Quote:
Originally Posted by 68 stang
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?