HD is one of the stocks I purchased way back in Jan/12 when this thread inspired me to get off my butt. I purchased it in my Schwab account (that I opened because of this thread) and also in my 401k Brokerage Link account (that I also opened because of this thread). It is up 85% since my purchase. This thread is pure win. :thumbsup: Thanks Greg. Your advice to buy what you know and like was right on the mark.

Don

^^^^^^^^^ AWESOME!!!



Investing CORRECTLY -- really is pretty damn simple.


It's when someone tries to get fancy that it fails.

my ford "F" is up 49% since I bought a year ago this May.

This is the best thread on the internet.

Because this thread is read by many -- I MUST comment that this is not a good habit to get into. Remember to look at your "investments" as a whole... it is, after all, ALL your money in the end. Therefore.... a well diversified portfolio would/should be a sum of all those investments. It's better to buy DIFFERENT names for each account -- and then still use the "5% rule"... to make sure you're not loaded up on any one investment.

I know this is hard to do ---- and it's far too easy to ignore these simple rules when things are humming along nicely (as they have been) ---- but these rules are more to protect you when the shizzle isn't running in your favor. Trust me when I tell you -- THEN you will be a believer in diversity --- and in not loading up the truck with "what was" working.

When I'm buying shares -- I use a DOLLAR amount -- and then round off... but I take into account my total dollar amount invested...... Where I diverge from that is actual real estate. I treat real estate as separate investments and just put in what I'm comfortable with --- and in my case --- usually enough so that I have a controlling interest as an investor (the management group actually has 49% usually -- but I want to be the largest investor on the other side).

I lump BONDS and STOCKS as a total..... so I have "X" amount invested... and use that to control the diversity as well as the 5% rule.

HD is not a major portion of either of my accounts. I think it represents roughly 10% of each account since I also took your advice regarding diversification. However, even then it is nice to see these kinds of returns on one or two holdings. It has helped cover a couple of my purchases that have not done as well.

Don

As long as we're on this subject --- I'd add that what you buy in which type of account is really pretty important.

Some things to think about when selecting.


IRA/ROTH etc --- what you put in here DEPENDS on your timeframe til retirement. Obviously if you have a long time -- say more than 15 years til retirement... then I'd personally select things that are more GROWTH oriented.


If it's money in a regular account --- and it's money that may or may not be tapped in to from time to time..... THEN I'd buy more steady eddies for that account.... because I might need the money when things are down. So the Cokes --- and that sort of name would be in my normal accounts.


A couple reasons here.... again --- just some food for thought. DIVIDENDS are taxable.... and GAINS aren't UNTIL YOU TAKE THEM. So in a normal account -- your money might DOUBLE over 10 years -- but you haven't been paying tax on that and won't until you sell. YOU WILL pay tax on the dividends even if you're having them re-invested.... at 20%. So you get 2K in dividends in that normal account and you're out of pocket $400 come tax day.


Now -- all of this DEPENDS --- like most things -- because nobody is doing or should be doing - what someone else is. It all has to be tailored to what your needs and goals are and your tax and cash flow situation is. I have NOTHING in IRA/401's -- I sold them out years ago because I had no need for them. I do still own an apartment house inside of an IRA -- and it's nothing but a PITA and is taxed as well! But that's a mistake on my part and I now can't seem to get out of it so it is what it is.

WalMart (WMT)
 

I just have to do one more post today....



I was just poking around and noticed something that, personally, I think is incredibly important to "investing".


Check out WALMARTS (WMT) 5 year chart on Google Finance.....


Now -- What I want people to really pay attention to is at the end of 2008 -- 5 years ago -- WMT paid a .24 cent per quarter dividend.... Yeah - WMT sucked wind for 3 or 4 years (as share price goes).... but -- the BIG BUTT -- they now have almost doubled the dividend to .47 cents per share per quarter.

Think about that for just a minute --- have ANY OF YOU gotten a 100% increase in your pay in the last 5 years???

This is what I'm talking about when I say -- you get paid to wait.... and that you don't have to be some miracle stock picker to make money in the market LONG TERM.

Forget the share price growth --- you've doubled your cash flow even if the share price just stayed flat!!! What's wrong with that scenario??

Today is what I was waiting for. Not a big sell off but buying down a dollar here and there.... Adding to positions already established. Gotta love it!

Greg,

Re: Diversification, a google search reveals 10 'sectors' (investment sectors...).

Are there some sectors you might favor? Sectors to avoid? I'm about 15 years away from retirement if that factors in.

Is there a rule of thumb about spreading risk? One stock of each sector before 2 of any one sector?

Sorry if this has been covered, I'm up to about page 75 in the thread and
had not seen this question.

Battling 'analysis paralysis' but I just opened a Schwab account, so I'm close to making some moves,

Thanks for the info and the motivation!

Steve O

Excellent questions!!!



Okay -- I'll try to keep this simple (the market is anything but!)....

Diversification is based on how much you really have to invest -- time horizon -- adversity to loss of capital etc. It's pretty dang hard for a guy with 5 grand to invest - to get much diversification.... at 10 grand a guy could buy 10 stocks - 1 grand each. I personally don't see any need for more than 20 stocks - regardless of how much money you have... 20 stocks will keep you in the 5% rule. More than that is just kind of a waste of effort and you loose track of what you own.

SECTORS are a different story. Sectors tend to go in ROTATION.... one sector can be a looser in an up market -- as investors roll out of that sector and invest in another sector. So just to have every sector covered.... is probably not a good strategy.

If you read this thread --- I'm personally more about owning the best of the breed in the field that you're going buy in -- and even more about owning names that you know and understand... by understand - what I'm saying is places you shop - places you eat - places that you buy from - in other words - something that you personally can look around and say -- I like this dump - and the parking lot is full - and the merchandise is good and these places seem to be well run. Whatever "these places" are...


The reason for that is because I believe that it's important to hold and invest more when things are crappy. If you can look around and trust the business you've invested in - then you'll tend not to panic and sell just because the share price isn't so hot for a year or two. And if you like the company - then you might feel comfortable adding to your position when things aren't so hot - and that's where real investors make their money.


SO -- make a list of places you'd like to own.... Just for fun - let's say
Home Depot
Ford
McDonalds
WalMart


Okay -- then we look and say -- you have THREE retailers --- but break it down more and you have FOOD -- General merchandise -- Home building supplies... and a manufacturer (Ford). I don't really see a problem in owning those stocks even though they're not diversified by "sector".

Now --- I like to own some OIL.... whether or not that's pipelines -- retailers - drillers - refiners.... there's so many kinds and types -- but again -- never buy something you know nothing about. I happen to always buy Chevron... I like their product - I see their stations -- I can sleep at night owning it. Maybe you're a Conoco guy... but you see where I'm going.

I don't own sectors I own COMPANIES that I like and can live with and understand -- and that pay me to own them (dividends) -- In other words -- they like to share their profits with me.


So the short answer is --- you don't want to be in all retail -- or all banking -- or all housing.... BUT -- you do want to be in great companies that pay you to own them and that you love.

Do that --- and you'll be happy and successful over time. Why own something in a "sector" you don't know a damn thing about -- just for the sake of being diversified.

So here's something else ------- I don't smoke or drink ------ But I love cigarette and booze stocks... because people buy them in an up economy or a down economy... even if a guy is laid off - he's still puffing away... While I might hate that and wish he'd quit.... he's not going to -- and I'm going to make money off that. Can't help him - might as well help myself. They're called SIN STOCKS.... don't overlook them.

I used to own AT&T and VERIZON -- then I said --- why bother -- AT&T is who I use - so that's the one I own. Nothing wrong with either one of them -- but I'm a customer of AT&T so they might as well pay me back once a quarter with a nice dividend.


Hope that helps.


Take you a few nights -- but go back and read from the beginning.....