Investing 102

[WSSix]

In light of the millionaires thread, I figured I'd start one asking how I can make my money work better for me. That way I can click on the higher buttons one day in response to the poll :)

Seriously though. I'm at a point in my life where all I currently do is work. I live in SW Kansas. There's nothing to freaking do here, and since I'm here for only the short term, I can't get myself set up with a house, shop, or even my car which is back in GA and currently for sale. I have no family or any obligations. Yeah, it feels good. Anyway, my savings account is doing nothing but growing right now at a whopping 0.80%. I want more out of it since it's there and not doing anything presently. I already have a 401k, Roth IRA, HSA, invest in my company's ESPP, and the aforementioned savings. It's an online money market account. I could go higher on my 401k but I'm already at 15% of my income. I'm looking for opinions and information on ways I can put just my savings to better use. I don't know anything about investing beyond the simple stuff and my retirement accounts. I'm not looking to get into anything risky. Hell, I don't know if there's anything else I should do aside from be patient.

So what do people with knowledge in these areas recommend? Any direction I can be pointed in for good info to educate myself beyond the basics? At least I think I've got the basics covered at this point.

Thanks

[ErikLS2]

Two sayings I heard for the first time a long time ago that I've seen in action are: "Don't work for your money, put your money to work for you" and "buy low, sell high". Now, that may be oversimplifying it a bit I know but I have seen many people who don't seem to make enough in their jobs and need more money go out and find more work to do so they're working all the time. I don't think you can ever work hard or fast enough (at least at a job) and make as much money as you can doing the right things with whatever amount of money you have.

I've seen this personally in real estate. When things were going crazy I had enough sense to realize that it couldn't continue and sold at just the right time for an over 100% profit in 4 years. This can apply to stocks, cars, art, etc. It's usually a lot easier to figure out when things are cheap too because when they're booming we are psychologically wired to figure that it'll just continue, that it can't go back down. Some of the greatest financial minds didn't even consider that stocks in late 1999 and early 2000 would ever go back down. I remember talking to my father about this at that time and suggesting to him I was considering getting out but he told me a manager of a very successful mutual fund he knew told him "oh no, this is solid, it will continue". Well, I didn't sell but I learned a lesson which I applied to the next bubble, real estate, which I was a part of.

One last thing I don't ever forget comes from Warren Buffett who says he's fearful when others are greedy and greedy when others are fearful. Oh and one more (can't recall the source): If you want to achieve something find someone who's done it and do what they did. I like these little quotes if you can't tell.:)

Hope to hear from more people wiser and more experienced than I. Good topic!

[realcoray]

I'm just about to get into real estate and it seems like if you are smart there are a decent amount of opportunities out there to earn far more than 0.80%.

The thing is I think everyone is different and can tolerate different risk levels. I remodeled my current house (essentially a duplex) and repair it so that is not a concern in terms of having a rental property. I'm not going to over extend and take on much overall risk, so even in a worst case scenario I don't get jammed up.

It's probably not for everyone though but I can say there are relatively safe ways to earn more than 0.80%.

[pw2006]

My OCD probably started when I was 12 years old drooling over cars in Super Chevy magazine. I soon came up with a plan, got my first job when I was 13, bought a junked 71 Nova that year and rebuilt the entire car in our barn over the next 3 years. I paid cash for the car, bought parts after I saved enough money and did nearly all the work myself (except when my dad heard me cussing and throwing tools, he would calmly come in, help me fix whatever I was stuck on and tell me to ask him for help if I get stuck again, then he would leave). I had it ready on my 16th birthday and man was I proud of that car...but I digress.

Sounds like you are heading in the right direction. I do all of my own investing, watch CNBC, read financial magazines/books, joined motley fool years ago and have some close friends that I discuss the market/stocks with. I hate debt. I maintain a net worth spreadsheet that also includes my annual financial targets/goals and a 10 year forecast. I still update it weekly(except when I am on vacation). Yes, I have OCD, especially when it comes to family, money and cars. We also try to stretch our money as far as possible by searching for deals on quality items and are not shy about using coupons/discount codes whenever possible.

Nowdays, whenever I hire a new grad, I give them the following advice...max your 401k and ESPP contributions, save a portion of any bonus received and target some of that bonus money for fun, establish a budget that looks out at least a year and build an emergency savings account with ~6mths of expenses. Find a good doctor and pay him a visit each year, being healthy has a very positive impact on net worth.

If you haven't opened a brokerage account, you should look into Schwab. They have a lot tools (online and people) to get you started without any sales pressure. They also offer free seminars to customers (investing 101, intro to options, adv option strategies, etc) that are pretty good. Since Christmas is around the corner, here are a few books that you might find interesting: Warren Buffet's biography, The Millionaire Next Door and The Richest Man In Babylon. So many ways to spend it, so few to make it. I'm sure others will pipe in, but that is my 2 cents.

[RECOVERY ROOM]

Real Estate and stocks.....there all going to go up if you can hold out to see it happen. Find a good broker and have a sit down with them.....Ask around and see who some of your friends are using. Mr. Weld will chime in on this, Listen.

[ErikLS2]

I think if you have a good sense of the psychology of people you can be quite successful. Remember when the first huge brick cell phones appeared? Lots of folks were thinking "who needs a phone with them wherever they go?" Well, who doesn't have a cell phone now? When everyone started getting them Qualcomm stock was up over 2000% in one year, 1998 or 99 I think. There's an opportunity like that out there right now, you just have to find it. There are these cycles where almost everyone in society has to have something and bubbles happen. It happened with computers and cell phones and houses. What's it going to happen with next? Tablets? Those goofy new running shoes? Alternative energy? Cloud computing? Just looking around you at society everyday can tell you a lot about what to invest in if you really look and think outside the box. Of course, there were those that bet on Betamax, HD-DVD and so on so you can lose too.

[SWAPMEETCRAZY]

I think if you have a good sense of the psychology of people you can be quite successful. Remember when the first huge brick cell phones appeared? Lots of folks were thinking "who needs a phone with them wherever they go?" Well, who doesn't have a cell phone now? When everyone started getting them Qualcomm stock was up over 2000% in one year, 1998 or 99 I think. There's an opportunity like that out there right now, you just have to find it. There are these cycles where almost everyone in society has to have something and bubbles happen. It happened with computers and cell phones and houses. What's it going to happen with next? Tablets? Those goofy new running shoes? Alternative energy? Cloud computing? Just looking around you at society everyday can tell you a lot about what to invest in if you really look and think outside the box. Of course, there were those that bet on Betamax, HD-DVD and so on so you can lose too.

Erik--should i sell my PAGER business??........lol...........jim.....^^^^very true

[GregWeld]

Okay -- only because Tracy said I had to chime in -- I will do as I'm told. :D


So -- this answer is one that I say to you -- well.... it all "depends". So without writing a book -- let's take a real BASIC look at savings.

A person needs to think of savings as various BUCKETS of money.

A bucket of money needs to be for "emergencies" -- and this bucket - just like the other buckets we'll get to - needs to be 'adjusted' to meet the needs of the owner. I don't need an emergency bucket. I have plenty of money. Most need some kind of "quick and easy to get to money" -- that needs to be taken care of first. Whether it's $500 or $5000... is up to you. This really needs to be funded by the people that can afford it the least - i.e., the guy with maxed out credit cards!

Another bucket is the retirement bucket.... you seem to be working on that. BTW -- Don't be afraid to put more into this bucket. You do not need to be limited to the 15% you're doing at work. The only thing you're doing to fund more than your limits is that you're putting in AFTER TAX money. Dude - when you retire - and you're all set for life - you won't give a damn what you're living on - the point is that you will have it! So max your workplace and then see if you qualify for a ROTH IRA... which is after tax savings that comes OUT tax free...

THEN -- you really asked about INVESTMENTS.... again - this depends - real estate is ILLIQUID... so unless you have a bunch of dough and are just looking to diversify - fugedaboudit. If you want some liquidity -- with GROWTH in your capital - and get paid to "wait" - get yourself a Schwab account - or some other discount broker - and buy yourself some big cap dividend paying stocks. The rule of investing is to never put more than 5% of your TOTAL INVESTABLE MONEY (all of your investable money not just what's in this particular account!) into ONE investment. That way - if you lost it all (all of one investment) you're not hurt. Pigs get fat - hogs get slaughtered. Ask the builders that loaded up on dirt before the real estate crash - because they ain't makin' any more of it they'd tell ya! Dumbasses...

I'd buy STOCKS for dividend AND growth... so look at a CHART of any company you're interested in... see that over the LONG RUN (like 10 years) the chart is lower on the left and rises as it goes to the right! Forget about the dips in 07/08 - every stock you look at will have that. But lets look at Kinder Morgan Partners - NYSE symbol KMP - there is a nice chart... AND it pays 5.86% (based on todays price) which is $1.16 per share per quarter. So if you bought 50 shares - every 3 months you'd get a dividend of $58 (you're getting paid to wait - you're waiting for the share price to appreciate!). Yeah I own it.

I'd also look at AT&T (symbol T) - pays about 6% dividend. Is "steady" price wise. Great place to park money and be relatively sure it's going to still be there - good market or bad. Again - you get paid to wait. Yeah I own it.

So that's what I'd be doing. Diversify - don't buy TWO oil stocks -- buy ONE - Then get a consumer food stock -- Coke (KO) or Pepsi (PEP) or McDonalds (MCD). Funny -- people laugh when I tell 'em to buy McDonalds -- the stock is UP 125% in the last 5 years! AND you get a .61 a share per quarter dividend! So here's the deal -- it's what I ALWAYS look for.... if they don't pay a dividend - I'm not a buyer - and if the dividend is "low" (like MCD's is) then I want the growth to be there.... I'll take STEADY (AT&T) but then I want a higher dividend. Does that make sense?

Then --- DO NOT GET CAUGHT UP IN TRADING - DO NOT PANIC - DO NOT LISTEN TO THE GROCERY STORE CLERK TELLING YOU ABOUT THEIR LATEST BIG MARKET HIT.... RUN AWAY from those people! DO NOT BUY GOLD... IF THEY MAKE A TV SHOW ABOUT SOMETHING (House flipping?) RUN FOR THE HILLS... DO NOT INVEST IN IT. YOU'RE ALREADY TOO LATE!

There is no get rich quick scheme. Steady Eddy whens the race. LONG TERM is not 15 minutes. Buy good quality big names that you know and understand - with good charts and good dividends. Then sit back and laugh at the losers when they're broke and you're not.


Oh -- and make sure you check the little box when you buy "REINVEST THE DIVIDEND". That way every time they pay you - they buy more of their stock automatically for you - more shares - more dividends - which buy more shares which pay more dividends...

If you buy a stock and it's value DOUBLES (just an example) then sell the "gain" and buy something else. Nobody ever went broke taking a profit. It helps you to diversify - and keeps each investment in that 5% bracket.

There's a lot more to it -- and more details etc - but them's the basics. Stay thirsty my friend!

:cheers:

[Sieg]

Thanks Greg. :hail:

[GregWeld]

Thanks Greg. :hail:

Welcome!

People THINK investing is so "difficult" -- and it's really not.

I use the "Jeff Lynch" school of investing. His deal was -- buy stocks in things you understand - or in a store you shop at - etc. Because if you go to that store all the time - YOU can tell if things are going right with the company -- and you can also tell when it's NOT.

So lets just say you're a guy that's in Home Depot all the time - and Lowe's -- and you can never get what you want at Lowe's and every time you're in Home Depot - the place is crawling with customers and you LOVE the experience... then I'd buy Home Depot - IF it met my other criteria (chart looks good and it pays a dividend and or has growth and dividend).

It really isn't rocket science - but people use excuses NOT to invest. It's sad because it's really so damn easy. There's some RULES you need to learn along the way - basics - I don't GAMBLE - I'm not a "trader" - I'm an INVESTOR. I don't buy the latest high flyer everyone else is. And there's money left on the cutting room floor because I don't - but I sleep at night - and my money grows just fine.

Let's take a look at that..... Let's look at two stocks... NETFLIX and MCDONALDS.

I don't eat at McDonalds unless I'm trailer trucking by myself... but their chart is stellar - and the dividend is STEADY. I sleep well at night AND it's grown 125% (so more than a double) in 5 years. FANTASTIC.

I don't own Netflix - but it's been the darling high flyer... and it grew a bazillion percent in 3 or so years.... great! No dividend - no long term chart - but it's a flyer. So --- had I put in 100 grand - it might have gone up to 500 grand... but at what point would I have pulled the trigger and sold? When I doubled - or would I have gotten greedy with that kind of "quick money" and held for the next double? In the meantime - it crashed and burned.

So as an INVESTOR I'll take McDonalds over Netflix.... because it's harder to KEEP your money once you have some - than it is to make it. That won't make sense to most - but if you have some "real money" - then it makes a lot of sense. It's real easy to LOSE money. I hate losing money!

[Simmo]

Some great advice here!

WSSix - you've made the first step which 9 out of 10 of us dont, and that is ASK! A lot of people dont think they're smart enough, and it would be easy to get half way through Gregs post and feel a wee bit lost, but as car guys we can rattle off what make, model, year, engine code and trim level of that car on the horizon is, and what mods are required to screw x amount of horsepower/shave x seconds off a lap time......it's simply because we've applied ourselves and invested time to educate ourselves in our hobby.

With that level of dedication in investment we'd all be ticking that top box. Reading "Rich Dad Poor Dad" R. Kiyosaki (I know it's outdated and the concepts over-used now, but it's still got to be the best 1st investment book IMO) was a light bulb moment in my life. It's funny how I've more or less forced friends/family to read it and for some, it had the same effect. Okay others did'nt take the message on board....but dont be one of those people, this is 1% brains and 99% mind set.

I'm no where near cracking a million, but I'm certainly on the right track and have totally changed my spending/savings/investment habits and am continually investing in my education to expand my ability to invest. Next time you pick up Super Chevy, put it down and pick up "Investor" or whatever it is you have in your part of the world and get started. Time is your friend, I'm in my 20's and doing it tomorrow is not an option.

Lastly, someone mentioned health earlier. It is your greatest asset. Preserve it. I've had a minor set-back in this area lately and it's never been more true for me, however having made a few savvy investment decisions beforehand I'm well placed to recover nicely.

My 2c... go buy a book now :)

[WSSix]

Thanks Greg. That does make a lot of sense. My levels are 15% in my 401k, 10%(which is max) in my companies ESPP (I'm with Halliburton), and I max out my Roth IRA every year. I figure I better keep that one up because I may hit the 150K limit eventually. Until then, I max $5k on that at the beginning of each year before I spend a penny on fun stuff for the bikes or the car. I feel like I'm doing well with the retirement portion of my money management. For my savings, I'm definitely looking to do better long term investments than my simple money market account. I'm in this for the long run. I'm too busy with other things to be aggressive and try to play the stock market game.

[Beegs]

DO NOT BUY GOLD... IF THEY MAKE A TV SHOW ABOUT SOMETHING (House flipping?) RUN FOR THE HILLS... DO NOT INVEST IN IT. YOU'RE ALREADY TOO LATE!


:cheers:

All great advice!! The above is key IMO, if you can master "seeing" where something is in it's value cycle, your financial decisions become much "easier".
Example: When "interest free" home loan ads started playing on TV, I looked at my wife and said this game is over.

[ErikLS2]

Greg has a lot of great advice, especially about diversity. Don't put all your eggs in one basket. Also, if you prefer to not look at individual stocks, you can do just as well with a good mix of GOOD mutual funds. Here is as good a list as I've found and what I chose from:

http://money.cnn.com/magazines/moneymag/bestfunds/index.html

If you just picked a mix of these funds and did no more research and bought them through a Schwab, eTrade, etc. and rebalanced every year at tax time you'd be doing pretty well.

[GregWeld]

A couple of things here.... So I have a bit of mia culpa to my original post.

He is looking at "regular" savings... so really a liquid place to put some money that he may need to use. To me -- that is different than "investing" or "playing in the stock market". I went back to re-read his question - and kinda went OOPS...

OKAY -- so even I keep cash (inside my Schwab account) that earns NOTHING... it just makes me feel good and I'm okay with that. BECAUSE the bulk of my dough is making me money. So to the OP'r - you're doing really really well with your RETIREMENT accounts! Kudos to you!

With your ordinary savings -- just figure out what makes you happy to have some emergency cash available. Hold that right where it is. Then take my advice and invest the excess in some - even one - dividend paying big name big cap stock. BTW -- that is NOT "playing" in the stock market. That is BRILLIANT investing.

Here's why I DO NOT LIKE mutual funds - You're paying them a fee to manage your money. When you break down a mutual fund... you'll find many are overlap invested. If you only have $2500 to invest -- then put that in McDonals - or Coke - or Kinder Morgan Partners - or Chevron.... your returns OVER TIME will be far better. It doesn't take any effort or brains to manage this. Next time you have $2500 - buy another good stock etc. In 10 years (saving just $2500 per year) you'll have your own "mutual fund" with NO fees. If you now have $100K in mutual funds - you're paying about 1 1/2% in fees... and over time that is compounded and affects your returns. Take you're $100K and buy 20 ($5K each) big name dividend payers - and pay NO FEES and you have the same exact investment. On $100K you should be able to "make" $5K a year in dividends invested conservatively - but you should also have CAPITAL GROWTH - so in 7 or 8 years - you should have $200K and be collecting $10K in dividends and so on. Remember that at retirement - you don't just suddenly withdraw all your money! You should live another 25 or 30 years... and that money should still be having capital appreciation! And the dividends should be GROWING in PERCENTAGE PAID. Example - McDonalds paid .38 a quarter in 2008.... they now pay .61 per quarter.... so the dividend is beating inflation and your retirement INCOME is growing without you having to do a dang thing!

NOW --- ABOUT "TIME" --- If you are 21 years old - and you save $2000 each year for 10 years and then you stop and do nothing from then 'til you retire -- you will have near 1 million dollars.

Money doubles about every 7 years -- so here's an example for time. First number is @ AGE

@ 21 $2000 - @ 28 $4000 - @ 35 $8000 -@ 42 $16,000 - @ 49 $32,000 - @ 56 $68,000 - @ 63 $136,000

That is 42 years -- so 21 plus 42 - is 63 (retirement age)... NOTE the last "double". That is HUGE!


IF you start this saving at 31 and save $2000 dollars until you retire - you'll have about HALF of that. So example:

@31 - $2000 @38 - $4000 @45 - $8,000 @52 - $16,000 @59 - $32,000

So you start to see how far behind you are with "LATE" savings/Investing?


Can you tell I like this stuff??:rofl: :woot:

[frankv11]

Well this is one subject I know nothing about but really interested. I would like to purchase some long term stocks and not interested in trading. What should be my first step?
Maybe Greg can have a crash course on investing and how to use some tools

[GregWeld]

Well this is one subject I know nothing about but really interested. I would like to purchase some long term stocks and not interested in trading. What should be my first step?
Maybe Greg can have a crash course on investing and how to use some tools

First step is to "SAVE" some money. Nobody can just save a hundred grand... but if you start saving $200 a month - that is $2400 per year! And if you read my example above -- you'll see that can grow into a hundred grand OVER TIME.

I tell my kids -- if somebody gives you $100 bucks for a gift. Blow half - and save half. BTW -- "Saving" is not saving to spend.... that is a different bucket.

If you need to save to spend (buy something) make that a different account. Save $100 a month - 50 to buy something - and 50 for REAL savings so you'll have money when you need it most. If you get a raise - or a bonus - SAVE IT.

The key to all of this -- is once you actually accumulate some savings -- you'll be amazed at the mind set CHANGE you'll see. You just won't want to piss it away - it takes some work and sacrifice to save - and all of a sudden you have 10 or 20 grand - blowing it on that new truck just doesn't seem to be as good of an idea. It becomes very satisfying to have "some money".

[RECOVERY ROOM]

I knew Greg would have something to say...Good advice for you younger guys to start saving early, Cut back on the weekend parting..LOL. Fifty bucks a week will be alot in 30yrs.

[GregWeld]

Tracy --

I think that is the biggest "mind set" that has to change for people to become better money managers.... The thought is -- I can't save "enough" or I don't have $500 to save. Yep - you're right - and you'll never have $500 if you don't start by saving $50! Save $50 a month and in less than a year you'll have $500!

I'm using really low numbers so people just need to slug in their own. A guy making $80 grand a year - should be able to save $500 a month. Dude! That's 6 grand a year! That 6 grand in 42 years is $336K!!

$336K at 6% dividend (what AT&T pays currently) is 20K per year in dividends -- and if you figure that is a return on the 6K you originally invested... I'd say that's a pretty damn good return! Save 6k ONCE @ 21 years old - and you get back 20K every year for the rest of your life when you hit 63 years old! Not bad!

[GregWeld]

Wanna really make a difference in your KIDS lives??

When they're born - put a grand away - add a grand every year til they're 63 years old...

Net result at retirement compounded at 9% (so you need 6% reinvested dividend AND capital growth of 3% a year - this is super super conservative and not even realistic! It should be far more over time!)

If you were a long term investor, the worst twenty years delivered a return of 7% a year. This occurred over the twenty years ending in February 2009. The best twenty years delivered an average return of 18% a year, which occurred over the twenty years ending in March 2000.

$2,976,771.57


Tax free MUNI BOND return on that balance PER YEAR at what I earn currently (5%) -- that's $150,000 in income per year NET NET TAX FREE off your silly little $1,000 per year from birth.

WAY better than college!

[ErikLS2]

The one point I will make about mutual funds is there are many on the list I posted with acceptable management fees, in the 0.02-0.6% range that perform well and get you instant diversification to an extent. In fact, all the funds on that list have to meet certain strict criteria including management fees. A professional stock picker with vast resources has to only outperform you doing it alone by the management fee he charges for you to be money ahead. Personally I wouldn't feel comfortable putting my first few thousand bucks in one stock, no matter how big or established it is but there are many ways to do this right. It's more important I think that you're doing it than it is how you're doing it but it's also important to make wise educated choices that suit your comfort level.

Greg makes a very good point about time. The general rule (not sure it's my rule) is to be more into stocks the younger you are as you have time to recover from a downturn. As you age you slowly get more conservative by transitioning to bonds. A withdrawl rate of 4% of your retirement account balance per year is a common number to ensure you don't outlive your money. You can use this handy calculator to figure how to achieve your retirement goals:

http://cgi.money.cnn.com/tools/retirementplanner/retirementplanner.jsp

I think Greg's best point is about how you FEEL when you begin to build up a savings. :thumbsup: Once you begin to see a growing balance in there you develop a respect for the money and work harder to make it grow.

[GregWeld]

Good points Erik...

Especially the one that you make about it doesn't matter so much how you're doing it - but that you ARE doing it.

Mutual Funds have their place - and most people feel more comfortable letting the pro pick. Nothing wrong whatsoever about this form of investing. But I will point out that PICKING THE RIGHT Mutual Fund is every bit as hard - and as important as picking the right individual stock. Most people just don't understand = nor can name their mutual fund = which means they can not follow (at all) a mutual fund. They tend to buy and hold and not go back and see what's up -- UNTIL they notice they're down 30% from the prior year. Then they SELL -- and then they buy the next mutual fund that had the best performance from the last period. THAT my friends is the fastest way to lose your ass... I see it happen CONSTANTLY.... people wake up and they get their statement and they're down - they panic and sell (at the bottom) and they then "re-invest" at the top. 99% can't even tell you why they bought what they did - nor tell you the top 3 holdings in the fund.

I like the "pride of ownership" of saying -- Yeah -- I own "such and such"... and it's easy to name the 5 or 6 you own - and it's easy to understand and or to hold through a down period because you actually know what they are and why you bought them.

When the market SUCKS --- I remind myself by looking at the stocks on a long term (10 years or 5 years) chart - and I see that - over time that line is low on the left and higher towards the right. Then I "skip the dips"... and I am reassured that I'm on the right course - OVER TIME.

There's all kinds of ways to get there -- you MUST just choose something that you can live with and JUST DO IT! That way there's no right or wrong way.

[CRCRFT78]

I think I need to go to the WELD SCHOOL OF INVESTING! I wish I understood my investments a little better. All good info that I will look over again once I have my portfolio in front of me.

[WSSix]

Thanks Greg. You're correct, this is my savings and I feel I have enough to play with as well as keep on hand should an emergency arise. That's why I called it investing 102. I felt like I had my retirement stuff set up correctly and in their appropriate accounts and wanted to venture into the next thing which I consider less conservative or more risky. Yet, I don't know squat about that stuff so I figured I better ask. This is money I will eventually spend on a house or car stuff I believe so I don't want anything risky. I just want better than 0.80% lol. Besides, who knows how long it'll be before I can actually spend it on a car or house. By that time, I may just leave it well enough alone and start the car fund over again.

For what it's worth, my Roth IRA is through Vanguard and it's their Star account which is a very low management fee mutual fund. I'd have to look it up as to how it's diversified through stocks, foreign and domestic, and bonds. I couldn't begin to tell you what particular companies or bonds the money is in though. Its doing just fine for me though considering it's a long term deal.

Also, I'm 31 and started the Roth at 26 but didn't necessarily max it out at 5k every year.

I'm glad to see others getting some information and knowledge out of these posts as well. That was my intent and I'm glad it's working out that way.

[RECOVERY ROOM]

This thread is a better read than most. Better than most stock watch sites. Easy to understand advice from a person who lives it not someone trying to sell it. Thanks Mr Weld....more please LOL

[Simmo]

This thread is a better read than most. Better than most stock watch sites. Easy to understand advice from a person who lives it not someone trying to sell it. Thanks Mr Weld....more please LOL

+ 1 :)

Hey Greg, have you ever thought of writing a book lol? So far I've focused on property which I really enjoy and I'm comfortable with. I can tell it's not the route you'd take but I am looking to put a small amount of funds (say 20K) into stocks but dont feel confident enough to go ahead yet.

I'm hands on so would be managing things myself...what literature would you suggest I delve into to boost my confidence/knowlegde? Maybe like a "stock market for dummies" type book or similar, heck any knowledge source for a newby would be a start.

Thanks for your contribution to the thread :hail:

[Neil B]

A bucket of money needs to be for "emergencies" -- and this bucket - just like the other buckets we'll get to - needs to be 'adjusted' to meet the needs of the owner. I don't need an emergency bucket. I have plenty of money.

Are you saying you don't believe in the concept of a guaranteed, low-interest fund even for people who don't need an emergency fund? I'm assuming this applies to a person who can meet their current obligations WITHOUT employment or having to pull from their other investment buckets.

[GregWeld]

All you have to do is read what I've already written -- that is INVESTING FOR DUMMIES 102 right there!

Can't make it much simpler...

Open an account - with a discount brokerage.... put some money in it.

Buy some big name big cap stocks that pay you a dividend.

Get more money - add to your account -- and repeat the above.

Whether you have a little money, or a boat load, the principles still apply... buy good names - diversify - don't get greedy - keep your investments to 5 ish percent so no single investment can hurt you in the event it goes down and or is a loss (think ENRON -- Too big too fail - BS!)

I have a Schwab account - it has a boat load of dough in it - but I still only own 21 stocks in the account. I don't need a lot of stocks - I just need good ones. I take a bit more risk because I can afford to. SO while I have McDonalds - I also own JNK - HYG - and NLY. That is an entirely different level of investing and not suitable for most on here if you're asking these basic questions. I live off my dividends and bond income. I raise my dividend income "average" by taking some positions that are riskier - therefore they pay higher dividends. SO my COKE (KO) is offset with some Annaly Capital Management (NLY).

My biggest gainers so far this year ---

Phillip Morse -- cigarettes! = Symbol PM - pays approx 4.7%

Altria -- more smoke... symbol is MO - pays approx 6.4%

Kinder Morgan Partners - oil and gas pipelines -- symbol KMP - pays 6.2%

McDonalds - junk food - symbol MCD - pays 3.3%

Con Edison - power - symbol ED - pays 4.8%

I offset the 3% stuff with the high risk as mentioned above - Annaly pays like 14%... I can afford to play that game I'm not trying to build capital or increase my retirement account... so don't you guys go there.

Just go to YAHOO finance -- or Google finance -- and put in those symbols -- then go to a chart and look at 5 year or 10 year or whatever they'll let you choose for time -- and look at the chart for each one. You'll see all manor of ups and downs in the squiggly line -- but the basic course over time is UP... so if you can train yourself to IGNORE the "noise" = hold steady - don't freak out - collect those dividends -- add to your account when its down the most and buy MORE stock when it's DOWN... YOU WILL BE REWARDED in time.

[GregWeld]

Are you saying you don't believe in the concept of a guaranteed, low-interest fund even for people who don't need an emergency fund? I'm assuming this applies to a person who can meet their current obligations WITHOUT employment or having to pull from their other investment buckets.

Well Neil -- the biggest statement in here is that everything in investing "needs to be adjusted to suit the needs of the individual investor". So a guy that has no bills - has plenty of income - has plenty of cash -- is an entirely different scenario than someone that IS NOT in that enviable position.

Personally I ALWAYS have a buttload of cash on hand. Cash is king. It allows me to buy something on a moments notice and NOT have to sell something in order to raise the cash. A real life for instance.... happened in the last week... my brother in law wants to buy a 4,000 square foot building - it's brand new - bank owned - cost 600K to build in 2010 - bank is asking 450K - I told Jay to offer 300K all cash close in a week... their counter was 335K --- BAM - Done deal. I'll carry that paper for 6%. What I DID NOT have to do was fret over what to sell in a down market - so I did NOT have to take a loss on something in order to take advantage of this "deal". I'm in a completely different "place". But it's still the same thing with different zeros... Maybe a little cash stash comes in handy to buy tires that are on sale and you need.... or whatever. The statement "you can never have too much cash" --- is only true for a guy that only has $500.... because cash doesn't make any money at current rates. But having "some" is always better than not. It just has to suit your comfort level. The rest should be making you money.

Think of money as employees -- every dollar is ONE employee.... they need to be WORKING to make you some money. Some of them are slackers - some need to be re-trained (sold to buy something else) and some are truly in a league by themselves (keepers). BUT YOU NEVER GIVE 'EM A DAY OFF IF YOU DON'T HAVE TO!:woot:

[GregWeld]

This thread is a better read than most. Better than most stock watch sites. Easy to understand advice from a person who lives it not someone trying to sell it. Thanks Mr Weld....more please LOL

You just need to keep working.... You ain't retiring 'til you're finished with "da bubble". :unibrow: :D

[Musclerodz]

very good read Greg, thanks......:thumbsup:

[GregWeld]

Okay - So I was re-reading my latest posts -- to make sure the verbage was generally correct...

I want to add some info - because this whole discussion also involves RETIREMENT --- some of you are young bucks with TIME on your side. Some of us - sadly - are far older and or already retired. Personally I'm 58 "already".... so I have an equal amount of investment in TAX FREE MUNI BONDS. That is a separate account - and is professionally managed. I don't understand the bond market - I don't want to learn it - it's BORING - but takes some skills to understand all the nuances. I have a LADDERED bond portfolio - it's laddered out 5 years. There is NO GROWTH in the capital (if you're not trading them - which I'm not). There is RELATIVE SAFETY in a bond portfolio - if a bond is held til "term" you get your investment back 100% - and in the meantime you collect an INTEREST PAYMENT (usually every 6 months on bonds). So this portfolio is - to me - SUPER SAFE - and just throws off income that is tax free. For the tax free part - I get LESS income than I could get if I bought stocks or something else... but that is where the pro comes in - he'll do the math and let's say you could make 7% TAXABLE -- then 4% TAX FREE is the same "net". WHAT BONDS DO NOT DO is they don't grow the capital. AND they can lose big time if interest rates are against you. THAT is why I'm only out 5 years and I'm LADDERED. Each year 20 % of the portfolio comes due so we re-invest that cash in the next one year out. EXAMPLE

1,000,000 invested in bonds due 2012
1,000,000 invested in bonds due 2013
do this out til 2015

The bonds due in 2012 will be re-invested in bonds due in 2016
The bonds due in 2013 will be re-invested in bonds due in 2017

and so on.

I just checked -- there are 81 individual bonds in my account and 13 "preferred" stocks (preferreds pay a higher interest rate but are really just like stocks and are taxed - not tax free).

Bonds are what you vote on -- say -- They want to build a new school and there is a SCHOOL BOND on the ballot - authorizing your county to issue "X" amount of bonds at "X" rate - Due "X" time (maturity)... you voted YES -- so the county sells the bonds - I buy some... and they pay me interest and give me back my principal when they "mature".

What happens to the "FACE VALUE" of a bond if interest goes UP? The face value of your bond goes DOWN. SO a bond that pays 5% and you have 100K in it - and now interest rates are 6%.... and I want to SELL my bond. I'd have to discount the price til the buyer gets a return of 6% on that same bond - even though the "issuer" is only paying 5%. But that 5% coupon was on the original 100K -- if the guy only pays 90K for it - it's like he's getting 6%.

I don't buy and sell bonds -- some do. I actually have a nice gain on almost every single one of them in my account - but THAT is not why I bought them - I bought them for the income they produce and I'm happy with that. SO I'll sit on them and do as I said above.

OLDER people need some bonds in their accounts -- they're safe (unless they're issued by Greece or Italy! LOL)... and usually will "counter" the stock market. So on big down days in the stock market - my bond account will be UP. And vice versa. Not dollar for dollar - but it HELPS balance out your total investment. I've never owned bonds until last year. Never felt I needed them. I was apartments - and stocks. But now - I've actually come to see that they "fit" what we're doing NOW.

I don't think anyone needs bonds until they're really quite well set. Stocks will get you where you need to be over the long run. Even if you're 64 you're not going to cash out "what got you there" (stocks) and suddenly go into all bonds. People with big incomes need bonds - remember that tax free status - that really helps bring down a high earners "income tax" liability -- but now we're getting into that whole 1% vs 99% thing and it's just a lot more complicated than that. If there wasn't a bond market - you wouldn't have new schools or fire stations - or stadiums - or streets.... but we digress. :cheers:


And I said I wasn't going to write a book!! :willy: :lol:

[GregWeld]

I sure hope this helps some folks understand what is "scary" to them. Because it shouldn't be. The problem is - people are reluctant to discuss finances and they shouldn't be. Everybody is different - some guys like SBC and some guys like Mopars = it's all good - and just like cars - finances need to be tailored to suit each persons requirements and what they're comfortable doing.

I have a buddy that has been in bonds for 30 years -- in my opinion -- he's lost his ass and could be so much more wealthy had he invested even half in stocks... but it's what he's comfortable with - so I don't try to make him see the light. The MAIN POINT is that he's doing SOMETHING - and anything is better than nothing.

[RECOVERY ROOM]

Now is a good time to get in theres a lot of undervalued stuff out there.

[John510]

If you have cash then buy real estate while its cheap and rent it out. I try to find major fixers and remodel them myself then rent them. These are usually foreclosed homes or REOs.

Example:

2 bdr/2 bath condo with flood damage. Worth 130-140K
Purchase price $80K
Escrow fees $1500
Remodel cost $12K

End Result $93,500

Rents for $1550
HOA/Prop Tax/Ins -368
Net Result Cash flow $1182

Thats a 16-17% Return on Investment. The problem is you need to search MLS everyday and make offers as soon as they get listed. This only works with cash deals. If you are getting mortgage loans to do this then you probably will not be positive since you have to pay interest up front.

[realcoray]

If you have cash then buy real estate while its cheap and rent it out. I try to find major fixers and remodel them myself then rent them. These are usually foreclosed homes or REOs.

Example:

2 bdr/2 bath condo with flood damage. Worth 130-140K
Purchase price $80K
Escrow fees $1500
Remodel cost $12K

End Result $93,500

Rents for $1550
HOA/Prop Tax/Ins -368
Net Result Cash flow $1182

Thats a 16-17% Return on Investment. The problem is you need to search MLS everyday and make offers as soon as they get listed. This only works with cash deals. If you are getting mortgage loans to do this then you probably will not be positive since you have to pay interest up front.

You can definitely do it with a mortgage, and I'm no expert, just getting started in this area myself but look at the same example property, but financing it and you can see how you can put your money to work.

If instead of paying cash outright for an 80k property (then 12k in repairs), you can buy four places @ 20% each (64k total), and then do say 10k or less in repairs each, and you would end up making very similar monthly cashflow (1295$), but you would build equity four times faster, aka putting your money to work for you. That is assuming 45% expenses and 8% vacancies.

Buying one outright is much lower risk, but buying four with a mortgage is not as risky as it may sound depending on an individuals circumstances. If a single house is unrented, you lose all of the cash flow, where if you have 4, you need two houses unrented at the same time to break even (the cash flow from one, covers the mortgage on an empty one).

I'm not in a position personally to get 4 places, so I'm looking at a triplex to get the same benefit of reducing my risk. The numbers from one example are like so:

List price: 144k
Down: 36k (my lender prefers 25%), 40k out of pocket total to purchase
Rent: 1800 (600x3)
Gross (minus 8% vacancy): 21,528$
- Expenses (50%): 11,808$
Net operating Income: 9,720$
- Mortgage (P&I): 6,470$
= Cash Flow before taxes: 3,250$

This results in a 9% return on the money I invest which is actually lower than what most people would desire for investment property.

[GregWeld]

I have a friend that lives in a 12 million dollar house -- he started (years ago) buying and fixing up single family rentals - while he and his wife owned and operated a restaurant. They worked their asses off late nights and burning the candle at both ends... After awhile they worked into duplexes and fourplexs...
Now they own HUNDREDS of apartment units - most in a the LLC style - where "investors" buy shares and get semi-annual interest payments - the investors all together own 49% and Ray owns 51% plus gets management fees etc.


The problem for "most" buying this type of property -- they don't have the skills or time to do the work themselves. That really complicates things -- or adds to the cost basis if you have to pay a pro - but LONG TERM - this is a great way to build wealth and cash flow. Pound that profit back into the next project - or pay off a couple early (20 years instead of 30) and you've got instant retirement savings and income. :cheers:

[LS1-IROC]

Wow..lots of good reading here!

I'm curious as to what the best way to save for college is. My wife and I have a little one on the way and want to start right away saving for their college fund. I'm wondering if a 529 plan is better or should I just buy big company stable stocks?

[ErikLS2]

Wow..lots of good reading here!

I'm curious as to what the best way to save for college is. My wife and I have a little one on the way and want to start right away saving for their college fund. I'm wondering if a 529 plan is better or should I just buy big company stable stocks?


A 529 plan is definitely the way to go. Look at Utah's, it was one of the best when I was researching them a while back. Neveda's was also pretty good if I recall. You don't have to live in the state to invest in their plan either. If you do happen to live in a state with a good plan and invest in it, you get a state income tax deduction on your contributions but this is not a good enough reason to invest in your home state if another state has a better plan. A nice benefit to these plans is once they are set up, anyone like other family members can make conributions to the plan directly. Most of them also have automatic plans where the money gradually makes it's way into bond funds as the child gets closer to college age, or you can manage your choices yourself within the plan. Check out this link, and the entire website:

http://www.savingforcollege.com/intro_to_529s/name-the-top-7-benefits-of-529-plans.php

A measure I like to use for rental property when borrowing money to pay for it is it's CAP rate . (see here:http://en.wikipedia.org/wiki/Capitalization_rate). Basically, if you can borrow the money at a lower interest rate than the cap you are earning interest on the borrowed money. This in itself doesn't automatically make it a good investment though, it's just a starting point.

Example:
Property CAP rate 8%
Mortgage Interest Rate 6%

This 2% spread is what you are effectively earning on the borrowed money. The CAP rate is based on the current market value of the property though, not necessarily what you pay for it. Therefore, if the property goes up in value but the rents don't increase the CAP rate goes down which could mean less potential buyers if you want to sell. The flipside to that is if you are able to raise the rents and the market value doesn't increase the CAP rate goes up! Also, the higher the CAP rate, the more risky GENERALLY the property is. Upscale fancy Class A properties usually have a lower CAP rate but a more stable tenant base as well as "pride of ownership" and often times less risk than a Class C or D property which might have a higher CAP rate and cash flow every month but probably isn't something you want to show off to your Lat-G buddies :D

[pw2006]

Wow..lots of good reading here!

I'm curious as to what the best way to save for college is. My wife and I have a little one on the way and want to start right away saving for their college fund. I'm wondering if a 529 plan is better or should I just buy big company stable stocks?

I live in CA and have 2 little ones (2 and 5). I set up 529s out of Utah when they were born (Utah has one of the lowest fee structures and there are no tax benefits using a CA 529). There are some limitations and/or penalties with 529s if the funds are not used and/or withdrawn (like if you overfunded the acct, kid decides not to go to college, life throws you a major curveball and you end up needing those funds due to illness, etc). You can roll any unused funds over to another family, but frankly, I am setting this bucket up for my kids' education. I am currently targeting a balance of ~$100k for each when they are 18. However, $25k per year may not be enough to cover an education when they are ready. So, I am supplementing the 529s with CA muni bond ladders. Personally, I would rather be underfunded in the 529 and have the flexibility of the bond ladder if needed. Just my 2 cents.

[Sieg]

Can you tell I like this stuff??:rofl: :woot:

Why didn't you beat this into my head 25 years ago? :willy: :willy: :willy: :rofl: :thumbsup:

Thanks for taking your time to share your knowledge to benefit others willing to pay attention and apply themselves. If this thread doesn't have a positive impact on at least a few individuals futures I'll eat a Pilot Power. :D

[GregWeld]

Two separate posts here -- will respond to both in this one:

REAL ESTATE --

I own "shares" of an apartment house LLC -- I own 2/3rds of it - it is professionally managed - I do NOTHING but collect the interest payment every 6 months. Usually these LLC's will accept investments of around 50K per "unit" (share). Sometimes they'll sell a 1/2 a unit if they have two people that only want half each. It's a good way to be in real estate WITHOUT THE HASSLES.

Downside - totally illiquid... but many of these are "flipped" in about 10 years when the tax benefits run out. Just something to think about.


COLLEGE --

Start early enough - invest in big cap dividend payers -- in 20 years (starting at birth -- they'll spin off enough income to HELP pay the tuition and you'll probably end up with a nice college graduation "gift" in the form of still having some capital left after 4 or 5 years of school. AND OR - if they choose a different path -- you can use the money for something else.

Do the MATH FIRST -- if you have a 3 year old -- you have 15 years to pound some money away. If you can save $400 per month -- that's $4800 per year -- 15 years -- you'll have 72 GRAND IF YOU HAVE ZERO CAPITAL GROWTH (this scenario is almost impossible!) which should spin off about 6% dividends or $4300 a year... so then if you took $5000 grand a year from capital -- and a little "out of pocket" -- you're good to go for a state school. Private school?? You better hope you have real good DNA and he/she gets a full scholarship! Both my kids are "out of state" tuition -- and the living expenses on top of that - figure 35 to 40 grand per year - took Alex 5 years - and Adrienne is right behind him - he's out - she's in (they're 4 years apart).

Student loans are just for those folks that didn't SAVE now -- so they'll pay much much more LATER. I want to BE the bank not OWE the bank. But that's a personal issue! :willy: :D

[GregWeld]

I live in CA and have 2 little ones (2 and 5). I set up 529s out of Utah when they were born (Utah has one of the lowest fee structures and there are no tax benefits using a CA 529). There are some limitations and/or penalties with 529s if the funds are not used and/or withdrawn (like if you overfunded the acct, kid decides not to go to college, life throws you a major curveball and you end up needing those funds due to illness, etc). You can roll any unused funds over to another family, but frankly, I am setting this bucket up for my kids' education. I am currently targeting a balance of ~$100k for each when they are 18. However, $25k per year may not be enough to cover an education when they are ready. So, I am supplementing the 529s with CA muni bond ladders. Personally, I would rather be underfunded in the 529 and have the flexibility of the bond ladder if needed. Just my 2 cents.


Good info but you'll be far better off if you buy some good dividend paying stocks and choose to re-invest the dividend. That way you "SHOULD" have capital growth and collect the dividend.

A school "savings account" like this really needs the growth component to it to help you get there... bonds don't "grow" but are bought for SAFETY. You also don't need the tax free status of the bonds. That is just giving you a lower return and you need a higher return - COMPOUNDED - to also help you get there. So just using McDonalds stock as a well known example -- whatever you'd have put away 5 years ago -- would be MORE THAN DOUBLE what you put away.... already! Where as your bond would still be the exact same value (if you're holding to maturity). If you're not "comfortable" with all stocks - then do half and half....

Put the account in the childs name with you as joint owner -- that way the dividends are taxed at THEIR rate which can be ZERO.

[pw2006]

Good call Greg! I will look into the joint accounts for the little ones, and the dividend plays are more interesting than my muni approach. Sorry, I'm a cpa and have ultra conservative tendancies. Can you send me more info on the mgmt co for your LLC? Our mgmt fees in Hawaii are outrageous, and I don't have a lot of time to deal with tenants. However, you LLC sounds intriguing!

[LS1-IROC]

Thanks for the info Greg! The stock route sounds more appealing to me. I'm a total newb at this. The only investments I have are in a 401k. My wife and I have been saving money since we got married and now is the time to invest instead of letting the money sit in a savings account.

[GregWeld]

Good call Greg! I will look into the joint accounts for the little ones, and the dividend plays are more interesting than my muni approach. Sorry, I'm a cpa and have ultra conservative tendancies. Can you send me more info on the mgmt co for your LLC? Our mgmt fees in Hawaii are outrageous, and I don't have a lot of time to deal with tenants. However, you LLC sounds intriguing!

No point in me sending you LLC info -- but they are on the internet.

http://www.suhrco.com/

I don't think they do anything in Hawaii!

But there are many, I'm sure, outfits in Hawaii that do this very same kind of deal. There you just need to look around and get references and have meetings with them to see if you do business the same way. I'm a "pride of ownership" guy - I want my buildings looking tip top - and I want them run with integrity.... Some of these outfits are all about ROI - and never put anything back into the building... they just milk it. That's not my style and I'm not doing business with anyone that runs stuff that way.

I also am BIG - in fact - HUGE on big money downs... and NO REFI's -- put 35 or 40% down -- and fixed financing. That's the steady eddy way to make money. SO all those things are important to me.

[GregWeld]

Thanks for the info Greg! The stock route sounds more appealing to me. I'm a total newb at this. The only investments I have are in a 401k. My wife and I have been saving money since we got married and now is the time to invest instead of letting the money sit in a savings account.


Well -- keep liquid! Cash is king -- so don't go "all in" and then be a forced seller when the market is against you. Don't get greedy on me!

The market historically has never been down THREE years in a row in any three year period - or some such rule.... but I'll guarantee the minute you get in -- there's a little guy on Wall Street that yells to his buddies -- "he's in! Take 'er down!". And they squeeze and squeeze til you quit. Then he hollers uncle and the market goes up. If you sell when it's down -- he yells to his buddies "he's out! Take 'er up!" and the market goes up the day after you've just sold. You only beat him by staying "long". You can only stay long by buying GREAT COMPANIES - and getting PAID TO WAIT (the Dividend!).

Forget the stock buying "tip" you get at the grocery store....

Buy companies like:

Phillip Morse
Altria
Con Edison
Coke
McDonalds
Johnson and Johnson
Kimberly Clark
Pepsi
AT&T
Verizon
Proctor and Gamble

If you want some more "yield" with HIGHER RISK you can sprinkle in a little:

Showing SYMBOLS here.

HYG --- High yield government bond fund
JNK --- Corporate junk bond fund
NLY --- Mortgages


These are all names you can actually tell someone what they do! You don't need to be brilliant... you just need to win by staying in the game.

[frankv11]

very informational thread. I'am also in the real estate investment side of it. I purchase properties at trustee sales auction , fix and sell them but its not as simple as it sounds. most people think you got to auction buy a house, work on it the next day and put it out on the market in a few weeks, the way they show on TV.
sometimes it could be a long process and a bit of a gamble. it can be a real gamble because there are no (zero) warranties as to what you are buying. at auction you are pretty much buying the deed of trust from the bank and you really have to do some homework or can end up paying big bucks for a piece of paper.
example you go to auction because there is a said property going up for sale.
you show up, fight the rest of the bidders , you get the winning bid, pay for it in full there and then ( you have to show proof of funds in cashier checks in order to bid) they collect as soon as you get winning bid. so you think you bought your self a piece of the rock, but some time later you find out you have bought a 2nd deed of trust or 3rd with the 1st going on sale tomorrow which in turn will completely wipe yours out. so you get NADA but a huge headache.
on the other side of the coin do your homework and you can get some good deals at trustee sales auction. sometimes you can get about 30% to 40% profit from initial investment in about 6 months. so flipping can still get you some money its just not a walk in the park and a bit of a gamble in a lot of aspects.

[LS1-IROC]

Well -- keep liquid! Cash is king -- so don't go "all in" and then be a forced seller when the market is against you. Don't get greedy on me!

The market historically has never been down THREE years in a row in any three year period - or some such rule.... but I'll guarantee the minute you get in -- there's a little guy on Wall Street that yells to his buddies -- "he's in! Take 'er down!". And they squeeze and squeeze til you quit. Then he hollers uncle and the market goes up. If you sell when it's down -- he yells to his buddies "he's out! Take 'er up!" and the market goes up the day after you've just sold. You only beat him by staying "long". You can only stay long by buying GREAT COMPANIES - and getting PAID TO WAIT (the Dividend!).

Forget the stock buying "tip" you get at the grocery store....

Buy companies like:

Phillip Morse
Altria
Con Edison
Coke
McDonalds
Johnson and Johnson
Kimberly Clark
Pepsi
AT&T
Verizon
Proctor and Gamble

If you want some more "yield" with HIGHER RISK you can sprinkle in a little:

Showing SYMBOLS here.

HYG --- High yield government bond fund
JNK --- Corporate junk bond fund
NLY --- Mortgages


These are all names you can actually tell someone what they do! You don't need to be brilliant... you just need to win by staying in the game.

Thanks again! I enjoy reading your posts. You have a way of putting things in a language I can understand. I spent about 3 hours lastnight doing research on investing and it was mostly very boring dry reading, unlike your posts.:thumbsup:

So.....what's the perferrred way to buy stock? Open up an online account and have at it, or best to go through an advisor that we can meet with face to face?
I think I got my wife on board with buying stock...we'll see:rofl:

[CRCRFT78]

I'm also curious what's your take on buying stock for someone with little or no experience. For instance, I've got a couple of shares of Apple, Nike, Caterpillar, Disney and Harley (all 10 shares or less). Nothing that will make me rich but I wanted to get my feet wet. Other than recognizing the names of the companies I couldn't really tell you why I picked them or if they were even good choices to begin with. What's your take on this Greg?

[GregWeld]

Thanks again! I enjoy reading your posts. You have a way of putting things in a language I can understand. I spent about 3 hours lastnight doing research on investing and it was mostly very boring dry reading, unlike your posts.:thumbsup:

Thanks! I'm just a hot rod guy - but I like helping other people... and would truly like to see AMERICA save and invest more because money isn't everything... but it beats the hell out of whatever is in second place!

If you're researching - there are really only a few things you need to look at...

Do you understand what the company is/does?

Do they pay a small dividend that has been paid over a very long time - and they have had stock price appreciation to make up for the smaller dividend?

Do they pay a larger dividend - but the price is "steady" over a long period of time (more like a utility) - and has their dividend GROWN over time. i.e., 5 years ago they paid .38 per share and they're now paying .61 per share... that means they're EARNING MONEY and returning it to the share holders. Not wrong or right just a different way to get there.

If the stock price dropped in HALF -- would you buy more of it? Because you understand their business... and you trust the product or reason why you bought it. So it's "outside forces" that crushed the price -- not because they screwed up the company.

[GregWeld]

I'm also curious what's your take on buying stock for someone with little or no experience. For instance, I've got a couple of shares of Apple, Nike, Caterpillar, Disney and Harley (all 10 shares or less). Nothing that will make me rich but I wanted to get my feet wet. Other than recognizing the names of the companies I couldn't really tell you why I picked them or if they were even good choices to begin with. What's your take on this Greg?

Well good for you -- you've at least got a start!

Okay -- stock by stock - you've got DIVERSITY - you have Apple (retail/tech) - you've got NIKE (retail) - Caterpillar (industrial) - Disney (entertainment) - Harley (manufacturer/retail/automotive).

I think Harley is too "faddish" for me to invest in... Sorry.

Don't buy anymore "retail" - you have enough exposure there. You really have 3 out of 5 that relies on some sort of CONSUMER buying at retail.

ALSO -- every one of these pays a dividend but they pay a very SMALL (under the rate of inflation) dividend... so on my screen they'd have to have a larger than normal stock price appreciation in order for me to buy them. So for your next investments try to pick a couple with higher dividends... AT&T -- VERIZON -- KINDER MORGAN PARTNERS - PHILLIP MORSE - ALTRIA... they all pay more than the rate of inflation AND have price growth...

[GregWeld]

So.....what's the perferrred way to buy stock? Open up an online account and have at it, or best to go through an advisor that we can meet with face to face?
I think I got my wife on board with buying stock...we'll see:rofl:



I'm not an advisor nor in the business - I'm retired... and never was in this business. I just run my own money.

Discount brokers are perfect for the "small" (and large) investor. They have very small fees... so your profit isn't eaten up with buying/selling commissions. They have useful tools on line - they walk you through if you need help you can go to their office or call 'em... or email me...

[GrabberGT]

All great and very appreciated info. Here's a new one... What are your thoughts on Roth IRA vs Whole Life Ins. vs the Dividend paying stocks model thats been outlined here. My only investment for my retirement so far is my 401k which I have maxed out at what my company will match. I'd like to start putting away some more for retirement and would like an unbiased opinion. The only opinion I have so far is the Life Ins company.

Thanks

[GregWeld]

All great and very appreciated info. Here's a new one... What are your thoughts on Roth IRA vs Whole Life Ins. vs the Dividend paying stocks model thats been outlined here. My only investment for my retirement so far is my 401k which I have maxed out at what my company will match. I'd like to start putting away some more for retirement and would like an unbiased opinion. The only opinion I have so far is the Life Ins company.

Thanks

Life insurance is a savings account for the beneficiary. :unibrow:

As an "INVESTMENT" it sucks bilge water.

A person should have enough life insurance to make sure their family doesn't suffer due to their loss. So if you have a 200K mortgage - and 50K more in debt - buy a 500K term life policy and that will insure the loved ones can live in the house debt free - pay off all other debts and have enough to bury your sorry ass. It's paid tax free - so it's a net net amount. Put the rest into savings/stocks/401K/RothIRA and hope you don't croak.

If you're a big earner - buy a $1,000,000 term life.... which will give the family enough to pay off debts and get started on a life without you. It's not an investment vehicle - it's an INSURANCE POLICY -- it's just there to help people get over the hump. As your investments grow and you age - reduce the face value unless you just like to pay insurance companies.

[CRCRFT78]

Thank you for the honest opinion Greg. I've been sitting on those few stocks for a year or so and the performance has been ok. I would like to get a little more involved in this as I feel I have a risk tolerance for this and would like to see some earnings. I hope you don't mind me emailing you with any questions I may have.

GREAT THREAD everyone. Definately a lot of good information, let's keep it going.

[GregWeld]

Well good for you -- you've at least got a start!

Okay -- stock by stock - you've got DIVERSITY - you have Apple (retail/tech) - you've got NIKE (retail) - Caterpillar (industrial) - Disney (entertainment) - Harley (manufacturer/retail/automotive).

I think Harley is too "faddish" for me to invest in... Sorry.

Don't buy anymore "retail" - you have enough exposure there. You really have 3 out of 5 that relies on some sort of CONSUMER buying at retail.

ALSO -- every one of these pays a dividend but they pay a very SMALL (under the rate of inflation) dividend... so on my screen they'd have to have a larger than normal stock price appreciation in order for me to buy them. So for your next investments try to pick a couple with higher dividends... AT&T -- VERIZON -- KINDER MORGAN PARTNERS - PHILLIP MORSE - ALTRIA... they all pay more than the rate of inflation AND have price growth...


Hey -- Here's what I've been preaching! Look at a FIVE YEAR chart of NIKE --- Symbol NKE http://www.google.com/finance?q=NYSE%3ANKE

Expand this chart out 5 years... using the time choices in BLUE at top of the chart.

Check it out -- in 2007 the split 2 for 1 -- so if you owned 50 shares in December 2006 - you now have 100 shares! And they've increased the dividend payout along the way. They used to pay .19 per share per quarter and they're now paying almost double that! And the stock price has almost doubled in the same 5 year period!

So you have twice and many shares - paying twice as much dividend - and the price has doubled.

If you put the same $1,000 in the bank savings account 5 years ago -- you'd have about $1,010 now! WHOO HOO!

[GrabberGT]

Life insurance is a savings account for the beneficiary. :unibrow:

As an "INVESTMENT" it sucks bilge water.

A person should have enough life insurance to make sure their family doesn't suffer due to their loss. So if you have a 200K mortgage - and 50K more in debt - buy a 500K term life policy and that will insure the loved ones can live in the house debt free - pay off all other debts and have enough to bury your sorry ass. It's paid tax free - so it's a net net amount. Put the rest into savings/stocks/401K/RothIRA and hope you don't croak.

If you're a big earner - buy a $1,000,000 term life.... which will give the family enough to pay off debts and get started on a life without you. It's not an investment vehicle - it's an INSURANCE POLICY -- it's just there to help people get over the hump. As your investments grow and you age - reduce the face value unless you just like to pay insurance companies.

Thanks. This covers Term Life. What about Permanent Life Ins. policies?

[WSSix]

Why do companies split their stock and is there anyway to know it's going to happen etc?


Also, I just noticed that Halliburton pays a dividend on their stock. Even though I've bought my stock through the ESPP, I should still get that dividend payment too, correct? I'm pretty sure I checked reinvest any dividends with my account but I'll have to look. I'm kind of excited since I've never known how to look up stock performance information before. Google Finance is pretty cool, lol.

[GregWeld]

Thanks. This covers Term Life. What about Permanent Life Ins. policies?

I'm just not a big life insurance guy -- but I'm in a lot different boat. I've only ever used Term life.

Look at life insurance this way -- you give money to someone else -- they manage it and make money off of it - and then they gamble that you're going to keep paying them for a bazzillion years (most don't) and they might have to give you some money back.

So - it might be considered "forced savings" for those that can't save but will "pay the bill".... but no matter how you cut it - it IS NOT a good "investment".

Use it for what it's for - and INVEST in stuff that will make you money.

Just my opinion.

[GregWeld]

Why do companies split their stock and is there anyway to know it's going to happen etc?


Also, I just noticed that Halliburton pays a dividend on their stock. Even though I've bought my stock through the ESPP, I should still get that dividend payment too, correct? I'm pretty sure I checked reinvest any dividends with my account but I'll have to look. I'm kind of excited since I've never known how to look up stock performance information before. Google Finance is pretty cool, lol.

Well there -- see how you are! Next thing you'll be telling me what to buy!

Google finance or Yahoo finance -- both good for just poking around and looking at stuff. Glad you found it to be somewhat useful.


Companies split their stocks for a variety of reasons -- usually to keep the 'momentum' going in their stock (it creates excitement in the market) and - #1 - to keep their share price "affordable".... People can buy shares at $35 or 50 bucks -- they become "hesitant" when it gets up to $100....

They usually only split like this when the company is GROWING and doing well.

A sure sign a company SUCKS --- a REVERSE SPLIT.... when they take 10 shares and turn them into 1 (expressed as 1:10) !! Citigroup (C) did this awhile back.... because their share price had fallen to about a $1 a share -- at that price -- they get "de-listed". It didn't help. :lol:

We could talk about reasons for days - but basically it's (a stock split) a "reward" to the shareholders.... people love 'em!

Berkshire Hathaway (Brk.A) (Warren Buffett - heard of him?) has never split their shares - ONE share is $112,325.00 PER SHARE -- how many of those are you going to buy? :captain:

[pw2006]

Well there -- see how you are! Next thing you'll be telling me what to buy!

Google finance or Yahoo finance -- both good for just poking around and looking at stuff. Glad you found it to be somewhat useful.


Companies split their stocks for a variety of reasons -- usually to keep the 'momentum' going in their stock (it creates excitement in the market) and - #1 - to keep their share price "affordable".... People can buy shares at $35 or 50 bucks -- they become "hesitant" when it gets up to $100....

They usually only split like this when the company is GROWING and doing well.

A sure sign a company SUCKS --- a REVERSE SPLIT.... when they take 10 shares and turn them into 1 (expressed as 10:1) !! Citigroup (C) did this awhile back.... because their share price had fallen to about a $1 a share -- at that price -- they get "de-listed". It didn't help. :lol:

We could talk about reasons for days - but basically it's (a stock split) a "reward" to the shareholders.... people love 'em!

Berkshire Hathaway (Brk.A) (Warren Buffett - heard of him?) has never split their shares - ONE share is $112,325.00 PER SHARE -- how many of those are you going to buy? :captain:

I like Buffet, I have owned his Brk.B shares for over 5 years. However, it doesn't have a dividend and it is about flat split adjusted since I have owned it. I sell out of the money puts and covered calls giving me a descent yeild. However, even with my options, I would have been much better off in MCD. How do we inverse hindsight?

[GregWeld]

I like Buffet, I have owned his Brk.B shares for over 5 years. However, it doesn't have a dividend and it is about flat split adjusted since I have owned it. I sell out of the money puts and covered calls giving me a descent yeild. However, even with my options, I would have been much better off in MCD. How do we inverse hindsight?


Oh god -- if I had a dollar for every one I've MISSED... There's so many high fliers... a guy could have made an easy million on a ten thousand dollar investment!:faint:

Yeah -- I'm not a fan of Buffet - and if you think you have flat returns now - wait 'til you get up one morning and read he's passed away! POOF!

NO THANKS! I wish him all the best - but I ain't counting on it. Talk about gambling?!?!?

It's amazing -- when I look at stocks -- which I do CONSTANTLY -- how many big moves I've missed in names you'd never guess in a million years had the kinds of moves they've had. McDonalds is just one prime example that everyone understands and "never knew".... I hate the product - don't eat there unless on a single guy road trip - but it's a great investment. Ditto the Terbacky stocks (MO - PM - LO)... I don't smoke - hate the smell - think it's DEAD wrong... but I'll invest in them!

[WSSix]

So given the choice between two stocks that both have done well over the years, would you recommend purchasing fewer shares of a more expensive stock or more shares of a less expensive stock? Does it even matter or is it personal preference?

[GregWeld]

So given the choice between two stocks that both have done well over the years, would you recommend purchasing fewer shares of a more expensive stock or more shares of a less expensive stock? Does it even matter or is it personal preference?

Dollar amounts are what matters --- so if you're going to invest $10,000 -- then I'd pick FIVE stocks and put in $2500 per... or 10 stocks and do 1,000 each.

I wouldn't match shares.... you'll never get it right and it's too hard to track!

If you put in 10,000 and next year your account is at 12,000 you know you're okay -- one stock will have done great - a couple okay - and a couple not so hot. If you've picked good names... don't do a thing... because I'll bet you that the next year you're mix will have different results and the one that was just "okay" might have moved up the ladder and be "the hot one".... that is WHY YOU DIVERSIFY! I'll guarantee that you can't have all 1O stocks (or 5) all up and you'll never be able to tell me in advance which one is going to be the star. Just pick 'em - re-invest the dividend - add money when you can into new names (more diversity) and pay a modest amount of time listening to the news or read the business page.

OLD RULE TO GO BY...... When INTEREST RATES ARE HIGH --- STOCKS WILL DIE.... So there will be a period when the "flight to quality" will move out of stocks and into bonds and interest bearing instruments... but if you try to "time" that - you'll always be behind and lose money trying to chase the market. Just diversify - pay attention... and buy more when they're down cause you get more shares and that brings your average cost down - over time - your TOTAL YIELD will be a home run.

[sik68]

Greg, big thanks and kudos to you...all this money talk started out feeling taboo for lateral-g but that's gone now and I'm learning a lot. I'm not even tired of reading about how rich you are anymore! :lol:

I have actually stopped reading my fresh copy of "Building the Mule" because of this thread. Weld's "Building the Portfolio" anyone?? Now I know how I am going to play this year's SEP.

Oracle seems like another one that fits the GW profile no? Albeit on the moderate side for dividend returns, but their 10+ year is solid.

[Van B]

Dollar amounts are what matters --- so if you're going to invest $10,000 -- then I'd pick FIVE stocks and put in $2500 per... or 10 stocks and do 1,000 each.


I got my calculator out and no matter how hard I try 2500 does not go into 10000 five times...and you want me to take investment advice from you. :lol:

Honestly Greg I hope to meet you some day. You seem like a good guy.

Reading this thread has made me decide that I can't keep all my eggs in my 401k and employer's plans, especially at age 45. I plan to take $10k after the first of the year and get going in stocks. One question though, how do you identify which stocks pay dividends?

[raguemoe]

Greg, now that we got the basics out of the way. I'd like you to address the proper allocation of one's resources (ie wife, kids & cars). This seems to be my greatest downfall in saving for the long term. Meaning I give the wife & kids too much, spend a little on cars and know I should be saving more! I know nothing about you, but anyone building a car like the 62 must have done well for themselve (And I assume has paid their dues & made sacrifices when younger). Thanks-Morris!

[CRCRFT78]

This thread is becoming addicting. I just wish my cash was updated as fast as this thread so I could take advantage of "Professor Weld's" financial advice.

[MoparCar]

Greg,
Thank you for taking the time to educate us. I really appreciate it! I know it's something you wouldn't have to do. Very educational. My favorite thread right now!

Wes

[jay72nova]

WoW!
alot of good advice here!

just to give another example, this is how I do things.
I own two houses the one I live in and the one I used to live in, I have the renters pay the mortgage and taxes and expenses on that one with thier rent.

outside of my mortages I save 20% of my income in invstment and savings of some sort. When I was single and when my wife and I were both working it was 30%
I lived in 300$ a month rentboxes and drove and old copcarbluesmobile for many years.

The only reason I bought a new car is becuase I got one tax free at invoice from Iraq...it won't happen again

I maxed out my 401k, (and I think everyone should) I like the HUGE boost it gets from the money coming out of my paycheck BEFORE it gets taxed....that garenteed growth right there!!! whatever your tax rate is you get an automatic growth boost the day it goes in the account..plus whatever the account makes....plus whatever your employer might put in.

I max out my IRA

I have all my money in my government TSP or my Schwab account which I have an IRA, individual investment account and a checking acount in. I use my investment account as my "savings"

Most of my investments are in index funds, no fees and they track the market....there are very few managers that beat the market and when they do its not year after year...and index funds don't have fees to pay which compounded turn out to be alot of money.

I have a couple high divedend stocks just for fun.

schwabb has some nice tools, one of which is an account analizer. you tell them your investment needs and it compares your needs to your account and tells you what they recommend you sell and buy...as in sell some large caps and buys some small caps because you said you could tolerate more risk than your account reflects. I use it.

anyway thats what I do.

[realcoray]

Greg, now that we got the basics out of the way. I'd like you to address the proper allocation of one's resources (ie wife, kids & cars). This seems to be my greatest downfall in saving for the long term. Meaning I give the wife & kids too much, spend a little on cars and know I should be saving more! I know nothing about you, but anyone building a car like the 62 must have done well for themselve (And I assume has paid their dues & made sacrifices when younger). Thanks-Morris!

I would suggest looking at what you can reasonably save, do a budget, actually look at what you spend money on and how much you need to spend and then look at what is left over and I would suggest setting up auto transfers to a savings or other account.

Most people if they make x, will spend x, or x+. Many people are focused on looking wealthy than actually being. Live below your means and save what you can then, putting it to work for you.

[raguemoe]

I would suggest looking at what you can reasonably save, do a budget, actually look at what you spend money on and how much you need to spend and then look at what is left over and I would suggest setting up auto transfers to a savings or other account.

Most people if they make x, will spend x, or x+. Many people are focused on looking wealthy than actually being. Live below your means and save what you can then, putting it to work for you.

I know, it was kind of a joke. The next time my wife asked for something I could tell her "Greg said she couldn't have it". And when the kids don't want to leave the nest I can say "Greg says". I just hope I don't have to eat dog food & live out of my airstream when I'm older (no offense to anyone who full times it in an airstream or eats dog food).

[jay72nova]

IMHO
and I don't intend to offend anyone but, I may...so sorry
if you own a 69 camaro, 66 stang, or any hotrod, protouring, etc or a laptop...your either
a. are doing ok enough to have saved allot of money... or
b. need to reset your financial priorities.

I personally never bought myself a toy after the age of 20 until I had over a years paycheck in savings...
we are talking an Army Paycheck so I don't want to here how somebody doesnt make enough for how much they work to save.

the thing is , you put the money directly in from your paycheck so you wont ever see it, if it isnt there you cant tell anybody "no" it just wont be there...
20% of every paycheck is reasonable less than that you screwing yourself, your future your kids future.

I have lived with really poor people in cardboard boxes with goats and not a pot to piss in LITERALLY! and I have done it all over the world in about 8 countries, really poor people are everywhere, but even they save half a cup of rice for tomarrow.

There are allot of people..(often immigrants) that make nothing and still save way more than 20% of thier income, they don't have big screen tvs, half a dozen vintage hotrod cars, go out to eat all the time. smoke 4 bucks a pack cigerettes and drink expensive beer etc...at least until their pretty darn comfortable, and if more americans had this dicipline than this country wouldnt be in the shi# we are in...its not the banks fault, or even billions of $ war spending or a lack of liberal government social programs..its people living like rockstars when they should be living under thier means...

anyway, sorry for the longwinded rant no offense meant to anyone

[John510]

Is it true you can't touch a Schwab account until your 59 1/2 without getting penalized?

[jay72nova]

Your IRA....or you get penalized...but I think there are exceptions for school and emergencies and the like but don't quote me on that..I'm not sure.

[Flash68]

Is it true you can't touch a Schwab account until your 59 1/2 without getting penalized?

Your IRA....or you get penalized...but I think there are exceptions for school and emergencies and the like but don't quote me on that..I'm not sure.

I have a self directed Schwab IRA from a former employer rollover, and you can withdraw 100% of it once a year tax and penalty free as long as you put 100% of what you withdraw back within 60 days. I did it last year to help fund a business venture.

[WSSix]

With a Roth IRA, you can withdraw whatever you've put in at any time. You can not touch the earned interest or you will be penalized. This is before you're 59 1/2. After that you can start withdrawing and living on the money from the account.

[GregWeld]

Greg, big thanks and kudos to you...all this money talk started out feeling taboo for lateral-g but that's gone now and I'm learning a lot. I'm not even tired of reading about how rich you are anymore! :lol:

I have actually stopped reading my fresh copy of "Building the Mule" because of this thread. Weld's "Building the Portfolio" anyone?? Now I know how I am going to play this year's SEP.

Oracle seems like another one that fits the GW profile no? Albeit on the moderate side for dividend returns, but their 10+ year is solid.


So the rule I look at FOR ME.... if the dividend is "low" -- then the offsetting information has to be GROWTH... and you have to see growth of the dividend payout over time --- SO YES! Oracle meets that criteria. It wouldn't be on the top 20 for me - because there are so many (dozens and dozens) that pay more and have as good if not better growth over time. BUT all of this info needs to be tailored by each guy to fit himself. AND #1 is you have to be happy to hold the investment and buy more IF it goes down (which is the equivalent of stuff going on sale!)...

[GregWeld]

I got my calculator out and no matter how hard I try 2500 does not go into 10000 five times...and you want me to take investment advice from you. :lol:

Honestly Greg I hope to meet you some day. You seem like a good guy.

Reading this thread has made me decide that I can't keep all my eggs in my 401k and employer's plans, especially at age 45. I plan to take $10k after the first of the year and get going in stocks. One question though, how do you identify which stocks pay dividends?

That's the problem with two thoughts going on -- trying to formulate those ideas and type - and watch tv at the same time! :willy: :willy: :lol:

I can only speak for SCHWAB where I have my accounts -- they have a "RESEARCH" tab... and in there they have screeners. You can select various parameters that you'd like to see in a stock ----- so ---- you can select size of company - and finally down to the dividend. Schwab uses less than or greater than signs for setting up these screens and they also have pre-selected screeners. I've used these many times when I'm trying to find homes for new money. I select the criteria -- then go and see if there are any names I know - then start drilling down on the other criteria I've set for myself --- increasing dividend payout - growth over time - etc.

[GregWeld]

Greg, now that we got the basics out of the way. I'd like you to address the proper allocation of one's resources (ie wife, kids & cars). This seems to be my greatest downfall in saving for the long term. Meaning I give the wife & kids too much, spend a little on cars and know I should be saving more! I know nothing about you, but anyone building a car like the 62 must have done well for themselve (And I assume has paid their dues & made sacrifices when younger). Thanks-Morris!


The people that I know that have the most --- have saved FIRST before anything else. They started this EARLY in life and now the compounding is coming home in spades.

I don't want this thread to become personal -- that's not my goal or intentions. I'm not a professional advisor - I'm just a hot rod guy. BUDGETING is a 'nother discussion and I really can't help you with that one.

[Sieg]

I'd like you to address the proper allocation of one's resources (ie wife, kids & cars). This seems to be my greatest downfall in saving for the long term. Meaning I give the wife & kids too much, spend a little on cars and know I should be saving more!
Hopefully I'm not out of line butting in with a suggestion:
You're not alone, most of us don't save enough and have the ability to save more. Consider developing a household budget and involving everyone in the process is a good first step. That will get the household members thinking along the same lines and may create a team focus. Then discuss funding family and individual wants vs. needs vs. savings. Using pie charts may be the simplest method to develop the plan(s). It will take a little planning and salesmanship but the lessons learned and the resulting savings it may pay good dividends. :thumbsup:

[SLO_Z28]

So, Greg, overall you're happy with your Charles Schwab online account?

Right now I have a Merrill Lynch account, because that's what the state says I have to have. I'm doing very well in it, and as long as the governor doesn't get his way I will be able to buy service credit and retire with 72% of my salary at 55, or 90% at 60. I have a 457 plan that lowers my pretax liabilities and doesn't have any penalties for early withdrawal. I still haven't desided weather once I start maxing out my 457 if I should continue to invest in stocks, or amortize the hell out of some real estate.

Someting tells me years from now, ill look back on this with a wife and kids, and think "man, I used to have money!" :lol:

[billscamaros]

This is an awesome thread ..... one that I am enjoying and learning from. It's right up there with the "12 Gauge Garage" in addiction rating!!

My 401K is in a mutual fund, and I have a couple of small annuity accounts - one each for my wife and I. The stock market has always seemed so complicated, mostly due to the input from the few friends that I have who buy stocks. I've thought about opening an stock account for years, but have always been too intimidated.

I've looked thru the Schwab and etrade websites and setting up an account seems pretty straightforward. $1K minimum to open the account, and it seems like you're off and running.

So, Is it really this simple?

It's $8.95 for every trade. Does that mean that every time I add $ to my account to buy more stock, it costs me $8.95? Or is a "trade" only selling a stock?

I think that I read that there is a minimum number to trades that I have to complete on a yearly basis?

Again .... really that simple? Choose a known stock with increasing value over the last 10 years and hop in the game?

Where is the magic? :_paranoid

[GregWeld]

This is an awesome thread ..... one that I am enjoying and learning from. It's right up there with the "12 Gauge Garage" in addiction rating!!

My 401K is in a mutual fund, and I have a couple of small annuity accounts - one each for my wife and I. The stock market has always seemed so complicated, mostly due to the input from the few friends that I have who buy stocks. I've thought about opening an stock account for years, but have always been too intimidated.

I've looked thru the Schwab and etrade websites and setting up an account seems pretty straightforward. $1K minimum to open the account, and it seems like you're off and running.

So, Is it really this simple?

It's $8.95 for every trade. Does that mean that every time I add $ to my account to buy more stock, it costs me $8.95? Or is a "trade" only selling a stock?

I think that I read that there is a minimum number to trades that I have to complete on a yearly basis?

Again .... really that simple? Choose a known stock with increasing value over the last 10 years and hop in the game?

Where is the magic? :_paranoid


Yep -- it's that simple!

A "TRADE" is a buy or sell.... but once you buy something... there is no more cost.

It cost you NOTHING to put money into your account.

The thing that I've been preaching is to just buy good quality names - that pay dividends - re-invest the dividends and DON'T try to be a trader! Don't try to hit the lottery by buying the next "hot stock"... You can do that IF you have lots of money and lots of skills and lots of experience. We're talking SAVINGS here - retirement savings - long term savings.... not trading stocks. Not a get rich quick scheme. Just straight forward save and have the power of time compound your savings.

The big difference between a "savings account" (money in a bank savings account) and stocks is that you don't want to be taking money in and out of stocks. SO.... you have a "savings account" and when you have "enough" in there that you're comfortable with - then the 'extra' should be invested. You don't want to put all your money in stocks - and then not have any savings (ready cash). That would be wrong. Even I don't do that. :wow:

[Sieg]

@billscamaros
Regarding Schwab I've been very satisfied with their web services. For over 10 years I've used their services for stock managment, trading, checking, on line bill pay, and over-seeing our company's profit sharing plan which is managed by a professional firm. Very good site architecture with a multitude of tools and sound advice. My only inconvenience is my local branch doesn't take cash deposits.

[Spiffav8]

Hopefully I'm not out of line butting in with a suggestion:
You're not alone, most of us don't save enough and have the ability to save more. Consider developing a household budget and involving everyone in the process is a good first step. That will get the household members thinking along the same lines and may create a team focus. Then discuss funding family and individual wants vs. needs vs. savings. Using pie charts may be the simplest method to develop the plan(s). It will take a little planning and salesmanship but the lessons learned and the resulting savings it may pay good dividends. :thumbsup:

I think this is very sound advice on achieving what I call Balance. It's never easy, but what you've suggested is perfect. If everyone has the same goal and pulling in the same direction things come a lot easier and quicker. It also allows you to help keep each other in line with your spending.

[89 RS]

This is some great info! Greg, thanks for sharing some great stuff as you can do with it with experience and knowledge. Most people would probably charge for the information you gave out.

[SWAPMEETCRAZY]

Between investment knowledge and the work progressing on "BUBBLELICIOUS" I don't see how Greg sleeps and I see how Rodger became a millionaire..........wait.......or is it vice-versa??................lol..........jim :rofl: :rofl: (Seriously Greg, we are all learning alot and we thank you)

[GregWeld]

Welcome Jim!

Hey -- I like the Bubbleliscious... but I'm not painting it pink!:D

[RECOVERY ROOM]

The Impala has a name now..HA HA. Great advice, Like I said before, nice to hear from someone that can explain it from experience. Ill keep reading it you keep posting on it

[GregWeld]

Here's a website that I "use" for general scanning of something I might of missed when looking for dividend stocks. Seeking Alpha has a "section" devoted to DIVIDEND investing. Not to be confused with TRADING! :D

I don't invest based on someone writing an article... I just get "ideas" -- and sometimes I get "reinforcement" for why I already own something.

Here's an article like that... since I already own MO and PM -- but this gives me a quick read on WHY I own them!

http://seekingalpha.com/article/314539-altria-why-this-cash-cow-should-be-in-your-income-portfolio?source=email_investing_income&ifp=0

[John510]

These kids will be future millionaires from just their allowance!

http://finance.yahoo.com/news/super-young-retirement-savers.html?page=1

[GregWeld]

Those kids are smarter than 99% of all the adults I know!


The one kid - says he's invested in Apple (Great!) - Microsoft (SUCKS!) - RIM (SUCKS) .... two BAD choices and only one good one - AND more importantly - he's NOT diversified... so he has some learning to do. But I'd still be proud of him for saving and investing!

Yeah - I made millions off Microsoft -- but that was SO YESTERDAY --- and it's been a nothing stock for 11 years now! Fugidaboudit and move on. That ship already sailed.:D

[Budweasel]

Greg, thanks for taking time to write all this down. Your solid examples are paint clear pictures of how to invest and dispense with a lot of the technical arguments that keep a lot of people on the sidelines.

For those of you starting out remember, "Perfect is the enemy of good". Go out there and get started!

This thread might be the best one on Lat-G. Thanks again.

[GregWeld]

I was just reviewing how to describe the "TOOLS" a guy can use to research stocks... and one of the things that people just don't get is what is called TOTAL RETURN. That is the stock - re-investing the dividends - and the stock price appreciation.

Schwab has a "Research tab" -- you can research stocks - or bonds or etfs (exchange traded funds). If you go to the STOCK tab -- you can enter a symbol or name... That will pull up a page with a SUMMARY of the stock... and in the GRAPH that comes up labeled "COMPANY PERFORMANCE" -- there is a underlined heading "Total Return"... when you click on that it will show you a graph comparing that companies total return against the S&P 500 (Standard and Poors 500 stock index) and a selected INDEX fund for the category that the stock you're checking is in. Using Kinder Morgan Partners as an example -- it pulls up the ENERGY ETF (ETF are exchanged traded funds that are a basket of stocks that make up an index - not unlike a mutual fund).

When you look at KMP (Kinder Morgan Partners) you'll see a CHART - and right beside that (to the right of it) it shows IN GREEN the total return for 1 year - 3 years - and 5 years.

Now - everyone wants to hit a "Microsoft" and become an instant millionaire -- FUGIDABOUDIT!

BUT here's real investments that I listed in an earlier post and their FIVE YEAR TOTAL RETURNS:


Kinder Morgan Partners --- KMP -- 129.5%

Altria --- MO -- 104%

Phillip Morse --- PM -- 112.3% (3 year period since they were spun off from MO just 3 years ago)

COKE --- KO -- 59.6%

McDonalds --- MCD -- 161.1%

Johnson & Johnson --- JNJ -- 13.4%

Annaly Capital Management --- NLY -- 113.6%

AT&T --- T -- 5.9%

Con Edison --- ED -- 59.3%

I don't know about you guys -- but 100% RETURN on my money in a 5 year period gets my blood flowing... beats a savings account that's for sure!

[WSSix]

wow! solid numbers for sure.


Thanks for all the effort you put into this thread Greg. I certainly didn't expect it to turn into a one man teaching lesson but I'm glad you've spoken up.

[Sieg]

wow! solid numbers for sure.


Thanks for all the effort you put into this thread Greg. I certainly didn't expect it to turn into a one man teaching lesson but I'm glad you've spoken up.

+1 Greg rekindled the spark for me. All those companies are on the watch list I created Friday. :hail:

Now where's the market heading :question:

[GregWeld]

Now where's the market heading :question:


I looked at my crystal ball --- and based on HISTORY -- UP over time.... but it will go DOWN 15 minutes after you buy in. That is, at least for me, the way it seems to work. But I get even in the end by holding (going long) and smiling while the pay me to wait.

I used to "play" in the market.... big numbers... get up in the morning - buy 4 or 5 stocks - and be out and back to playing on cars by noon. That is GAMBLING and it was only "dumb luck" that had me out of the market during the 1999 "dot.bomb" days or I'd have lost a few bazillion dollars. But - here's the difference - what I was playing with was NOT my only money - My house is paid for - my cars are paid for - so it was "okay" for me to take some dough and gamble like that. In the end -- all I really did was to create a huge tax due bill...

When I look back at that era -- and do the math... I'd have been far, far, ahead if I would have just bought those same stocks I was trading - and held on to them. It was those 'lessons' that made me the "investor" I am today... so in that sense - it was educational! :woot:

[RECOVERY ROOM]

Best thread on the site IMO. Take the advice, Make money and have your Interior done :lol:

[GregWeld]

^^^^^^^^^ Yeah buddy! Make money FIRST -- then you can have your cake and eat it too!

[Sieg]

I looked at my crystal ball --- and based on HISTORY -- UP over time.... but it will go DOWN 15 minutes after you buy in. That is, at least for me, the way it seems to work. But I get even in the end by holding (going long) and smiling while they pay me to wait.

LMAO - There was a point every stock I bought was guaranteed to go down 10+% especially IPO's. :rolleyes:

My first stock purchase was a 100 shares of Nike when it hit $5 for the first time which was big money for me at 18 years old.........it doubled and I sold it...........I don't want to know and never tried to compound the value out.

Again, thank you for the insight you are providing those who choose to read this thread on the forum as it is truly generous, genuine, and an invaluable sharing of investing wisdom. :thumbsup:

[PDXFactory]

Greg and all...great thread!

I haven't been here on Lat-g for too long, and I can't say I ever expected to see this sort of discussion going on! You guys think this thread is addicting? Just wait until you start investing and you see that money double (or triple, or ???). Now that is addicting!

I'm guessing that to some even this thread is still making the whole investment 'game' seem intimidating, but really it doesn't have to be. I think there are a few really key points that Greg has made (and others as well):

1. Start investing as early as possible.
2. Only invest money that you don't need immediate access to (i.e. you already have savings/emergency funds).
3. Diversify.
4. Buy what you know.

Honestly, if you follow those basic rules I think you could pretty much get to retirement as a fairly successful investor! You'll be ahead of the vast majority of Americans, that's for sure!

One thing I haven't seen discussed with regards to buying and selling stocks that I thought I would add is the difference between a short term and long term gain. While every investment has its own tax related issues, I would consider this the most basic concept that you need to know. If you buy and sell stocks frequently, your gains (profits) are taxed at a different rate than if you hold for a year or more. Short term is taxed at your ordinary income rate, while long term is taxed at a flat 15% (or 0% if you are in the lower tax brackets). This is part of the reason you should only invest money you don't need immediate access to (the other being that you don't ever want to be 'forced' to sell at an inopportune time just because you need cash!).

The large stocks that Greg mentions are relatively safe, and are a good place to start if you are just getting into the market. Jump in and then continue to educate yourself as your total investment grows! As you learn more you can expand into more advanced investments if you so choose. The more money you have in your portfolio, the more investments there will be available to you.

I'm far from an expert and don't have a ton of money invested in stocks outside of my 401K's and IRA's, but I do find it pretty dang fascinating and fun. Who doesn't like getting 'free' money? There is a TON of information out there online, and the books people have mentioned are all good. It's never too late to start learning!

Thanks to all, and happy investing,
Marcus

[GregWeld]

I've had fun with this thread... investing is a passion of mine that is right up there with hot rodding.


Laughing about the Nike buy. Back in the day -- I bought (was allowed to buy) 1000 shares in the IPO of Starbucks.... it went public at $14 -- on a Thursday or a Friday... I flipped it out up .50 on Monday and thought I'd cut a fat hog in the azz... 'cause I'd made a whopping $500 in one or two days.


It has gone up 6392% --- but I made $500 :wow: :lol:


That's a ONE POINT THREE MILLION DOLLAR loss.....

[Sieg]

I've had fun with this thread... investing is a passion of mine that is right up there with hot rodding.


Laughing about the Nike buy. Back in the day -- I bought (was allowed to buy) 1000 shares in the IPO of Starbucks.... it went public at $14 -- on a Thursday or a Friday... I flipped it out up .50 on Monday and thought I'd cut a fat hog in the azz... 'cause I'd made a whopping $500 in one or two days.


It has gone up 6392% --- but I made $500 :wow: :lol:


That's a ONE POINT THREE MILLION DOLLAR loss.....
I've only got 50 shares of Nike now..........just because. Have any SB's :unibrow:

Speaking of passion, that '62 has serious potential, I'm looking forward to living vicariously through that build thread. A friend picked up a black '62 409 SS in the 80's and my first impression of that car is etched in my mind. :thumbsup:

[GregWeld]

Greg and all...great thread!

I haven't been here on Lat-g for too long, and I can't say I ever expected to see this sort of discussion going on! You guys think this thread is addicting? Just wait until you start investing and you see that money double (or triple, or ???). Now that is addicting!

I'm guessing that to some even this thread is still making the whole investment 'game' seem intimidating, but really it doesn't have to be. I think there are a few really key points that Greg has made (and others as well):

1. Start investing as early as possible.
2. Only invest money that you don't need immediate access to (i.e. you already have savings/emergency funds).
3. Diversify.
4. Buy what you know.

Honestly, if you follow those basic rules I think you could pretty much get to retirement as a fairly successful investor! You'll be ahead of the vast majority of Americans, that's for sure!

One thing I haven't seen discussed with regards to buying and selling stocks that I thought I would add is the difference between a short term and long term gain. While every investment has its own tax related issues, I would consider this the most basic concept that you need to know. If you buy and sell stocks frequently, your gains (profits) are taxed at a different rate than if you hold for a year or more. Short term is taxed at your ordinary income rate, while long term is taxed at a flat 15% (or 0% if you are in the lower tax brackets). This is part of the reason you should only invest money you don't need immediate access to (the other being that you don't ever want to be 'forced' to sell at an inopportune time just because you need cash!).

The large stocks that Greg mentions are relatively safe, and are a good place to start if you are just getting into the market. Jump in and then continue to educate yourself as your total investment grows! As you learn more you can expand into more advanced investments if you so choose. The more money you have in your portfolio, the more investments there will be available to you.

I'm far from an expert and don't have a ton of money invested in stocks outside of my 401K's and IRA's, but I do find it pretty dang fascinating and fun. Who doesn't like getting 'free' money? There is a TON of information out there online, and the books people have mentioned are all good. It's never too late to start learning!

Thanks to all, and happy investing,
Marcus

Thanks Marcus!

Okay - so just to be sure - dear readers (I feel like Abby) - DIVIDENDS are taxed at 15% (currently) and that is for what are called QUALIFIED DIVIDENDS (there's other kinds of dividends). The stocks and their dividends we've touched on here - are all qualified.


Marcus is referring to GAINS (if any) on the sale of shares. And what he says is right on. There is as he states long term capital gains and short term capital gains. The rule for IRS is ONE YEAR AND A DAY. Frankly, I don't get caught up in that much because I'm interested in collecting the dividends so hold more than a year.


Marcus -- I've had to delete several posts because I'd read them and go -- nah - to0 much info. This is "Investing 102" - so I've kept 'em super simple (which investing really is). But you're 100% right -- there's a ton of different investment "vehicles" once you actually have a little dough. Which, of course, adds DIVERSITY once someone feels the need to. I'm not sure at what point someone needs to be in much more than the three basics -- Stocks - Bonds - Real estate (other than your home). At 58 - and I've been retired for 20 years - I've just this last year bought bonds. It just somehow felt "right" to put some money into nice safe tax frees... but the lack of growth kills me... because I've always gone for growth! At some point though - a guy needs some safety. So I guess I've got one foot in the grave! :D

[killer67]

Great info!! Thanks Greg for reminding me how my bad my financial decisions have been and why I will work until I am 97 years old :lol:

[GregWeld]

Great info!! Thanks Greg for reminding me how my bad my financial decisions have been and why I will work until I am 97 years old :lol:

:lol: :lol: Well..... I'm not quite sure what to say!


So... we're re-doing our estate planning and wills.. And, since Adrienne (21) is home from college - we thought we'd have a "family meeting" and discuss some of our "ideas" and let them digest them for a day or two - and then have some input. Of course this is in the event both Mom and I meet our untimely demise... Now - we know our kids... #1 Son would most likely buy a Bugatti one day after he got the money... Adrienne would invest the money and live off the dividends. BUT -- surprisingly enough -- both thought that their inheritance should be in trusts and managed professionally... to protect them from themselves. Mom and I thought that was pretty impressive as they both admit that they most likely are not equipped to be very good money managers. Fair enough!

My point to this is -- that most people (me included) have a long list of "I wants". Only a very few can fulfill that list AND save enough to retire on. So the key to all of this discussion is to try to do both in moderation.... saving first... and the savings will eventually allow you to peck away at the list.

[Sieg]

[QUOTE=GregWeld;385154both thought that their inheritance should be in trusts and managed professionally... to protect them from themselves. Mom and I thought that was pretty impressive as they both admit that they most likely are not equipped to be very good money managers. Fair enough!
[/QUOTE]
There is a good measurement of success as a parent. Congratulations.

My best friend died at 54 in 1995, his son would never take his advice, I guess in an attempt to prove himself, his inheritance was placed in a trust that he couldn't access for 3+ years until he was 28. Three of us tried multiple times to sit him down and give him investment and planning guidance to no avail. It took him and his wife 2.5 years to blow 6+ million dollars and have no assets. He's now divorced and living in a rental. Sad story to witness.

Money is only part of the equation.

[RECOVERY ROOM]

Theres some good stuff out there you just have to keep your eyes open, If its national news you already missed the big gains..In most cases. If someone thinks they know something post it up, maybe we all can become the new power of the country !!! :lol:

[PDXFactory]

Marcus -- I've had to delete several posts because I'd read them and go -- nah - to0 much info. This is "Investing 102" - so I've kept 'em super simple (which investing really is). But you're 100% right -- there's a ton of different investment "vehicles" once you actually have a little dough. Which, of course, adds DIVERSITY once someone feels the need to. I'm not sure at what point someone needs to be in much more than the three basics -- Stocks - Bonds - Real estate (other than your home). At 58 - and I've been retired for 20 years - I've just this last year bought bonds. It just somehow felt "right" to put some money into nice safe tax frees... but the lack of growth kills me... because I've always gone for growth! At some point though - a guy needs some safety. So I guess I've got one foot in the grave! :D

Ha...yeah, I had trouble only writing "a little" because there is a lot to get excited about when you learn more and see what is really possible! I really do hope that one of the biggest things people take away from this is exactly what you said - investing is really simple as long as you stick to the basics!

Retired at 38, huh? I guess I'd better hurry up...I'm almost 36, so I only have a couple more years until retirement. Ha!

Theres some good stuff out there you just have to keep your eyes open, If its national news you already missed the big gains..In most cases. If someone thinks they know something post it up, maybe we all can become the new power of the country !!! :lol:

Tracy, are you advocating the start of an official Lateral-G Fund? I'm liking the sound of that! :thumbsup:

[GregWeld]

So here's a couple thoughts -- and remember that I'm really "exposing myself" personally here - but I can only use information and share that - from what I really KNOW... not what I heard from someone else tell someone else.


I was "reviewing" someones portfolio... at their request. Just a look and compare function.

They were in SONY (SNE).... Okay - great name right?! But the OWNER of the account only knew they were in Sony and that sounded great!

A quick check of the charts -- SNE is DOWN 64% over 10 years and DOWN 50+% over the last 5 years!

Compared to an investment in McDonalds (just to pick a favorite) that is UP 267%

So 100K invested in SONY is now worth 40K and the same 100K invested in McDonalds (at the same time - 10 years ago) is now worth almost 400K. (I'm not doing any math here - I'm just making quick comparisons).

Here's THE POINT.... his money is professionally managed -- so he never did ANY research for himself - nor did he even know WHY he was invested in what he was invested in! That my friends is total BS!! You going to buy a motor and not ask what's in it and how it was built and what kind of power it's making? One 454 could produce 300HP built for a truck - and another could be making 700HP... HUGE difference. Treat your investments the same way! Do just the minimum amount of research. You can check all this in Google Finance or Yahoo Finance - it's so dang easy just to look! It will pay off in the long run.

[Budweasel]

I see a new brand for instructional books. The first one will be: Investing for Gearheads

[billscamaros]

Just go to YAHOO finance -- or Google finance -- and put in those symbols -- then go to a chart and look at 5 year or 10 year or whatever they'll let you choose for time -- and look at the chart for each one. You'll see all manor of ups and downs in the squiggly line -- but the basic course over time is UP... so if you can train yourself to IGNORE the "noise" = hold steady - don't freak out - collect those dividends -- add to your account when its down the most and buy MORE stock when it's DOWN... YOU WILL BE REWARDED in time.

So let me ask another question about the Google Finance charts. Looking at Duke Power (DUK) on the chart, I toggle the 10 year view and notice that in around mid 2006, the price went from $33.21 on 10.37M (shares?) to $18.74 on 34.68M (shares?). Does this indicate that the stock "split"? This would be a good thing? On the 5 year chart, it looks as though the price has remained steady .... I assume that this isn't the good growth that you're looking for?

I do have to say that I'm getting a little hooked on checking various stocks out on Google Finance.

[PDXFactory]

So let me ask another question about the Google Finance charts. Looking at Duke Power (DUK) on the chart, I toggle the 10 year view and notice that in around mid 2006, the price went from $33.21 on 10.37M (shares?) to $18.74 on 34.68M (shares?). Does this indicate that the stock "split"? This would be a good thing? On the 5 year chart, it looks as though the price has remained steady .... I assume that this isn't the good growth that you're looking for?

I do have to say that I'm getting a little hooked on checking various stocks out on Google Finance.

What you are looking at there isn't a stock split - it's a dramatic drop in stock price! The other number is the volume of shares traded - I'm not familiar with DUK, but there was obviously a reason (rational, or not) that the price dropped so far and the market reacted with a lot of people trading a lot of shares. (One thing to always remember is that for every share sold, there has to be a buyer somewhere - while half of the traders were freaking out and selling, the other half was buying!) Charts are generally 'split adjusted' meaning it shows the graph as though the splits never happened to keep the chart easier to read.

(EDIT - you got me curious, and a quick search showed that in January 2007 Duke Energy spun off part of its business (forming a new seperate company called Spectra Energy, NYSE:SE) and gave each shareholder 1 share in SE for every 2 shares they held in DUK. This means that if you previously owned DUK, you now owned shares in both DUK and SE. The drop in the stock price would be the market response to this. It makes sense when you think about it - DUK should be worth less money now that the company is smaller, and the market reflected that. This is kind of a special case and isn't something that happens everyday!)

If you click on the 'settings' button below the graph you can turn a lot of the indicators on and off. Take a look at NKE or SBUX and run it out to 5 or 10 years and you'll see at least one split in there.

Make sense?

Marcus

[RECOVERY ROOM]

Tracy, are you advocating the start of an official Lateral-G Fund? I'm liking the sound of that! :thumbsup:[/QUOTE]

MARCUS that sounds like a good idea

[GregWeld]

I see a new brand for instructional books. The first one will be: Investing for Gearheads


:lol: Good one!

I like ---

Investing for life.... as in.... a better one!

[Stuart Adams]

Your last check should go to the morgue and bounce....

Your kids just fight over it, give it to them while your alive, so you can all enjoy...

Book called DIE BROKE..

[Sieg]

To reinforce Greg's advice:
11:16 AM Among the stocks making new 52 week highs as year end approaches are faithful big-caps across a number of industries: Wal-Mart (WMT), Pfizer (PFE), Verizon (VZ), and McDonald's (MCD). All yield more than the 10-year Treasury and likely have more adaptive managements than that in D.C. What's not to like?

[OLDFLM]

So here's a couple thoughts -- and remember that I'm really "exposing myself" personally here - but I can only use information and share that - from what I really KNOW... not what I heard from someone else tell someone else.


I was "reviewing" someones portfolio... at their request. Just a look and compare function.

They were in SONY (SNE).... Okay - great name right?! But the OWNER of the account only knew they were in Sony and that sounded great!

A quick check of the charts -- SNE is DOWN 64% over 10 years and DOWN 50+% over the last 5 years!

Compared to an investment in McDonalds (just to pick a favorite) that is UP 267%

So 100K invested in SONY is now worth 40K and the same 100K invested in McDonalds (at the same time - 10 years ago) is now worth almost 400K. (I'm not doing any math here - I'm just making quick comparisons).

Here's THE POINT.... his money is professionally managed -- so he never did ANY research for himself - nor did he even know WHY he was invested in what he was invested in! That my friends is total BS!! You going to buy a motor and not ask what's in it and how it was built and what kind of power it's making? One 454 could produce 300HP built for a truck - and another could be making 700HP... HUGE difference. Treat your investments the same way! Do just the minimum amount of research. You can check all this in Google Finance or Yahoo Finance - it's so dang easy just to look! It will pay off in the long run.

Talk about the perfect analogy for your intended audience! :lateral:

[RECOVERY ROOM]

To reinforce Greg's advice:
11:16 AM Among the stocks making new 52 week highs as year end approaches are faithful big-caps across a number of industries: Wal-Mart (WMT), Pfizer (PFE), Verizon (VZ), and McDonald's (MCD). All yield more than the 10-year Treasury and likely have more adaptive managements than that in D.C. What's not to like?

Its kinda addicting isn't it...:lol: .

[GregWeld]

Here's what is addicting.... my Schwab account is UP over 100 grand in the last two days... and I just sat here watching CNBC and blabbing on Lat G....

Now - those are "paper gains" -- but over all -- my account in that particular brokerage (I use a few) -- is UP "on paper" more than I've spent this year... That is CAPITAL GROWTH.

Some days the account is DOWN -- some days up a little -- some days it's up OMG... but overall -- that "chart" I'm always referring to is low on the left and climbing to the right.

Here's another little "funny". I invested in a company (start up money) 7+ years ago. Bought a bunch of shares dirt cheap -- they are not "liquid" because they're not publicly traded so it's really "dead money".... then the company went public -- and "on paper" that investment was HUGE (imagine buying at .56 a share and watching it go to $28 a share!)... then the "market" had it's hiccups -- and I watched those shares "on paper" drop to $1.70 a share.... oh the horror -- right? But I still had a 300% gain on them at that low ridiculous price! So I watched millions turn into "not much".... but I didn't spend those "paper gains" -- I didn't borrow on those "paper gains" -- and when those "paper gains" weren't so much - it was just a sigh.... Then a year or so more of time goes by and the shares are at $5 -- then $10 -- then $17... then somebody buys the company out and those paper gains are REAL MONEY paid in cash.... @ $34 per share....

My point -- it took lots of TIME (7 or 8 years!)..... and there was lots of "paper gain" (which means nada!) and there was lots of "woulda/shoulda/coulda".... but I knew the company - believed in the original investment -- so rather than selling at the bottom - I just held on.... and bingo THE LUCKIEST MAN ALIVE comes knocking...

The other "point" is that you have to take the good with the bad --- the highs and lows - keep your wits about you - don't panic - UNDERSTAND what you have invested in and WHY.... (in this case it was some "gambling" money so I was okay with them being down and the investment being worth zip).

Had I NOT played the game (think of an ante in a poker game - can't play if you don't ante up!) I would never have gotten the reward. And trust me - for every "winner" I can tell you about MANY losers!

BUY GOOD STUFF -- DO NOT GAMBLE -- UNDERSTAND WHY YOU BUY -- GIVE IT SOME TIME (not a half hour!).

I have enough NORMAL investments that I can afford to dabble in RISKY stuff.... DO NOT GO THERE because you will LOSE more than you will make. This thread is about SAVINGS and INVESTING - not gambling and getting rich quick. Please don't lose sight of that. It's also about THEORY not actual names to invest in. Do your research - KNOW WHY YOU BUY -- have the investments meet YOUR requirements - and that depends on age - knowledge of the industry your investing in - what type of account it is, i.e., is it a retirement account or an account for college for kids - or are you just wanting to play around and TRY to make some money (please don't tell me about this!)....

[Sieg]

Numbers like that make me giddy. :D

My shinning star of the day even after it dropped big:
Oracle - 480 $12,369.60 $25.77 -$3.40 $2,789.95 +$9,579.65 +343.36%

It's one of the few stocks I timed and bought right. :lol:

[GregWeld]

Numbers like that make me giddy. :D

My shinning star of the day even after it dropped big:
Oracle - 480 $12,369.60 $25.77 -$3.40 $2,789.95 +$9,579.65 +343.36%

It's one of the few stocks I timed and bought right. :lol:


Stuff going UP always feels better than stuff going DOWN.... and for every 10 stocks invested in - 2 will be winners - 3 will be "okay" -- 2 or 3 will be even -- and 2 or 3 will SUCK!

The winners will make up for the losers and the "okays" will be your real gain... Trust me folks - you will NEVER get all 10 stocks "right". But if you're in 10 stocks you'll be in the game!

Good call on the Oracle. One stock I've never bought - since I live in the land that Bill Gates owns and he and Larry are mortal combatants! But it's been a great stock over a very long period of time!

This brings up some RULES -- and I don't know what they are -- other than I've heard them mentioned from time to time. Something along the lines of "the stock market advances on 3 or 4 DAYS in a year - and if you're not in the market on those days - your annual gains will be next to nothing". Don't quote me on the number of days etc - but it's a very small number of days that the market move up BIG... and those days - are to me - the days that remind you why you are in the market (and not OUT of the market). Those days WILL come the week right after you sell.... and you just watch them slip through your fingers.... Trust me - I've experienced that pain.

[Sieg]

"the stock market advances on 3 or 4 DAYS in a year - and if you're not in the market on those days - your annual gains will be next to nothing". Don't quote me on the number of days etc - but it's a very small number of days that the market move up BIG... and those days - are to me - the days that remind you why you are in the market (and not OUT of the market). Those days WILL come the week right after you sell.... and you just watch them slip through your fingers.... Trust me - I've experienced that pain.
How did you know I had lunch today with the guy I bought those 100 shares of Nike from? :( :rofl: I live in the land of Nike and still have issues wearing their shoes, partly because their lasts are a little narrow.

Back to a positive: Do you have any PCL?

[GregWeld]

How did you know I had lunch today with the guy I bought those 100 shares of Nike from? :( :rofl: I live in the land of Nike and still have issues wearing their shoes, partly because their lasts are a little narrow.

Back to a positive: Do you have any PCL?


I can't wear Nike either... for the very reason you point out. Well -- that and my buddy is the CEO of Brooks...

Nope -- no Plumb Creek.


:cheers:

[LS1-IROC]

Been looking at some stocks this last week...correct me if I'm wrong Greg...but wouldn't it be a good time to by Coke?

[GregWeld]

Depends on why you're buying it.

I own Coke (KO) for "stability" in the account... sort of a ying/yang thing -- which is the way I run my accounts. It counters the HYG and JNK and NLY I own - and I own A LOT of them... so I balance that with Johnson and Johnson (JNJ) and Coke (KO) etc.

Remember -- everything in investing needs to suit the account owner. What I do is not suitable for someone else. I LIVE off my yield - not my TOTAL yield... so I'm not looking for growth (per se). I already have "enough". I don't reinvest the dividends -- I SPEND 'em! :yes:

So a couple points here.... Coke is slow steady growth (42% over 10 years) and pays a smallish dividend (2.7%) so to me - it's more like a BOND - I'm not going to double my money in 3 years BUT it won't go down much either. Thus the "steady" statement. If a guy drinks PEPSI -- it's the same story with a slightly higher dividend. SO if you want stability - and get paid to wait - and sleep well at night - then choose one of these for those reasons.
Counter that steady eddie with something and you have a higher yield and a bit faster growth in capital... it's all about balance - not getting greedy - and being happy with what you own.

[OLDFLM]

I can't wear Nike either... for the very reason you point out. Well -- that and my buddy is the CEO of Brooks...

Nope -- no Plumb Creek.


:cheers:

Tangent... Brooks are the only running shoes I could wear on active duty for PT! If you have stocks with them I contributed 4 pairs a year during my career! LOL

[GregWeld]

I forgot to make the second 'point'....

You asked "isn't it a good time to buy...."

I don't "time" the market. I just pick the names I want to be in - get my reasoning hat on - and take the plunge. I can never figure out when is a good or bad time.

Personally = since I buy much larger positions than any of you are going to do - I do things a bit different in that I scale in and scale out of stuff. But you can't really scale in and out if you're buying 100 or 200 or 50 shares. If you're buying 1000 shares or 10,000 shares - then you can take a bite of 50% of the buy and then another quarter and so on - same on the sale side.

So pull up that LONG TERM chart -- and you tell me when you would have gotten "in".... I can see in retrospect/hindsight when it was the right time - but danged if I can tell you in the future when it's coming! :lol: So this brings up the scaling in thing just for a little "class time here".

Lets say I want to own 10,000 dollars worth of a stock. I usually have been watching it for awhile (months sometimes in my case) and I am aware of where it's been trading... let's say $50 ish.... so I take down $5,000 worth. AS USUALLY HAPPENS it will GO DOWN 5 seconds after I get into it... it doesn't matter what IT is.... I will check the news on that stock to see WHY it went down - I will research it a bit - I will look at that chart again - short and long term to remind myself WHY I BOUGHT - and if it was down "with the market" and there is nothing BAD news wise - I might take down another $2500. Think about this as a "sale". You'd be all over sale in the store for Levis! You know they cost 25 a pair and suddenly they're 20 a pair... so buy an extra one! You'd love it! AND THE PLUS HERE IS -- If I bought 100 shares at 100 dollars - at 10% dividend yield.... and bought 50 more at 95 I now own 150 shares at an average cost of 98 and the yield went UP just a smidgen... if it goes down to 90 I buy MORE... and sometimes when it does that I'll double up (or as they call it - double down)... I might buy 150 shares which is double what I already had ----------- NOW ------- I have plenty of cash on the side lines --- and I've been doing this for a very very long time ---- I'm just explaining this for guys that are getting started and want to learn a bit......

What I've done is to bring my position down CLOSER to where it's currently trading. And when (and IF) it goes back - then I scale out of that and get the position back down to the DOLLARS that I wanted to originally have in it. This gets complicated with TAXES and the FIFO rules --- FIRST IN FIRST OUT.... so the first SALES are going to be of the shares that I paid 100 for! So I don't want to be selling those at 90 for a loss --- I'm going to sit on this position (remember I'm also getting that wonderful dividend!) and when they're back to 97 or 98 or 99 --- I start getting out. I will have a SMALL loss --- but I will be left holding the cheaper shares! Thus I'll have a very nice gain in those!

Hope I made sense! It was a bit of a rambling reply. :cheers:

[LS1-IROC]

Thanks Greg. The reason I brought up Coke was that it seems to be down as of late. I had just read an article about Coke stock and how it's a good investment for retirement. They suggested buying in at anything under $70 a share, which right now it's way under that.

[MoparCar]

Greg,
This post to me is one of the most useful---not always looking at the stock that turns down as a loss if you manage your buys and sells smartly over the long term. Also the FIFO information is again very simple but a very good reminder.

Thanks for all your "education".
Wes

[RECOVERY ROOM]

BRK/ B stock is a good long term, I've got faith in Berkshire. There in it for the long haul...They like Coke also among others. Like what has been said getting in is timing that cant always be seen or when to get out.

[GregWeld]

Greg,
This post to me is one of the most useful---not always looking at the stock that turns down as a loss if you manage your buys and sells smartly over the long term. Also the FIFO information is again very simple but a very good reminder.

Thanks for all your "education".
Wes

Wes - I'm going to open my own brokerage!! :lol:

Can you tell I love this stuff??

[GregWeld]

BRK/ B stock is a good long term, I've got faith in Berkshire. There in it for the long haul...They like Coke also among others. Like what has been said getting in is timing that cant always be seen or when to get out.


My only problem with Berkshire -- what happens the day you wake up and the headline is WARREN BUFFET DIES

Not saying what that's going to look like - but it scares me to think that many people are invested "with him" - and not really in what they own. So I can own Coke on my own - without taking on the WB risk premium....

Sorry - that's just the way I think.

[GregWeld]

In hopes of setting the hook to get you guys started --- here's a snap shot of the DIVIDENDS I have been paid since July in just one of my accounts (and not trying to brag here or anything like that!) I'm just trying to show you REAL MONEY PAID == and all taxed at a maximum of 15%!

GET STARTED DANG IT!!!




Date Action Qty Symbol Description Price Amount Fees & Comm

Specified Transactions
12/15/2011 MCD MC DONALDS CORP
type: QUALIFIED DIV
$2,100.00

12/15/2011 ED CONSOLIDATED EDISON INC
type: QUALIFIED DIV
$3,000.00

12/15/2011 KO COCA COLA COMPANY
type: QUALIFIED DIV
$940.00

12/13/2011 JNJ JOHNSON & JOHNSON
type: QUALIFIED DIV
$1,425.00

12/09/2011 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$1,230.37

12/07/2011 HYG ISHARES TRUST IBOXX $ HIGH YIELD CORP
type: ORD DIV - CASH
$1,921.54

12/07/2011 PFF ISHARES S&P U S PFD FUNDS&P U S PFD STK INDEX FD
type: ORD DIV - CASH
$1,077.79

12/02/2011 SBUX STARBUCKS CORP
type: QUALIFIED DIV
$510.00

12/01/2011 JPM+I JPMORGAN CHASE 8.625%PFDDEP SHS REPSTG 1/400 NON
type: QUALIFIED DIV
$4,042.97

11/29/2011 INTEREST 10/28THRU 11/28
type: MARGIN INTEREST
-$329.18

11/29/2011 SCHWAB1 INT 10/28-11/28
type: INTEREST
$1.84

11/15/2011 NNN NATIONAL RETAIL PPTYS REIT
type: ORD DIV - CASH
$1,347.50

11/15/2011 KRB+E M B N A CAPITAL 8.10%33TOPRS DUE 02/15/33
type: CREDIT INT
$2,531.25

11/15/2011 KRB+E M B N A CAPITAL 8.10%33TOPRS DUE 02/15/33
type: CREDIT INT
$1,012.50

11/14/2011 KMP KINDER MORGAN ENERGY LP UNIT LTD PARTNERSHIP INT
type: ORD DIV - CASH
$4,640.00

11/14/2011 EEP ENBRIDGE ENERGY PTNRS LP
type: ORD DIV - CASH
$5,325.00

11/09/2011 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$958.28

11/07/2011 HYG ISHARES TRUST IBOXX $ HIGH YIELD CORP
type: ORD DIV - CASH
$1,841.88

11/07/2011 PFF ISHARES S&P U S PFD FUNDS&P U S PFD STK INDEX FD
type: ORD DIV - CASH
$1,232.43

11/01/2011 T A T & T INC NEW
type: QUALIFIED DIV
$2,580.00

10/28/2011 SCHWAB1 INT 09/29-10/27
type: INTEREST
$2.44

10/27/2011 NLY ANNALY CAPITAL MGMT REIT
type: ORD DIV - CASH
$6,000.00

10/17/2011 USB+L US BANCORP 7.875% PFD DEP SHS REP 1/1000 PFD D
type: QUALIFIED DIV
$3,521.91

10/11/2011 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$934.30

10/11/2011 PM PHILIP MORRIS INTL INC
type: QUALIFIED DIV
$1,925.00

10/11/2011 MO ALTRIA GROUP INC
type: QUALIFIED DIV
$4,100.00

10/07/2011 MRK MERCK & CO INC NEW
type: QUALIFIED DIV
$1,710.00

10/07/2011 HYG ISHARES TRUST IBOXX $ HIGH YIELD CORP
type: ORD DIV - CASH
$1,883.93

10/07/2011 PFF ISHARES S&P U S PFD FUNDS&P U S PFD STK INDEX FD
type: ORD DIV - CASH
$1,206.47

10/04/2011 KMB KIMBERLY-CLARK CORP
type: QUALIFIED DIV
$1,400.00

10/03/2011
as of
10/01/2011 KO COCA COLA COMPANY
type: QUALIFIED DIV
$940.00

09/29/2011 SCHWAB1 INT 08/30-09/28
type: INTEREST
$2.15

09/28/2011 GEA GEN ELEC CAP 6.625%32PINES DUE 06/28/32
type: CREDIT INT
$2,484.38

09/23/2011 BAC BANK OF AMERICA CORP
type: QUALIFIED DIV
$50.00

09/16/2011 MCD MC DONALDS CORP
type: QUALIFIED DIV
$1,220.00

09/15/2011 ED CONSOLIDATED EDISON INC
type: QUALIFIED DIV
$3,000.00

09/13/2011 JNJ JOHNSON & JOHNSON
type: QUALIFIED DIV
$1,425.00

09/12/2011 JNK SPDR BARCLAYS CAPITAL HIGH YIELD BOND ETF
type: ORD DIV - CASH
$505.72

09/08/2011 HYG ISHARES TRUST IBOXX $ HIGH YIELD CORP
type: ORD DIV - CASH
$1,971.75

09/08/2011 PFF ISHARES S&P U S PFD FUNDS&P U S PFD STK INDEX FD
type: ORD DIV - CASH
$1,243.93

09/01/2011 JPM+I JPMORGAN CHASE 8.625%PFDDEP SHS REPSTG 1/400 NON
type: QUALIFIED DIV
$2,964.84

08/30/2011 SCHWAB1 INT 07/28-08/29
type: INTEREST
$3.76

08/15/2011 NNN NATIONAL RETAIL PPTYS REIT
type: ORD DIV - CASH
$1,347.50

08/15/2011 KRB+E M B N A CAPITAL 8.10%33TOPRS DUE 02/15/33
type: CREDIT INT
$2,025.00

08/12/2011 KMP KINDER MORGAN ENERGY LP UNIT LTD PARTNERSHIP INT
type: ORD DIV - CASH
$3,450.00

08/12/2011 EEP ENBRIDGE ENERGY PTNRS LP
type: ORD DIV - CASH
$3,195.00

08/05/2011 PFF ISHARES S&P U S PFD FUNDS&P U S PFD STK INDEX FD
type: ORD DIV - CASH
$636.99

08/01/2011 VZ VERIZON COMMUNICATIONS
type: QUALIFIED DIV
$2,925.00

08/01/2011 T A T & T INC NEW
type: QUALIFIED DIV
$2,580.00

07/28/2011 NLY ANNALY CAPITAL MGMT REIT
type: ORD DIV - CASH
$6,500.00

[CRCRFT78]

With the exception of Todds (Payback) post/view count and Jasons (War) one man show on fabrication, this is the best thread on Lat-g right now.

[Vegas69]

My thread is a painful reminder of what not to do financially. :unibrow:

[Sieg]

My thread is a painful reminder of what not to do financially. :unibrow:
:eek: Payback isn't paying you back? :unibrow:

[CRCRFT78]

This thread has definitely lit a fire under my ass. I've had an interest in handling my own investments/retirement after checking on my 401k about 4 years ago and seeing that it took a 50% loss. I've read a few books and have talked to some "professionals" (I use that term loosely because I really didn't feel as if I gained much by talking to them) and not one has broken it down into something I can relate to or truly understand. Greg, I feel that your explanations have helped me too really see the BIG picture and understand in the simplest form where I need to start and what I have to do to get going. THANK YOU.

And to the other contributing members, your information has also helped me to realize that there are other areas that are worth considering if stocks aren't your cup of tea. 2011 was an eye opening year for me after losing my house. Although I have never lived above my means I feel I can definitely downsize even more and get back on track and make 2012 a positive year both financially and personally.

Truly a must read thread for anyone looking to step up their financial game. :thumbsup:

[GregWeld]

Those DIVIDENDS in a "normal" account - should have been reinvested right back into the stocks that paid them AUTOMATICALLY --- I cash my checks.... so get the real money credited into my account.

One of the things I did with some "recent" (like January 2011) new money was I set up a single account with some of it - rather than "commingle" it with old money. That way I could track how it was growing and I could look at the dividends in it. Two ways to gauge my "investment".

I looked at this account today in order to copy and paste those dividends I posted earlier. AND HERE'S THE KICKER.... not only have I gotten those DIVIDENDS -- the account is UP 4% in capital growth(paper gains - not real gains).

[hifi875]

x2 best thread on the forum!!!! great tangible information.
thanks!!!!

[GregWeld]

This stuff is no different that watching someone build a car -- you learn "something" from all of these great builds -- I'm just trying to get you all to start building your FUTURES.

[RECOVERY ROOM]

My only problem with Berkshire -- what happens the day you wake up and the headline is WARREN BUFFET DIES

Not saying what that's going to look like - but it scares me to think that many people are invested "with him" - and not really in what they own. So I can own Coke on my own - without taking on the WB risk premium....

Sorry - that's just the way I think.
. Know what you mean, I ask that same question..

[Budweasel]

Not a bad allowance there Greg.

I echo some others when I say you have inspired me to look at my 401k. I have to admit I just put the money in and expect it to be "managed". And thought that was enough.

You really took away a lot of the mystique that has intimidated me. Thanks.

[ErikLS2]

Greg, I'm reall liking your way more and more, not that I ever disliked it. One thing that comes to mind is these investing "professionals" who will claim to know what to put you in. I experienced this when my wife didn't want to have anything to do with her retirement plan and just wanted someone to do it for her and she didn't want to listen to me. She had an Edward Jones guy come over and give us his pitch. He has all these load (high sales charge) mutual funds for her and I had my Money magazine list of low cost above average performing funds. Basically, he was pushing funds that he got a commision on because after all this is what he does for a living. The Money list has some really good funds on it, if you're into them, and it's relatively unbiased and the criteria for them to make the list is fundamentally sound.

These professionals don't really know anything you can't learn by doing what Greg is saying and it really comes down to do whether you think they can predict the future any better than you can yourself?

[WSSix]

Soon, I intend to start moving some of my money into a Schawb account(I like their website best, it's easy to find info) and I intend on posting all the details. I consider myself a normal person of normal means and want to take this to the next step and put Greg's advice into action. I'll most likely choose four stocks at most likely $1000 each. From there I'll post up how things are going. Updates won't happen quickly, maybe once a year.

All I want to do is show people what they can do themselves just as Greg has though I'm starting from scratch with the investing portion. I enjoy this stuff a great deal but I didn't know where to turn which is why I started this thread. I never expected Greg or anyone to step up the way he has with information. I was expecting to be pointed towards websites and literature and told to go read. I can see myself maybe taking a second career as a fee only financial planner in a couple decades. Obviously, I would need a lot more education myself before I did something like that but I like helping people live better. I just believe people waste so much money and they could live so much more easily and happily by doing simple things. I've given advice to my friends to help them get their finances under control to help them live better. It's methods that I used myself to keep myself out of debt while through college and my 20s. It was simple and very basic stuff like stop buying a damn 20oz coke everyday. However, it worked and I was proof of it since I walked away without debt. I figured I'd extend the courtesy to you guys since I started this post and show what I'm doing and how it's working for me. Any one else that cares to join me is more than welcome. We'll call it the Investment Club. Who wants to play Judd Nelson's character, lol?

[GregWeld]

Great WSSix....

Just don't share it when you're going DOWN!! LOL


Like I've said before - we share all manor of info on cars - motors - tire sizes - offsets.... so this is just one more item we can discuss... and is actually far more helpful!

[GregWeld]

Not a bad allowance there Greg.


Dude -- you haven't even scratched the surface....

But that is NOT the point - I just wanted to show some real figures because I thought that might get some folks motivated to start putting more away and not be so frightened of the ups and downs of the market (the old - get paid to wait statement) -- and to show living PROOF of what DIVIDENDS start to look like!

[Sieg]

Not a bad allowance there Greg.

98,544.24, roughly 20K per month! Most of us could squeeze by on that. :yes:

Again, thanks for the inspirational share Greg :thumbsup:

[WSSix]

Oh no, I'll show when I'm going down as well. I'm in this for long term gains. I'm not educated enough to try any get rich quick schemes other than work hard and watch how I spend my money.

[GregWeld]

98,544.24, roughly 20K per month! Most of us could squeeze by on that. :yes:

Again, thanks for the inspirational share Greg :thumbsup:



Sorry --- I couldn't! GD 1%'r


:D

[GregWeld]

Oh no, I'll show when I'm going down as well. I'm in this for long term gains. I'm not educated enough to try any get rich quick schemes other than work hard and watch how I spend my money.

Good -- this will be fun!

[Beegs]

....everytime I check this thread it has 30 new posts! All good stuff...:thumbsup:

Makes me want to vomit when I think of the three years I spent "daytrading"....my hair turned white, I had massive heart burn AND I got my ass handed to me. What a waste of time...I got REALLY good at fractions though..:lol:

Greg.....big thanks to you for sharing your wealth of knowledge on this subject!! I need to find my password for my online account and look at some good names for long term holds, thanks for lighting a fire under my backside.....:yes:

[GregWeld]

Greg, I'm reall liking your way more and more, not that I ever disliked it. One thing that comes to mind is these investing "professionals" who will claim to know what to put you in. I experienced this when my wife didn't want to have anything to do with her retirement plan and just wanted someone to do it for her and she didn't want to listen to me. She had an Edward Jones guy come over and give us his pitch. He has all these load (high sales charge) mutual funds for her and I had my Money magazine list of low cost above average performing funds. Basically, he was pushing funds that he got a commision on because after all this is what he does for a living. The Money list has some really good funds on it, if you're into them, and it's relatively unbiased and the criteria for them to make the list is fundamentally sound.

These professionals don't really know anything you can't learn by doing what Greg is saying and it really comes down to do whether you think they can predict the future any better than you can yourself?


Edward Jones is one of THE WORST "investment houses" in the ENTIRE UNIVERSE.... you hit the nail right on the head -- these basterds only buy front end loaded funds! Their commissions are like 5% UP FRONT -- but you never see that on a statement -- you have to do the math to figure out they screwed you... and they buy "mutual funds" that are hard to find and figure out what the f is in them... and then you check the "EXPENSE RATIO" of the fund and find out it's 1 1/2%.... so by the time you pay these AHoles 5% up front - and then pay the fund management another 1 and a half percent - and the "fund" has a 1.25% "dividend" --- do the math --- YOU'RE GOING BACKWARDS with inflation factored in!

I so hate those kind of people! They've ruined more retirement funds than the law should allow!

I just looked at someone else's "professionally managed" funds.... every one of them was a front end loaded mutual fund... OMG -- I just want to go postal on those kinds of firms!

FOLKS -- there is NO REASON WHATSOEVER to invest with an Edwards Jones or any outfit like that!

Investing is so easy a caveman can do it! Just buy big good companies that have paid an increasing dividend over a long period of time... and with charts that go from low to high over a long period of time. If you know the name - look 'em up! Check 'em out! This ain't rocket science! Pick a drug company - go to your medicine cabinet and see who makes the stuff -- then go to Google or Yahoo Finance - - and search the name -- the go to your food cupboard - gather some food names - go look 'em up and do some comparisons -- then drive down the street around town -- what's the biggest retailers -- write 'em down and look 'em up...

If you did that -- you'd own FOOD -- RETAIL -- PHARMACEUTICALS - GAS and OIL - so if you owned 5 stocks you'd already start to be DIVERSIFIED! THE key to this is to own what known as "BEST OF CLASS".... so when the name surfaces -- now start to compare this against other names you know in the same "industry"... so if you're thinking "retailers" -- then compare COSTCO - WALMART - TARGET - HOME DEPOT - LOWES etc.... if it's "drugs"/pharmaceuticals -- then look at MERCK - PFIZER - JOHNSTON and JOHNSON (not really a drug company).... If you need Food -- there's a ton of great names - just open your cupboard or refrigerator...

OR -- If you poke around in a Schwab account -- there is a RESEARCH function and you can use it to search for all the companies in an industry/sector.... and then you can sort 'em by their size - or by their growth over a period - or by the dividend they pay.

Does this take some work? Yeah.... but isn't it worth it? It takes some work to build a car too...

When you find some names that look good to you in your research --- WRITE THEM DOWN -- and Write WHY you like them -- and what they look like on paper i.e., Growth % over 5 or 10 years -- dividend payment - the sector they're in (retail - gas - manufacturing etc) so you can then not overlap. Get two or three names in each sector and then go back and compare them. I like Coke - I don't drink Pepsi - they're so similar on "paper" that I just prefer to own Coke. It's as simple as that. I use AT&T -- I used to own AT&T and VERIZON -- but I wanted more diversification - and I wanted a bigger position in another couple of companies so I sold the VZ and bought MORE AT&T and another couple of stocks in different sectors.

I own TWO "terbacky" stocks -- PM and MO -- I HATE smoking -- it kills people -- but as long as people want to smoke - and the companies pay great dividends and have great growth -- I'm going to own 'em. It's kinda like "guns don't kill people - people kill people" - kinda the same with smoking... :unibrow:

People are going to use -- food - drugs - smoke - buy gas - and talk on their cell phones... So I'm going to own the BEST OF THESE COMPANIES in these sectors... as long as they meet the other 'requirements' -- capital growth and dividend payers... and have that nice sweet chart.

:woot:

[GregWeld]

....everytime I check this thread it has 30 new posts! All good stuff...:thumbsup:

Makes me want to vomit when I think of the three years I spent "daytrading"....my hair turned white, I had massive heart burn AND I got my ass handed to me. What a waste of time...I got REALLY good at fractions though..:lol:

Greg.....big thanks to you for sharing your wealth of knowledge on this subject!! I need to find my password for my online account and look at some good names for long term holds, thanks for lighting a fire under my backside.....:yes:


Welcome!!

I used to day trade BUT -- HUGE BUTT -- I NEVER EVER day traded with my "regular funds" -- I only traded a separate account that if it went to zero wouldn't have been anything to me. BIG DIFFERENCE from that and what many people are doing! I think I mentioned it in one of these posts.... It was fun - it was 'easy' - and I was good at it. BUT it was also during a record breaking BULL market. Anybody could do it. Just like the first guys that started flipping houses... it was so easy they made TV shows about it... but day traders and house flippers - usually lose in the end. It only takes a couple bad deals and, bang, you're out. ME -- I'd prefer to stay in the game and win long term. What kills me is that the names I traded in - had I just bought and held - would have made me SO MUCH MORE! OMG -- as in 10's of millions MORE. Thank god I came to my senses!

I have a very long list of woulda/shoulda/couldas....

Just a funny story -- because we need to keep all of this fun - even if it's at my own expense....

I'm really conservative - as in really when it comes to financial stuff. We owned a LOT of Microsoft stock back in the mid 90's.... and we wanted to buy a boat. SO -- I sold enough stock to pay cash for it. Okay -- we're talking "Yacht" to most here - but I always just called it "the boat".... by the time I paid the taxes - paid for the "options" price on the shares and got enough to pay for the boat - I'd sold over a million bucks worth.... SIX MONTHS LATER - the stock splits 2 for 1 -- and in another 6 months it splits 2:1 again - and a year later splits 2 for 1 again! I figure I paid around 20 million for "the boat"... it was the smallest 20 million dollar boat in the history of the UNIVERSE (thanks AL!).

BUT Hindsight is 20/20 and at the time -- there was no f'n way I was going to borrow money to buy a boat! What if the whole world fell apart?!?! At least I'd go down not owing anyone for anything! That is just the way I roll.... but man I wish I hadn't done that!

[Sieg]

We owned a LOT of Microsoft stock back in the mid 90's.... and we wanted to buy a boat. SO -- I sold enough stock to pay cash for it. Okay -- we're talking "Yacht" to most here - but I always just called it "the boat".... by the time I paid the taxes - paid for the "options" price on the shares and got enough to pay for the boat - I'd sold over a million bucks worth.... SIX MONTHS LATER - the stock splits 2 for 1 -- and in another 6 months it splits 2:1 again - and a year later splits 2 for 1 again! I figure I paid around 20 million for "the boat"... it was the smallest 20 million dollar boat in the history of the UNIVERSE (thanks AL!).

BUT Hindsight is 20/20 and at the time -- there was no f'n way I was going to borrow money to buy a boat! What if the whole world fell apart?!?! At least I'd go down not owing anyone for anything! That is just the way I roll.... but man I wish I hadn't done that!

Thanks a lot! I just about pissed myself :rofl: A good friend of mine who is an employee "incentives" manager for MS just bought a boat (dingy) last month and I've been harassing him a "little" bit about his personal wealth wealth. :rofl: :rofl:

This thread is truly a priceless lesson in life!

[pw2006]

Hey Greg- I have a story as well... I sold some of my apple options back in 2002 to help pay for my wedding/honeymoon/house down payment. The shares were trading for a split adjusted ~$7.40, we now trade close to $400. I don't refer to her as an anchor. :_paranoid But man do I wish I had hindsight!

[RECOVERY ROOM]

....everytime I check this thread it has 30 new posts! All good stuff...:thumbsup:

Makes me want to vomit when I think of the three years I spent "daytrading"....my hair turned white, I had massive heart burn AND I got my ass handed to me. What a waste of time...I got REALLY good at fractions though..:lol:

Greg.....big thanks to you for sharing your wealth of knowledge on this subject!! I need to find my password for my online account and look at some good names for long term holds, thanks for lighting a fire under my backside.....:yes:

Know what you mean on the day trading, Total waste of time...This thread has got me rethinking about how I handle the investing ideas

[ErikLS2]

I love the idea of starting a kind of investment club where we share ideas and stock picks. Think we could buy enough of a stock to force the price up? :lateral:

One I thought of but didn't buy was Ford in 2008-09 when it was like at $2. It was pretty clear they weren't headed for bankruptcy or a bail-out and if you look at it's chart it went to like $18 or so in 2 years, 'bout 450% annual return but there's that hindsight again. Where's that opportunity out there now? Greg, you da man, c'mon now

[Vegas69]

With the baby boomers hitting retirement age, there has to be some companies that are going to benefit more than others. Maybe velcro shoes? :lol: Seriously, drug companies and health care providers have to be high on the list. Who else?

[GregWeld]

Hey Greg- I have a story as well... I sold some of my apple options back in 2002 to help pay for my wedding/honeymoon/house down payment. The shares were trading for a split adjusted ~$7.40, we now trade close to $400. I don't refer to her as an anchor. :_paranoid But man do I wish I had hindsight!

Gwen started at MSFT in 1984 --- in 1986 they went public and her first stock option was 750 shares at $32.50.... at Thanksgiving there was a bunch of fellow 'softies' at dinner and we were laughing at this "gift" -- I said I'd prefer a coupon for a free turkey at Safeway.... Because at the time - MSFT was trading at $30 and this "option" was higher at $32.50....

Man was I dumb!

Okay - just so ya know - that 750 shares - split so many times that it grew into 108,000 with a cost adjustment for the splits @ .11 cents per share.

Did I mention how dumb I was??

[RECOVERY ROOM]

I love the idea of starting a kind of investment club where we share ideas and stock picks. Think we could buy enough of a stock to force the price up? :lateral:

One I thought of but didn't buy was Ford in 2008-09 when it was like at $2. It was pretty clear they weren't headed for bankruptcy or a bail-out and if you look at it's chart it went to like $18 or so in 2 years, 'bout 450% annual return but there's that hindsight again. Where's that opportunity out there now? Greg, you da man, c'mon now

I bought Ford the day they were sitting in congress, They didn't have their hand out. I got in at 1.50. Smartest thing I ever did with money, Sold it at 17. And bought it again when it went down to 10..Holding on to that for a while. I like the idea of sharing Ideas and thoughts with other people on here. Everyone could benefit

[Musclerodz]

Greg.......

Thanks again for the insight. It is crazy to think here I am on a car forum and the first thread I go look for is this one. :thumbsup:

[GregWeld]

Greg.......

Thanks again for the insight. It is crazy to think here I am on a car forum and the first thread I go look for is this one. :thumbsup:


When I lived in NYC -- I had a sign on my desk that read "Try not to let the urgent get in the way of the IMPORTANT".

So dang true... we all have the "I wants" and sometimes we let those jump in front of what's IMPORTANT - and it's IMPORTANT to be able to retire and still live etc for a very long time!

I think that's why this thread has taken on a life of it's own so to speak... everyone kinda knows how important this stuff really is... it's just that nobody talks about it. Glad you like it 'cause it is actually kinda fun!

:cheers:

[Track Junky]

Just wanted to say thanks Greg for providing all of this great information. I've been plugging in and out of this thread. I have never dabbled in this sort of thing and may give it a try.
Forgive me if you have already mentioned but what would be the first steps for someone that is new to this?

[GregWeld]

Just wanted to say thanks Greg for providing all of this great information. I've been plugging in and out of this thread. I have never dabbled in this sort of thing and may give it a try.
Forgive me if you have already mentioned but what would be the first steps for someone that is new to this?

First step is to open a discount brokerage account -- I use Schwab which is why I mention them - because it's what I know. I have accounts at many different places but this is the one place that has all the research and info etc that is user friendly. You can (as I do) have several DIFFERENT accounts at one brokerage. SO you could have an IRA as one account - and you could have a separate account for just "savings/investing" - and another one in a joint account with your kids for college savings/investing etc. And a secret one for car parts/track fees... :rofl:

Once you have an account established -- and funded (as little as $500? I'm not really sure what the minimum is) then you can BUY a stock or two stocks. If it's a small amount - say $1000 or under - I'd just buy ONE stock.... and then you can save up and buy another when you have another 500 or 1000. If you have 10,000 to start - then I'd buy 5 stocks @ 2,000 each and so on. If you have 100,000 then I'd buy 15 to 20 stocks/ETF's and you'd have your very own mini mutual fund - but it would be without the "expenses" the funds have and would probably have a better return!

Schwab people will walk you through this process should you require it. You can actually go to one of their offices and use their computers and have someone look over your shoulder should you need it.

If you go back through this thread -- I've given some pretty good names which I've also shown the growth rates (5 year?) and the dividend %'s on. Pick a couple from there - or compare them with similar names. My point all along has been that this is super easy to do and all it really takes is to just get started.

I need everyone on here to get rich like Charley - so I have people to race with in our old age!

EEEEEEEEEEEEEEEHHHHHHHHHHHHHAAAAAAAAAAA

[Woody]

I am very interested in this thread. I mostly lurk on Lateral G and over the last couple of days this is the first thread I have been coming to.

I have been investing in stocks and mutual funds for about 20 years now. I like the idea of working together with other people on investment ideas because many times other people have different viewpoints and it makes you think about things that you might not have considered on your own.

With that being said, I would like to throw out a stock for consideration that I like right now. The stock is Microsoft. I know Greg said Microsoft is dead money right now, but here is why I like it.

I believe it is out of favor and undervalued right now. If you look at a ten year history of revenue growth and earnings growth, it compares very well to any of the high quality stocks that have been mentioned in this thread. For example, the ten year growth rate of net income is 146% for MSFT. As a comparison McDonalds had a 150% increase in net income over the same 10-year period. During the same ten year period, the stock price of MCD has gone up 260%, while MSFT has declined 23%. The PE (Price Earning ratio) is only 9 for MSFT compared to a 15 PE ratio for the market as a whole. MCDs PE is currently 19.

So my thinking is that now is a good time to buy. I have found that chasing the hot stock/mutual fund generally gets you in at the high. I tend to be a contrarian and look for things that may be out of favor but have the potential to come back in favor.

MSFT currently has a 3.08% dividend rate, while MCD has a 2.87% dividend rate. I am mostly comparing MSFT to MCD, but MCD has had one of the strongest runs over the last ten years.

I would like to hear others thoughts about Microsoft as well as any other stock ideas you may have.

[Track Junky]

Thank you Greg. Just to give you an idea of my current and past investment break down, any time I had money I bought property. I started in 2000. By 2006 had 6 properties and buy gut instinct i immediately dumped two of the most recenly bought and luckily did not take a hit on the last two and lost $150k on the still owned previous which is what i used as a down payment so yes....I took a $150k cash hit.

I'm OK on the others as I bought in pre 2003 and they are rentals.

Now I am stagnet, in the construction business in the Sacramento area, and business is slow. My thoughts were.....well I have these properties I could rely on for retirement.....but in the back of my mind I'm not 100% confident as I would like to put 3 kids through college.

I am going to go back and take notes on all you have shared.......and once again, this site is very fortunate to have you......Thank you.

[GregWeld]

I am very interested in this thread. I mostly lurk on Lateral G and over the last couple of days this is the first thread I have been coming to.

I have been investing in stocks and mutual funds for about 20 years now. I like the idea of working together with other people on investment ideas because many times other people have different viewpoints and it makes you think about things that you might not have considered on your own.

With that being said, I would like to throw out a stock for consideration that I like right now. The stock is Microsoft. I know Greg said Microsoft is dead money right now, but here is why I like it.

I believe it is out of favor and undervalued right now. If you look at a ten year history of revenue growth and earnings growth, it compares very well to any of the high quality stocks that have been mentioned in this thread. For example, the ten year growth rate of net income is 146% for MSFT. As a comparison McDonalds had a 150% increase in net income over the same 10-year period. During the same ten year period, the stock price of MCD has gone up 260%, while MSFT has declined 23%. The PE (Price Earning ratio) is only 9 for MSFT compared to a 15 PE ratio for the market as a whole. MCDs PE is currently 19.

So my thinking is that now is a good time to buy. I have found that chasing the hot stock/mutual fund generally gets you in at the high. I tend to be a contrarian and look for things that may be out of favor but have the potential to come back in favor.

MSFT currently has a 3.08% dividend rate, while MCD has a 2.87% dividend rate. I am mostly comparing MSFT to MCD, but MCD has had one of the strongest runs over the last ten years.

I would like to hear others thoughts about Microsoft as well as any other stock ideas you may have.


Woody ---

This entire thread is about THEORY of investing -- not really 'stock picks and tips of the day'.... With that said -- the reason it is NOT that kind of discussion and I've tried to stay away from that is because everyone needs to tailor THEIR OWN investments. If a person buys what someone else said to - and they don't know why they bought it - the first time they look at their account and the stock is DOWN -- they're going to want to sell (at a loss).

So -- if you like Microsoft -- and like "contrarian" investing (like salmon swimming up stream) then that's what you should buy. You'll be happy with it.

BUT since this is a beginners class.... the thread is called INVESTING 102... I've been doing just "basics" -- basic names - basic theory... which DOESN'T include "contrarian investing".

Okay --- I write the above -- because I have to write for the MANY eyeballs that read these things.... I write all my posts that way.

Microsoft has all the right "numbers" except one -- CAPITAL GROWTH -- and it has a HISTORY of that. Look at a chart -- the stock PEAKED in 1999 (December of 1999) and has what appears to be a MOUNTAIN... going almost vertical to the peak and then STRAIGHT DOWN on the other side. Microsoft (MSFT) has the largest "float" of any stock in the entire UNIVERSE... which means -- there are more SHARES available (issued) than any other company. PERIOD. So it takes much more BUYING INTEREST to raise the stock price than any other company (that might have one quarter the number of shares for instance). Add to this the Billy Boy (not a fan) DUMPS 4 and 500 million dollars worth a month.... and he has an ENDLESS SUPPLY (he can sell a BILLION DOLLARS WORTH PER YEAR FOR THE NEXT 50 YEARS). His stock is FOUNDERS STOCK -- i.e., it's never been in the market until HE sells it. So that is NEW SUPPLY. That right there knocks the price down. Look at an insider trading report -- you'll see he's in there dumping dumping dumbing month after month year after year.

PERSONALLY -- I want CAPITAL GROWTH.... AND.... the Dividend. So if you want to compare McDonalds with a 260% capital growth -- and a dividend -- against Microsoft (MSFT)... and that's where you want to put your money... I'd say your investing style is "GAMBLER" because you are gambling that you can swim up stream against a known (historical) tide.. and win. I'll bet against you and I'll buy MO - PM - MCD - KMP etc and at the end of the year I'm going to be richer than you are. :unibrow:

I have a broker (also a personal friend) that handles my bond account. His firm (McAdams Wright Ragen, Inc.) always has MSFT on it's "BUY" list.... and I keep telling Fred -- I'll take 100K in APPLE and you put your 100K in MSFT and get back to me at the end of the year. Just compare the two charts -- overlay them so you can see the two charts on the same chart... you can do this in GOOGLE FINANCE -- MSFT is DOWN 10% YTD while AAPL is UP 20% YTD... Same chart - overlay (compare) McDonalds -- UP 30% -- Compare that with Phillip Morse (PM) UP 35%

Again -- I'm doing this as a "lesson" -- please do not take this personally but I'm using your question to show a bit of research and what to look for and how to compare etc.... So I ask ANYONE -- why would you CHOOSE to put money in what has a history of going nowhere vs a history of going somewhere... UP vs DOWN....

Here's how I'd play MSFT -- because I think it's a LOSER... it's a LOSER in the tech wars in mobile which is where "computing" is going (and it's going there FAST).... I might PARK some money there because I would feel it's safe for a few weeks (I used to use GE for this) and if I played the dividend game I could pick up the dividend and then bail. But I would NOT invest in them hoping against hope that someday they might figure it all out and the public is going to come swarming back in a feeding frenzy and push up their stock.

Remember how the market works -- it takes more people that WANT to buy than people that want to SELL to lift a stock price. You tell me when that is going to happen going forward? In the meantime -- I'd prefer to have my money in something that at least historically looks like it's on the right path... which is going UP not sideways or down.

[Woody]

Greg,

I appreciate your input and that is why I posted. I wanted to get some others viewpoints and maybe some new ideas on how others analyze stocks.

I will try to keep it to a more general discussion in the future.

Thanks

[pw2006]

I am very interested in this thread. I mostly lurk on Lateral G and over the last couple of days this is the first thread I have been coming to.

I have been investing in stocks and mutual funds for about 20 years now. I like the idea of working together with other people on investment ideas because many times other people have different viewpoints and it makes you think about things that you might not have considered on your own.

With that being said, I would like to throw out a stock for consideration that I like right now. The stock is Microsoft. I know Greg said Microsoft is dead money right now, but here is why I like it.

I believe it is out of favor and undervalued right now. If you look at a ten year history of revenue growth and earnings growth, it compares very well to any of the high quality stocks that have been mentioned in this thread. For example, the ten year growth rate of net income is 146% for MSFT. As a comparison McDonalds had a 150% increase in net income over the same 10-year period. During the same ten year period, the stock price of MCD has gone up 260%, while MSFT has declined 23%. The PE (Price Earning ratio) is only 9 for MSFT compared to a 15 PE ratio for the market as a whole. MCDs PE is currently 19.

So my thinking is that now is a good time to buy. I have found that chasing the hot stock/mutual fund generally gets you in at the high. I tend to be a contrarian and look for things that may be out of favor but have the potential to come back in favor.

MSFT currently has a 3.08% dividend rate, while MCD has a 2.87% dividend rate. I am mostly comparing MSFT to MCD, but MCD has had one of the strongest runs over the last ten years.

I would like to hear others thoughts about Microsoft as well as any other stock ideas you may have.

My take is that you have better downside protection with MSFT right now, than with MCD and like you said, they have a similar dividend yield around 3%. Next year's growth rates for revenue/EPS for MSFT are (7.6%/10.6%) versus MCD at (5.6%/12.4%). So, just looking at analyst estimates, revenue is expected to grow a little faster at MSFT than MCD, but margins are expected to grow a little better at MCD (which is likely why people are willing to pay more for MCD via the higher PE). With the large delta in the PEs, MSFT looks like a better investment to me than MCD right now.

Another option (pun intended) but more complex trade, is to look at options. If you are comfortable with options (no, not all options are risky), you can buy MSFT stock and write covered calls against your stock. For example, if you bought MSFT today at roughly $26 and wrote a March 2012 covered call for $26 for $1. $1/$26 / 3 (option expires in ~3 months) x 12 (est annual return) = 15%. This will cap your gains if the stock rises, but also gives you $1 of downside protection. If the stock stays flat, you let the option expire in March and write another option. If the stock rises, your stock will get called and you have to live with the $1 gain. I am not advocating this trade, but just giving you others options on trading.

If you are a beginner, start doing a little research (starting with Greg's awesome list of stocks above) and buy some shares. Do not try to get rich quick and if you are new to trading, do not use margin to buy stocks. Again, just my 2 cents.

[Bucketlist2012]

I just joined today, and after posting my car on the projects thread, here I am..

Investing and Cars, and Money management, are some of my Passions...

Being the Newbie, I just want to say hello, and I will be commenting from time to time..

Again, GREAT thread. What better , than to help each other with investment ideas, and strategies.

I think I am going to learn more than just Cars on this website...Very, Very Cool.

Merry Christmas and to a even better 2012....

[Woody]

My take is that you have better downside protection with MSFT right now, than with MCD and like you said, they have a similar dividend yield around 3%. Next year's growth rates for revenue/EPS for MSFT are (7.6%/10.6%) versus MCD at (5.6%/12.4%). So, just looking at analyst estimates, revenue is expected to grow a little faster at MSFT than MCD, but margins are expected to grow a little better at MCD (which is likely why people are willing to pay more for MCD via the higher PE). With the large delta in the PEs, MSFT looks like a better investment to me than MCD right now.

Another option (pun intended) but more complex trade, is to look at options. If you are comfortable with options (no, not all options are risky), you can buy MSFT stock and write covered calls against your stock. For example, if you bought MSFT today at roughly $26 and wrote a March 2012 covered call for $26 for $1. $1/$26 / 3 (option expires in ~3 months) x 12 (est annual return) = 15%. This will cap your gains if the stock rises, but also gives you $1 of downside protection. If the stock stays flat, you let the option expire in March and write another option. If the stock rises, your stock will get called and you have to live with the $1 gain. I am not advocating this trade, but just giving you others options on trading.

If you are a beginner, start doing a little research (starting with Greg's awesome list of stocks above) and buy some shares. Do not try to get rich quick and if you are new to trading, do not use margin to buy stocks. Again, just my 2 cents.

Thanks for the input.

[GregWeld]

Greg,

I appreciate your input and that is why I posted. I wanted to get some others viewpoints and maybe some new ideas on how others analyze stocks.

I will try to keep it to a more general discussion in the future.

Thanks



Don't do that. I thought it was a great question!!

I'm posting from my phone or I'd tell you why.

[JoeliusZ28]

Well this is my first post on this site, I've been a lurker here for a while but James (LS1-IROC) pointed me to this thread.:yes: Just finished reading through it all, very good information, thanks! Right now I happen to be about halfway through the book 'bogleheads guide to investing.' I'm 25 and looking to get an index fund setup soon, I'm just wondering if anyone can offer some opinions on schwab vs vangaurd? Seems like they are both good, should I just pick one and roll with it, or could it be beneficial to have an account with both?

This thread definitely has piqued my curiousity in dividend stocks, now too :thumbsup:

[GregWeld]

Well this is my first post on this site, I've been a lurker here for a while but James (LS1-IROC) pointed me to this thread.:yes: Just finished reading through it all, very good information, thanks! Right now I happen to be about halfway through the book 'bogleheads guide to investing.' I'm 25 and looking to get an index fund setup soon, I'm just wondering if anyone can offer some opinions on schwab vs vangaurd? Seems like they are both good, should I just pick one and roll with it, or could it be beneficial to have an account with both?

This thread definitely has piqued my curiousity in dividend stocks, now too :thumbsup:


A discount broker is a discount broker -- so just pick one with an office that is handy to you - in the event you want to stop and deposit a check etc -- or need to send a wire transfer -- that kind of stuff.

Welcome aboard!!!:cheers:

[GregWeld]

Greg,

I appreciate your input and that is why I posted. I wanted to get some others viewpoints and maybe some new ideas on how others analyze stocks.

I will try to keep it to a more general discussion in the future.

Thanks

Woody --- I thought your question on Microsoft was a very good one -- and I hope you didn't take my discussion of why I wouldn't choose that particular stock as a personal affront - that wasn't my intention.

It was a great question! Many people would love to be able to pick the "next Microsoft"... and still look at MSFT stock as some kind of a "must own". So it was a perfect name to bring up here -- since I've been pounding the desk saying to get into names you know and understand.

I was trying to use that question to put another level of thought process into this "stock picking" business. I really wish MSFT would be the stock that it used to be... but it has had 10 long dismal years of being stuck in the mud. I'm trying to get people that haven't EVER invested in anything -- to start saving and investing -- and I NEED them to buy a little bit of this and a little bit of that, and have SUCCESS! That success needs to be GROWTH in their money (account) AND to see what dividend investing can do for them. Even if a guy only gets a $10 dividend -- that is "free money".

On the way home today - I got a text that said "GO McDonalds"! -- So I called the guy and said "what's up with that" --- well he was all excited because 5 months ago I got him to start investing and one of the picks was MCD -- and he bought at $84 and today it closed at over $100....

He wouldn't be real excited if he'd bought MSFT at @ $25 and it closed today at $25.15


I'll come back to the "This thread is Investing 102".... I want these guys to see some RESULTS.

I've hammered 'em on LOOK AT THE LONG TERM CHART...... because that TREND CAN BE YOUR FRIEND (old dumb saying but it works)... Or "don't try to catch a falling knife" (don't buy a broken stock that is falling just because it used to be "good"). These are all sayings that actually do work. And they're good reminders to me (I use them to myself all the time!).

So again -- my only "lesson" point was -- if I look at a chart of MSFT -- and it's been FLAT for 10 years -- I don't get any good argument that says "BUY IT BECAUSE IT MIGHT GO UP".... That's just gambling. Like standing at a slot machine thinking "My next 20 bucks might hit the big one...."

[RECOVERY ROOM]

Greg.......

Thanks again for the insight. It is crazy to think here I am on a car forum and the first thread I go look for is this one. :thumbsup:

Me to Mike, sorta like those old EF HUTTON COMMERCIALS

[billscamaros]

So I can say that this thread has motivated me to look a little bit at the existing investments that I have ..... and I use the word "investments" loosely.

I have a long neglected Fidelity IRA with some cash sitting in cash reserve. As you might guess, my gain on cash sitting in reserve over the past few years has been .000000000000001%. I'm one of those guys who knows absolutely nothing about stocks or invesments; nothing beyond how to log into the account and see my balance. This stuff has always been so confusing!!

So .... due to Greg's obvious excitement about this investing stuff .... I decided to take the time to become familiar with my account. I've been poking around on the Fidelity website, using their research tools and reading their investing info. I decided to use the Fidelity account as my "test bed" for learning the basics. A few days ago, I bought some Nike and McDonalds stock out of my IRA cash. As Greg had mentioned in one post, the stock price immediately dipped into the red and I thought "crap ...... now I've made Greg loose millions!!" But after a day or so, it was back into the positive numbers. (Why does that initial price dip happen??)

Although I realize that it's all "paper", my Fidelity account has increased in value more over the past few days than it did in the past two years. I still have some cash left in reserve, and I've been Google Financing virtually every name that comes into my head ... I've even made up a few acronyms! Eventually I'll spread the cash out into small chunks of stocks that follow the "10 year gain" and "dividends reinvested" rules. Since this Fidelity IRA money is left over from a previous employer IRA that I rolled into another fund, I can't/won't "co-mingle" any other cash into it. And this is seperate from my current employer 401K where most of my retirement money is sitting.

Next up is to get my "emergency/regular savings" up to where I want them, and then I'll look at a seperate brockerage account.

Anyhow ..... thanks to this thread, I've learned a ton over the past week or so. And continuous learning is a life goal.

Thanks guys!!

[LS1-IROC]

Well this is my first post on this site, I've been a lurker here for a while but James (LS1-IROC) pointed me to this thread.:yes: Just finished reading through it all, very good information, thanks! Right now I happen to be about halfway through the book 'bogleheads guide to investing.' I'm 25 and looking to get an index fund setup soon, I'm just wondering if anyone can offer some opinions on schwab vs vangaurd? Seems like they are both good, should I just pick one and roll with it, or could it be beneficial to have an account with both?

This thread definitely has piqued my curiousity in dividend stocks, now too :thumbsup:

Welcome Aboard Joel!:cheers:

[GregWeld]

So I can say that this thread has motivated me to look a little bit at the existing investments that I have ..... and I use the word "investments" loosely.

I have a long neglected Fidelity IRA with some cash sitting in cash reserve. As you might guess, my gain on cash sitting in reserve over the past few years has been .000000000000001%. I'm one of those guys who knows absolutely nothing about stocks or invesments; nothing beyond how to log into the account and see my balance. This stuff has always been so confusing!!

So .... due to Greg's obvious excitement about this investing stuff .... I decided to take the time to become familiar with my account. I've been poking around on the Fidelity website, using their research tools and reading their investing info. I decided to use the Fidelity account as my "test bed" for learning the basics. A few days ago, I bought some Nike and McDonalds stock out of my IRA cash. As Greg had mentioned in one post, the stock price immediately dipped into the red and I thought "crap ...... now I've made Greg loose millions!!" But after a day or so, it was back into the positive numbers. (Why does that initial price dip happen??)

Although I realize that it's all "paper", my Fidelity account has increased in value more over the past few days than it did in the past two years. I still have some cash left in reserve, and I've been Google Financing virtually every name that comes into my head ... I've even made up a few acronyms! Eventually I'll spread the cash out into small chunks of stocks that follow the "10 year gain" and "dividends reinvested" rules. Since this Fidelity IRA money is left over from a previous employer IRA that I rolled into another fund, I can't/won't "co-mingle" any other cash into it. And this is seperate from my current employer 401K where most of my retirement money is sitting.

Next up is to get my "emergency/regular savings" up to where I want them, and then I'll look at a seperate brockerage account.

Anyhow ..... thanks to this thread, I've learned a ton over the past week or so. And continuous learning is a life goal.

Thanks guys!!


:hail: :hail: :hail: :hail: :lateral: :cheers: :woot:


And that folks is just how it works - and it truly is just that simple.

Will the account go straight up day after day ---- NO --- It is like a stairway -- up - maybe back a couple - then up - then sideways - then back - then up a little... kinda like our car builds. Eventually we finish. Right?

XOXO to all!

[GregWeld]

Another thing that I hope everyone will/can begin to see -- when staring at all of these charts and stuff that I've been hammering on..... YOU DON'T HAVE TO CATCH THE NEXT GREATEST, BIGGEST INVENTION OR THE HOTTEST STOCK TIP in the stock market!

This is why I wanted everyone to see names like McDonalds - Kinder Morgan - Phillip Morse etc.... that these BORING old stodgy "names" actually can have some pretty stellar charts! And they can have some pretty darn good dividends!


FORD was a pretty GIANT GAIN... for those with the guts to see the sky wasn't falling and they could see the DIFFERENCE that FORD didn't have to borrow from the government (us) to stay alive... if you caught that (bought that) at $2 and rode it to $10 -- that is a 500% gain!

So let's use this as an example. BE CAREFUL about taxes! If you bought at 2 and sold at 10 -- within ONE YEAR AND A DAY - you'd OWE regular income tax rates on that GAIN.... but if you held it ONE DAY AND A YEAR - that becomes LONG TERM CAPITAL GAINS and is max tax rate of 15%

If it's within the IRA or 401K - then there is NO TAX DUE YET --- that tax is when you WITHDRAW. So hopefully - when you retire - your tax rate is LOWER than when you're working. If you bought that within a ROTH!! Katie bar the door -- those gains are TAX FREE. PERIOD. That's the beauty of a ROTH IRA. Everyone that qualifies should have a ROTH IRA.

[GregWeld]

I bought some Nike and McDonalds stock out of my IRA cash. As Greg had mentioned in one post, the stock price immediately dipped into the red and I thought "crap ...... now I've made Greg loose millions!!" But after a day or so, it was back into the positive numbers. (Why does that initial price dip happen??)


:lol: :lol:

There is a little man on the floor of the stock exchange -- the minute you BUY -- he yells at his buddies.... "Bill's in, TAKE 'ER DOWN!"..... and the minute AFTER you SELL -- he yells "Bills out, TAKE 'ER UP!"

Actually --- the down days are to test your faith in what you just "invested" in. When that happens -- go to the "alter of the chart" and refresh your brain by looking at that stellar growth and dividend and see WHY YOU BUY....

If you just gambled and bought something without having done the research... and you never had any faith... then you sold your sole (your shoe sole not your soul) to the devil and he'll eat you alive... and you'll sell at a loss. A few of those and you're out and you've failed. (Just having fun here with the alter and devil stuff). :unibrow: :D

[billscamaros]

Merry Christmas guys!

[CRCRFT78]

Greg is the Lat-g Santa. He has given us all an early Christmas gift that can last a lifetime if we apply the knowledge wisely. Thanks again for your insight into this investing game. :thumbsup:

[RECOVERY ROOM]

I was up till 3am the other night going over info, Im rethinking a lot of things now. Once you read the advice and start understanding what you see it makes sense. Everybody that makes a profit is going to owe G.W. dinner at SEMA next year. LOL

[Musclerodz]

I was up till 3am the other night going over info, Im rethinking a lot of things now. Once you read the advice and start understanding what you see it makes sense. Everybody that makes a profit is going to owe G.W. dinner at SEMA next year. LOLGreg may enjoy that alot! And you would have to have been to dinner with Greg to know what I am talking about. ( 6 adults in a Honda Civic after leaving an all you can eat steak house does not look cool btw:rofl: ) It might even qualify as DIVIDENDS?

[GregWeld]

Just don't blame me when it all goes horribly wrong!!! :(


Remember -- this is all just THEORY.... Good theory - and it does work over time.... but you'll hate me in the down markets we will all suffer! But with those dividend payments -- they're a whole lot easier to take.



Mike -- I still get a good laugh about that "scene" at SEMA every time I think about it! Those times are what good memories are made of! :lol: :cheers:

[GregWeld]

Remember not to get caught up in "irrational exuberance"! And with the highs will come lows... the market doesn't go straight up. It's more like a dance. Like building a high end build -- a lot of time is spent taking stuff apart!

This is what I just read on one of the websites I visit for market info/news - and I thought it pertinent to post here....

A Santa Claus rally phenomenon usually occurs during last 10 trading days of the year, along with the opening week of the new year, where trading volumes are lighter and there’s a bias to raise prices to “window dress” returns for fund managers.The rally continues into the new year due to inflows of new pension money from 401(k)s and IRAs buy into equities.

The point of this is --- don't forget that oldest of rules... the minute you buy - they will fall... and you MUST remember why you bought - your time frame (really? Was it only a one week time line?) - refresh your brain with a look at those charts... and if you've kept some powder dry - if it's a stock you like long term - BUY MORE it just went on sale! But don't buy more unless it's gone down 10% or more (that's a BIG move!)...

[GregWeld]

Here's a good look at what DIVIDENDS look like! $4000 invested in two similar companies --- same industry (aka Sector) -- but one pays a higher dividend than the other. This is showing DIVIDENDS ONLY not the capital growth (or loss) if any. I just cut and pasted this chart because I thought it was very interesting to actually SEE the money trail.


http://static.seekingalpha.com/uploads/2011/12/23/912334-132469062189856-Tim-McAleenan_origin.jpg


The above is just the chart showing the difference in the COMPOUNDED rate of return of the dividends paid. Below is a link to the actual article I stole it from. The discussion points in the article are "in a nut shell" to look for DIVIDEND INCREASES over time - when looking at all comparisons. Both of these companies are "best of breed" - but Chevron increased it's dividend payout % MORE than EXXON -- and over time that made a $1000 difference!

Interesting is all -- you'll learn nothing from it really because it's a HISTORICAL look and is only meant to help you PERHAPS make another investing decision --- the company that historically increased it's dividend or the one that pays higher NOW but hasn't raised the dividend much over time. EITHER ONE IS A WINNER IN MY BOOK BECAUSE YOU WOULDN HAVE AT LEAST BEEN INVESTED IN SOMETHING RATHER THAN NOTHING... :willy: :unibrow: :D

http://seekingalpha.com/article/315903-battle-of-dividend-kings-chevron-vs-exxon?source=email_investing_income&ifp=0

[Sieg]

Nuts! I didn't get any high div stocks for Christmas. :( :D

[GregWeld]

Nuts! I didn't get any high div stocks for Christmas. :( :D

GOOD ONE!!
:rofl:

[WSSix]

Interesting. I was looking into oil companies as a sector to invest in. Exxon was on that list. I'll check out Chevron too.

[GregWeld]

Interesting. I was looking into oil companies as a sector to invest in. Exxon was on that list. I'll check out Chevron too.

My personal gas/oil/energy plays are in KMP (Kinder Morgan Partners) and EEP (Enbridge Energy Partners)... I chose them because of the much higher CURRENT dividend. But remember -- I'm not looking at growth as much as I am for current dividend yield because I'm already retired and live off that stream...

Both the above pay over 6% -- and for me -- that's HUGE.

Can't go wrong with either CVX or XOM, or any of these names in my book. As long as you're DIVERSIFIED.... and we know - like food etc -- people are going to be using Oil/Gas/Natural gas for a very long time (sadly because I'd like to see less dependence on them but that's a different discussion). :thumbsup:

[GregWeld]

I just overlaid (compared) a chart of these 4 names -- and EEP is the laggard for 10 year capital growth with a paltry 58% -- the other 3 - XOM - CVX - KMP are all 120% PLUS 10 year capital growth.... they are in virtual lock step with each other AND they pay that nice dividend.

I think these 10 year Google charts INCLUDE the dividend as reinvested to calculate that growth rate but I'm not sure. That would actually be the CORRECT way to look at them for pure comparison sake.

[Sieg]

Since Greg isn't in the office yet, this article may be of interest to a few of his students. :D

http://seekingalpha.com/article/315339-targeting-a-retirement-income-level-from-a-dividend-growth-portfolio-part-3

[GregWeld]

Since Greg isn't in the office yet, this article may be of interest to a few of his students. :D

http://seekingalpha.com/article/315339-targeting-a-retirement-income-level-from-a-dividend-growth-portfolio-part-3


Great.... if you want to confuse the hell out of people.
:willy:

[WSSix]

It makes sense to me. A car traveling at 25mph but accelerating at 20mph will eventually over take a car traveling at 60mph but only accelerating at 10mph. The question's when will that occur? Depending on each person's current age and desired retirement age, they will need to choose the car that has the correct current speed and acceleration to cross a threshold at the required time. The more time you have, the more choices you have as there are multiple combinations to get you there.

Ok so it's a little more involved once you try to actually choose the stock, but I think the idea/approach is rather simple to understand. It's like you've been saying, start early and it'll be easier.


And for you engineers and math people, please ignore my simplistic and incorrect units associated with acceleration. The concept's the same even if the units are correct :D

[GregWeld]

Agree with the points -- it's just not Investing 102. I think in order to keep the thread on track -- and to get people to actually START to save and invest... we've all got to keep the message simple and on point.

I'm not ARGUING with Sieg.... far from it. I'm just saying that "concepts" are nice - but usually hard to put into practice. We need to practice walking before we can run... and we need to start out just buying (investing) in simple concepts that can show success. Make it too complicated -- (it's not really - once you're into it - but for this discussion it "could be") and you'll loose people.

I've actually deleted several posts before I submitted them because after I read them - I thought - too much info... too much thinking...

To me - it's kinda like that chart of XOM and CVX --- just buying either one got a good result... 10 years LATER one was better than the other - but who would have known that when they were hitting the buy button? Better to have just bought either one - or a little of both? - and reap the rewards!

In THEORY -- we're trying to show why dividend paying stocks are good investments (not necessarily better than some other particular stock) long term... and that to just get started looking at and understanding your investments, is better than ignoring them. :cheers:

[Sieg]

Great.... if you want to confuse the hell out of people.
:willy:

http://s3.amazonaws.com/advrider/peepwall.gif.......but I did say "a few." Sorry :(

[GregWeld]

http://s3.amazonaws.com/advrider/peepwall.gif.......but I did say "a few." Sorry :(

It's good info.... and it's something that I actually try to look at when selecting a particular stock over another in the same sector. I want to see that increasing dividend payout over time.

My reasoning is far simpler though... and isn't mathematical or hard to understand in THEORY..... I want the dividend to try to keep up with INFLATION. Simple as that.

That's why I'll repeatedly try to beat into you guys heads... real simple "Investing 102":

Good name that you know and understand their business

Good chart that marches higher over a long time frame

Good dividend

Reinvest the dividend (if you're not already retired)

Dividends increasing over a long period of time

Diversify until you have at least 15 names

The old KISS principal. :lol:

[CRCRFT78]

Not to go completely off topic but what do some of you recommend when it comes to saving for your children? What types of accounts are some of you using?

[WSSix]

Totally agree and understand Greg. We'll keep it simple here because you're right in that choosing a good stock matters more than doing nothing. The debate over which of the good ones is best can come at another time.

[GregWeld]

Not to go completely off topic but what do some of you recommend when it comes to saving for your children? What types of accounts are some of you using?

I'm going to jump in here (as usual?) because we just have been having this discussion at our house (re-doing wills and estate planning before year end)...

So just some quicky thoughts - and things our attorneys and trust managers put in our heads to think about.

You can "GIFT" to your children (anyone actually) $13,000 per.... so Husband and wife - can EACH gift 13K to a child (or anyone) per year. So that's 26K per couple to an individual. TAX FREE - No paperwork no nothing....

It is "best" to gift them assets that have "appreciated".... so --- you bought McDonalds 10 years ago - it's up 300%.... rather than you selling some - and giving the "money" as a gift -- it's best to just transfer "13K" worth of the asset to them. You will not have the long term capital tax (15%) AND the receiver gets what is called the "stepped up cost basis" -- so their "gain" if any is from the date you transferred the asset. So let's say you bought at $100 - it's not worth $300.... the "kid" gets the stock and their "cost" for tax purposes is the $300. They can sell it the next day and have no tax liability... (if it stayed at $300). So you escaped taxes on your gain - and they have no gain so pay no taxes. Sweet!

The other "discussion" we had about "kiddies" is that you can't help THEM if you're not in a position to help yourself. So you need to save and get financially "fit" yourself FIRST.... Which - frankly - was good advice from the trustees. In other words it's impossible to help someone else unless you're in good shape yourself. A guy that can't swim can't help someone that is drowning.

Many people PREFER forced savings accounts -- 529's (educational trust accounts) etc. Or you can set up a ROTH IRA (but that is for THEIR RETIREMENT) -- and remember this.... at 21 - whatever you "gave" them in various accounts - is THEIRS. So that works great if you have great kids -- not so great if they've fallen prey to a bad spouse or "you name it" bad things.

I had accounts in both kids names with us as joint owners - put assets in them for years - then drained 'em for college expenses - took the last of the dough out a month before they turned 21 and just "recaptured it" back into our accounts. I get stuck with paying the bills one way or the other... and this way I didn't wake up one day to find out they cashed out and went to Vegas with their buddies.... and ended up in a movie "Hangover 3". :D

Gwen and I will "gift" them up to the max as we see fit... and as they need for babies - house - a busted car etc. But we set ourselves up FIRST so we can now do that and it's no biggie.

I'll "expose" myself a bit more here - just for general educational interest... We are in a position that we are way over the amounts you can put in trusts in the event one of us passes and or both pass etc... so we "can/need" to put assets into trusts and get them out of our estate "IF" we want to escape so large "death taxes".... and we'd discussed putting house down payments or enough to buy a house outright in a trust for each kid. But we don't want "trust fund babies"... and these trusts bring with them extra costs etc and they get complicated if the kids want to sell and move for another job - and the "trust" owns the house and blah blah blah....

I'm all about keeping stuff SIMPLE and so I can understand it. I hate crap with RULES - because over time - the rules change or we violate the rule and get hit with penalties etc. Hate stuff like that! :lol:

[GregWeld]

Totally agree and understand Greg. We'll keep it simple here because you're right in that choosing a good stock matters more than doing nothing. The debate over which of the good ones is best can come at another time.


That's what I've been trying to PREACH -- get started -- post it up if you feel like it - let's all discuss it -- rip it apart - or learn from it (MSFT?) etc. but get started is the KEY point.

WITH THAT IN MIND -- I'd love to see "you all" post up some names and the reasons you think they're a good candidate for ownership.... let's get it up to 10 names -- a basic "portfolio" if you will.... and see what that looks like??

Kind of a "on paper" investment club??

[ErikLS2]

It is "best" to gift them assets that have "appreciated".... so --- you bought McDonalds 10 years ago - it's up 300%.... rather than you selling some - and giving the "money" as a gift -- it's best to just transfer "13K" worth of the asset to them. You will not have the long term capital tax (15%) AND the receiver gets what is called the "stepped up cost basis" -- so their "gain" if any is from the date you transferred the asset. So let's say you bought at $100 - it's not worth $300.... the "kid" gets the stock and their "cost" for tax purposes is the $300. They can sell it the next day and have no tax liability... (if it stayed at $300). So you escaped taxes on your gain - and they have no gain so pay no taxes. Sweet!


Greg, it's against my better judgement to counter you on this but without having the time to research it (just on a quick lunch) I believe this only applies if the gifter dies. Otherwise the original cost basis is retained.

Otherwise, 2 people each could buy a stock and then just gift their purchase to the other once it had appreciated and pay no taxes as long as the gift was below the current annual limit. I wish they weren't, but the IRS is smarter than that.

Since you have brought up McDonalds's more than once I think it's interesting to note that they are much more a real estate company than a burger company. They buy prime real estate to put their restaurants on and then lease it back to the franchisee on top of their 8% (I think) franchise fee. How many times have you seen a McD's move a few hundred feet down the road just to be on the corner?

Just wanted to say too Greg what a great thing you are doing sharing all this information with everyone. I looked at the times of some of your posts yesterday and good lord man, did you even take time away for Christmas? :thumbsup:

[GregWeld]

I will stand corrected that the RECEIVER uses the cost basis of the GIVER... and not the "stepped up" cost on the date of the transfer. So Erik is absolutely right about that. My mistake.

There are other stepped up cost basis transfers -- and I confused those when posting. We've been in these discussions for weeks now - and there's a lot to take in.

Let's not get off on an estate planning tangent in "investing 102" -- I was just trying to respond to the OP question about how to help your kids out.

Thanks for catching that Erik!!

[GregWeld]

Just wanted to say too Greg what a great thing you are doing sharing all this information with everyone. I looked at the times of some of your posts yesterday and good lord man, did you even take time away for Christmas? :thumbsup:


We do Xmas on Xmas eve.... Xmas day is for just hanging.... and then I had 12 people (two other families - not related) for dinner (mid afternoon) and then kicked them out by 9! They were hammered enough by then... :lol:

Since I don't drink -- I'm an early riser... but do "tire" of the drunks early... At my house - we insist on designated drivers... so usually one of the kids gets stuck driving their parents home. The party started with eggnogs... then I cracked a 3.0L bottle of Stags Leap SLV... then another two bottles of wine! I'm so glad my head wasn't "soggy" when Jawarren showed up to work out this morning!!!

[69x22]

So Greg, all my money is tied up in 401 retirement accounts, but I have after tax money built up as well. My question is if I take some of this after tax money and open a Quiken account how will I know how much taxes I owe each year? Will Quiken send me a form or will I be stuck with figuring it out on my own? I appreciate all of the info.

[pw2006]

That's what I've been trying to PREACH -- get started -- post it up if you feel like it - let's all discuss it -- rip it apart - or learn from it (MSFT?) etc. but get started is the KEY point.

WITH THAT IN MIND -- I'd love to see "you all" post up some names and the reasons you think they're a good candidate for ownership.... let's get it up to 10 names -- a basic "portfolio" if you will.... and see what that looks like??

Kind of a "on paper" investment club??

Let's get this discussion going with a few stocks I am in. I included the ticker/name/industry/forward PE and dividend yield. Take a look at some of the stocks below, do your research and be comfortable with the company/charts before you buy. As Greg said, as soon as you press the buy button, someone out there knows and will drive the stock down.

VOD- Vodaphone primary owner of Verizon- (telecom)- 10.4 PE, 5.3% yield. I am looking for international smartphone growth exposure. Downside is I can't reinvest dividends in the form of stock. Alternative is VZ (Verizon)

BBEP- This is an MLP (oil/gas pipelines) with a forward pe of 7.7 and current yield of 9.1%. An alternative that i have owned for years is KMP, but you might wait for a little pullback.

F- Ford (automotive)- 5.8 PE, ~2% yield (kinda weak yield, so you may want to look at GE)

COP- Conocophilips (oil/gas)- ~8.5 PE with a 3.6% yield

LLY- Eli Lilly- (biotech)- 9.6 PE with a 4.7% yield
MRK- Merck- (biotech)- 10 PE with a 4.4% yield

PM- Phillip Morris (cigs)- 16.2 PE with a 3.9% yield (alternate is Altria ticker MO)

KFT- Kraft (food) 16.6PE with a 3% yield.

So with the above, stocks you are covering people that use cell phones, drive cars, heat their house, smoke cigs, have a prescription and eat.

[GregWeld]

So Greg, all my money is tied up in 401 retirement accounts, but I have after tax money built up as well. My question is if I take some of this after tax money and open a Quiken account how will I know how much taxes I owe each year? Will Quiken send me a form or will I be stuck with figuring it out on my own? I appreciate all of the info.


I didn't know that Quiken was in the brokerage business -- :D So I'm going to assume this is a typo and you meant if you opened a discount brokerage account -- and used Quiken to do your tax accounting??

All brokerages will send you tax reporting information - Schwab breaks it down and sends me every trade - long term vs short term gains - they show wash sales info - dividends qualified or non qualified etc. I hand that paperwork to my accountant and he handles it for me. I get this type of breakdown from every brokerage I'm in so they all do it.

For those of you in IRA's and that type of tax deferred accounts - you don't have anything to report (yet)... because all your gains etc are "deferred" until you withdraw. And if you have a ROTH IRA - there is no tax ever since these are funded with after tax dollars (these are the best plans ever IMHO).

[Woody]

That's what I've been trying to PREACH -- get started -- post it up if you feel like it - let's all discuss it -- rip it apart - or learn from it (MSFT?) etc. but get started is the KEY point.

WITH THAT IN MIND -- I'd love to see "you all" post up some names and the reasons you think they're a good candidate for ownership.... let's get it up to 10 names -- a basic "portfolio" if you will.... and see what that looks like??

Kind of a "on paper" investment club??

Other than the stocks you have identified in prior posts as good candidates, I have three that I would like your thought on.

United Technologies (UTX)
10 year price increase 135% (good chart); Dividend increased 291% over last ten years, and good EPS growth rate. Dividend rate 2.65%

Lockhead Martin (LMT)
Like it for the same reasons as UTX, but has even larger increases in price, dividend growth and EPS growth than UTX. Dividend Rate higher than many of the stocks that were discussed at 4.95%. However, this company relies heavily on government contracts. Does that make it too risky?

Travelers Group (TRV)
Insurance play; Has had less of a price increase and dividend increase than either UTX or LMT. Dividend rate 2.77%.

[GregWeld]

Let's get this discussion going with a few stocks I am in. I included the ticker/name/industry/forward PE and dividend yield. Take a look at some of the stocks below, do your research and be comfortable with the company/charts before you buy. As Greg said, as soon as you press the buy button, someone out there knows and will drive the stock down.

VOD- Vodaphone primary owner of Verizon- (telecom)- 10.4 PE, 5.3% yield. I am looking for international smartphone growth exposure. Downside is I can't reinvest dividends in the form of stock. Alternative is VZ (Verizon)

BBEP- This is an MLP (oil/gas pipelines) with a forward pe of 7.7 and current yield of 9.1%. An alternative that i have owned for years is KMP, but you might wait for a little pullback.

F- Ford (automotive)- 5.8 PE, ~2% yield (kinda weak yield, so you may want to look at GE)

COP- Conocophilips (oil/gas)- ~8.5 PE with a 3.6% yield

LLY- Eli Lilly- (biotech)- 9.6 PE with a 4.7% yield
MRK- Merck- (biotech)- 10 PE with a 4.4% yield

PM- Phillip Morris (cigs)- 16.2 PE with a 3.9% yield (alternate is Altria ticker MO)

KFT- Kraft (food) 16.6PE with a 3% yield.

So with the above, stocks you are covering people that use cell phones, drive cars, heat their house, smoke cigs, have a prescription and eat.


That is a great looking group of stocks! I like the diversity - the yields - and they are mostly names you know and can describe their businesses.

The one EXCEPTION IMHO IS:

BBEP -- BreitBurn Energy Partners is what's called an MLP - that is a Master Limited Partnership...

When you compare charts of this - against KMP (Kinder Morgan Partners) it will make you want to throw up a little. BBEP has been DOWN 50% (vs KMP UP 123%) and then back up to "even" and for awhile it suspended it's dividend. And when it resumed it's dividend, it did so at a lower payout than the previous payout and is still paying out way lower than where it was (.44 now vs .52 in 2007). So for our INVESTING 102 -- this stock would be scary to own and has virtually no capital growth. Compared to XOM (EXXON) - CVX (Chevron) - KMP (Kinder Morgan Partners) just to pick 2 or 3 - with very nice charts - I'd prefer to own one of the steady eddies over this name. Just my opinion.


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


FORD (F) -- I like to sprinkle my account with some "pure growth" plays. Not many but they're fun to gamble on - and this is IF you already have some of these other good names paying you these nice fat dividends. I own Apple for that reason (bought at $85) and have owned Ford several times since the $2 mark - and just sold my Starbucks (SBUX) for a nice gain. So IMHO it's OKAY to play with this kind of stuff because it gets you interested and you can make (or loose) some money. I'd bet on FORD in the long run and sleep well at night doing it.

[GregWeld]

Other than the stocks you have identified in prior posts as good candidates, I have three that I would like your thought on.

United Technologies (UTX)
10 year price increase 135% (good chart); Dividend increased 291% over last ten years, and good EPS growth rate. Dividend rate 2.65%

Lockhead Martin (LMT)
Like it for the same reasons as UTX, but has even larger increases in price, dividend growth and EPS growth than UTX. Dividend Rate higher than many of the stocks that were discussed at 4.95%. However, this company relies heavily on government contracts. Does that make it too risky?

Travelers Group (TRV)
Insurance play; Has had less of a price increase and dividend increase than either UTX or LMT. Dividend rate 2.77%.


Woody ---


All good picks....

So here's just "my thoughts".... because you raised the question. UTX and LMT "rely" on government spending (defense spending) and we're trying to wind down Iraq and Afghanistan... and we're in a huge budget crisis... so I might loose a bit of sleep worrying about cuts here. So - remember that I am retired - I don't like to worry and go for a higher dividend payout (which really affects your compounding over time)... and so for me personally - I'd pick other names without the POTENTIAL for downside risk. BUT when you look at their charts -- they're good charts... so maybe that worry is all much ado about nothing. BUT - I always try to tell myself - if there is other stuff to buy that DOES NOT have that component - then why wouldn't I just buy the other stuff and leave these alone? It's only a game I play with myself - but it is the way I think. For INVESTING 102 - I'm trying to just type out some THOUGHTS a guy should ask himself.

TRAVELERS INSURANCE (TRV) - Nice chart - big name - I understand the business.... and would certainly feel comfortable owning this. It would be a "steady eddy" purchase for a portfolio - counter balance to something else I might buy that is a higher paying dividend but with more "risk" (to use one or two names for comparison sake -- JNK - HYG - NLY that all pay big dividends but have higher risk!)... so that's how/why I'd own this. I use Johnson and Johnson (JNJ) and Kraft (KFT) and AT&T (T) for this kind of "balance".

[Stuart Adams]

This has been a very good and interesting thread.

Greg,I know it feels good to help others, you da man.

[GregWeld]

This has been a very good and interesting thread.

Greg,I know it feels good to help others, you da man.



Thanks Stuart! I love this stuff. Hot rodding, and investing, are something I'm passionate about. SO this thread is right up my alley - I'm on Lat G - discussing stuff that helps others whether it's car parts / welders / or investing. What's not to like? :lol:

Being useless and retired - my day starts out around 6AM with coffee - the computer on my lap - and CNBC on the tube... eventually I mosey on out to the shed...

EEEEEEEEEEEEEEHHHHHHHHHHHAAAAAAAA

[Stuart Adams]

Thanks Stuart! I love this stuff. Hot rodding, and investing, are something I'm passionate about. SO this thread is right up my alley - I'm on Lat G - discussing stuff that helps others whether it's car parts / welders / or investing. What's not to like? :lol:

Being useless and retired - my day starts out around 6AM with coffee - the computer on my lap - and CNBC on the tube... eventually I mosey on out to the shed...

EEEEEEEEEEEEEEHHHHHHHHHHHAAAAAAAA

That's fantastic. You have a great job..

[NOVA]

WSSix Thanks for starting this thread and Greg for your extremely well spelled out info,excellent Job.
Also Thanks to the others who have contributed, I see this thread staying up towards the top! Keep it coming, Great stuff.
Thanks again all, two thumbs up :thumbsup: :thumbsup:

[CRCRFT78]

Ok because I believe this thread has provided a lot of good information I am willing to put myself out there and hear what some of you have to say. At this point in time this is what I have in my Rollover IRA (Fidelity):

Stocks
Apple (AAPL) P/E-14.75 Div/Yield-Not listed 10YR-+3788%
Caterpillar (CAT) P/E-14.03 Div/Yield-0.46/2.00 10YR-+256.89%
Disney (DIS) P/E-14.94 Div/Yield-0.60/1.60 10YR-+81.87%
Harley (HOG) P/E-20.28 Div/Yield-0.12/1.29 10YR--28.24%
Nike (NKE) P/E-20.94 Div/Yield-0.36/1.47 10YR-+248.03%

Mutual Funds
Fidelity Freedom Fund 2045 (FFFGX) 10YR--8.63%
Spartan Total Market Index Investor Class (FSTMX) 10YR-+23.73%
Vanguard Total International Stock Index Fund (VGTSX) 10YR-42.13%

The mutual funds I basically picked because of a book I was reading at the time. The stocks I picked because of popularity and brand name at the time. Again, all of this was done when I had absolutely zero knowledge about investing. I'm not happy with HOG and DIS performance and have begun rethinking holding onto those. The mutual funds are also something I'm contemplating selling off to buy into some of the stocks mentioned throughout this thread. I believe I have a high risk tolerance and can withstand the ups and downs of the market. And now that I've got a better understanding I'm wondering if I should hang onto what I have or switch it up. What do you all think?

[GregWeld]

Ok because I believe this thread has provided a lot of good information I am willing to put myself out there and hear what some of you have to say. At this point in time this is what I have in my Rollover IRA (Fidelity):

Stocks
Apple (AAPL) P/E-14.75 Div/Yield-Not listed 10YR-+3788%
Caterpillar (CAT) P/E-14.03 Div/Yield-0.46/2.00 10YR-+256.89%
Disney (DIS) P/E-14.94 Div/Yield-0.60/1.60 10YR-+81.87%
Harley (HOG) P/E-20.28 Div/Yield-0.12/1.29 10YR--28.24%
Nike (NKE) P/E-20.94 Div/Yield-0.36/1.47 10YR-+248.03%

Mutual Funds
Fidelity Freedom Fund 2045 (FFFGX) 10YR--8.63%
Spartan Total Market Index Investor Class (FSTMX) 10YR-+23.73%
Vanguard Total International Stock Index Fund (VGTSX) 10YR-42.13%

The mutual funds I basically picked because of a book I was reading at the time. The stocks I picked because of popularity and brand name at the time. Again, all of this was done when I had absolutely zero knowledge about investing. I'm not happy with HOG and DIS performance and have begun rethinking holding onto those. The mutual funds are also something I'm contemplating selling off to buy into some of the stocks mentioned throughout this thread. I believe I have a high risk tolerance and can withstand the ups and downs of the market. And now that I've got a better understanding I'm wondering if I should hang onto what I have or switch it up. What do you all think?

VGTSX --- Sadly this has a horrible 5 year track record.... and hasn't even had a good track record since the lows of the US stock market (this fund invests in FOREIGN stocks). So it give you DIVERSITY but happens to be a not so hot fund. As you already know. If it was in my portfolio I'd sell it and move on and try to catch up with something (almost anything :unibrow: ) else.

FFFGX -- Again - sadly you already know the story here.... a 3rd stringer... and I personally have never understood a fund that invests in other funds. WTF kind of an investment is that. The fund manager buys other mutual funds that are run by the very same company that he works for. Each Mutual Fund has expenses - and this fund has it's own expenses - so everyone is making out - except you! The proof is in the pudding so to speak.

DIS -- Has a good chart - just increased it's cash dividend - and it's a name you know and isn't' "going anywhere" as in - it's here to stay. It gives you diversity. Steady. Pays a smallish dividend. Nothing wrong with it IHMO


HOG -- IMHO -- this "was" a good stock -- but is a trendy/fad stock. They only do one thing - Harleys.... that "fad" is just that. And the dividend is showing the result --- going DOWN not up. Dividends are directly related to EARNINGS and if you're not earning - you're not paying out. The guys I know that all rushed out to buy Harleys - have all sold 'em - they're 10 years older now than they were when they bought them for the "cool factor". The chart hasn't really recovered from the lows of 2008.

APPL -- I own this stock - and use it to park cash in. There is "RUMOR" (and that's all it is) that they may pay a special dividend due to all the cash on hand. Microsoft did that - in an effort to lift the stock... it failed. Apple is a growth story - but there is HUGE downside risk in this name. They fail to make a quarter - or they fail to have a great new product launch and you get taken to the woodshed before you can hit the sell button. At these prices ($400 a share) you could own a nice steady eddy that pays a nice dividend and have 10 times the amount of shares. So unless you have big money - I don't think this is a very good name for "modest money" accounts. It's priced for perfection (and so far has been perfect) and everyone is LOOKING FOR IT TO FAIL/HICCUP.... They're just holding their collective breaths. Do I think it's going to? I don't know - no crystal ball - I LOVE their products... I own the stock (1250 shares of it!) but I can afford the risk and I watch the market and am nimble at trading.... so I'm on the fence with this name.

CAT -- A good long term play - pays a smallish dividend.... but gives you good international exposure - it's an industrial...and I'd sleep well at night with this holding. It's dividend has increased over time - and it split back in 2005.


NKE -- What could anyone say bad about Nike. Great chart - increasing dividend - great products. Gives you "retail" for diversity.


FSTMX -- So here's why I'm not a lover of Mutual funds -- this fund is made up of great names - biggest holding APPLE (you already own apple!) and top of the line US stocks. BUT -- BIG BUTT -- you're not getting the dividends from those stocks! So you're growth is stuck in the mud and you're not getting the cash either. If you just bought what's in their top 10 holdings - and you got the dividend every quarter - you'd be better off. Having said that - there's nothing particularly wrong with it - but you could duplicate this fund on your own so why suffer their expense ratio? Just look at their top ten holdings - and go buy 'em - heck - you could skip every other name and still probably do better than they have?

[GregWeld]

I couldn't help think about the "big news" today from SEARS (DOWN 27% today).... that they're going to close a bunch of stores and that business sucks.... well DOH!

Here's the way I invest... it's the old "Jeff Lynch" school of investing (he ran his mutual fund - Magellan - this way).... He bought stocks of companies that he understood - and where he shopped etc.

SO ask yourself.... when was the last time you went to SEARS to buy anything? Tools? A refrigerator? A flat screen tv?

I can't remember the last time I was in one.... so it doesn't surprise me that they're not doing well. I'm an "every man" guy. Blue jeans and t shirts... and I shop at Home Depot - Lowes - Best Buy - and a real appliance store when I need something. SEARS never enters my mind.... so I sure as heck would not invest in it.

I'm just saying - that when you look around "your world" - where do you go - what do you eat - what gas do you buy - etc. Are the places clean and well kept? Are they busy? Do you get good service? Are you happy with the products and choices? If so - look up their chart and see how they're doing! Look up the competition and where you DO NOT shop - or don't like - or the places look crappy and see what their chart looks like.

It's fun... and educational. :woot:

[realcoray]

I couldn't help think about the "big news" today from SEARS (DOWN 27% today).... that they're going to close a bunch of stores and that business sucks.... well DOH!

SO ask yourself.... when was the last time you went to SEARS to buy anything? Tools? A refrigerator? A flat screen tv?

I can't remember the last time I was in one.... so it doesn't surprise me that they're not doing well. I'm an "every man" guy. Blue jeans and t shirts... and I shop at Home Depot - Lowes - Best Buy - and a real appliance store when I need something. SEARS never enters my mind.... so I sure as heck would not invest in it.

Last night my wife and I went to Sears to look at ovens. I had a good idea of what we wanted and we found one and wanted to buy it. We could not get anyone to help us to just pay for it. We approached a sales person not next to a customer and he said he was busy and would be for half an hour. We ended up leaving although my wife did try to get someone in the tools area to help, again to no avail.

I would not suggest investing money in a company that makes it hard to give them money as a customer.

[James OLC]

Great thread - thanks to everyone for the great discussion and informative insights. Investing is such a fundamental life skill that it really should be part of a basic high school education.

My two bits and my "ten":

1. The easiest way to consistently and (relatively painlessly) invest is through work. take advantage of your companies retirement plan if you can but resist the temptation to just sit on it - sell what you can, when you can to avoid finding yourself over exposed in the company that you already depend on.

2. Try not to too emotional about your investments... Easier said then done but you have to try. This applies to buying, holding, and selling.

3. Find the balance that you're comfortable with... Decide what you can handle risk/return wise and try to avoid investing with regrets. Like Greg has advocated, over the last year I've "abandoned" most stocks that don't pay a dividend in favor of a low risk, "guaranteed" return.

4. Keep in mind that your broker has his own agenda and it's in his best personal interest to sell you specific stocks.

As I mentioned earlier, I've gone the low(er) risk route and have focused on dividend paying stocks. Long story short.... For 3 and a half years i bought in to my old company's retirement savings plan - they matched my contribution up to 11% - at anywhere from around $7 to $11. When I left they were at around $9.50 and my retirement holdings were almost all in the companies stock. After I left the stock tanked, reaching a low of $4.50 before the company was bought by the Chinese for $10.08 - saving my bacon and forcing me to reevaluate my strategy

Now I hold (not in any order):

Enerplus (TSE:ERF) - oil and gas exploration - pays 0.18 a month while trading at 25.90. Good foundation but not a bunch of upside; the yield makes this one work.

Artis Real Estate (TSE:AX.UN) - commercial real estate - pays 0.09 a month and trades at 14.11. Decent growth but again, the yield carries it.

Student Transportation (TSE.STB) - yellow school buses - pays 0.046ish a month and trades at 6.57. steady growth and a good yield.

NAL Energy (TSE:NAE) - oil and gas exploration - pays 0.07 a month and is trading at 7.90. The dividend cant be maintained at this level and has to come down. The stock price/performance reflects this... I dont like it but I'll take the dividends for now.

Parkland Fuel (TSE: PKI) - local refiner/gas station chain - pays 0.085 a month and trades at 12.86. good yield and is performing well over the last quarter.

Temple Real Estate (CVE:TR.UN) - commercial real estate - pays 0.04 a month and trades at 4.90. good yield but limited upside.

Liquor Stores (TSE.LIQ) - liquor stores - pays 0.09 a month and trades at 15.15. good yield and i understand the market.

Petrobakken (TSE.PBN) - oil and gas exploration - pays 0.08 a month and is trading at 13.02. They overpaid for some assets, got hammered by the market, and put together a solid quarter. The yield is lower than some but they're up 40% in the last month or so...

Mullen Group (TSE.MTL) - oil and gas services - pays 0.25 a quarter and tradex at 19.56. One of my weakest yields but sustainable if not exciting)

Americas Petrogas (CVE.BOE) - oil and gas exploration - no dividend but good growth potential. As Greg suggested earlier, i rode this one up 60%, sold the profits, and hope for another run.

With those I see a decent return on the dividends alone. My upside is probably limited on most and its always painful to watch some run up until exdividend date then drop like a rock the day after but it's about as reliable return as I could find.

[GregWeld]

James -

Nice dividend stream - but DUDE <spicoli style> you need some diversification!

However.... I also understand your trade and what YOU understand... and perhaps you even have an "insiders view" of the industry.

[mpozziCPL]

Greg and James ...

I'll PM you my investments, piddly as they are, as you've got a much better handle on managing this stuff than I do. I'm one of those that hands on to stocks much longer than I should and haven't looked at my 401K in almost 20 years. You mention investing in places you shop and I wonder if Summit and Ross Dress-for-Less are publicly traded ...

Add to this my broker just got popped for a DUI. Weaving, cops lit him up. Tried to run from the cops, blew through a red light, and wisely decided to stop before he got stopped. Didn't look as good on the TV mug shot as he did when we met and I transferred my investments over last spring.

Plan B ...

Mary P.

[Chad-1stGen]

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

[GregWeld]

Greg and James ...

I'll PM you my investments, piddly as they are, as you've got a much better handle on managing this stuff than I do. I'm one of those that hands on to stocks much longer than I should and haven't looked at my 401K in almost 20 years. You mention investing in places you shop and I wonder if Summit and Ross Dress-for-Less are publicly traded ...

Add to this my broker just got popped for a DUI. Weaving, cops lit him up. Tried to run from the cops, blew through a red light, and wisely decided to stop before he got stopped. Didn't look as good on the TV mug shot as he did when we met and I transferred my investments over last spring.

Plan B ...

Mary P.


OMG! Yeah - that's not going to work out real well.... Drunk AND stupid....

I'll be happy to look at your holdings... It's fun and I enjoy it and always learn something from it.

JUST FYI -- Summit isn't publicly traded - but of course you knew that! I've toyed with buying Snap-on (SNA).... but I missed buying them BEFORE I started building the shed... LOL


XOXO

[pw2006]

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

Hi Chad- The stock market has been a little rough the past 10 years or so. The S&P 500 is flat over the last year and last 10 years, with lots of volatility. Interest rates on govt bonds are so low right now, they are not keeping up with inflation. If you were to invest in 30 yr govt bonds to try and get some return (~3%), as soon as interest rates start to rise, your principle will drop (unless you hold them to maturity). Dividend stocks tend to be less volatile, typically drops less when the market falls and rises slower when the market rises, this is also referred to as beta. So, a lot of people are looking at dividend stocks that have a decent yield and less beta than the market.

[GregWeld]

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

Well -- the major difference is that these PAY YOU. They're not gambling that the price is suddenly going to double... or that you can trade them daily and get in and out... or borrow cheap money and sell something in a month.

The reason people are coming on board the dividend train is because the dividend percentage is a known calculated rate. When you compare this rate to other "interest bearing" investments - the rates are very compelling. Compared to Bonds - CD's - Money Market funds etc the return is huge... and the only reason they would be BAD is if the stocks go way up and the dividend as a % then would come down. That can happen - but it doesn't take away that long term steady march of dividends reinvested. Historically this is a great way to invest. It's not another get rich quick scheme that just popped up.

So let's put this into real life terms. I own 25,000 shares of Annaly Capital Management (NLY) @ an average cost of $16.88 - it's dividend this quarter is .57 per share. This stock went "ex dividend" on the 27th -- and I will get a cash payment of $14,250.... and I'll get that or similar in another 3 months - and so on -- so that dividend (provided the dividend stays at .57) will pay me $57,000 this year.

I don't care if dividends are the "hot money" or anything else - because that $57,000 per year is REAL MONEY and I get it. Even if the stock goes DOWN -- I still get that dividend - if the stock goes up - I still get that dividend and I'd also have capital growth... but what I L O V E is that check! :unibrow:

The reason I PREACH look at the historic chart -- is because the capital (stock price gains) have been going like this for YEARS.... if not - I don't buy 'em. I can only get a glimpse of the future by looking at the past. There is no guarantee that they will continue - or at what rate - or that they won't go down - but if they have a 25 year history of paying that dividend - I have to go with that. I don't really know what else I could do differently. I can't make any money on CD's... I could buy houses cheap and HOPE they are going up some time (my bet is that they will)... but that takes talent - and work - and involvement etc. I can do my stock and bond investing with my laptop... and so far... it's beating all the real estate I own... and I've been doing it for 30 years. Doesn't make me an expert. And remember -- this is Investing 102 -- not "let's pick the next Microsoft" (been there done that - LOL). We're talking COKE - JNJ -MCD - KFT - etc.....

[GregWeld]

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.


BTW -- I think this is a FANTASTIC observation.

I have always said -- if the grocery clerk tells you about the latest great way to make money --- RUN --- RUN AWAY from that idea - whatever it is -- because by the time the clerk is in -- it's nanoseconds from complete collapse!

I do not feel this way about DIVIDEND investing. Because of the reasons I stated in my earlier post.

I really just wanted to say - this is EXACTLY the kind of info and thought processes that I love to see in this thread -- because you are spot on! EVERYONE is looking for YIELD... because the world is in a deflationary period and it's just harder and harder to figure out where to get a decent return on your funds. If there's no "growth" -- then the growth stocks (they don't pay dividends) suck - if there's too much growth - then the interest rates will go higher and money will move to "interest bearing" stuff and out of the stock market. But -- BIG BUTT -- If a dividend paying stock price goes DOWN -- then the dividend % actually RISES.... so the dividend paying stocks tend to stay in lock step with other interest rate bearing "investments". Their share price might go down - but that dividend is declared as a dollar (cents) amount not a percentage of the share price..... so as the share price declines the percentage of the dividend rises. When the share price declines - I tend to buy more shares. It brings my average cost down - and keeps the dividend return percentage near where I need it to be.

Think of this as a rental house versus your own home. The major difference between the two "investments" is that the rental guy is paying the mortgage on the rental house - and eventually you'll kick him out and sell the house...

A dividend stock is paying you every quarter. If you choose to reinvest the dividend (rather than take the cash payment like I do) - then when the share price is low - you'll buy MORE shares - if the share price is high - you'll buy LESS shares.... but regardless of that - you'll end up with MORE SHARES which will pay you more dividends which will buy more shares which will pay you more dividends...

So let's look at my Annaly (NLY) post above -- I get $57,000 per year -- I have 400K invested - in 10 years what do I have invested if I take the dividend and spend it. Dude -- In 10 years THEY have PAID ME - $570,000 and I still have 400K (if the share price just stays exactly where it is today) worth of stock (or in other words I still own the asset). Now - had I chosen to reinvest the dividend? OMG -- Every year I'd have gotten MORE than the 57,000 because that amount of money would have bought another 3,000 shares... so the following year (2012) would have paid me dividend income of ($7600 plus the 57,000 = 64,600) and that would have bought another 3800 shares.... so now I'd own 31,800 shares paying $72 GRAND per year and if I reinvested in the shares I'd by buying $72,000 worth of shares to add to my pile! So do you see why this works??

I cash mine and piss it away on cars and stuff.... don't be like me. Check the "REINVEST THE DIVIDEND" box!!

[pw2006]

Greg is smooth at explaining these things. :thumbsup: Hopefully this explanation will help limit your concern regarding bubbles. The great thing about investing in stocks, is that the companies are public (owned by shareholders) and must report their financials information each qtr. When stocks start to get bubblicious, you can typically see this in their price to earnings (PE) ratio. Since 1900 the average PE ratio of the S&P 500 is ~15. The current PE ratio of the S&P 500 is around 13, which would suggest that the S&P 500 is not overpriced on a historical basis.

For educational purposes I'll compare 2 growth stocks that do not pay dividends to show you how to look for potential bubbles. First, let's calculate Apple's (AAPL) PE ratio. Apple's stock is currently trading around $403 per share. Wall street is estimating Apple's 2012 earnings at $34.77 per share (EPS). Divide the stock price by the EPS ($403/$34.77) and you get a forward looking PE ratio of 11.6. Which is lower than the S&P average. Now lets look at Amazon (AMZN), they are currently trading at $173 per share and wall street is expecting them to earn $2.01 per share in 2012. Their forward looking PE ratio is 86, which to me is an extremely high PE ratio. So getting back to the bubble comment, when looking at investments for Investing 102, look for stocks with a reasonable dividend yield, that has a history of paying and growing their dividend AND has reasonable PE ratio.

Hope this helps!
Rob

[James OLC]

James -

Nice dividend stream - but DUDE <spicoli style> you need some diversification!

However.... I also understand your trade and what YOU understand... and perhaps you even have an "insiders view" of the industry.

Yeah... I hear you buddy... I'm just not good at (a) change and (b) stuff I'm not hands on with every day.

I do have some gold and minerals (mining) in the portfolio but they are not dividend paying stocks and I bought them for tax purposed more than anything. I had some conventional golds in the mix but some of them funded the OLC build back in the day and the entry point seems a bit too tenuous at this point...

I also have a green tech stock (gasification tech) that is my "stock I love to hate" but never seem to do the right thing with. I first bought in about 5 years ago at $2 about 6 weeks later than I should. I grinned when it went to $3 but held on because I was drinking the kool-aid. When it dropped to $1 a tried to ignore it and when it hit bottom around $0.5 I (somewhat reluctantly) averaged myself to something that made sense. I then grinned last month when it to $0.8 but again... I held on... no... I don't know why why... Today it's back at .5 (dammit .475)... It's been a "good learning experience" but that's about it.

[GregWeld]

Yeah... I hear you buddy... I'm just not good at (a) change and (b) stuff I'm not hands on with every day.

I do have some gold and minerals (mining) in the portfolio but they are not dividend paying stocks and I bought them for tax purposed more than anything. I had some conventional golds in the mix but some of them funded the OLC build back in the day and the entry point seems a bit too tenuous at this point...

I also have a green tech stock (gasification tech) that is my "stock I love to hate" but never seem to do the right thing with. I first bought in about 5 years ago at $2 about 6 weeks later than I should. I grinned when it went to $3 but held on because I was drinking the kool-aid. When it dropped to $1 a tried to ignore it and when it hit bottom around $0.5 I (somewhat reluctantly) averaged myself to something that made sense. I then grinned last month when it to $0.8 but again... I held on... no... I don't know why why... Today it's back at .5 (dammit .475)... It's been a "good learning experience" but that's about it.


Oh -- If you read this thread - you'd think everything I ever touched turned to gold.... HA! Far from it.. the key is to have more winners than losers because we are ALL going to have plenty of losers. It's just part of the way the world turns.

Back about 15 years or so ago --- I used to do more "trading" - not day trading but just lots of "movement" in and out of stuff. Sort of always chasing the flavor of the month (or week). I had enough dough that I USUALLY could buy my way out of a bad investment - and by this I mean - I'd average down the position. So newbs -- please don't do this - but here's what I'm talking about.

Say you bought 300 shares @ 10 and then went down to 8 - so you'd buy 300 more @ 8 - this gives you 600 @ 9.... so "on paper" at least you're current cost is closer to where it's trading... then let's say she's holding at 9 - so you buy another 600 @ 9 -- now you have 1200 @ 9.00

So the "theory" here is that I'm now holding the shares that are closer to the current price -- Works great IF -- BIG IF -- they come back to $9.50 or so and you can then scale out..... BUT -- BIG BUTT IN THE ROOM -- They can also (more likely! LOL) continue to decline -- so you buy even more...

Short story of this kind of idiocy - I lost 93K in one name and only lost $1 per share! The "first loss" I was trying to buy my way out of was maybe $5 grand.... :wow: :faint: But this "method" had worked so well for me in the past that I just kept chasing it down!

And - it is too long ago to remember - but my guess is -- a half hour after I sold and booked the loss -- the little man on wall street hollered to his buddies "The Dumbass is out -- take her up"!!:rolleyes: It never fails.

So the minute you sell your .05 shares - the next week they'll announce an all cash buyout of $15 a share. :lol:

[68 stang]

Greg,

How do you know when to sell. Say you bought a stock and it had a good history of paying a dividend and went up in price over the long term. But it does not do that and falls in price. Or quits paying the dividend. How do you know when to fold and walk away.

How about cashing out some the stock, so if there is a 100% price increase over a year. What now?

Thanks

[GregWeld]

Good questions!

There's some old sayings on Wall street - that can, and do, make "some" sense... as in "nobody ever went broke taking a profit".... True enough -- but -- Always seems to be a big butt right?

So your question is multi faceted and really complicated - but also somewhat easy --

If a company reduces or suspends paying a dividend - YOU SELL IT! FAST! That is the kiss of death because that means they don't have the profits to continue to share with YOU the guy that owns the company (via stock ownership).

When a stock is going down - you need to understand WHY it's going down - a sales slip? A shrinking profit margin? Accounting fraud? There's so many things that can cause a stock to slip -- or is it the "SECTOR" the stock is in and all in that sector are going down? Or is it just that we're in a bear market and EVERYTHING is down? That's why that is a hard question to answer because there are so many reasons. Having said all of that --- there's a lot of money to be made buying the "best of breed" stocks in a bear market.... and that's when I personally do my best "shopping" -- because it's like every stock in the universe just went "on sale". I love to buy when stuff is on sale!

Now -- the other question was "what if a stock went up 100%" --- Buddy! Your mouth to gods ear! 'Cause that is what everyone is looking for! :D But -- there's that butt again - you always need to "rebalance" the portfolio... and if the stock has gained so much that you're out of balance - you want to sell some of it and buy something else (diversify!).... Yeah -- it can keep going -- and you'll kick yourself for not having held every dime when it doubles again.... BUT that's where the old saying "pigs get fat and hogs get slaughtered" comes from. Better to be a profitable pig. Think about it this way as well - if you had a double - and sell half - the balance is "house money". That is a very nice place to be!

NOW -- all of this "depends" -- depends on how much money you have - how old you are - how familiar you are with why the company is going gangbusters etc. I've had stocks that have been at .56 - gone to $28 - and gone back (faster) to $1.70 - and then gone back to $35.... Those are RARER than a ZL1 -- and not for your average Investor 102 class. So taking some of the profit off the table is the "prudent" course... even if you live to regret it. Scroll back and read my post about the 20 million dollar yacht (boat) I owned. But I've never looked back and have been happy taking the gains and using them to live another day.

Wanna look at a real life - recent - scenario? Look at the chart of NETFLIX (NFLX), there's a stomach churner! And that all came about because the CEO shot his mouth off... So to speak. One day you've got a 3Xr and in a manor of a few days and weeks - you're looking at a loss! But if you'd bought at 100 and sold some at 200 - and sold some more at 300 - you'd be "okay" holding here at 65 (I'd have bailed completely).

[Chad-1stGen]

Hi Chad- The stock market has been a little rough the past 10 years or so. The S&P 500 is flat over the last year and last 10 years, with lots of volatility. Interest rates on govt bonds are so low right now, they are not keeping up with inflation. If you were to invest in 30 yr govt bonds to try and get some return (~3%), as soon as interest rates start to rise, your principle will drop (unless you hold them to maturity). Dividend stocks tend to be less volatile, typically drops less when the market falls and rises slower when the market rises, this is also referred to as beta. So, a lot of people are looking at dividend stocks that have a decent yield and less beta than the market.

You are telling me. I've invested money into the stock market straight out of my paycheck every single month since 1999. I know just how bad the market has sucked the last decade+ Good news is that I learned I can hold things for the long haul even when things look terrible (2008/2009).

Correct me if I'm wrong but beta within the context of the stock market isn't a measure of volatility or risk by itself. I believe beta is the measure of the volatility of an investment compared to the overall stock market. Beta of 1.0 moves lock step with the market. Beta of 0.1 will pretty much do its own thing and not impacted by the market or events that tend to impact the market.

BTW -- I think this is a FANTASTIC observation.

I have always said -- if the grocery clerk tells you about the latest great way to make money --- RUN --- RUN AWAY from that idea - whatever it is -- because by the time the clerk is in -- it's nanoseconds from complete collapse!

I do not feel this way about DIVIDEND investing. Because of the reasons I stated in my earlier post.

I really just wanted to say - this is EXACTLY the kind of info and thought processes that I love to see in this thread -- because you are spot on! EVERYONE is looking for YIELD... because the world is in a deflationary period and it's just harder and harder to figure out where to get a decent return on your funds. If there's no "growth" -- then the growth stocks (they don't pay dividends) suck - if there's too much growth - then the interest rates will go higher and money will move to "interest bearing" stuff and out of the stock market. But -- BIG BUTT -- If a dividend paying stock price goes DOWN -- then the dividend % actually RISES.... so the dividend paying stocks tend to stay in lock step with other interest rate bearing "investments". Their share price might go down - but that dividend is declared as a dollar (cents) amount not a percentage of the share price..... so as the share price declines the percentage of the dividend rises. When the share price declines - I tend to buy more shares. It brings my average cost down - and keeps the dividend return percentage near where I need it to be.


I bolded the part that scares me the most about plowing money into dividend payers right now. The reason bonds have done amazing the last 25+ years and managed to kill stock market the past 10+ years is interest rates have been steadily declining since 1984. It's a damn good time to own interest rate bearing investments during a decreasing interest rate environment. It's not so good during an increasing rate environment.

If rates spike in 5 years, dividend stocks yielding ~3% are going to get killed if they don't have growth potential to keep them buoyed. Why buy a dividend stock that consistently pays our ~3% dividend when you can buy a significantly lower risk item (traditionally a bond) or even risk free item (CD) paying much higher? That's right you won't. So the dividend payout has to increase or the stock price has to fall to keep yields attractive.

Interest rates can't go down and the Fed has basically promised to keep rates flat for 2 years but then what?

I'm an investor and not a market timer so I keep putting a big chunk into the market month after month. And like I said there are some good dividend payers that I want to buy but between the tax inefficiency** of dividend stocks and the fact a total market index fund like VTSAX has been yielding 2%+ I don't know if the extra 1%-2% average yield is worth losing the growth potential of something like VTSAX in light of what I believe interest rates will do... in the long run

** For me purchasing individual stocks in a 401K is not an option, only my IRA. $5k a year isn't going to make a whole lot of difference so that leaves after tax investing. With dividend gains returning to ordinary income tax rates next year dividend investing is tax inefficient.

For others reading along. If buy two investments. Investment A for $100 and investment B for $100. Investment A stock prices grows 5% a year and pays a dividend of 5% a year that you reinvest for 10% total returns per year. Investment B doesn't pay a dividend but grows 10% a year so that both investment's A and B total return is equal. You pay zero taxes on investment B until you sell and currently that would be taxed at a lower rate than ordinary income taxes. Investment A would trigger taxes every year and at the end when you sold (if you sold) your return after taxes would be less.

[GregWeld]

Chad -- Nobody here is going to debate WHAT YOU THINK and WHAT IS RIGHT FOR YOU.... I've said this time and again - and will repeat. You - the individual - must sleep at night with the decisions you made for your investments.... regardless of what that is.

Having said that... you left out the fact that IF and WHEN interest rates rise - your bonds are going to be just as hammered (capital)... and that interest rates tend to rise slowly and are WELL TELEGRAPHED by the fed. There is plenty of time to bail from whatever strategy you've employed.

Now -- if and when interest rates start to rise - which will also telegraph that things (economically) are getting better - which generally leads to a RISE in the stock market... so, much of the "loss" of the dividend % paid is made up with the corresponding increase in capital gains. You must take the two together - capital increase and dividend payouts in order to calculate your return. The market will (should) rise in a interest rate rising environment "at first"... because it signals strength in the economy - then inflation will set in - and yields will fall - and so to, will stocks.

Back in the mid 70's and early 80's -- you didn't need to own stocks because a bank CD would pay you 12%! But those are market cycles and 99% of the folks can't "time" them. And we're talking about steady eddy investing here not market timing. Even though I understand what you're talking about.

BONDS - Of which I have a HUGE position in - are TERRIBLE investments unless you're already retired or are very near retirement and you just can't bear to have any capital loss (you'd hold to maturity). They have no capital growth but are bought for SAFETY and for the tax free (albeit below "market" rates) dividends. Unless you're a trader - and that isn't what INVESTING 102 is about.

Personally -- I wish we had RAGING INFLATION.... I owe nothing - and would be happy as a pig in poo to be getting 10% interest in a money market fund/CD.... but the folks old enough to remember those days will tell you that they weren't good times at all.

[GregWeld]

For others reading along. If buy two investments. Investment A for $100 and investment B for $100. Investment A stock prices grows 5% a year and pays a dividend of 5% a year that you reinvest for 10% total returns per year. Investment B doesn't pay a dividend but grows 10% a year so that both investment's A and B total return is equal. You pay zero taxes on investment B until you sell and currently that would be taxed at a lower rate than ordinary income taxes. Investment A would trigger taxes every year and at the end when you sold (if you sold) your return after taxes would be less.


That sounds GREAT --- tell me which stocks you're going to guarantee me are going to go up. Because that is the MAJOR difference in dividend investing and investing in pure capital growth. Most people can not pick which stocks are going to rise. And with that comes RISK... Dividend investing -- in the kind of names we've been discussing - have a history - AND pay that dividend. What that can do for you is cushions and comforts during the downturns and creates income for reinvestment.

TAXES are a whole different discussion... and unless someone is a "seer" you can't predict what our infamous bozos in Congress will or won't do.... TAXES and their scenarios need to be discussed with a CPA on an individual basis. What my tax situation is, will be far different than someone else's.

[Chad-1stGen]

Chad -- Nobody here is going to debate WHAT YOU THINK and WHAT IS RIGHT FOR YOU.... I've said this time and again - and will repeat. You - the individual - must sleep at night with the decisions you made for your investments.... regardless of what that is.

Having said that... you left out the fact that IF and WHEN interest rates rise - your bonds are going to be just as hammered (capital)... and that interest rates tend to rise slowly and are WELL TELEGRAPHED by the fed. There is plenty of time to bail from whatever strategy you've employed.



I wasn't advocating bonds either. To me, my post still clearly states that its not good to own interest rate bearing securities (which includes bonds) in a rising rate market.

Bonds and Dividend stocks scare me a bit because I expect both of them to get hammered if interest rates rise rapidly.

I wished I owned a hell of a lot more bonds the last decade than I did (mostly 100% equity invested). As of now I have less than 10% of my money in bonds and have trouble significantly increasing a bonds position given where rates are at.

I was generally comparing dividend stocks to a total stock market index fund like VTSAX which has been yielding 2% and which I think has a much better chance of actually achieving the following statement you made:

The market will (should) rise in a interest rate rising environment "at first"... because it signals strength in the economy - then inflation will set in - and yields will fall - and so to, will stocks.


Fair enough on debating what is right for each individual. I've seen this thread building for a while and thought it worth putting out some additional viewpoints on dividend investing that I haven't seen discussed. Namely the tax efficiency of it and its increased sensitivity to interest rates. At the end of the day I'm still very interested in getting some more dividend specific stocks and had been researching it quite a bit before this thread ever popped up but is why I've been following this thread. However, it is good to have different perspectives (the point of this thread) and you are extremely bullish on dividends :)

[Chad-1stGen]

That sounds GREAT --- tell me which stocks you're going to guarantee me are going to go up. Because that is the MAJOR difference in dividend investing and investing in pure capital growth. Most people can not pick which stocks are going to rise. And with that comes RISK... Dividend investing -- in the kind of names we've been discussing - have a history - AND pay that dividend. What that can do for you is cushions and comforts during the downturns and creates income for reinvestment.

TAXES are a whole different discussion... and unless someone is a "seer" you can't predict what our infamous bozos in Congress will or won't do.... TAXES and their scenarios need to be discussed with a CPA on an individual basis. What my tax situation is, will be far different than someone else's.

Ha ha you are replying too fast for me :)

Obviously neither of us can guarantee a stock is going to go up (whether it pays dividends or not). You have shared a lot of examples of investments in this thread but to be fair the only way to truly compare different portfolio's is to look at the net IRR based on the specific cash flows of an investor's total portfolio, not just specific investments.

Re: Taxes yes they are complex but that doesn't mean you should ignore them. And I wasn't attempting to forecast what the Gov't would do with taxes. Just pointing out the fact that starting in 2012 dividends will be taxed as ordinary income which is known right now.

[billscamaros]

So what are your thoughts on General Mills (GIS) and American Electric Power (AEP)?

GIS - div/yield .31/3.00, P/E 17.29

AEP - div/yield .47/4.53, P/E 12.75 , but doesn't have a distinct rising growth over the past 10 years.

Regarding the Greg and Chad conversation involving taxes .... would you approach the dividend differently in an tax deferred IRA vice a straightforward brokerage account?

[Chad-1stGen]

would you approach the dividend differently in an tax deferred IRA vice a straightforward brokerage account?

Absolutely!! If all your money is in one type of investment it doesn't matter. Also people may not have room in tax advantages accout like an IRA. That said, always keep as much of your fixed income (aka bonds) and dividend stocks in tax advantages accounts. If you do have growth stocks keep those in your taxable brokerage accounts.

[GregWeld]

I was generally comparing dividend stocks to a total stock market index fund like VTSAX which has been yielding 2% and which I think has a much better chance of actually achieving the following statement you made:

Since this is an EDUCATIONAL thread - I will try - as I have been trying - to explain reasoning and thought process in all my replies. I'm not "debating" any actual thought process - rather - trying to open it up and just discuss these ideas and thoughts for the purpose of educating - and let the reader decide what the take-away points are for themselves. I'm also trying to be at the kindergarten level so when someone reads my posts - they can actually have an "ah ha" moment and actually understand, in a broad general way, what I'm saying.

I have stated previously that I fail to see the point of mutual funds and or other types of funds that attempt to just buy a basket of stocks and try to "emulate" some index (and they also have associated fees). The VTSAX that you mention does just exactly that. It's merely a basket of stocks - blended - and has a "dividend" of 2%.

So here's my educational pitch for individual stock selection and thus making your own mini mutual fund - which should - in absolute terms - provide a higher rate of dividend and that is made up of stocks the owner can actually "understand" and have some control over etc.

The VTSAX simply holds stocks to emulate "the overall stock market" -- and in good times that might be great - you'd get some capital growth - but the dividend spin off of 2% isn't sufficient to carry the investment thru the inevitable downturns.


Here's the funds top ten holdings:

Exxon Mobil Corporation (XOM)

Apple, Inc. (AAPL)

International Business Machines Corp (IBM)

Chevron Corp (CVX)

The Procter & Gamble Co (PG)

Johnson & Johnson (JNJ)

AT&T Inc (T)

General Electric Co (GE)

Pfizer Inc (PFE)

And here's why I'm trying to educate rather than try to just say "buy this or buy that or don't do this - do that"...

AT&T's current dividend is 5.83% ----- ALMOST TRIPLE what the VTSAX is paying out - and it's a holding of this index fund

GE's current dividend is 3.76% --- ALMOST DOUBLE what the VTSAX is paying - and is a holding of this fund

So with barely any research at all -- a person should be capable of getting a better dividend return -- and if all you want to do is emulate the stock market, any number of the biggest of the bigs will and have done that for years and years.

Now -- Please don't take me wrong - I'm not arguing with you. I am however - trying to educate people to help them see that they are perfectly capable of going out and "investing" and having a bit of fun doing so - and have a firm grasp on what it is they own, and their reasoning behind it.

If you had 10,000 to invest -- why settle for a market emulator that's going to go down with the market or up with the market and it's going to pay you less than the rate of inflation to hold on to it. A guy could just buy AT&T and at least triple his dividend rate and perhaps stay above the rate of inflation. I'm on a flight - so don't want to do the math - but a 6% compounded rate of return over time is going to be so far ahead of a 2% it isn't funny.

[GregWeld]

Absolutely!! If all your money is in one type of investment it doesn't matter. Also people may not have room in tax advantages accout like an IRA. That said, always keep as much of your fixed income (aka bonds) and dividend stocks in tax advantages accounts. If you do have growth stocks keep those in your taxable brokerage accounts.


Again -- on the educational side of this only -- I disagree -- but with the following differences -- again because when we make big statements - we need (in this thread) to make sure people understand the THOUGHT behind such.

There would be absolutely ZERO advantage to hold tax free muni bonds in a tax advantaged account (which means tax deferred really) because there is no tax due. That holding would be best held in an ordinary account because it's not going to affect your taxes.

IF -- BIG IF -- these BONDS are CORPORATE BONDS -- then that is different because that INTEREST paid is taxable at ordinary income tax rates. It would - of course - be TAX DEFERRED if held in an IRA/401 type account.

A "GROWTH STOCK" (pays no dividend for this discussions sake) -- or let's really just say ANY STOCK that has a GAIN - has NO TAXABLE EVENT if it's not sold - i.e., the gain is NOT REALIZED... that stock can grow to the moon and have no tax consequence until you sell. SO the major difference in where you'd hold this type of stock is not really important under current (I should underline that! CURRENT) tax law. LONG TERM GAINS are currently taxed at 15% regardless. Only SHORT TERM GAINS (held less than one year and a day) are taxed at ordinary income tax rates.... So if your mother is 80 and has virtually no income - and you sell 10 grand of her long term holdings - big deal - she pays 15%! And it would be less of a big deal if you sold something short term because she may have NO TAX DUE based on her income. But these are CPA discussions not really "investing" except that they can affect your return so are worth talking about.

But now we're having a tax discussion -- rather than an INVESTING 102 discussion....

Here's something I've had to tell my CPA - and trust me when I tell you that my tax bill is beyond ridiculous.... so we have LOTS of discussions of where, when, why and how come!

"If I make a buck and have to pay the gubment 40 cents of it -- I still made 60 cents.... right?"

Isn't it better that I make 60 cents than nothing at all?

Frankly -- I'm happy as hell my tax bill is huge - 'cause that means I made a killing! And "they" only got a small percentage of it. The rest is all mine!:cheers: :woot:


EEEEEEEEEEEEEEEEHHHHHHHHHHHHAAAAAAAAAA

[Musclerodz]

Hopefully next year I can graduate from kindergarten and nap times to 1st grade and start earning some grades rather than stars!:woot:

[GregWeld]

Hopefully next year I can graduate from kindergarten and nap times to 1st grade and start earning some grades rather than stars!:woot:

As soon as you're potty trained.... :rofl:

[Chad-1stGen]

Again -- on the educational side of this only -- I disagree -- but with the following differences -- again because when we make big statements - we need (in this thread) to make sure people understand the THOUGHT behind such.

There would be absolutely ZERO advantage to hold tax free muni bonds in a tax advantaged account (which means tax deferred really) because there is no tax due. That holding would be best held in an ordinary account because it's not going to affect your taxes.

IF -- BIG IF -- these BONDS are CORPORATE BONDS -- then that is different because that INTEREST paid is taxable at ordinary income tax rates. It would - of course - be TAX DEFERRED if held in an IRA/401 type account.

Good point about Muni's. Obviously (though I now hestitate to use that word :p) you don't want to hold tax free investments in your tax advantaged retirement accounts like IRA/401K's.


A "GROWTH STOCK" (pays no dividend for this discussions sake) -- or let's really just say ANY STOCK that has a GAIN - has NO TAXABLE EVENT if it's not sold - i.e., the gain is NOT REALIZED... that stock can grow to the moon and have no tax consequence until you sell. SO the major difference in where you'd hold this type of stock is not really important under current (I should underline that! CURRENT) tax law. LONG TERM GAINS are currently taxed at 15% regardless. Only SHORT TERM GAINS (held less than one year and a day) are taxed at ordinary income tax rates.... So if your mother is 80 and has virtually no income - and you sell 10 grand of her long term holdings - big deal - she pays 15%! And it would be less of a big deal if you sold something short term because she may have NO TAX DUE based on her income. But these are CPA discussions not really "investing" except that they can affect your return so are worth talking about.

But now we're having a tax discussion -- rather than an INVESTING 102 discussion....



True you are now having tax discussions but I still think that even at the investing 102 level that its worth touching on. What you said above does matter. Your 80 year old mother would only pay the 15% long term capital gains tax if it was in an after tax account. If that stock was in a traditional IRA (as opposed to ROTH) it would be subject to ordinary income. The 80 year old Mom could be much better off having the stock with big gains in an after tax (non IRA/401K type retirement) account in this example (depending on other assumptions).

To take that one step farther if she did own bonds or high dividend stocks (maybe steady eddy's that don't have large capital gains) she would be better off having those in the IRA/401K accounts.

Of course this matters most for retirement investing, vs. just plain old investing so I won't try to clutter up the thread with it.

Here's something I've had to tell my CPA - and trust me when I tell you that my tax bill is beyond ridiculous.... so we have LOTS of discussions of where, when, why and how come!

"If I make a buck and have to pay the gubment 40 cents of it -- I still made 60 cents.... right?"

Isn't it better that I make 60 cents than nothing at all?

Frankly -- I'm happy as hell my tax bill is huge - 'cause that means I made a killing! And "they" only got a small percentage of it. The rest is all mine!:cheers: :woot:


EEEEEEEEEEEEEEEEHHHHHHHHHHHHAAAAAAAAAA

Of course it is better to make money and be taxed than to make no money at all. But, that fact alone doesn't mean you shouldn't minimize the tax bill when decisions you make can influence it. Let me be clear. All of the previous discussion I've contributed regarding taxes and tax advantaged accounts like IRA's is on the basis that you have a diversified portfolio of investments that includes bonds and equities and that some of those equities are growth stocks. This describes most people saving for retirement in modern day America through a 401K plan. Under that scenario the type of account you hold investments in matters.

If anyone is really interested in tax efficiency of their investments I suggest visiting the following link (just one of many good explanations, fund biased).

http://www.bogleheads.org/wiki/Principles_of_Tax-Efficient_Fund_Placement

Below is an illustration of what I've been trying to convey (fund biased, but you can substitute most of the "funds" verbiage with "stocks" and get the same answer).
http://img190.imageshack.us/img190/1826/taxefficiency.png

[GregWeld]

Good discussion Chad.... and the right way -- in THIS THREAD I believe to discuss this kind of stuff... because we can have a private "insiders view" discussion and argue points etc -- BUT -- HATE THAT BIG BUTT -- then nobody else can follow along or learn from it.

And I'm not trying to tell you how to post - but I think you see what my intent is and if we - both - all - anyone - makes a point of something then we really need to have it be a readable understandable dissertation rather than just blanket statements. So, kudos to you!

I'll make one point about all of the TAX discussion. There are so many scenarios that only YOUR OWN CPA / TAX PROFESSIONAL should recommend how you handle your investments. Talk to them FIRST - and get a grip on what is best for YOUR personal situation.

It's not a one size fits all answer. Everyones age - income bracket - investment strategy etc needs to be tailor made.

For instance - everyone on here knows I've been retired for years... and my tax strategy is to minimize taxes and maximize my annual income... thus - dividends (that magic 15%) and Tax Free Muni's are what I go for.... I already own apartment complexes and other "income" producing investments, so I'm already at the max tax bracket on those... But that's a far different scenario than someone that is trying to maximize a return on a 401/IRA and that is different yet on a ROTH... and some on here don't qualify for a ROTH etc... Thus the importance to spend $300 (?) on a consultation with a pro. It can make you money and SAVE you an unexpected tax bill. The old "OOPS AND I THOUGHT I WAS BEING SO SMART" kind of oops. Or the "but I read somewhere that...." The sickening response being - "yes that's correct - but you don't qualify for...."

[GregWeld]

So here's something I find "interesting" -- as I've been constantly pitching "the names you know" --- 'cause you can find happiness in growth of capital AND get that dividend (sorry Chad -- it's a theme that works!)

Here's the TOP FIVE DOW STOCKS OF 2011 --- Check out that capital growth and how many of these are names you know?

Top five Dow gainers of 2011: MCD +31% (McDONALDS) , IBM +27% (IBM), PFE +24% (PFIZER) , HD +20% (HOME DEPOT), KFT +20% (KRAFT)


Is that complicated? :D

Highly doubtful they will repeat -- and there's all kinds of info about chasing past performance etc. But I'd buy and hold any of these.