes let's take your average 65-year old retiree today and rewind the clock back to 1970, 43 years ago. Just entering the workforce, what would have happened if that younger version had the presence of mind to invest in a share of Coca-Cola? Well that's a great question, and I'm glad you asked.

If you use the historical price lookup feature on the Coca-Cola website for January 2nd, 1970 you would find a closing price of $0.86 a share with a split adjustment factor of 96. In other words, a single share of KO would have cost just over $82 in 1970 and would give you claim to 96 shares in 2013. With today's pricing around $38 a share that represents a total investment value of about $3,600 or roughly 45 times what you initially paid. Said differently, every dollar that was invested in KO at the beginning of 1970 would have seen annual capital appreciation of about 9%.

But of course - as the infomercial goes - there's more. We haven't yet included dividends in this wonderful business mix. A quick check to Coca-Cola's dividends page and one finds a pleasantly coincidental dividend history dating back to 1970. During this time KO not only paid but also increased its dividend every single year. In addition, the company split its shares on 6 separate occasions. The starting dividend yield in 1970 - based on a $1.44 annual payout and an $82 share price - would have been an unimpressive 1.75%. Yet what happens in the next 42 years is exceedingly remarkable.

A single share of Coca-Cola stock bought in 1970 for $82 would have netted that partial owner $1,190 in dividends over the years. Think about that: forget capital appreciation, with the dividends alone an investor could have generated nearly 15 times their initial investment without thinking about selling a share. On a cumulative basis, one's initial investment would have been repaid in about 19 years. In total, the dividend compounded by about 17% a year.

If you add the nearly $1,200 in dividend income to the $3,600 in paper worth, that equates to about 58 times ones initial 1970's investment. Put in a different light, that's a very solid - yet certainly not overwhelming - 10% annual compounded gain. There's something to be said for owning a wonderful business that utilizes the "magic" of compounding over the very long-term.

Finally, one could manually go about calculating the total return based on reinvested dividends. Luckily, Yahoo Finance offers a reasonable approximation of this figure by providing Coca-Cola's "adjusted close." On January 2nd of 1970, KO had an adjusted close price of just $0.26 a share. Compare this with today's price around $38 and you find a total yearly compounded return of about 12%. Expressed differently, this represents about 145 times one's money or a roughly $12,000 ending value on that original $82 purchase. And of course the numbers get really interesting once you start investing in multiple shares.

So here's the point of going through all that information: in 1970 Coca-Cola had been a public company for 51 years. In addition, KO had been paying a dividend since 1920 and had increased this payout for nearly a decade. In other words, it wasn't exactly a new concept. Yet an investor still could have found fantastic results. Adding in Buffett's story, and we're talking about practically a century worth of solid returns. And of course the company is much more powerful today than it was back then. Presently you might say that Coca-Cola is still a good company, but it's a bit expensive. You'd like to see it come down a few dollars where it would have a better valuation. And that might very well be true:

http://static.cdn-seekingalpha.com/uploads/2013/9/30/899603-13805750380649502-Eli-Inkrot.jpg

We have no way of knowing if Coca-Cola will be able to provide the same solid results for the next investing career as it did for the previous. But I believe this example still carries weight. It alludes to the fact that you don't have to find the next obscure microcap stock to find solid return results. Some of the best investments are profitable companies that are sitting right in front of you. There's a reason why companies continuously make money. Meanwhile, quibbling over a percent or two here or there - while prudent in theory - might force you to miss out of some of the best companies in the world.

If I were to update Buffett's Coca-Cola story, it would go something like this:

By 1970 Coca-Cola had been paying dividends for half a century and was selling for $82 a share. And you might have thought that price was a couple of dollars too high, or the dividend yield was too low or that it had a good run, but it's time to shine in the beverage world was over. You can always find a few reasons why it's not the ideal reason to buy. Years later you would have seen presidential scandals, an oil crisis, double digit inflation, various wars, terrorist attacks and a global financial crisis, the whole thing. There's always a reason, but in the end if you bought 1 share for $82 and reinvested the dividends it'd be worth about $12,000 now. And that factor so overrides everything else. Considering the companies that you want to own for the very long-term is often just as essential as thinking about the valuations that the market is offering.

Link to article and author: http://seekingalpha.com/article/1722342-coca-cola-an-updated-view-on-a-lifetime-investment?source=email_the_daily_dispatch&ifp=0

[Vortech404]

Sieg,

Thank's for posting that. Makes me feels good about owning KO. !!



John

[Sieg]

Sieg,

Thank's for posting that. Makes me feels good about owning KO. !!

John
You're welcome John,

KO's track record and fundamentals make for a good benchmark to compare future purchases against.

More often than not, like women, the best ones to enter into a long-term relationship with aren't always the flashiest. :thumbsup:

[Vegas69]

So I'm getting ready to make my 2nd buy. My oil and pharmaceutical stocks have done well, retail ok, and phone company not so much. Do I invest in my two performers or diversify? Do you sell the underperformers in and reinvest in another pony?

My initial thought is to invest in my top two performers on a low day and let the other two ride. If I was to sell, it would be the number 4 performer but I think it's to soon to consider it a trend.

[GregWeld]

So I'm getting ready to make my 2nd buy. My oil and pharmaceutical stocks have done well, retail ok, and phone company not so much. Do I invest in my two performers or diversify? Do you sell the underperformers in and reinvest in another pony?

My initial thought is to invest in my top two performers on a low day and let the other two ride. If I was to sell, it would be the number 4 performer but I think it's to soon to consider it a trend.

We all have opinion's right!


I would hold the course on what you have --- and add more names...


In all the years I've been doing this -- I've never --- let me repeat that -- NEVER had all cylinders firing at the same time... the loser today become a breakeven -- the winner becomes a ho hum - and some other stock is just killin' it.... wait 4 months and the same horses are all running in different directions.

AFTER you have at least 10 names --- then go back and build bigger positions....

[Sieg]

Todd, try to diversify the sectors you're in so you have some balance. Perform a historical sector analysis and see what catches your eye and compliments your current holdings.

[Vegas69]

10 4:relax:

[toy71camaro]

Sweet! just had to share..

Bought ABT sometime last year, long before the "split" of ABBV. Well, ABBV has soared since the split (~36% for me), and ABBV took "most" of the ABT dividend with them. However, since I'm in it for the long term, I kept both halves of the split. ABT has bounced around anywhere from +1 to +15% for me since, with a measly .14/qtr dividend. Today however, that changed. Announced today they beat their profit estimates and the stock is up 6+%, also boosting the divvy 57%. Wowsers thats a "big" boost! Still only a 2.45% dividend, but its getting back to normal range, which I had a feeling it would eventually.

[GregWeld]

Don't ya just love dividend investing!!


A pay raise you didn't even have to ask for!

[Sieg]

Another article that I felt was worthy of sharing.

Disclosure: I am long KO, CA, WU, SWY, CSX, SPLS, PG, WMT, KMB, CL, JNJ. (More...)


In a recent article by David Van Knapp, "Which Popular Dividend Stocks Are Always' Overvalued," the author presents 59 Dividend Growth Stocks and views them through the window of a valuation tool, F.A.S.T. Graphs. He points out that this group of stocks seem to always be selling at valuations that are mostly on the high side of things.

The comment stream on this article has been very interesting and for the most part, very thoughtful. One comment in particular caught my attention, though. It was written by a person who questioned one of the more frequent notions expressed by many DG investors. Here's what that comment said:

All you Dividend Growth Investors that claim you love it when stock prices go down so you can buy more are getting what you wished for. I never want my stocks to go down in price no matter what.

Something to Consider

Stock prices go up and they go down. If I own a stock at a cost of $35 dollars a share and the stock goes up in price to $45, I have a paper profit (unrealized gain). Unless I sell my stock at $45 a share, I will not realize that profit. If I do sell the stock and it continues to go up in price, then what?

That same stock that rises to $45 a share experiences bad market day. The price drops to $40 a share. Did I lose money? No. I lost an unrealized gain.

Now with the stock priced at $40 (which is a pullback) does it represent a buying opportunity? Maybe, maybe not. It really depends on what my investment strategy is.

Based on my own metrics of value, I purchased the stock at $35 and based on my investment strategy [DG] the fundamental reasons for having bought it in the first place are still in place. That is an income stream that will grow year over year.

I might have a value range for this stock that is between $35 and $45 dollars. So a price of $40 with no real breakdown in fundamentals, but only a market glitch, may just make $40 a good place to add even more shares to my account.

What I Know:

Dividend Growth Investing is practiced by a very diverse group of people. While there is no definitive standard for the strategy, I think that many investors who are not familiar with the strategy or who want to learn more about it by spending some time reading Lowell Miller's book, "The Single Best Investment" to become familiar with the thought process behind the concept.

All too often, it would appear that many investors who are not familiar with the strategy and the concept of investing for dividend growth make a lot of assumptions that are off target.

That's not because they want to be contrary about DGI, but more from what I believe is a lack of understanding about the strategy itself. Let's take a look at how I approach DG investing and see if I can illustrate a few points about the strategy.

What You Should Know

My first goal is to find stocks that are priced at a value to intrinsic worth. Now one might argue that valuation is a subjective exercise. I would tend to agree with them. However, over time, an investor finds a methodology for addressing valuation and when that methodology produces positive results, the average investor tends to stick with that particular methodology. If that methodology is not working then you might need to make some adjustments.

As I become more comfortable with making decisions based on my particular set of criteria used for evaluating stocks, the method tends to become more objectified. In November of 2012, I made a purchase of Safeway (SWY) at $16.50 a share. To my criteria, SWY was priced at a value at that price. I also purchased Western Union (WU), CA Technology (CA), Staples (SPLS) and CSX Corp (CSX) at that same time.

My second goal is to find companies that have paid dividends for a long period of time. Now my own methodology allows for the purchase of companies that have a dividend payment history of at least 5 years.

The 5-year history is not, in and of itself, a deal breaker. Sometimes a company will have a more limited dividend growth time frame and that's ok. That stock might very well become a Dividend Challenger (a company with that 5-year history) soon enough.

At the same time, this goal of a 5-year history, does not prevent me from buying companies with a 3-year dividend growth history, especially if the company is priced at a value. In the example given above, Western Union and CA Technology both had dividend histories that were less than 5 years, but both can become part of the Dividend Challenger list very soon.

My third goal is to find companies that have been increasing their dividends at a rate that is historically greater than inflation. Why is that important to me?

Since I am attempting to create an income stream that will increase annually, in order to fund my retirement years, I want a Dividend Growth Rate [DGR] that stays ahead of inflation.

By the very nature of portfolio building and using valuation as an entry point, there are going to be stocks in my portfolio that grow their dividends at different rates. Addressing those companies that fail to meet my metric of exceeding inflation would make a stock like AT&T (T) one that I might be keeping an eye on and perhaps eliminating it from the portfolio at some point in time.

Points to Consider

Now as a long term investor, there are companies that I have owned for a very long time. There are also companies that I have not owned very long, like the ones previously mentioned.

If I am going to make the decision to add to an existing holding I want that stock to be priced at a value. That means that sometimes, I won't be adding to that holding except through dividend reinvestment. That's ok. In keeping with my initial strategy (buying at a value) these existing holdings may or may not be priced at a value to intrinsic worth.

So a pullback on that company's price may present a buying opportunity to add to my existing position. If I own a particular company and I am wanting to complete my position in that company I may be better served if and when that stock "pulls-back" from current pricing levels.

If one of my metrics is a PE below 15 for example, doing the math to arrive at a price that would give me a PE below 15 is not all that difficult. The same is true with other metrics that an investor might use, such as price to sales, price to book, etc.

Coca-Cola (KO), for example is a company that I've held since 1984. While I have a full position with this company, my wife's Roth account did not have a position in KO. With the recent pullback in price and the corresponding dividend yield point exceeding 3%, KO seemed to be priced at a point where adding it to her portfolio made sense. A pullback taken advantage of.

That brings us to the second notion concerning pullbacks. If you don't own a particular company, but want to have it as part of your portfolio, buying it at an overvalued price does not always serve you very well.

On the other hand, buying on a pullback and having an entry point at a value point relative to the true worth of a company is a pathway to success.

I don't recommend stocks for people to buy. I write articles about my different portfolios and share what companies I am looking at and which companies I am purchasing. If someone reading one of my articles decides to purchase stock in a company that I mention, I would hope that that investor would do their own due diligence before following my lead. Right now, I find that oil refiners are beginning to look attractive. I've recently purchased Holly Frontier (HFC) and I am watching Marathon Petroleum (MPC) and Phillips 66 (PSX). I have also been watching fertilizer companies and have been looking at Potash (POT), Mosaic (MOS), and Agrium (AGU).

Summary and Conclusion

But, don't forget that if a particular company has gotten ahead of itself, even with a pullback, it might not be at a value point that would indicate a "buy" point.

Know where the "price" needs to be, in order to meet your own standard of value and be content to wait on your stock to reach that price.

Remember, buying Coca-Cola on the recent pullback accomplishes a number of things for me. First, I bought a great addition to my wife's portfolio. Second, I bought a company that yields 3% at the price I paid for it. Third, I bought a company that has a 51 year history of paying and increasing dividends. Fourth, I bought a company that has been increasing those dividends at a DGR of 8% for the last 1, 3, 5, and 10 year periods.

Do I like pullbacks? You bet I do.

[Sieg]

I just watch Google break $1,000 per share..........:confused59:

[GregWeld]

A couple of thoughts about the article....


Investing is a way of life... Using some criteria to pick what to invest in is something everyone must do, otherwise how could anyone make any decision to buy or sell. You must have some reason for the decision.

What I have found over the last 30 years of making these choices is that it's very easy to "justify" the purchase.... and it's very easy to be "scared out" of that decision (price drops - market drops - or some other hiccup)...

It's my belief that generally I've lost money when I've bought something I didn't really believe in --- and or --- used money that I needed for something else.

So - let's take FaceBook for an example.... "Everyone" bought the hype and the froth... and then when the shares didn't do as "expected" --- they were dumped. That's an investment trap that happens a lot and that everyone needs to be aware of. So then what happens is you were burned by "expectations" and now are wary of the next "big thing" and miss out on the shares that DO go up 100% on the first day. It's why I've just decided to steer clear of this kind of stuff. It becomes too emotional.

That is why I say that for Investing 102 -- that you simply choose stocks of companies that you like and know and understand their business. It's just a simple "criteria" that you can live with. Then you look for your investments to be somewhat diversified.

Investing only gets complicated when you start to build your portfolio and begin to have some "real" money working. What I mean by that is that once you get about 50 or 100 grand invested... and you have your 20 names.... and now you're trying to "reach" a bit. Reaching for more yield - reaching for more diversification - reaching to catch that next Google etc. But my feeling about that is that you should have an EXCELLENT base of investments and you should have a relatively good understanding of YOURSELF and what your reactions and expectations are by the time you've built your portfolio to this point. It's funny that the more money you have in the market - the less "afraid" you become. When you're starting out with $2500 -- you're almost paralyzed by the thought of investing it. That's when you need to have a criteria that is comfortable more than anything else.

[GregWeld]

I just watch Google break $1,000 per share..........:confused59:



I chalk that one up as "the one that got away". What a huge miss on my part...


Ya just can't own 'em all -- at least that's how I justify that mistake.

[toy71camaro]

I just watch Google break $1,000 per share..........:confused59:

Same here. yowza.

[Sieg]

I chalk that one up as "the one that got away". What a huge miss on my part...


Ya just can't own 'em all -- at least that's how I justify that mistake.

Up 35+% since January, pays no dividend other than that whimpy gain. :sieg:

Think I'll buy 1 share just for portfolio bragging rights. LOL! Yeah I own Google.........How many shares do you have?.......Uh, enough to make me happy............if it splits a few times! :sieg:

[toy71camaro]

1 bought $25 worth back in like 2006 when it was roughly $550 share. Which is like .04 shares worth. lol

It sat stagnant around that $550 price for a long long time (last year and a half or so). Its now worth $46. An 85% gain.

I also bought $25 worth of Apple at that same time. It was roughly $140/share. Its now worth $100 for a 261% gain. lol (was quite a bit more earlier this year when they were in the $600-700's).

But, all in all, even with those large gains, its not worth it to sell em. It'll be a large % of the gain in the selling fee ($8?ish) and have to mess with capital gains tax. Not worth it for a 85% ($10 gain) lol.

BUT, I can say i own some from "back in the day". :P