I bought some when they were less than $100... I cashed alot out in silver but I kept a little for when they will be worth one million dollars each. lol

OK now I want to go back to the begining and read some of the links.

I have a question about this one

http://money.cnn.com/magazines/money...nds/index.html

It lists those funds YTD and 5 year. Does the 5yr mean average per year or total 5 year return? Some of those funds say 5years around 12-15% which seems like a lot but if thats total does that mean they are only averaging 2-3% at year? :(

Every time you see a time period like 5 or 10 year return it's the average per year over that time frame, unless it's identified as a cumulative return. Usually, but not always, the bulk of the positive return was in one or two years during that time period. You could earn much higher than that if you were in for a shorter time period but the RIGHT time period. But, there is no way to know or predict that time period. With the exception of getting dividends it only matters when you buy and when you sell, what happens in between doesn't matter.

Another thing to be careful of with these mutual fund annual averages is that you would have had to be in the fund the entire year to actually realize that return since the bulk of the return comes on just several of the best days that year. I read a study one time that the average investor is far below these average returns because they get in once they hear it's doing good which is generally AFTER it's done doing good. Somewhere in this thread I posted a chart showing just how quickly your return dwindles as you miss more and more of the best days in the market in any given year. I go back to my first post in this entire thread, the key is buy low, sell high, with much more focus on buy low which psychologically is the hardest thing to do.

Go back and look how well you would have done if you had the balls to put everything you could muster in at the bottom in March 2009 when everyone was saying the stock market is doomed never to return.

Since 1962 the average return on big cap stock market is 9.62%…. thus the saying that you average 10% annual average returns in the stock market. But there's a CAVEAT! You can be UP 30% one year and down 40% the next year. This is why you can't put money in the market that you're planning on needing in the "short term". Because for certain - the market will be down when you absolutely must have the money. Long term - it's the best place in the world to be invested. But short term - you can get creamed.

If you're saving to buy a house… I would split my investments and savings putting perhaps 60% in the market -- and keeping 40% in liquid CD's or some other "certain" capital return. That way you could take advantage of POSSIBLY getting some growth in your capital - but you wouldn't have to depend on perfect returns when the time comes that you want to make your downpayment. You could end up with 100% of what you need just from the 60% you invested in the market -- but you could also come up short and either be forced to wait or forced to sell in a down market. Or you could use the 40% cash you saved and just figure out some other combination to make your down.

Now let's discuss the mutual fund list you referred to.


#1 --- all 3 and 5 year "returns" are going to be skewed heavily on the up side because we're coming off near depression like lows! It's easy to show big 3 and 5 year returns IF -- you were in at the bottom and that's your comp.


#2 --- If you've read this thread -- you'd understand that you can build your own mini mutual fund (if you have 25K or more to invest) and skip the fees etc which affect your return.


#3 --- People are naturally drawn towards large numbers and tend to invest in Mutual Funds with the largest returns "lately". History is not a guarantee of future performance. In other words the funds that show the largest returns today may be under performers going forward. For example. They might be heavily invested in Financials -- which went way south in '08 and '09 and have made huge comebacks… or they may be invested in home builders and ditto - they've made big comebacks. SO ----- You need to really look behind the curtain of any mutual fund to see what they're invested in and then think about whether or not that set of investments has seen their best days -- or is there room to expand going forward.

Do you remember when GOLD was "going to $2,000 an ounce?? I do… was just a few months ago…


The problem is not things going UP -- the problem is when the chi t hits the fan and things go DOWN and they go down far faster than they go up!


I have no problems with someone that wants to buy BitCoins -- or buy FaceBook - or whatever else they want to buy. But for INVESTING 102 -- there are appropriate investments or not appropriate investments… Lots of people made great money flipping houses -- lots of my friends got very rich during the "dot com" era… I personally got rich in "tech" -- a couple of times. But like I always say --- better lucky than smart. You (anyone) are lucky if they can catch a wave - ride it - and get off and ride into the sunset. MOST DO NOT… they catch the wave and it slams their ass on the beach.

If someone has plenty of extra money (whatever level that is for each person) and wants to play with this kind of stuff -- GREAT! But for MOST it's not appropriate and once burned they're twice shy and then they get to retirement age and have zippola. This thread is about how to lift people off their asses and have them actually have a nice retirement.

Hello, my name is "Disillusioned Investor",

I'm part of what I have heard referred to as an investor of the lost decade, only my lost decade lasted 15 years. I started investing in the stock market in 1997, and finally pulled the plug and went to 100% cash in the fall of 2011. I'm 47, my wife is 52, we don't have any kids, are debt free except for our mortgage (12 years left on a 2.9% 15 year fixed note) , and have a decent amount in our IRA and Roth IRA accounts and a nice nest egg in a taxable investment account. We were in mostly conservative asset classes for the early part and the late part of that period and got aggressive with equities during other periods. We gained most of our investment funds from additions, not growth, but we had times where we made a lot of money in the market, and we've had times (at least three) where we've lost our arse in the market. For a while my adviser was trying to build my wife and I a "dividend paying" asset base much like what Greg talks about in this thread. We also had a fairly large chunk in High Yield muni bond funds in late 2008...which while they kept their dividends in check, lost 35-40% of their net asset value.

We didn't bail then...like so many people did. We doubled down and got very aggressive and early 2009 treated us very well. By the end of 2009 we were on the plus side again and went back to the dividend paying plan that was directed by my adviser (A Merrill Lynch guy that I really like and trust).

My problem with that plan was the hunk just wasn't big enough to create the kind of income needed in retirement and the changes made chasing dividends often resulted in asset value losses. I can see the merit in that sort of a plan, I'm just not sure it fits our needs at this time.

Here's the deal, I'm in asset preservation mode. I'm winding down my working career, I don't want to have to go back and make what I have again if I loose it. Between our retirement accounts, real estate holdings, cash value life insurance, and cash in our investment accounts...we are pretty sure we can make do and retire (or slow way down anyway) very soon and spend the next 10-15 years really enjoying ourselves without going crazy. The hardest part will be accessing what's in the retirement accounts before we reach 59.5 years of age...and keeping what is in all of the investment accounts keeping up with inflation.

My partner is in his 70s and we've discussed this many times. I tell him how much I've enjoyed being out of the market and not having to worry about the next big drop. He's the polar opposite...when he's been out of the market for timing purposes, he can't sleep worrying that he's missing the next big bull market.

Being disillusioned like I am, I really have a hard time trusting the market anymore. I firmly believe that the institutional investors build opportunities into the market for themselves...and the rest of us are along for the ride. There have been WAY too many times the market has had a run like crazy for no reason...and just as many times where things have tanked when the fundamentals were there and even though one was doing everything they were supposed to, they lost their arse anyway. I don't like that feeling of no control anymore.

The reason I've been following this thread, and reading Greg's (and others) investment advise...is to try to find some sort of happy medium out there. I like Greg's theory of buying what you know...that makes a LOT of sense, especially since buying on fundamentals has been such a bust over my investing career. Don't get me wrong, I've made a LOT of money in the market...I've just lost a ton of money in the market more times than I feel I should have as well. I guess I'm a recovering investor...the time off has been very healing for me. Maybe I'll get back in some how, some way...maybe I won't.

I have enjoyed reading this thread though...and will continue to do so.

\Disillusioned investor...out...

Lance ----


You only loose money when you SELL… So what I'm saying is -- you're either into the wrong investments -- or you tend to pull the plug at the wrong time.

The reason I'm saying this - #1 - MANY people read these threads… so when I write - I write for "others" not just a single response…

The reason I preach investing the way I do - is that this is INVESTING 102 -- a beginners thread… it's not a "I have millions and do all manor of investing" thread. So buying what you know - understand - and TRUST to be there long term is to keep people from freaking out and selling at a loss when things aren't going so well. Rather - what they should be doing is putting steady money to work on a constant basis… which will have them adding more shares when prices are lower…

There's no way for anyone to respond to your post… because the details just aren't there - and they don't need to be and I'm not asking for them. Rather - what I'm seeing is a "boom and bust" investor (face value - without the details). Happy as a clam when the market is up -- poo faced when the market is normal or down. THAT is a sure fired way to loose your ass. My guess is that if you looked back at your actual stock investments - when you bought them - and did some quick calculations had you HELD them and reinvested the dividends - rather than going to cash or moving in and out… that you'd be far richer now.

Now --- another thing is in my humble (not really) opinion is that you're very near sighted. You're not ready for retirement -- or can't retire like you'd like to - and you've stopped investing because you're "nearing" retirement. REALLY? You going to die shortly? Or do you plan to live until what age? If you add the time until you can access your funds - 59.5 years old - and when you plan to be 6 feet under -- say another 30 years (89.5 ain't that old anymore!) seems to me you'll have a very very long horizon for the market to work for you and keep working for you.

See that's the problem -- INFLATION -- I've already been retired for 22 years (or 23 - I forget) -- and I'm just 60 -- and I plan to live a very good long time - and I plan to spend more as I age because there's a whole lot of stuff I've yet to do. Therefore my investments are paying me to play now - and growing over time - with rising dividend payouts - and capital growth… I DO NOT PLAN to suck. I PLAN to live well and keep it that way. Will my net worth go up and down over the next 30 years? Hell yes! Will my dividend payouts keep coming and keep me in the lifestyle to which I'm accustom? Yes - unless there's something like the zombie apocalypse which I can't control.

So --- I think your SALESMAN (called a broker) is making more money than you are moving you in and out of the market - and selling you inappropriate investments - and then calling you up and selling (churning) your accounts when it's easy to play on your fears.

Bonds are terrible investments and are only used as a small portion of your funds and should be used as TAX FREE MUNI'S when you already have a very high taxable income. Not sure why a guy would put a retirement account in bonds - except they don't really know much about investments… If you owned the bonds as TAX FREE MUNI'S to get current income without the additional income tax - then that is a different story… but we don't know your actual situation. IF you'd held the bonds until maturity - you would not have lost a single dime.. and you'd have been collecting the interest. Bonds shouldn't be bought for capital appreciation - they should only be bought for INCOME and "safety" IF == BIG IF == You plan to hold until maturity. BONDS SUCK OTHERWISE.

So here's my advice - and I'm not being critical nor am I making fun of you or anything of the kind….

I think you need to rethink your investment approach - and take charge of your own investments WHEN you think you can approach investing as what it is - INVESTING. When you understand that capital appreciation happens over time - and that at times you may be going backwards - but that over time you'll have gains. And when you understand that a balanced investment portfolio isn't a get rich quick scheme… and that the market doesn't go straight up day after day… and most importantly - that you understand your personal investing weaknesses. If you are the type that tends to panic at the least amount of "capital loss" (even if they're not realized) - then maybe no investment is suitable for you. But I believe that people can LEARN to change their ways and conquer their fears If they can learn to buy great companies and trust that over time they will be fine.

Learn that (let's just pick a company and make some sh t up) CHEVRON will go up and will go down - but that they pay you 3% every 3 months… and that even when the stock you bought at $120 is now at $100 - it's still paying you 3%…. and that you really don't have a loss unless you're stupid enough to sell… and that if you owned 100 shares at $120 and bought 100 more at $100 you'd now have 200 shares at $110… and you'd be making 4% because the dividend is being paid in dollars not percentages… and then 5 years go by and Chevron is trading at $130 and now paying 4% (on the current $130 price!) which raises your actual dividend to about 6% because your 3% calculation was based on the rate paid at the time you bought it. Period. When they raise the dividend - it's a raise and if you want to know what you're making in real terms you'd just have to do a bit of simple math.


In other words --- Chevron (CVX)in 2004 was paying 36.5 cent per share per quarter --- and today they are paying $1.00 per share per quarter. So if you'd bought and held back in 2004 -- and paid a whopping $47.70 per share -- and now you're 10 years later and they're paying you $4.00 a year to own their stock - that's almost 10% on your cost basis… and that's if you'd never re-invested the dividends (which everyone should be doing unless they're already retired!). Oh yeah -- and let's not forget that capital appreciation you're worried about --- it's (Chevron) only 237% over the last 10 years.

I don't know -- it all seems so boring to me…. but then again -- I'm just retired and running my race cars and building new hot rods and traveling all over the place in my Semi…

Yes - now I'm being a smart ass…. but it's also factual. Just saying'. Maybe you're broker ain't so smart after all.

Oh trust me Greg, you aren't telling me anything I haven't already heard before. I know that you started this thread to help newbies understand and get acquainted with investing in the market, but I can't help wonder if it can't help disillusioned investors as well.

I've tracked all of my investments in Quicken and I haven't put Quicken back on my home laptop since it's hard drive crashed last summer. When I get to work tomorrow I can give you some examples of equities that worked out well for us over the years and some that didn't even though I held them much longer than I should have. The tax free munis were not in my retirement accounts, they were in the taxable accounts and yes, they were used more to keep taxable income low than capital appreciation. They were supposed to be the "safe" investment for my more liquid assets. :bang: Dollar cost averaging, keeping on buying even during the 3 different bust periods we've been through, was really what saved us. I understand that theory very well, just as much as dividend reinvestment which we've also always done. Problem comes when there's no more income coming in to keep on pouring into the market during the down years.

My FA is not a pump and dump type of guy and if we moved in and out of certain stocks or asset classes at the wrong times, it was more likely at my doing than his. I'd say over all we were about 50/50 on moves working out, half real good, half bad timing, but there were other factors involved as well in those moves, not just trying to market time.

About 1 year after I cashed out, I plugged into a spreadsheet all of the investments I held at the time and updated the share prices. This would have been approximately August 2011 - August 2012. The total appreciation was about $10,000 and about half of that was in Apple, which I would have probably sold before then as it had had a huge run up during that period. I realize that dividends wouldn't have been included in that calculation but the dividends were pretty small scale on the grand scheme. I just used this exercise to try to see what I missed. I came away from the exercise thinking that the extra sleep I gained during the same time period more than made up for the gains I missed out on.

I think mentally, if I'm going to get back into the market, I'm going to have to ease back in and only with a set percentage of the overall. When I was in before, I had 90% or so of my liquid assets invested. It's very unnerving when your business is taking a dive and at the same time your net worth is taking a dive as the market crashes. Tie into that some untimely deaths of friends and family members at near the same time and it makes one step back and reevaluate exactly what is most important.

My wife and I have spent the last 20 some years working our tails off and saving and scrimping and making smart financial decisions at the cost of personal enjoyment. Everyone has to decide for themselves when enough is enough, and I don't know that anyone will ever really know. I know this though, I'm going to stop chasing every last dollar I can and start taking the time to spend with those I love and enjoying day to day. If I have to adjust my life style in order to accomplish that, I'm okay with that. I spent a lot of years with nothing, so I know how to live on very little if necessary.

I do realize that I need to do something to keep up with inflation though, and that's what I'm trying to figure out how to do while preserving capital at the same time.

Please don't take my posts here as an anti-Greg investment theory stance, I don't mean that in anyway whatsoever. I'm intrigued by the way you describe your investing and am thankful that you are so willing to share it with others. Much like Ron has helped me dial in the tuning on my car, I think it is very cool that you give back your knowledge free of charge to anyone that will listen. I'm just trying to figure out if there is a way to make it apply to my personal situation comfortably.

Lance --

I never took your post as anti anything… only that you were relating your personal investing experience and that you were gun shy by your own admission.

My response was to put into perspective what I SPECULATED may have brought you to your disillusionment with investing. I've heard 'em all before… I have many friends that have lost everything they got lucky (Microsoft millionaires as well as other "self made" friends) and made… only to plow into markets and investments they never understood.

#1 rule of investing -- Never buy into anything you don't really really understand. That means the tax implications for your particular situation. That means the losses. It means the economic conditions that might affect your investment over time, etc.

SO HERE'S THE TAKEAWAY FOR YOU PERSONALLY….


Go back and look at the names we've discussed here… and do a bit of research on when you might have purchased them (in other words - when you were putting money to work - not that you actually purchased these names) and get the charts working for you…. and see what you could have had in income from dividends -- and how much capital growth you'd have had with a buy and hold strategy.

I don't think there's a single looser - over time - in the names we've tossed out in the last 300 some odd posts. There are INAPPROPRIATE names for many people -- and I've always put in that caveat! High yield bonds - JNK - HYG - and Annaly Capital Management (NLY) are not buy and hold investments!! I've said this 100 times… and these are the types of investments that I mean when I say - you must UNDERSTAND your investments. They get killed in a rising interest rate environment!

With a well blended portfolio of dividend paying investments -- a guy should be able to get about 5% dividend (using current rates/investment costs)… which means it takes ONE MILLION DOLLARS -- to make $50,000 (Fifty thousand dollars) per year in "income". That will be taxed at 20% -- so a NET spendable income of $40,000….. not much is it! But here's the kicker -- you should also be almost debt free at retirement - and you should also be collecting Social Security (maybe 2K a month?) AND your capital should appreciate "on average" over time around 8 or 9%. That means about every 3rd year or so - you should be able to pull out 100K and use that to take the family to Hawaii -- or pay cash for a new car -- or "toy" -- or just to raise your standard of living - or do a small remodel. By the time a guy hits mid 70's -- he should just be kicking back and playing golf and shouldn't have any worries what-so-ever.

I don't care what people invest in… but they need to invest… they need to do realistic math… they need to understand that it's their debt that's killing them financially…and that TIME is the great multiplier of money… and that they can't afford to gamble. They need to INVEST, not gamble, in order to make up for lost time. Buying a lottery ticket isn't the answer to a comfortable retirement. Being a forward looking thinker and making a plan, and sticking to it. and understanding TIME - including time spent in retirement is the key. It's never too late to start…

By the way -- I'm not a guy that thinks "diversification" is the key to any of this. In all my investing life - I've never seen that work the way it's supposed to. In other words -- when the market sucks - so does real estate - so does your business you were counting on… when it's good - they're all good… when it's bad… they're all bad. THAT IS WHY WE NEED INCOME -- so you don't have to sell to get money to live on when things SUCK! If you're counting on the rental income each and every month to survive - the renter will stiff you and move in the middle of the night and steal all the appliances… or the roof needs repair - or the place needs paint… or the neighborhood goes to hell and the rental is half what you expected. Stocks will always be down IF you MUST sell to get some money. Your business will be in a depression when it's time to retire… But if you own the building - there's rental income… if you're invested in stocks that pay you to own them - then you have income - If you're paying attention to your investments - then you would have sold the house in the ****ty neighborhood and would have bought a duplex in a better neighborhood… and you wouldn't have spent every last nickel it created - because you'd KNOW that it's going to need paint - and a roof - and remodeling once in awhile. So what I'm saying is -- INVESTING is about a way of life -- of paying attention -- understanding -- planning -- not boxing yourself into a corner. It's not about getting lucky… it's about being smart, and diligent, and desire.

Again, just being devil's advocate here...but here's a look at this same scenario from my current view. Remember, I have no kids and our siblings have no kids...so no heirs at all to worry about leaving anything to.

Given that, say I take that same million dollars and put it in a CD or likewise investment and pull the same $50,000 a year out of it. That's 20 years minimum of cash flow without taking a single bit of risk. I'll be 67 years old by then, the wife even older and I'll be tired of enjoying my money by then as I've had the last 20 years of freedom with no worries.

BTW, my average ROI for the 15 years I was in the market, 4.5% before taxes. Were there mistakes made, sure...but there were also 3 major corrections during that 15 year period, none of them caused by any actions of mine. And we had plenty of good years as well with well more than 8-9% appreciation. My investment life timing has just sucked.

Like I said in my first post, the investor's lost decade.

I'm an accountant by nature, so I realize that one can make numbers spin just about anyway one wants to given different scenarios. You can make things appear rosier and I can make them appear worse, just by juggling things around. I'm trying to not play that game.

I really am trying to figure out a method by which I can keep up with inflation while incurring minimal risk at the same time. It's almost like I need to look at this as if I was already 67 years old yet I can't pull money out of my IRAs for another 12 years or so without a 10% penalty.

Keep in mind, we have other assets and incomes in place already as well. I'm mainly concerned about the hunk we have in our retirement accounts and taxable investment accounts.

I realize my situation is different and if you'd rather not discuss it in this thread, I understand. I have pretty much exhausted the normal people I would talk to things like this about and welcome a different perspective. I believe that things are different after 2008 and with no signs of QE ending anytime soon, I don't believe anyone knows what is coming around the bend. I do like to talk about it with those that are participating though.

Ordinarily I wouldn't say this -- but I have to be honest -- mostly because other people read this stuff and are trying to learn from this thread…

Some folks just plan to fail. I think I have a good understanding of why your investment plan hasn't worked out well for you.

Lance --


You'd do well by starting at page #1 --- and take a few pages per night --- and try to absorb some of the "info" that's been posted here. This entire thread is about how to THINK - What kinds of questions you should ask about your personal requirements etc…. it's never been about "Dear Abby - what should I personally do with my money". It's not about what stock to buy, despite many stocks used for examples. It's a beginners thread about "investing" in general. And while there are specific questions which require some discussion… Nobody can tell anyone else what's the right way or thing for them to invest in. Todd likes housing - another guy loves Tech - somebody else is young - and someone else is 5 years from retiring. What you will learn is that there are just some fundamentals here. Real basic stuff - that works "in general" - in good markets and bad.

Investing isn't about QE ending today or tomorrow - it isn't about what's going to happen in the future that nobody can predict…. that's why it's about a long term strategy that over time will have people INVEST in great companies - that pay them dividends - that buys more shares - that pays them ever more dividends and builds their nest egg with compounding. There are different strategies discussed for taxable vs non taxable accounts… again depending on the availability etc to the individual.

For investing principals in general - there should be no distinction between accounts or types of accounts --- a person's financial health and retirement depends on ALL OF THEIR RESOURCES…. combined. There's no separation when you're trying to figure out if you have enough to retire… there's just some basic principals about what types of investments are appropriate for a taxable account vs a non-taxable (or rather, tax deferred account - i.e., muni bonds shouldn't be inside an IRA/ROTH etc).

I think that for the people who have read and actually followed this thread and acted on their accounts… that it has for the most part - been productive for them. People are eager to learn and discuss investing "in general" and then act as they see fit for themselves. It's just not a Dear Abbey please help me thread and I'm not going to engage in that type of discussion.

Lance ---


Here's one more "lesson"… about long term "stock market" returns. Note that you said you went to cash in 2011… that means you missed 10% return in 2012. The compounding is done in spikes… up 10 -- down 5 -- up 6 -- down 4 -- down 3 -- up 9. If you're out in the up markets -- then you've completely missed the "total" return for the period. That's why market timing doesn't work. It only works to make you feel good when you can walk around saying "I got out of the market before "X"…. The problem is that you'll also miss out on the next leg up. Investing is about feeling CONFIDENT that over time you're doing what you should be doing. That means then that you have to be invested in stuff that you can be confident in. Whatever that is. If you're not a good stock picker - most are not - then the least a guy should do is go with the best name in a category and trust that they're well run and will be around when you need them. It's not rocket science. A guy doesn't even have to be very smart. It's enough just to know the names of the best run companies and let time do it's thing. It's when people try to out smart the market that they get crushed.





Average Stock Market Return per year: Last 5, 10, 20 ... Years
The long-term, more than 100-year performance: Since 1900 (end-of-year 1899), through 2012, I estimate the average total return/year of the DJIA (Dow Jones Industrial Average) was approximately 9.4% -- 4.8% in price appreciation, plus approx 4.6% in dividends. (Some numbers may not add up due to rounding.)
Since 1929 (year-end 1928 -- i.e., before the crash), through 2012, the return was 8.8% (4.6%, plus 4.2%) [note: see The 1929 Stock Market Crash]
Since end-of-year 1932 (i.e., after the crash): 11.1% (7.0%, plus 4.2%)
The average annual stock market return for the past twenty-five calendar years (since 1987) was 10.6% (7.9%, plus 2.7%) The market was up over 40% before the October 19, "Black Monday," crash. After a significant recovery, the Dow actually closed up 6% for the year.
Stock market returns for the last 20 years (since 1992): 9.6% (7.1%, plus 2.4%) In the middle of one of the longest bull markets in history. [see below for additional 20-year periods]
Returns since 1999 (13 years) -- the dot-com bubble year-end peak: 3.4% (1.0%, plus 2.4%).
Returns for the last 10 years (since 2002): 7.2% (4.6%, plus 2.6%) Year-end trough after the dot-com bubble. [see below for additional 10-year periods]
For the last 5 years (since 2007), 2.6% (-0.2%, plus 2.8%) Year-end peak of housing bubble.
Since 2008 year-end trough after the housing bubble: 13.4% (10.5%, plus 2.9%)
For 2012 the stock market (Dow/DJIA) total return was 10.1% (7.3% plus 2.9%)
2012 year-end dividend yield was 2.7%

As long as I'm on a roll….. Some folks think real estate is a "sure fired" investment…. so let's compare the ups and downs of the stock market vs the housing market!!





Stock market last 100 years…. Oh to be certain there are periods of not much growth -- thus the dividend!!! Get paid to wait!!




http://i919.photobucket.com/albums/a...os/file-50.jpg







And then the sure fired long term investment in housing….. the last 100 years…






http://i919.photobucket.com/albums/a...os/file-49.png

And not to be left out -- the 100 year chart of BOND yields vs the yield on equities….


BONDS YIELDS IN BLUE…. EQUITIES IN RED. 56 years of equities beating the bonds and 56 years of bonds beating equities. The difference will be is GROWTH in capital - which this chart does not attempt to show.






http://i919.photobucket.com/albums/a...os/file-51.png

Now let's do the MOST REVEALING comparison….. REMEMBER that this is a comparison of what just one hundred dollars would be worth…. a lousy 100 bucks…



LOOK AT THE COMPOUNDED RETURN COLUMN!!!! That's where there is a serious ass kicking being done ---


Not to count out the AVERAGES shown by dated periods at the bottom of the page.


Sorry - I could not paste this page as a picture - so you'll just have to click the link!




http://pages.stern.nyu.edu/~%20adamo...histretSP.html

For those unwilling to look at the above link…. what it showed was that $100 stinky dollars (a lot of money in 1928) invested in the S&P 500 (a basket of stocks you can now buy - traded as the SPY) - netted you $193,219 in 2012

$100 invested over the same period in Treasury Bills -- netted you a whopping $1971.

$100 invested over the same period in 10 year Treasury bonds netted a whopping $6926

Those are COMPOUNDED VALUES !!!

EVER HEAR ME SAY -- BONDS SUCK??? LOL

Here's the AVERAGE RATE OF RETURN of the S&P 500 over three different periods of time all ending in 2012

1928-2012 11.26%

1962-2012 11.10%

2002-2012 8.71%


Was there historical blow ups during these periods? Hell yes! And you got killed if you sold in those down markets! But if you rode it out - you were richly rewarded compared to the other "SAFE" investments weren't you… and that's my point. The market doesn't go up like an elevator - well actually it does because elevators can stop along the way and so does the market…

The reason I love DIVIDEND stocks is because you can still live during those down periods - because the stocks are still spinning off income! In retirement you're not supposed to draw down your capital… you should be able to live off the income produced. Who knows how long you're going to live in retirement? Who can predict this? If you plan to live 20 years (85 years old?) and you planned to be out of money by then -- well -- dude! You suck! Because it's going to be a pretty nasty time for you when you're 86 and you're out of money!

Anybody here tell me what a car cost 20 years ago? What your property taxes where 20 years ago? What clothes cost back then?

I don't know what they were - but I can tell you for certain that they cost far less then than they do today. So your plan better be for income GROWTH -- or each year you're falling further behind.

My little buddy Pierre is 78 years old -- he just bought a new hot rod project and had a new shop built… so I wouldn't be so quick to say -- "Well - I probably won't be doing much by then". BS!!! I was parked next to a guy at Thunderhill that was 79 years old and he was out there on the track with his Mustang track car!

Again -- my point is -- better plan for success… and plan to live decently… and plan to live and enjoy life FAR LONGER than you may live… because I'd rather go out of this world on the big end than the short end.

Go back to that Chevron dividend just used as an example… they used to pay 36.5 cents per quarter -- now they're paying $1.00 per quarter. I'd say that goes a long ways towards helping me pay my bills in the future because their payout (in this example) is growing.

Now -- a guy can do all kinds of math --- and just using Chevron (a name I just picked for zero reason what so ever) as an example might show that inflation is more than the payout growth of their dividend… OKAY… I'm just trying to make some Investing 102 points here - again - about the way we all need to THINK about our futures - and our investments - and the length of time we're going to have for our investments to do "okay". It's not "I bought X company yesterday and they're down .50 a share today - so I suck as an investor"…. Okay -- maybe you're timing is HORRIBLE… but give those picks some time… And if you've followed along here and bought GREAT COMPANIES… not the ones the store clerk told you was the hot stock of the day… my bet is that 7 of the 10 names you bought will be ahead -- a couple of them WAY ahead - a couple of them just "okay" and a couple will suck. But you will be ahead overall -- nicely -- and your dividend payouts will be more than they were when you bought.

END OF STORY : > )

Just wanted to chime in here and thank Lance and Greg for their recent posts. The explanations on the two sides helps understand the different ways of thought process.

Thanks Fella's.

A question was asked of me about "when do I sell"….


That's a swirling bowl of confusion and never can be answered because it all "depends". It depends on whether or not you think the fundamentals of the company have changed - and not to your liking. Therefore - you're no longer CONFIDENT in owning the shares. That would be a sell signal for me.

If you own INTEREST RATE SENSITIVE shares - such as JNK - HYG - NLY…. and you think or see interest rates are going UP -- then that would be a sell signal for those shares that would be taken to the woodshed in that environment.

I don't do --- "I'm down 5% so I should sell". I don't do "the market is down so I'm going to sell everything and get out". I would do that if I thought the world was going to hell in a hand basket… but I don't think that way. To me - that would be akin to saying -- Oh! The Democrats have control of congress so the USofA is down the tubes… or vice versa. The USofA has withstood the test of time.. and will do "fine" over time regardless of who or who isn't running things.

Ditto with the market…. I've just put up charts that show real numbers over long periods of time - to PROVE that over time your investments are going to do just fine.

If you buy weird stuff - and if you don't know what you're doing and just randomly take someones advice to buy such and such because of blah blah blah --- then you'll take what they give you - because you don't know why you own it - and you won't really be connected to the stock in any way other than you bought it. I've never preached that. Conversely what I've said would help you make a buying decision is to buy companies you're familiar with - where you shop - or in an industry you're involved with etc.

Then I've always said to do the chart comparison after you've thought about your choice --- look at the top 3 or 4 names in the same industry and compare their TOTAL RETURN charts -- and their dividends etc. You can pick the loser in the top 5!! If you don't look and do a bit of research. Choosing SEARS just because it's a name you know - will probably not do your portfolio any good. Now -- if you want to bet that they'll make a comeback -- okay that's a different issue. It's not where I'd choose to invest but my point is - everyone needs to know why and what they're buying ---- and if the "bet" doesn't work out - then you also need to be able to sell and move on.

NOBODY is going to get it 100% right! EVER! It doesn't happen. I've never been able to make it happen! And you'll find that the "winners" and "losers" rotate! Your big winner this year may be a drag next year… that doesn't mean you just sell it… you "revisit" it and see why you own it - and how it fits your current portfolio - and is it the same company now as it was then etc. Go back to the charts and compare it's performance against like businesses. Sometimes they march in lock step - sometimes they don't - groups go in and out of favor -- That's why you diversify within your investments! Cars can be hot and housing could be hot this year - or for 2 years -- and then flat line for 3 or 5 years… and something else goes gangbusters.

One thing I try to ask myself is "if I sold this" what else would I be SURE of that is going to be better… sometimes I have that answer and sometimes I don't -- if I don't then I usually tend to just let it ride. Same thing with taking some gains off the table --- if I have a big winner -- then sometimes I'll just trim off some of the gain and reinvest it in something else… There's no hard and fast rule to tell you what to do.

To further support the hold or long term strategy, as if it needs any more support, is my stake in OXY. Spring 2012 when I bought it it was doing fine but quickly fell and fell hard. I've simply held on to it and while it's not back in the green yet, it's dang close. The dividends it was paying were reinvested of course and those have started to really help me get back to the positive side. I need to go look at it and see if it gets to the point where my initial investment is still down but overall I'm positive because of the dividend payments and their growth. Fun times!

Not to pick on you but I'd like to add some perspective.

One of life's greatest values is helping others. As you grow older, I hope you find some people and charities that you would be happy to leave your stakes to at the end of the day.

Wouldn't it be great to spend a chunk of your retirement helping others with your time and money? That's one of my long term goals.

I don't see how a CD is going to be a sufficient game plan. Right now you are lucky to get 1%. That's $10,000 on $1,000,000. When interest rates go up, so will the returns on CD's but inflation will kick your butt.

The bottom line is you must put your money to work if you plan to become financially independent. There will be plenty of springs of opportunity, you just have to keep your nose in the wind.

Net Asset Value…How do we as investors put an actual value on the companies we own, want to own, or want to sell?

I just went through the exercise of updating a financial statement for my partner and something interesting came up. A couple of his business interests are 2 real estate partnerships he bought into in the mid 80s. Of the 9 partnerships he was in at the time, only 2 of them survived. One is a shopping center and the other is a mobile home park.

The shopping center has finally turned the corner and just recently finished paying it’s loan off and the mobile home park is still struggling, but hasn't had a cash call in many years now.

The question came up of how to value the ownership stake in each of these business partnerships on his financial statement. Do you use the cost basis, what the latest partnership balance sheet shows for owner equity, or a multiple of the earnings the partnership pays out each quarter?

Think of the shares of stock each of you have bought in certain companies in the same way. Basically you are in partnerships with the other owners of the company. You have a cost basis in the shares, the stock price dictates the asset value (market value) of the company, and the dividend that is paid out is the income from the company.

The accountant in me wanted to use the balance sheet number, add up the assets, subtract out the liabilities and divide what was left by ownership shares and use that number.

The cost basis really only comes into play after the asset has been sold, used to figure out the tax liability on the sale. It is not typically representative of the net asset value. It is used to figure the total ROI though.

The earnings multiple seemed to be the logical answer. Have any of you ever looked at PE ratios and multiples when trying to put a value on a company you own? Somewhere between 5 and 10 times earnings is considered the “standard” when valuing a privately held company (PE ratios are typically MUCH higher on publicly traded companies). So you take the dividend\distribution said partnership is paying, multiply it by 10, divide by ownership shares and boom, there’s your net asset value…right?

That is what my partner’s financial adviser wanted to use in this instance for the shopping center. It was a justifiable value that looked pretty good on paper too. The thing is, the mobile home park in the scenario above…pays a tiny dividend\distribution. When asked how to put a value on it, the FA said to leave it like it was…using the balance sheet method like I always had in the past. That was a justifiable value just as well, and looked much better on paper than the earnings multiple. The FA has no stake in these assets, he is just helping with the overall picture. The financial statement is prepared to give to the banks that hold notes held by my partner as part of the reporting process. My point is, one can use numbers and how they are arranged to make just about any point they want to on paper.

In reality, what your ownership in this company is really worth…is what someone else is willing to pay for it. In a publicly traded company, the market determines that value. In a privately held company…the only way to tell for sure is to put it up for sale.

In the case of the shopping center mentioned above, the balance sheet shows asset values of close to 8 million dollars. They were paying a dividend\distribution of $800,000 a year before the loan was paid off, now they should be able to pay a dividend\distribution of 1.7 million a year. Ten times earnings would put the company valued at 17 million dollars, right?

Here’s the kicker though. Is the property pumping out great income right now? Sure…after 30 some years of losses, then partial income, then finally getting on the right track and producing…sure it’s paying out good income. Problem is…what do you do with the asset now? If you were to sell the company, the assets are almost completely depreciated…that means the first thing you have to do is recapture all of that depreciation…at regular income tax rates. Then everything above that after your initial cost basis is deducted…is subject to capital gains income tax as well. Not too mention that all of the dividends\distributions that you have been collecting over the past few years have also been taxed as regular income… If one wants to really figure the total ROI over the years accurately, the cost of divesting the asset HAS to be figured into the equation.

So “just don’t sell it” is the answer. Okay, you leave it in the account\trust it is sitting in and you pass away. Anyone check to see what Estate Tax rates are these days? Before that asset gets transferred to your heirs, if the estate is of any size at all, good old Uncle Sam is going to take a fairly significant portion of it. And in most cases, the asset is going to have to be sold at whatever market value is at the time…to raise cash to pay the estate taxes.

My reason for bringing this up in this thread is that it is my belief that one must pay attention to the net asset value of any investment they own. Anything that can affect that value beyond the owners control must be paid attention to by the owner. And there are a lot of things that can affect that net asset value that are beyond the owner’s control.

The 1986 Real Estate tax law changed the way commercial real estate property was depreciated and set that whole industry on it’s ear and affected not only the whole economy, but directly the savings and loan industry and the owners of commercial property across the country. In 2008, the failure of the bond insurance companies (AIG, Lehman, etc) due to involvement in bad CDOs and the resulting meltdown took down the net asset values of everyone’s stock portfolio.

Say one of the good companies you own, good dividend paying company…has trouble making money for a long period for some reason out of their control. See the 2008 recession… Say they have to cut their dividend rate because of cash flow deficits. First thing that happens is their net asset value drops as there are more sellers of the stock than there are buyers. Don’t think for a second that ANY company out there won’t pay attention to their share price dropping and resort to practices that are not in their normal realm to try to prop their share prices back up again. Sometimes these practices work other times they only make things worse (See JCP for one example). You as a shareholder are in the meantime…just along for the ride. You have a choice to make, continue to hold the company even with the reduced dividend rate and hope it comes back, or sell it at a loss and try again with another company. Neither are very good options…and both directly affect the total ROI figure negatively.

Another factor is the “the stock is only worth what someone else is willing to pay for it” scenario. If the large institutional investors decide for whatever reason that the company you own doesn't fit in their portfolio for whatever reason, they can drive the price of a stock down just by flooding the market with sell orders. If there aren't enough other buyers out there to buy up those shares, the law of supply and demand kicks in and the share price goes down. So, what do you do…hold it and hope it turns around? Or sell and cut your losses and try again somewhere else.

I firmly believe that the large institutional investors can drive a market one direction or the other strictly to build opportunities in for them to make more money on the back side. Retail investors are just along for the ride. Don't get me wrong here, this works both ways. I've been on the upside of these deals as well. Sometimes you just catch a wave and ride it...nothing much more fun than when it's going your way. But on paper, neither way makes much sense or is justifiable.

The real estate books I have read stress two important points regarding the issues you raise:

1) Once you're IN to investment real estate, the most effective strategy is to be IN for life. Don't sell the asset unless it's for a like kind exchange. Then you can avoid capital gains taxes and depreciation recapture.

2) You should divide your assets up early among your heirs in trusts, sooner rather than later while the value of the asset is less. The trustees will own the asset from here on out, but you retain control thus keeping the distributions flowing to you.

After reading all of this.... I can't for the life of me figure out what your point is.

Maybe it's the accountant in me...but I never go into an investment without looking at what the ramifications will be if or when I decide to get back out of the investment.

I would never go into a simple partnership without a buy\sell agreement in place deciding how to split the partnership up later if things go bad...for instance. Stuff happens...

The point I was trying to make above was that to accurately figure the total return on an investment, the costs of getting out of the investment will eventually need to be calculated in. That's all.

The only two things that are certain in life are death and taxes, one can't be avoided, the other is getting harder and harder to avoid and must be accounted for.

You don't invest to figure out taxes. You invest to make money. When you are successful and make some money. You pay taxes.

Here's the deal. You WANT to be in the maximum tax bracket. The more taxes you pay, means the more money you made.

The only people that actually discuss taxes are those that have spent their gains
Without providing for the taxes. That's a separate issue.

My income tax form was 184 pages long last year. I NEVER complain about having to pay taxes.

Regarding figures....


Old saying is: Figures lie... And liars figure.



Anyone can crunch numbers a bazillion ways. Investing is about buying something that makes you money. Either as a gain long term... Short term... Or pays you income (rent or interest or dividends).

Having inheritance taxes is a good thing... It means your investments made you a millionaire. Get over it. The recipients of your good fortune will be more than happy to get the free net (after taxes) that you left them. You'll be dead and won't give a damn and have little use for the money you made.

Their isn't really an inheritance tax issue for married couples until your net worth exceeds 10 MILLION. If you're that successful. Get over it. You don't really have any problems the attorneys and accountants can't solve.

Not investing due to tax consequence is like not exercising/dieting so you don't have to buy new cloths. I call these "Good Problems".

I do agree that you must always look at the REAL numbers and exit strategy to take full advantage.

Good one Todd. Nothing ventured, nothing gained.

I'm soaking all this in. I'm getting a better and better grip on all this. Got my Schwab account opened up this year and started a pension fund for my employees. At 47, better late than never (although i started at 31 and got bad advice and paid more attention to my company than my "growable" asset/income base).

Greg, i thank you yet again for bring the "complex" down to simplicity. My brain tends to over complicate everything, in other words "KISS" keep it simple stupid...

I never meant to suggest that one should not invest to make money...just because you'll have to pay taxes on the gain. What I was trying to get at is the result of whatever happens at the end of the investment should be figured into the total ROI.

The other part of my post was in regards to how to figure out the value of an investment, any investment. And what really drives the value of said investment up or down?

I was mistaken on what I was thinking about Estate Taxes. For some reason I forgot that the Tax Act of 2012 extended the 5 million dollar exemption on estates. For a while there it was looking like it was going to revert back to 1 million dollars. That takes Estate Taxes out of the question for the most part.

So how do you select your stocks in a market like this?

I have about 20K of dead money in old 401K that I am planning on rolling to to a investing 102 type of IRA but after a solid week of research in my spare time I am lost. Everything I look at has a great 5yr track record. Most are at or close to the all time highs. I know you should not try to time the market but should I try to wait for at lease a little pull back?

I so wish I knew all this 10 years ago. I had a small porfolio owned about 6-7 stocks. I don't even remember what they all were but I do remember having $3000 each in Exxon, Amazon , and Apple :shakehead: I didn't even know what I was doing just coppying from advice from a guy at work. I sold it all in 6 months happy I had made almost a grand.

Joe. - there's never the perfect time. And if you've read this thread you'd know about the evil little man that takes the market down 15 minutes after you've just bought. You can count on that happening!!


Here's the real deal though. Take a stock that's been around for awhile. Let's use
Exxon (XOM).... Hit up google finance and explode the chart to max... That squiggly line is a zillion ups and downs... And that big dip there in '08 was this last "Great Recession" ---- that was the time to buy in anyone that can read this lifetime.... But disregard that and what I want you to see is that regardless of when you bought in the last 30 years... It's higher than when you bought. That's the beauty of time - and this time includes the time you're going to spend in retirement! So how many years until you retire.... And then how many years do you plan to live in retirement? If it's more than 5.... Just get in and start collecting dividends.

It's like waiting for the next greatest tv to get bigger and cheaper. If you're waiting for that you're not enjoying watching shows on a killer tv right now... You'd just be missing out.

When I read your posts --- what I get from you --- is that you're thinking way too much. You're TRYING to make investing complicated. It is NOT.


10 million for a married couple -- since in most states the "estate" is split evenly right down the middle… each has the ability to do a pass through of 5 million… The problem comes with the total gets passed down to the next generation. And then that's when trusts come into play. Again --- this is NOT complicated and if you have that kind of money then that's what lawyers are for… A person doesn't have to know about it or lay around thinking about it - you just take the issue to the proper people - and they figure it all out and give you some simple options. Most people don't have an inheritance tax issue.


Investing is not about taxes -- it's not about inheritance - it's not complicated… it IS about putting money into investments (whatever that choice is) as early and often as a person can… and allowing time to compound the money. Trying to avoid this - or plan down the road for all the what if's is a complete waste of time. By the time you're rich and living off your investments -- the rules will have changed twice or more anyway…

100% error free post

OCD is hard to live with, trust me on this. ;)

By the way -- not picking on you or arguing or anything of the kind --- BUT LOTS AND LOTS of people read these posts…. and what this thread is about is SIMPLICITY in a simple easy to understand investment approach. As people get more money... then... by that time they will understand the "market" and will actually have enough that perhaps they'll be looking to diversify into other types of investments -- other as in -- rental income properties - or stocks etc.
That's an entirely different issue. Most folks aren't there yet… what I'm trying to do is to get them there… without over thinking it… or making it scary… etc.

Some folks that started to soak this all in back when the thread was just beginning (THANKS WSSix for starting it in the first place!!) -- already have seen what this simple easy to understand approach does for them. They've actually even had a couple of "dips" in the market and have also seen that there was no need to "cash out" just because their stocks were down a couple bucks a share… and in fact -- some even added to their positions during the dips -- and now are feeling quite "savvy" having done so!!


I understand where you're coming from Lance…. and everyone has their own situation… there's more to investing than there is to making horsepower… but this thread is about just getting started and learning some real basic "walk before you run" ideas about investing.

If I shared all the investments I'm in -- and all the tax implications - and all the inheritance and trust stuff I've got going on… or we went into detail on every single persons issues --- NOBOBY would get started at all… AND THAT WOULD BE THE BIGGEST MISTAKE OF THEIR LIVES….

wow, i am grateful to have read alot of this thread but i still feel like i dont know the first thing i should do about my situation.i know i need to save and get any money i have to work for me.i am sure alot of readers are in my shoes but how does a 47 yr old guy who has no debt except for a mortgage,married,2 kids(1 getting ready to go off to school and 1 still in diapers,makes 90k+(1 income currently),with no savings possibly figure out a way to get ahead.ive been employed my whole life but can never get ahead.now that im married its impossible to save a dime.i was out of work this yr for the first time in my life when i parted ways with a business partner who screwed me out of 6 yrs of my life with nothin to show for it and i had just enough in savings to get by until i landed a new job.again,i should be thankful i had some money to make it by and i landed a job making 20k more.yippee!!! you would think with no debt it would be easy but it seems any money saved gets taken for some emergency .i guess i should be grateful that i have savings to spend on things like house and auto repairs that are musts but life is running out and the future seems bleak and i dont want to work till im dead.i live a humble life and do not live beyond my means,.i dont drink ,smoke or gamble, so where does it all go?maybe gregweld could offer some advice.

Sorry that there's not much advice to give here… except that if you don't have any left over money each month to SAVE --- then you indeed ARE living above your means. That doesn't come out right --- and isn't meant to embarrass or put you down… but many people make far less and live on far less… (not saying they're saving anything either!).

I do have a best friend -- he and his wife NEVER made 100K COMBINED - and they retired millionaires. They saved 30+% of their salaries beginning with their very first paychecks and never stopped saving. The years went by and the money compounded a few times. They're now enjoying their travel trailer and heading down to sun country like typical snowbirds.

Only since you mentioned my name --- and I realize that I contribute a lot in this thread (as far as post count goes) but I don't do Dear Abbey… I'm not a personal financial planner… I just post in here like I do about cars etc… I help when I can with very general information. Trying to fix your finances so you can save is not something I can do…. BUT there are financial planners that you should seek out and have some discussions with. Many are free of charge for the first visit or two… and perhaps they can take a look at what you've got going on and may offer some insight. :thumbsup:

When I was a senior in high school, I did COE I think it was called, basically I went to school a half day and worked the other half day. One of the classes I took to be in this program required us to bring our paycheck stubs in and keep a budget accounting for every single cent of that paycheck...for our whole senior year!

Ever since then, I have kept very good track of my finances...and it has been invaluable to our savings. If you don't know exactly where your money is going, you won't know how or where to slow it down.

Not sure if you have ever done a budget 66Fury, or if you keep your finances on your computer...but Quicken is a GREAT tool for this and is pretty cheap and easy to run. I tell people all the time how much this exercise back in high school helped me to manage my finances. Especially when it came time to get "creative" with my bookkeeping if you get my drift... :whistling: Could you imagine telling your high school teacher where every dollar you spent for the whole year went? :_paranoid

thanks for the replies and i didnt mean for anyone to fix my problems. given my situation i was curious to where i could start to build a financial future.i hated to call out gregweld on this,sorry to put you on the spot.i know people live on far less and manage to save more but even living my simple life the everyday things that are daily needs are so damn expensive that im stuck.i know people do it ,i just dont know how.i guess my family could go without food and clothes and we could walk everywhere,turn off a/c ,read by candles and so on and so on but i dont think those are the things that others have done to get ahead.every little bit helps and i do watch every dime as im putting it in the hand of the line of people with their hand out taking it from me.ive worked hard all my life and have nothing in the way of real savings and cant figure how others do it.im not so worried about my future ,i want to make sure i leave something to my 2 yr old before i die.