Investing 102

[pw2006]

My OCD probably started when I was 12 years old drooling over cars in Super Chevy magazine. I soon came up with a plan, got my first job when I was 13, bought a junked 71 Nova that year and rebuilt the entire car in our barn over the next 3 years. I paid cash for the car, bought parts after I saved enough money and did nearly all the work myself (except when my dad heard me cussing and throwing tools, he would calmly come in, help me fix whatever I was stuck on and tell me to ask him for help if I get stuck again, then he would leave). I had it ready on my 16th birthday and man was I proud of that car...but I digress.

Sounds like you are heading in the right direction. I do all of my own investing, watch CNBC, read financial magazines/books, joined motley fool years ago and have some close friends that I discuss the market/stocks with. I hate debt. I maintain a net worth spreadsheet that also includes my annual financial targets/goals and a 10 year forecast. I still update it weekly(except when I am on vacation). Yes, I have OCD, especially when it comes to family, money and cars. We also try to stretch our money as far as possible by searching for deals on quality items and are not shy about using coupons/discount codes whenever possible.

Nowdays, whenever I hire a new grad, I give them the following advice...max your 401k and ESPP contributions, save a portion of any bonus received and target some of that bonus money for fun, establish a budget that looks out at least a year and build an emergency savings account with ~6mths of expenses. Find a good doctor and pay him a visit each year, being healthy has a very positive impact on net worth.

If you haven't opened a brokerage account, you should look into Schwab. They have a lot tools (online and people) to get you started without any sales pressure. They also offer free seminars to customers (investing 101, intro to options, adv option strategies, etc) that are pretty good. Since Christmas is around the corner, here are a few books that you might find interesting: Warren Buffet's biography, The Millionaire Next Door and The Richest Man In Babylon. So many ways to spend it, so few to make it. I'm sure others will pipe in, but that is my 2 cents.

[RECOVERY ROOM]

Real Estate and stocks.....there all going to go up if you can hold out to see it happen. Find a good broker and have a sit down with them.....Ask around and see who some of your friends are using. Mr. Weld will chime in on this, Listen.

[ErikLS2]

I think if you have a good sense of the psychology of people you can be quite successful. Remember when the first huge brick cell phones appeared? Lots of folks were thinking "who needs a phone with them wherever they go?" Well, who doesn't have a cell phone now? When everyone started getting them Qualcomm stock was up over 2000% in one year, 1998 or 99 I think. There's an opportunity like that out there right now, you just have to find it. There are these cycles where almost everyone in society has to have something and bubbles happen. It happened with computers and cell phones and houses. What's it going to happen with next? Tablets? Those goofy new running shoes? Alternative energy? Cloud computing? Just looking around you at society everyday can tell you a lot about what to invest in if you really look and think outside the box. Of course, there were those that bet on Betamax, HD-DVD and so on so you can lose too.

[SWAPMEETCRAZY]

Originally Posted by ErikLS2

I think if you have a good sense of the psychology of people you can be quite successful. Remember when the first huge brick cell phones appeared? Lots of folks were thinking "who needs a phone with them wherever they go?" Well, who doesn't have a cell phone now? When everyone started getting them Qualcomm stock was up over 2000% in one year, 1998 or 99 I think. There's an opportunity like that out there right now, you just have to find it. There are these cycles where almost everyone in society has to have something and bubbles happen. It happened with computers and cell phones and houses. What's it going to happen with next? Tablets? Those goofy new running shoes? Alternative energy? Cloud computing? Just looking around you at society everyday can tell you a lot about what to invest in if you really look and think outside the box. Of course, there were those that bet on Betamax, HD-DVD and so on so you can lose too.

Erik--should i sell my PAGER business??........lol...........jim.....^^^^very true

[GregWeld]

Okay -- only because Tracy said I had to chime in -- I will do as I'm told.


So -- this answer is one that I say to you -- well.... it all "depends". So without writing a book -- let's take a real BASIC look at savings.

A person needs to think of savings as various BUCKETS of money.

A bucket of money needs to be for "emergencies" -- and this bucket - just like the other buckets we'll get to - needs to be 'adjusted' to meet the needs of the owner. I don't need an emergency bucket. I have plenty of money. Most need some kind of "quick and easy to get to money" -- that needs to be taken care of first. Whether it's $500 or $5000... is up to you. This really needs to be funded by the people that can afford it the least - i.e., the guy with maxed out credit cards!

Another bucket is the retirement bucket.... you seem to be working on that. BTW -- Don't be afraid to put more into this bucket. You do not need to be limited to the 15% you're doing at work. The only thing you're doing to fund more than your limits is that you're putting in AFTER TAX money. Dude - when you retire - and you're all set for life - you won't give a damn what you're living on - the point is that you will have it! So max your workplace and then see if you qualify for a ROTH IRA... which is after tax savings that comes OUT tax free...

THEN -- you really asked about INVESTMENTS.... again - this depends - real estate is ILLIQUID... so unless you have a bunch of dough and are just looking to diversify - fugedaboudit. If you want some liquidity -- with GROWTH in your capital - and get paid to "wait" - get yourself a Schwab account - or some other discount broker - and buy yourself some big cap dividend paying stocks. The rule of investing is to never put more than 5% of your TOTAL INVESTABLE MONEY (all of your investable money not just what's in this particular account!) into ONE investment. That way - if you lost it all (all of one investment) you're not hurt. Pigs get fat - hogs get slaughtered. Ask the builders that loaded up on dirt before the real estate crash - because they ain't makin' any more of it they'd tell ya! Dumbasses...

I'd buy STOCKS for dividend AND growth... so look at a CHART of any company you're interested in... see that over the LONG RUN (like 10 years) the chart is lower on the left and rises as it goes to the right! Forget about the dips in 07/08 - every stock you look at will have that. But lets look at Kinder Morgan Partners - NYSE symbol KMP - there is a nice chart... AND it pays 5.86% (based on todays price) which is $1.16 per share per quarter. So if you bought 50 shares - every 3 months you'd get a dividend of $58 (you're getting paid to wait - you're waiting for the share price to appreciate!). Yeah I own it.

I'd also look at AT&T (symbol T) - pays about 6% dividend. Is "steady" price wise. Great place to park money and be relatively sure it's going to still be there - good market or bad. Again - you get paid to wait. Yeah I own it.

So that's what I'd be doing. Diversify - don't buy TWO oil stocks -- buy ONE - Then get a consumer food stock -- Coke (KO) or Pepsi (PEP) or McDonalds (MCD). Funny -- people laugh when I tell 'em to buy McDonalds -- the stock is UP 125% in the last 5 years! AND you get a .61 a share per quarter dividend! So here's the deal -- it's what I ALWAYS look for.... if they don't pay a dividend - I'm not a buyer - and if the dividend is "low" (like MCD's is) then I want the growth to be there.... I'll take STEADY (AT&T) but then I want a higher dividend. Does that make sense?

Then --- DO NOT GET CAUGHT UP IN TRADING - DO NOT PANIC - DO NOT LISTEN TO THE GROCERY STORE CLERK TELLING YOU ABOUT THEIR LATEST BIG MARKET HIT.... RUN AWAY from those people! DO NOT BUY GOLD... IF THEY MAKE A TV SHOW ABOUT SOMETHING (House flipping?) RUN FOR THE HILLS... DO NOT INVEST IN IT. YOU'RE ALREADY TOO LATE!

There is no get rich quick scheme. Steady Eddy whens the race. LONG TERM is not 15 minutes. Buy good quality big names that you know and understand - with good charts and good dividends. Then sit back and laugh at the losers when they're broke and you're not.


Oh -- and make sure you check the little box when you buy "REINVEST THE DIVIDEND". That way every time they pay you - they buy more of their stock automatically for you - more shares - more dividends - which buy more shares which pay more dividends...

If you buy a stock and it's value DOUBLES (just an example) then sell the "gain" and buy something else. Nobody ever went broke taking a profit. It helps you to diversify - and keeps each investment in that 5% bracket.

There's a lot more to it -- and more details etc - but them's the basics. Stay thirsty my friend!

[Sieg]

Thanks Greg.

[GregWeld]

Originally Posted by Sieg

Thanks Greg.

Welcome!

People THINK investing is so "difficult" -- and it's really not.

I use the "Jeff Lynch" school of investing. His deal was -- buy stocks in things you understand - or in a store you shop at - etc. Because if you go to that store all the time - YOU can tell if things are going right with the company -- and you can also tell when it's NOT.

So lets just say you're a guy that's in Home Depot all the time - and Lowe's -- and you can never get what you want at Lowe's and every time you're in Home Depot - the place is crawling with customers and you LOVE the experience... then I'd buy Home Depot - IF it met my other criteria (chart looks good and it pays a dividend and or has growth and dividend).

It really isn't rocket science - but people use excuses NOT to invest. It's sad because it's really so damn easy. There's some RULES you need to learn along the way - basics - I don't GAMBLE - I'm not a "trader" - I'm an INVESTOR. I don't buy the latest high flyer everyone else is. And there's money left on the cutting room floor because I don't - but I sleep at night - and my money grows just fine.

Let's take a look at that..... Let's look at two stocks... NETFLIX and MCDONALDS.

I don't eat at McDonalds unless I'm trailer trucking by myself... but their chart is stellar - and the dividend is STEADY. I sleep well at night AND it's grown 125% (so more than a double) in 5 years. FANTASTIC.

I don't own Netflix - but it's been the darling high flyer... and it grew a bazillion percent in 3 or so years.... great! No dividend - no long term chart - but it's a flyer. So --- had I put in 100 grand - it might have gone up to 500 grand... but at what point would I have pulled the trigger and sold? When I doubled - or would I have gotten greedy with that kind of "quick money" and held for the next double? In the meantime - it crashed and burned.

So as an INVESTOR I'll take McDonalds over Netflix.... because it's harder to KEEP your money once you have some - than it is to make it. That won't make sense to most - but if you have some "real money" - then it makes a lot of sense. It's real easy to LOSE money. I hate losing money!

[Simmo]

Some great advice here!

WSSix - you've made the first step which 9 out of 10 of us dont, and that is ASK! A lot of people dont think they're smart enough, and it would be easy to get half way through Gregs post and feel a wee bit lost, but as car guys we can rattle off what make, model, year, engine code and trim level of that car on the horizon is, and what mods are required to screw x amount of horsepower/shave x seconds off a lap time......it's simply because we've applied ourselves and invested time to educate ourselves in our hobby.

With that level of dedication in investment we'd all be ticking that top box. Reading "Rich Dad Poor Dad" R. Kiyosaki (I know it's outdated and the concepts over-used now, but it's still got to be the best 1st investment book IMO) was a light bulb moment in my life. It's funny how I've more or less forced friends/family to read it and for some, it had the same effect. Okay others did'nt take the message on board....but dont be one of those people, this is 1% brains and 99% mind set.

I'm no where near cracking a million, but I'm certainly on the right track and have totally changed my spending/savings/investment habits and am continually investing in my education to expand my ability to invest. Next time you pick up Super Chevy, put it down and pick up "Investor" or whatever it is you have in your part of the world and get started. Time is your friend, I'm in my 20's and doing it tomorrow is not an option.

Lastly, someone mentioned health earlier. It is your greatest asset. Preserve it. I've had a minor set-back in this area lately and it's never been more true for me, however having made a few savvy investment decisions beforehand I'm well placed to recover nicely.

My 2c... go buy a book now

[WSSix]

Thanks Greg. That does make a lot of sense. My levels are 15% in my 401k, 10%(which is max) in my companies ESPP (I'm with Halliburton), and I max out my Roth IRA every year. I figure I better keep that one up because I may hit the 150K limit eventually. Until then, I max $5k on that at the beginning of each year before I spend a penny on fun stuff for the bikes or the car. I feel like I'm doing well with the retirement portion of my money management. For my savings, I'm definitely looking to do better long term investments than my simple money market account. I'm in this for the long run. I'm too busy with other things to be aggressive and try to play the stock market game.

[89 RS]

This is some great info! Greg, thanks for sharing some great stuff as you can do with it with experience and knowledge. Most people would probably charge for the information you gave out.