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.

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?

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.

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.

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

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:

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.


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.

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/Princ...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/img190/1...efficiency.png

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...."

Top dow stocks of 2011
 

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.

Nice yields... and the growth on a good old standby - GIS (General Mills) is outstanding...steady eddy.

AEP (American Electric Power) has been not so hot - but has that 4.5% dividend. My advice -- BUY CON EDISON (ED) has near the same dividend (3.87%) but has capital growth of 40% on top of that... compared to a capital loss for the 10 year period for AEP.

That chart will make you even sicker if you go out and compare the time period "ALL" -- ED is up 900% compared to AEP @ "only" 69%

Just saying -- that if you want to own "best of breed" in any given sector - they're best of breed usually for very good reasons -- and here's a perfectly good example of the difference.


Long time periods for sure -- but here's the way I think about this stuff... I'm 58 already (damn) but I plan to live to at least 88 -- THAT IS THIRTY MORE YEARS -- and I want to have growth in capital to sustain my superior spending spree.... :willy:

Thanks for putting so much thought into this thread, Greg. It's very timely for me. I'm 52 now and although I've contributed into my 401K for many years, I can't say that I've given alot of thought to retirement. Over the past year or so, I've realized that retirement is approaching in the next 15 years or so, and it's time to fine tune my plans.

I can't imagine not working, simply because I always have. However, I'd like for it to become an option vice a neccessity.

This thread has been cool because it's motivated me to look at my current investments a little more critically, and because it's given me the opportunity to learn something new. In the vein of learning something new, any advice on basic investing books, newsletters, or websites? I'd like to better understand how to evaluate the P/E, yield, etc of different stocks. I thought that the "beta" chat between you and Chad was interesting, but I don't understand the relevance of it in respect to the stock market.

Thanks

Bill

Good questions Bill, and I'm glad you've found this interesting. I've been working hard to try to make it EASY (need that big red E A S Y button)....

So along that EASY theme.... I don't use ANY of the stuff you asked about. Don't need it. Don't need to clutter my head with useless info such as the Beta. That - in my HUMBLE (yeah right!) opinion is where people go sideways.

Investing IS NOT COMPLICATED and doesn't need to be "learned". Follow my steps - that I have listed and discussed in previous posts... regarding simple easy to understand "anyone can do this" investing approach. Pick names you know - compare them to the competition - check the long term chart - make sure they pay a dividend - diversify. If the companies growth is steady eddy - then I want a bigger dividend payout. If the stock meets all of the above and has a smallish dividend then it must have stellar growth as the 'offsetting factor'. If I have too many boring smallish payers -- and can AFFORD SOME RISK I offset that smallish dividend/growth with a bit more risk (JNK - HYG - NLY) just for "instance".

Lots of people can argue numbers and such all day long - they pull stuff from here and there... but like a drag race car - can they put it DOWN? I know guys that spout all manor of info about motors and traction etc - but when you line up they get crushed. Some can talk and some can DO.

The important STEPS are to pick - compare - make a list - compare 'em again to make sure you understand... check for diversity... do what your brain says is right for you... if you like CHEVRON GAS over EXXON then buy the Chevron. If you shop Home Depot over Lowes - buy the Home Depot (if all the info is pretty comparable). If you don't do it that way - you kick yourself in the ass when it doesn't go your way.

The guys that listen to the talking heads on TV all the time... and listen to the news and then REACT constantly -- they're getting BEAT. Now - obviously you have to listen for BIG NEWS - let's just pick SEARS.... because if you're in that name (and you shouldn't have been because it doesn't meet ANY of the above criteria) then you need to make a decision to hold 'em or fold 'em... But if you sold McDonalds because the news said someone spilled coffee - and you think that is really going to kill the company - REALLY? - then you're reacting to just "news" and you'll lose.

Whenever I'm thinking too much -- I go back and revisit those charts and stretch 'em out as long as they'll go... and if it's a good chart... and the dividend is intact and growing - then I can soothe myself. If I'm thinking about a pick too much -- and stressing over it - then I go and look at all the stuff - try to remember why I picked it - and if I'm still stewing - I sell it and start looking (may take me days or weeks to find/settle on the new one) for a better INVESTMENT.

It really is just that simple. I'm running mid 8 figures... and this is EXACTLY how I do it. And I kid you not when I say this is just exactly how I've been doing it for YEARS. I retired at 41 and I'm 58 now and this is all I've done for "work" all this time - running my own investments. I've never once looked at a beta... or anything else more complicated than what I just wrote. If it works for me - it will work for you.

hey Greg,

I've been glued to this thread as well and wanted to get your take on a stock: SXL. seems to have the right shaped chart with growth and growing dividend.

how do you "read" this one? thanks again for all your insights in this thread and happy new year everyone :thumbsup:

Sunoco Logistics Partners L.P. (Public, NYSE:SXL)

Range 38.90 - 39.62
52 week 24.40 - 39.98
Open 39.48
Vol / Avg. 253,411.00/226,762.00
Mkt cap 4.07B
P/E 16.35
Div/yield 1.24/12.59
EPS 2.41
Shares 103.33M
Beta 0.18
Inst. own 24%

link to chart

What your thoughts on HSY?

Range 61.72 - 62.19
52 week 46.24 - 62.26
Open 62.05
Vol / Avg. 606,311.00/1.09M
Mkt cap 13.91B
P/E 22.86
Div/yield 0.34/2.23
EPS 2.70
Shares 225.12M
Beta 0.26
Inst. own 54%

They have been steadily increasing dividends and they split in 2004. It's my wifes favorite company...LOL

I'd own it - if I didn't already own EEP and KMP etc. Great dividend and excellent growth. What I like to do is to keep the "pigs get fat and hogs get slaughtered" counter balance so don't just go dividend hoggish and load the boat up with all high dividend payers -- balance is key. But good picking here!

This holding - Herseys - would be the perfect counterbalance to the previous stock pick - SXL.... because of the "smallish" dividend it needs (IMHO) to be balanced out with a higher paying dividend of something. Otherwise you're losing out to inflation. But a great name with a decent chart and the only downside is that under 3% dividend.

Greg,

How often do you suggest us new guys be checking up on the stocks that we own? It seems to me that you can get a little OCD with it all.

How often do you suggest we rebalance our portfolio?

What exactly is a EFT? You have mentioned them before. It appears to me to be more like a mutual fund that buys bonds. Is there a fee for using them? On the EFT JNK, back in January of 11, they paid a short term, and a long term capital gains. Instead of the dividend of being around .25 it jumped to .90. Could you explain this please?

Do you look at the Price to Earning ratio, when choosing a stock? Do you also look at the earnings per share when make a decision?

Thanks again for the wealth of information you have given us.

Great question -- and I would say it depends -- because if you're investing in the kind of stuff I've been saying is where my money is - then you don't need to check but about once every quarter... just to make sure you're on track -- but if you're buying some speculative stuff - then daily. Mostly what you need to do is to just pay attention to the news - interest rate announcements by the FED etc...and then if you're not sure what that "means" and the affects it can have then jump up and ask someone.

REBALANCE any time you're out of balance - i.e., you have a big run up in one stock - then take the gain - leave the balance - and spread out (diversify) or if you have a loser - make sure you know why it's a loser and see if it has a chance of coming back or is it 'broken'. I would call the recent announcement of the SEARS closing news - a 'broken' stock. You just have to sell that kind of news and move on.

ETF - Exchange Traded Funds - are NOT like Mutual Funds - but kinda are - they typically are a basket of a sector/type. So lets just say you want to invest in oil and gas - then there are probably several ETF's that just buy that basket of stocks. It's an easier way to buy a few companies in a narrow focus... without having to pick just one or two names. Very effective and cost effective. The downside is that a bad pick can pull down the performance of the ETF... so I'm not a fan. I think people are smart enough to make good picks and are generally happier knowing what stocks they own and why they own them. Just IMHO.

Paying out a special dividend or returning a capital gain - can be done for many reasons and is quiet common in Mutual funds or ETF's... You own the shares of the companies they have invested in - and lets say they owned a bunch of APPLE and they have a 1000% gain and decide to sell some of it in a big way -- they pass that gain down to the share holders... along with paying the regular dividend.

P/E (price to earnings ratio) is not something I pay attention to. I like LONG TERM GROWTH in the price of the stocks I own - and I pay attention to that -along with the dividend payout and the long term growth of that dividend payout. This really tells me all the info I need to know. It tells me the company is well managed - over a long period of time - and that they're making money enough to pay an increasing dividend out - again over a long period of time. Right now Apples P/E is quiet "low" - but to me the stock is "expensive" and priced for perfection. I own it - but I've owned it since it was at $85 and have taken profits (gains) in the name... but it doesn't pay a dividend so I have to have the stock price growth to compenstate which it has provided handsomely. McDonalds has a higher P/E and the talking heads on TV will mention it - but I don't really care about such matters - because what I'm looking for is good management - growth (sales and same store sales - and growth in new markets etc) and as long as they have things like that - then the rest takes care of itself.

It's kinda like two cars - one guy has 1000 hp and one guy has 650 hp -- everything else is the same. Put the two on the track and if you just looked at the 1000 hp number you'd bet on that car to win... EXCEPT -- the driver sucks and the guy in the 650 car runs circles around him. I'd prefer to bet on the management and history over just "numbers". It has to be the complete package - not just one set of numbers. The numbers might be good indicators but if you'd just bought stocks on those - you might make a lot of bad bets. That's not to say you just ignore them - but you're making the entire process more complicated than it really is. I'll harp again and again - names you know - companies you like to do business with - good track record - good dividends - diversified portfolio... (relative to what you have to invest).

Does that make sense?

A question regarding capital gains ........

In your example of the stock that made huge gains, and now you want to rebalance your portfolio. Let's assume that you've owned this stock a few years. You sell off some shares off and buy shares in a different stock. So you have fees for the buying and selling. But do you pay capital gains now on the money that you made, or do you not have any gains since you have reinvested those dollars?

Excellent question -- with multiple answers - and my answer is going to give you just enough info so that you'll know that you should contact your tax pro BEFORE you sell!

There are three different ways to make a trade for accounting purposes and these ways must be selected at the time of the trade BEFORE the trade is "settled" (check with your brokerage for this info).

FIFO -- First In - First Out

LIFO -- Last In - First Out

Specified Lot

These "methods" can be used PER TRADE - and obviously affect your gain or loss. Because if you've bought shares over time - they're at different costs, thus have different gains/losses.

What I can't answer for you - is - say you bought 10 shares at $100 ($1000) and it's now worth $3000 -- and you just want to take your original $1000 out and leave the "Gain" ------- and that is what I think you're asking...... and I have to tell you I honestly do not know the answer.

Bill -- I wanted to SEPARATE the answer to your question because this is so complicated.

There is another selection of "method" that is selectable in my Schwab account but I didn't research to see if it's available (selectable) in my other brokerage accounts.... I've on "vacation" and just didn't want to take the time...

But Schwab has a "Tax Lot Optimizer" selection where the sales are selected via various conditions to MINIMIZE the tax consequences. LEGALLY of course... so they'd sell the least gains first and so on until the sold the number of shares you wanted to sell.

BUT I CAN'T EMPHASIZE ENOUGH - this is an IRS / TAX PREPARER question don't listen to what some bozo like me tells you on a forum.

:lateral: :cheers: :woot:

Hey billscamaros- You would pay taxes on the gains in the year they were incurred, the tax basis does not roll into your new stock purchase.

Don't take this post personally -- I just wanted to respond because there are so many people reading this stuff... and we don't want to give some info that might be right for some and wrong for others...

Really - that's not enough information - because we don't know if he's asking about an IRA - a ROTH - or just a regular account.... We don't even know if there are LTCG taxes due because his income might not be high enough to pay ANY... there are ZERO LTCG taxes for some folks... and for some of us there is the AMT and all manor of other mitigating circumstances. That's why I didn't want to give him some "pat" answer. Because it "depends". Maybe all his gain is from reinvested dividends that he's already paid taxes on?

That's why I said his questions can really only be answered by HIS tax pro...

I think questions like this are GREAT because they give people information they should at least think about etc -- but can't be answered in a forum. And they're just as critical as the timing on an engine - which we know there is no pat answer because it depends on the cam - the gears - the use - and blah blah blah... What you really need to know is that it's critical to find out BEFORE you act - so you can form a PLAN.... and act accordingly.

By the way folks -- note that when I say LTCG are ONE YEAR AND A DAY -- that "DAY" is critical because the IRS rule is "longer than one year" -- which doesn't mean ONE YEAR -- it's LONGER THAN ONE YEAR. Thus I always add that "one year and a DAY". The devil is always in the details.

Great points Greg, taxes totally depend each person's set of circumstances. :cheers:

Yep -- and that's why I said earlier that we really don't want to turn this into a tax discussion -- only in the BROADEST of terms etc and give people enough info to at the very least KNOW THEY SHOULD ASK - because TAXES are a real trap we can all fall into. There's just too damn many circumstances.

A retiree on SS might be able to sell enough gains to supplement their SS and not have any tax due...

And I get the root of the question.... and it's a good one. But the answer "depends". :willy:

I will answer honestly for my own personal situation -- I don't give any thought to what the tax consequences are for a trade. I just do what's best for making (or not loosing) money. The taxes are what they are. I just can't clutter my head with all the rules etc in order to save $500... and then lose $2000 because I didn't want to pay taxes. But that's my personal "method". I pay way more taxes than I need to - my tax guy yells at me - and I tell him "sorry dude... I just don't care.... I made money didn't I?" and he always concedes that in fact "yes I did"... And to me - that's the bottom line. But that's not good advice for others... because it CAN AND DOES make a difference!

This thread is making me realize there is ALOT more to this than just buying and selling. Now comes into play the questions about taxes and being taxed. I recently dumped a stock and two mutual funds I wasn't happy with in favor of purchasing some other stocks. Because this is a rollover IRA account (not sure if that affects anything tax wise) should I be worried about the taxes now or does that come into play when deductions begin to come out at retirement?

I also have a brokerage account with Schwab that I'd like to start using to help supplement my retirement accounts. Do you suggest getting started with that in the same manner? Pick some names we know, study the charts and buy some stocks? Or should I sit down with my tax guy before getting started with that to discuss everything?

IRA/401 are TAX DEFERRED ACCOUNTS -- no taxes due UNTIL you retire and start the withdrawals. The PREMISE is that you would then be a far lower tax brackets and that your withdrawals are controlled to minimize taxes etc. So if you made the transactions inside these types of accounts -- then you don't need to worry - there is no taxable action NOW.

If the transactions are within a ROTH IRA - there is NEVER any tax due - because that was after tax funds. You pay no further taxes even upon withdrawal. They're WONDERFUL but are very limited with their own "maximum funding per year" rules and they have limits as to WHO (by income) can fund them.

Any account that is OUTSIDE of a "tax deferred" type retirement account - is going to be subject to tax accounting. So depending on your trading - your amount of dividends received - whether or not those dividends are "qualified" etc. Your income at the time. Whehter or not you OFFSET the gains with sales of loses etc (which is what people do at year end -- they take gains and offset those gains with taking a loss thus rebalancing their accounts if they need to etc).

If you're not going to TRADE -- so you're not in and out of stuff all the time - You buy and hold for that magic ONE YEAR AND A DAY - which makes the trade Long Term Capital Gain.... taxed currently at 15% -- and the QUALIFIED dividends are currently taxed at maximum 15%... OR you don't do anything - you just let the stuff grow -- then you're only taxed on the dividends received . You have to make a lot of dividend income to really incur much tax due. 15% is pretty dang small amount - and you should be happy as a clam if you're picking up 10 grand a year in dividends and only owe 1500!

:cheers:

On top of the rollover IRA and the Schwab brokerage account, do you recommend also opening a Roth IRA and possibly more than one brokerage account? I'm trying to get the ball rolling but don't want to overwhelm myself either. I'm definitely having a good time reading all of the posts and absorbing all of this information.

Not quite. So I still have 10 shares that are now worth $300/share. I want to leave the original $1000 in place and move the $2000 in "gain" to some other stock because I want to rebalance my portfolio. So I sell $2000 of the stock and buy $2000 of stock in some other company ... all within my brokerage account .... I don't receive any of this in actual cash payout. (And let's assume that it's a straightforward brokerage account .... not a regular or Roth IRA account. So I already paid tax on the original $1000.)

Let's assume that I had that original stock for a couple of years, so that $2000 gain is a long term capital gain - correct? And I immediately re-invested the gain into another stock. I guess that my question is: given this scenerio, when do I pay tax on my capital gains .... in the tax year that I make the capital gains, or when I actually take the payout from the account?

Ahhh .... I didn't read thru all of the posts prior to asking my latest question. So, the answer is 'yes' .... the capital gains are defined immediately upon selling the stock.

When you'd take the action to SELL the stock - that very instant if you have a gain - you've got a taxable event. So let's say you'd bought stock in 2009 and sold some for a gain in 2012 -- you'd have a taxable event in 2012 to report (provided it's in s normal account for this discussion). Doesn't make any difference that you rolled it into another stock - you took the gain. That help??

Jose -- A ROTH IRA is the best thing that ever happened to the American SAVER.... because you could put $4000 in there and it could go to a MILLION and upon retirement (proper age per the rules) you could pull out the retirement amount (again - allowed by the rules) and have NO TAXES....

Dude! It just doesn't get any better than that!

So yes - by all means - if you qualify for - and can contribute to a ROTH - HELL YES! Pound it! That's free money!

Yes ... that answers the question! Thanks again for your insight and your willingness to share it!

Yes Greg that all makes sense to me. I just have 2 more questions.

What to do when the FED raises the interest rate?

Would you sell your shares in a company if the management team starts to leave the company, and it has been a proven performer?

I'll do NOTHING once the FED starts to raise interest rates... because that would mean that the economy is IMPROVING so stocks will get a nice boost from that (MY GUESS ONLY SINCE WE DON'T KNOW). But maybe by the time the FED gets back to 2 or 3% -- I might start thinking about thinning (raising cash) so I can be ready to buy more bonds. BUT Remember that for most of you - you're on the 20 - 30 - 40 year plan... and steady and not moving around is what is going to work best for you.

If the economy is good - then you're stocks should provide you with growth and that nice dividend. Compounding that dividend is - over time - what works.

What most people do is buy at the top - and sell at the bottom - and then buy something else at the top and sell low etc. You really can't "time" the market or when it's going move - you'll always be behind the curve. SO for 99.9% of investors (including me) they're better off just staying where they are and putting NEW MONEY into the alternative (Bonds/CD's etc).



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If the news is bad on a company - and the board is firing the heads etc because of it - I'd bail.... Otherwise you're gambling that the "new guys" can right the ship. I'd rather be in shares that don't have that issue.

Greg,

You have mentioned in a couple of your posts that you believe Apple is priced for perfection. A few of questions.

Does that mean you think it is currently over-valued?

Would you buy it now if you did not own it already?

Can you take us through your thought process in determining why it is priced for perfection.

You mentioned that the PE is roughly 14 and the overall market PE is about 15. Would that not indicate it is slightly undervalued or am I misinterpreting the use of the PE.

Thanks

Good question -- and buy the way (pun intended) -- I'm not trying to be or going to be the threads "stock guru" -- but the question is put in a fashion that is the correct (IMHO) way so that we can discuss what something means. We'll use this particular stock - but it's not a recommendation - rather - it's a discussion of thought process to be applied to ANY stock.

The statement "priced to perfection" is not a PREDICTOR of price - nor does it set the current price of a stock (in my mind)... what it does say to me is this:

IF ANYTHING HAPPENS - a "sales miss" - a "product slip up" - a "profit decline" etc -- THE STOCK GETS HAMMERED.

I would buy APPLE on a price decline -- why? Because I think there is a huge shift to their products and the way they work. They're the market makers, not the market followers - and I like that in a company - ESPECIALLY in TECH. Apply that thought to any company -- are they the "best of breed" or are they "me too's"? I like best of breed.

So the statement priced to perfection is just generally used as a "buyer be ware" statement - that the MOMENTUM in a stock is based on everything CONTINUING to go their way. The EXPECTATIONS are very high and the company MUST perform at 100% or even better.

NO I DO NOT THINK IT IS OVERVALUED -- If I did - I'd be a seller... rather than a "holder" -- BUT -- I have taken my profits on this company and am mostly holding free money in the name. When someone buys today - they're betting the stock can and will rise from here. That's a question NOBODY can answer. My GUESS is that they can...

OKAY ---- INVESTING 102 will give you this THOUGHT PROCESS.

One share of a stock trading at 4 or 500 dollars per share and no dividend.

How many shares can you buy? 10? 20? 30?

So let's use the 30 share number. If the stock goes up 10% and it's $400 a share - you have a $40 per share gain - X's 30 ='s $1200 paper gain.

REALLY? 12 GRAND invested to MAYBE make 1200?

So the same 12 Grand invested in Annaly Capital Management (NLY) just to use ONE EXAMPLE ONLY -- would buy you 700 shares (@ $17 a share) and pays you .57 per share - per quarter - or - DRUM ROLL -- $1600 a year!

So that's the problem -- IF -- big if -- you're a beginning investor - and prefer NOT to gamble on pure capital gains - but would prefer to plod ahead... Personally -- I do "both" -- but it depends on your risk tolerance and how much you have to invest etc.

Now -- if you have 12 grand to invest in one stock - that should be only 5% of the total you have to invest - so you should have around 200 grand. At that amount - I think it's probably "okay" to have one stock like this in your portfolio. But if you only have 50 grand to play with... this is pretty "rich".