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.
|