I would add to this strategy of investing that there are a couple very nice perks to owning/managing rental real-estate!

Depreciation

Expenses that can be offset onto the property... I shouldn't have to say anything more here. :D

Don't forget the value of the property your purchasing should increase over time if you are buying at a low point in the market. As long as you can hold for say 10 years it should increase for sure. Where I am things are sky high so it's tough to get get a good return on your investment. Rent basically covers expenses if that. But prices have been appreciating like mad over the last 10 years. (Basically more than doubled, I'd say 250% growth realistic)

The one main difference between property and stocks is property is illiquid, meaning you cant sell it quickly and get your equity out, stocks are liquid so you hit the sell button and they are gone the next day.

Maybe take Greg's advice and diversify. Have some income property and some stocks in your portfolio is a good idea if you can.

Yeah, appreciation can vary (and you can be bit by it as I'm sure some were during the downturn), and while you can probably anticipate it to increase by about inflation (3%), I just consider it a bonus. I effectively bought equity as a house immediately next door sold for 190k, and a week after I closed a house right across the street sold for 220k. I seriously considered turning and flipping the house for an instant profit.

Good point about the liqudity of property. Another subtle distinction is that if you have an investment account and are re-investing your dividents (which you should be if that's your thing), it's all automatic. I may be getting 10% returns but the real power of investing is in the re-investing your profit. When I get 300$ in a month, I can't do anything real estate related with that money itself, so it's a good spot where the ideal would probably be to have it in some sort of higher yielding liquid account.

That being said the money will probably just go into finishing my car or building a shop, but I do save a lot of what I make in order to pursue things like this.

Ok, I'm not going to dump all kinds of money in this but I stumbled on this just looking around. Seems like an interesting way to invest in gold which I'm leary of but I think a lot of inflation is a given in the future.

http://finance.yahoo.com/echarts?s=F...rce=undefined;

2 Ways to re-invest that rent money:

#1 use it to pay down your principal faster, in turn saving you interest. The sooner that house is paid off the sooner you can collect 100% of the rent as income.

#2 use to renovate the house (if needed) this increases the value of the home and/or makes it easier to sell.

Personally that's what I'd do with the rent money, and the use the greater rent profit later on for cars etc like Greg mentioned.

150% growth = more than doubled

250% growth = more than tripled

Just sayin... :cheers:

I'm in a good spot where I don't need the money now to pay for my car stuff, but I do intend to pay down the house faster even though on paper it's a terrible investment move. I am risk adverse so less debt feels better for me and I think everyone has their own risk/reward point that affects what they feel comfortable doing.

If I was trying to maximize my return, what I would do is leverage the house I just bought, cashing out my down payment and the equity, netting probably 65k, and buying two more similar houses. The current house would be completely break even with the higher payment, but I would double my cash flow and returns from the other two.

We have discussed the Paid off House vs. Investing, and you are right. It is a personal choice for peace of mind..All the math and pencil and paper saying it may be better to invest the money with today's mortgage rates, means nothing if it doesn't feel comfortable.. What ever you do, it will be the right thing for you..:cheers:

Right on. I go back and forth with this decision based on cash reserves and my confidence in a variety of things.... the economy in general, business projections, Camaro needs... :lol:

Yes Dave, I am 52, and about to re-finance another 30 year loan at 3.5%. I own approx 50% of my home, but I am a guy that doesn't need to own my Home..A good chunk, yes, but 100%, nope, not me.

I don't see property going up very much for years, and I know I will do better Investing, for sure, even if/when , we take another nose dive in the Market, long term, it's where I plan to keep my money.

As far as "Camaro needs", that is my only "Money Pit". With interior, and HP needs, and then 28 years old paint, I will never be done, and I will never get out what I put in..

You would think I would know better, but the need for my car is just too strong, and my Investment Brain gets cloudy.:cheers:

A paid off house when rates are at 7 to 15% is smart.... but when they're under 4%... that would be just plain dumb.

We're at HISTORIC low mortgage rates.... and the rates of return on our investments should far out pace a FIXED mortgage. Think about this over a 10 / 15 / 30 year time frame.... surely our interest rates won't go down much from here... but they certainly could RISE from here.... So put yourself in a position to pay 4 and earn 8....

There is absolutely NOTHING WRONG with having some money for fun stuff...

It's just that many (most?) have too much fun and not enough savings/investments... The more you have invested and earning money - the more fun stuff you can afford!

Just to compare, in Canada you can't really write off interest on your personal home only a portion of it if you use for home office etc. It's different tax wise than the US. I'd have to check specifics but it's a less common thing up here.

Edit I just looked it up:

Greg, that is my plan, and I am sticking to it. Some people would say , why would I take a 30 year loan, when I am 52 years old ? At 3.5%, why not ?

I can beat that long term easily. It took years for my Wife to get that, but she understands now. She wanted to throw more at the principal until I showed her the numbers.

So here's why it's DUMB DUMB DUMB to have a paid for house....


I just went and looked at the Schwab account I always reference here... (I hold back because I never really want you boneheads to know how much money I really have! :D )

That account spins off over 400,000 in dividends per year ----- AND ----- has a 10.34% capital gain (paper gain). There's over 7MM in that account... and it's on pace to return 1MM in cash and gain this year if things just hold where they are.

Now -- I realize that I have an "out sized" argument going here -- but the point is that no matter how much have invested or how much you owe -- if you manage your money correctly... you should have a gain on your house - a gain in your account - and you should be taking a tax deduction on your house which effectively reduces your percentage rate you're paying by the effective tax rate (4% mortgage - 30% tax bracket - your real rate is closer to 3%).... so if you're paying 3% effective rate -- and you're getting a 4% dividend and 7% growth on your investments.... you can see very quickly that there's nothing gained by paying off a mortgage.


:cheers:

You sir, need to buy a Ferrari or the new Lambo. To quote yourself, "There is absolutely NOTHING WRONG with having some money for fun stuff... " :D



Doooooo it!

Well let's see.... I already own:

Audi R8 Sypder
MB S63 AMG
Porsche Cayenne Turbo
'32 Ford Roadster
'37 Ford Roadster
'56 Nomad
'65 Mustang R Code clone track car


Is that not enough fun for one guy?

In May I was in Europe at the Monaco Grand Prix - in June I took the '32 Roadster to LA Roadsters show - I just got back from the Shelby Mini Nats @ Sonoma raceway...

How much fun can a guy have? I'm OLD... I need some rest.... :cheers: :D

Did the KO stock split just happen? I see my share price now shows as $19.70 instead of $78.79 is this a 4 way split or something meaning your # of shares is multiplied by 4 as the previous share value seems like it was divided by 4???

Yup it split. 2 for 1 though. Things may not look right until Monday.

I noticed KO has split just in case some of you are wondering about it being in the red this morning.

Coke (KO) / Con Ed (ED)
 

Yes -- Coke (KO) split TWO for ONE --- so the share price drops to half what it was --- and also the dividend is now cut in half (from where it was) so is now .255 per share per quarter.... BUT of course - you have twice as many shares.


Con Ed (ED) went EX dividend today... so it will most likely trade down.... but of course.... it also is sending you .605 per share dividend. Note that this name is highly "defensive" and is a "blue haired old lady stock" IMHO... Utilities are like that... cause even if you're broke ya gotta pay your electricity bill! This stock is UP 55% in the last 3 years -- most likely because people have flocked to the "safety" of names like this. I'd expect a "rotation" out of this name - if the economy heads UP...

ROTATION is a very important factor in the stock market. Remember that while we want to pick great names.... NOBODY can fight market trends. The HERD mentality can and does affect your holdings. Make no mistake about this. A market is up when more people want to buy what you have than sell it.. and the reverse is also true! So if the HERD (big money) starts to think they can make a better return in TECH over "steady eddy" Con Ed... then they'll sell ED and buy "X" tech company. You can substitute various names here but that is what a market is.

There never seems to be more money = the money just rotates. Most people need to sell something to buy something else whether it's houses - cars - or stocks. So IF the economy is seen as turning around --- then we'll see a ROTATION out of steady eddy dividend payers to "cyclicals" - and the "industrials" and "tech" etc.

Here's the way I think about this... so let's just use Con Ed (ED) as an example.

Every quarter these guys send me .60 cents per share... ($2.40 per year). If the share price goes down $5.00 I don't really care (right now) because I own it for that check they're sending me. I really only care about the share price when I'm ready to SELL it. If I'm nowhere near selling it... then it's just a placeholder. That placeholder still owes me money though! And pays right on time. If I'm holding it for 10 years... then they've sent me $24.00.... and my guess is 10 years from now - the price per share should be higher than what I paid for it AND I've gotten $24.00 in cash on top of that. (dividends in IRAs should be re-invested but either way - you got the money).

:woot: Now climb that ladder!

Yeah buddy... got to love a good split!

Just FYI -- I had 6,000 shares -- that went to 12,000... and I bought 3,000 more this morning for a total of 15,000

The dividend isn't great at 2.8%... but generally Coke ads stability to an account and has pretty decent growth (21% one year - 74% three year - 66% five year total return).

If you look at pictures of the poorest countries on Earth..

Some you have never even heard of. What are they drinking and what do they have in their hands ?......

A Coke.

Thanks, that should drive the price down. :thumbsup:

Just got back from Vacation.. first day back at work (Reno's Hot August Nights last week. Woot!).

Anywho, just caught back up, and yes, I still check this thread multiple times a day, (when not on vacation, lol). Even tho I'm not posting, I'm still reading, learning.

:woot:

Fair enough! Just want to make sure people are still interested.

As long as this thread is, it's harder for me to find "points of interest" to use for educational purposes. I can only hammer Best of Breed - and dividend investing about 10,000 times before that's boring.

So I'm trying to find things that peak my interest -- and then I have to remember to use them as a post.


Hot August Nights is a hoot... went there every year for about 15+ years! My grandparents lived in Carson City - so it was a good excuse to visit! Then I got bored with it and elected my sister to figure out where else we could go within a 1200 mile radius of Seattle/Portland. Frankly - I got tired of getting ripped off by the hotels that are $49.99 a night the week before -- that are $499 the weekend of HAN. So we've been to Wheels and Waves in Santa Barbara - Cruise to Yellowstone - L A Roadsters Show - Cruise to the Coos (Oregon) etc and have been having a blast going "anywhere else than Reno". :unibrow:

Yeah.. I hear ya. But your doing a great job. Keep filling us in on the highs and lows of it all. So hopefully everyone is prepared for when the $h!t hits the fan, we are smart enough to go on a buying spree. ;)


We've been going a number of years too. But only the last couple we've put a car in it (always drove my dads car up there, but wasn't entered in it). We've been lucky enough to get rooms for $30-40 a night at Circus Circus, as long as you book way in advance, but this year, it was crazy cheap. Around new years day they emailed some special out (I always check their email specials). They had Mon-Thurs for $20/night, and Fri and Sat nights for $49. CRAZY cheap. So we booked then. That's around the time I normally find good deals for them, but never that cheap. Normally Thurs its $49 and fri its a bit more (like $79), We don't normally stay Sat night. We like Circus Circus cuz its cheap (see above ;) ) and they block off a floor (or more) dedicated to classic cars, and have security in/out of that floor for parking, and then also security riding around those floors on bikes just to keep an eye on things.

Would love to check out those other venues... This vacation is one I take my Son (6.5 yrs old) and go with my parents. We cruise "Grandpa's hot rod" (65 Chevelle Malibu). Hopefully I'll get some pics up soon of the vacation.

Back on to Investing 102... Finally still a tad in the 'green" overall on my ROTH, I've finally overcome the "flop" of a purchase from a few years ago of SCEUF (Storm Cat Energy) that tanked and went bankrupt right after i bought it. :wow: :rolleyes: What did i fail to do? Research. Now the company. And I took a "friends advice" that's "been a good stock for many years".. Then BOOM. tanked. LOL. That was my "live and learn"... I didnt touch anything with stocks much again til Last year, when i started back into it and found "dividend investing".. Then early this year I was shown the light of this thread (thanks Mike!) and now on my slow road to a decent retirement (I hope!).

Albert...You are welcome..

You are one of the few that I have helped get started on their future.

Maybe Ace/Stace, will read this thread too.

But most just don't do anything about investing and hope for the best..

I do not understand those people...They do not plan for the future...

You are on your way. Good Job...:thumbsup:

So today was a real mixed bag -- and while the market was a total "ho hum" -- when I looked at my Schwab account it was way mo better than ho hum! So what gives?

I call it the law of large numbers - and I've written about it before... but here's where it starts to affect YOUR accounts... BALANCE. And I don't mean your account balance - but the balance of the shares you have in your accounts -- and also the diversity.

Since I have outsized positions in this account by NUMBER OF SHARES in certain names -- they can really affect your day - either GOOD or BAD... and that's why I mention the balance of number of shares....

I have (again - just using my own real life as an example here) 20,000 shares of Altria (MO).... so when it moves a whopping .23 a share (like today) the LAW OF LARGE NUMBERS takes hold.... 20,000 X .23 = $4,600 BUCKS! A nice days work if you could get it! BUT -- Dang that big butt in the room -- it works on the way DOWN as well....

This balancing act is far harder to achieve for "newbs" or smaller accounts - let's say "smaller is anything under 100K". It's just almost impossible to own 500 shares of everything in your account because of the share price differences.... So you end up with 500 shares of something at $20 a share -- and only 125 of something at $125 a share.... Obviously the 500 shares have a larger affect on your account when they're up or down because of that pesky "law of large numbers". So this brings me to the more important way to look at money. Money is about PERCENTAGES.... and when you open your account and see it's down $500 for the day and you swallow hard --- but if you have 50 Grand in the account -- that's not a very large PERCENTAGE... ditto, of course if it's going up.

A better gauge is how your account is doing OVERALL.... and how it's doing RELATIVE to "the market". There is no way on god's green earth that you can own 15 or 20 stocks and have GREEN in every one of them all the time. And they're never up evenly. So better to look at how your account is doing OVERALL AS A PERCENTAGE rather than a number (10% vs $1000 dollars) and make that percentage be your goal - then the numbers will take care of themselves.

To get back to balance --- when you have a good day or a bad one --- look not just at the dollar amount -- but which stock affected your account the most -- and is it down/up big? Or is it the law of large numbers that made it look "outsized". The biggest number of shares in your account might have only been down a dime... but the multiplier is what makes it look bad/good rather than the percentage of move.

Not much you can do to change that - cause you'll never achieve a perfect balance. It's just another point of THOUGHT when you're looking at your account and brings a little better perspective when you sort out the details. :cheers:

My goal is to beat VFINX every year.... it may seem like a silly goal but I have to start somewhere..

That's a good gauge....


So far that account (Schwab) has a 10.48% "gain" vs the VFINX's 12.04%


VFINX is heavily weighted in "tech" with some 20% of their holdings in that space and no doubt Apple being their top holding has certainly boosted that performance.

Since it's always fun to "explore" what someone else is doing here's a link to Morningstar showing their YTD returns on the companies they invest in. Note that Apple (AAPL) has a 54% YTD return -- and AT&T (T) is second best with 27%

http://quicktake.morningstar.com/syn...7&symbol=VFINX

I had an EPIC FAIL and forgot to include the link to Morningstar as stated in the previous post... so edited it and added -- but here it is again.


http://quicktake.morningstar.com/syn...7&symbol=VFINX

One of the oldest sayings on Wall Street --- is "when interest rates rise the stock market dies"...

Now of course... nothing is ever a zero sum game... and old sayings have longevity are are "generally" very accurate.

Interest rates have risen NOTICEABLY on the 10 and 30 year T bill.... and also on mortgages. While both are still really low historically --- the take-away is --- to pay attention to this "trend" if it is one.

Interest rates rising are a good thing! And a bad thing! How can they be both?

Interest rises as there is more demand for BORROWING.... more people borrow when they feel like they can pay the loan back... so rising interest rates signal that the economy is/might be getting better.... AND THAT IS A GOOD THING....

BUT... that dang big butt!

As the yields on interest bearing stuff (like T bills) rise - people sell stocks and move to "safe" interest bearing accounts.... so the stock market usually begins to suffer as money flows OUT....

BUT... dang that big butt!

The stock market could also benefit - because if the economy is better - then the companies should have better sales and better bottom lines!

Okay --- I know --- it's all crazy and if someone could figure it out and it was easy then everyone would be rich right?

My take is -- the companies that pay the lowest yields will get pressure (selling) first... so many of the steady eddys that we love -- that pay lower dividends as a percentage -- would be the ones that people would sell first. But as the price comes down on the shares -- the yield goes up! (IF you pay the new lower prices).

I guess the only real point of this for Investing 102 -- is to stay somewhat heads up to the interest rate market. It signals lots of stuff... a rising economy -- better business -- and frankly -- we actually need to see that! We're not there yet - but you need to stay vigilant to what the market is telling you and the "market" is always ahead ---- by months --- but it doesn't always get it right.

Thanks for the last post Greg, very enjoyable and wisdomatic read. :thumbsup:

Welcome...

Sometimes I can ramble -- but there is a point in there somewhere! :D

Interest rates are CRITICAL... ignore their importance at your own peril. I guess that was the point. Doesn't mean to ACT -- it means to pay attention!

Totally understood, again very good read. The older I get all those cliche's I chuckled at as humor as a kid now hit very close to home.

Here's something else I've said more than once in this thread.... IMHO I only think a guy can follow just so many names... too many and you just get confused -- too few and you're not diversified. My 'goal' for someone asking is that when they get to 100K invested - they should have about 20 names...
When you get to a million -- there's really not much need to have 100 names - - when 20 good ones will serve you just fine...


So here's a guy that follows my thinking perfectly!


As of 06/30/2012, Kynikos Associates LP owns 22 long stocks with a total value of $257 million. He is said to manage more than $6 billion. Jim Chanos has been called the Warren Buffett of short selling.

Along the lines of the "what ifs" such as the POSSIBLE rising interest rate scenario... I think the FAR BIGGER DEAL that will affect the stock market is the election in November.

While the PRESIDENTIAL race is very important for "investors" (and the general public) the CONGRESSIONAL races are far MORE IMPORTANT.... A democratic SENATE and HOUSE of REPRESENTATIVES will and I should underline WILL..... raise the tax rates on anything and everything they see as their personal piggy bank (your wallet). THAT will affect what people invest in etc.

Dividends - that now enjoy a 15% tax rate are highly competitive with other investments because of that rate. Raise that rate to ordinary tax rates and that competitive edge just gets blown away. People like me - with LARGE incomes from dividends WILL find other homes for their money. Muni bond rates are LOW right now precisely because of the advantage dividends enjoy. A 3% TAX FREE rate of return is not so hot when a guy can buy a 5.5% (or higher) dividend and pay ONLY a 15% tax.

THE TAKEAWAY FOR INVESTING 102:

What AMERICANS forget is that the PRESIDENT DOES NOT MAKE LAW -- CONGRESS and the HOUSE DO! So in my book -- those selections are far more important when it comes to who I vote for as my Senators and Representatives (Dem or Rep) because it's those jackazzs (BOTH PARTIES IMHO) that rule the roost... NOT the President. While he's the leader and the big voice -- he doesn't make the rules -- those 535 OTHER GUYS do!

Right now -- the main reason we have INACTION on almost anything - is because of the REPUBLICAN House -- vs -- the DEMOCRATIC Senate. The house is voting one way and the senate the opposite - therefore NOTHING gets done.

I AM NOT DISCUSSING POLITICS HERE.... this is not "I'm voting for Obama or I'm voting for Romney" discussion. Let's not go there because it is a bottomless pit of one guy against the other....

I AM SAYING -- PAY ATTENTION to what changes and who you vote for in these (IMHO) far more important races because the outcome WILL - (underline WILL) affect you!

If you want real change (one way or the other - I'm not saying which way YOU should vote here) then it's the change in the make up of these two legislative bodies that will make the big difference. :faint:

I decided earlier to add some risk to my portfolio and picked up a small position in CYOU before the dividend. So far so good. I picked the shares up for $24.73 and they paid a $3.76 special dividend. Up about 11% after the dividend is paid. Still a risky affair as this is a China stock (always the fear of fakes) and the Chinese economy has been cooling. Therefore this is a small position more for fun and to see where they go with dividends.

I'm also now green on SAN! Took a lot of patience, and a good average down when the stock was around $5. I've now trimmed back that position so it is inline with the total value of many other stocks in my portfolio. I got a little heavier than I'd like to have been in SAN, but it worked out. But, this is not always the case.

Pretty happy overall with unrealized gains YTD - nearly 14%. Hoping for continued success rest of year and beyond.