Investing 102

[GregWeld]

So here I am -- even on Xmas Eve - reading finance stuff.... and watching TV with the other eye -- and trying to keep Stella off my computer...



So... many times you've heard me state that money competes -- and asset classes compete for money -- and the same money moves around always in competition for trying to make the money "work". Gotta keep them employees cranking day and night, right?!?! No days off! No slackers! Some need retraining... some are doing fine - some are stellar...


This "comment" made me laugh --- because it's absolutely true!


"It has become clearer that 2013 for the U.S. equity markets was all about where can I place my money to make a decent return, and I think a lot of people ended up chasing the market and pushing it higher. It was the least worst house on a bad block," said Robert Pavlik, chief market strategist at Banyan Partners, contrasting the U.S. market to those in Asia, Europe and emerging markets.

"And, when interest rates started to tick up on Treasuries, equities seemed like the only game in town. That and the fact that the Fed continues to print money and provide a low cost of capital environment for corporate America," Pavlik added.




Money CHASES "return" ---- and that's what I've been saying about watching rising interest rates - because there's a "place" where rates on "X" will be good enough for people to sell "Y" and buy "X" and that's what you need to be heads up about. I don't know what that looks like -- but the "SMART MONEY" will chase returns. They have computer programs that do all the calculations -- and there's an axis point that causes the money to move from one type of asset to another -- with taxes etc factored in.

The thing is -- we look at TOTAL RETURN -- well --- okay -- but total return has to be GROWTH in our share price AND a dividend. Typically the lowest total return stocks will get hit first... because the "smart money" moves out to raise capital -- and then they buy whatever is the next thing. But then what happens is -- as the share prices go down --- what happens to the dividend??? The dividend is paid as a dollar amount -- it is NOT paid as a percentage.... so as the share price drops -- the PERCENTAGE that dividend represents goes UP... Making competition for the next new thing that WAS higher...

So guys like me BUY MORE when the price goes down -- we're not first on the spot -- ya got to pick your spots -- but you build a cash position and you take the opportunity when presented. So it looks like this ---- Let's just say Coke (KO) at current price pays 3% === and the price drops per share 10% --- now that dividend is 4% !! And so on.



To calculate the percentage of dividend a stock pays -- you divided the ANNUAL DIVIDEND by the current share price.


$1.00 annual dividend / share price of $10.00 = 10%

So if the share price dropped 10% to $9.00

$1.00 annual dividend / share price of $9.00 = 11%


Of course what TIME gives us is that perhaps you bought a year ago and the shares have already gained 10% in price -- so a small drop doesn't mean much -- it's still paying that dividend.... but if it drops 10 or 15% below your original cost - that's when you want to start to look at buying some more of it. You don't double down -- you just chip away. All the time making a BETTER % dividend on your new purchases.