Investing 102

[frankv11]

Well this is one subject I know nothing about but really interested. I would like to purchase some long term stocks and not interested in trading. What should be my first step?
Maybe Greg can have a crash course on investing and how to use some tools

[GregWeld]

Originally Posted by frankv11

Well this is one subject I know nothing about but really interested. I would like to purchase some long term stocks and not interested in trading. What should be my first step?
Maybe Greg can have a crash course on investing and how to use some tools

First step is to "SAVE" some money. Nobody can just save a hundred grand... but if you start saving $200 a month - that is $2400 per year! And if you read my example above -- you'll see that can grow into a hundred grand OVER TIME.

I tell my kids -- if somebody gives you $100 bucks for a gift. Blow half - and save half. BTW -- "Saving" is not saving to spend.... that is a different bucket.

If you need to save to spend (buy something) make that a different account. Save $100 a month - 50 to buy something - and 50 for REAL savings so you'll have money when you need it most. If you get a raise - or a bonus - SAVE IT.

The key to all of this -- is once you actually accumulate some savings -- you'll be amazed at the mind set CHANGE you'll see. You just won't want to piss it away - it takes some work and sacrifice to save - and all of a sudden you have 10 or 20 grand - blowing it on that new truck just doesn't seem to be as good of an idea. It becomes very satisfying to have "some money".

[ErikLS2]

The one point I will make about mutual funds is there are many on the list I posted with acceptable management fees, in the 0.02-0.6% range that perform well and get you instant diversification to an extent. In fact, all the funds on that list have to meet certain strict criteria including management fees. A professional stock picker with vast resources has to only outperform you doing it alone by the management fee he charges for you to be money ahead. Personally I wouldn't feel comfortable putting my first few thousand bucks in one stock, no matter how big or established it is but there are many ways to do this right. It's more important I think that you're doing it than it is how you're doing it but it's also important to make wise educated choices that suit your comfort level.

Greg makes a very good point about time. The general rule (not sure it's my rule) is to be more into stocks the younger you are as you have time to recover from a downturn. As you age you slowly get more conservative by transitioning to bonds. A withdrawl rate of 4% of your retirement account balance per year is a common number to ensure you don't outlive your money. You can use this handy calculator to figure how to achieve your retirement goals:

http://cgi.money.cnn.com/tools/retir...entplanner.jsp

I think Greg's best point is about how you FEEL when you begin to build up a savings. Once you begin to see a growing balance in there you develop a respect for the money and work harder to make it grow.

[GregWeld]

Good points Erik...

Especially the one that you make about it doesn't matter so much how you're doing it - but that you ARE doing it.

Mutual Funds have their place - and most people feel more comfortable letting the pro pick. Nothing wrong whatsoever about this form of investing. But I will point out that PICKING THE RIGHT Mutual Fund is every bit as hard - and as important as picking the right individual stock. Most people just don't understand = nor can name their mutual fund = which means they can not follow (at all) a mutual fund. They tend to buy and hold and not go back and see what's up -- UNTIL they notice they're down 30% from the prior year. Then they SELL -- and then they buy the next mutual fund that had the best performance from the last period. THAT my friends is the fastest way to lose your ass... I see it happen CONSTANTLY.... people wake up and they get their statement and they're down - they panic and sell (at the bottom) and they then "re-invest" at the top. 99% can't even tell you why they bought what they did - nor tell you the top 3 holdings in the fund.

I like the "pride of ownership" of saying -- Yeah -- I own "such and such"... and it's easy to name the 5 or 6 you own - and it's easy to understand and or to hold through a down period because you actually know what they are and why you bought them.

When the market SUCKS --- I remind myself by looking at the stocks on a long term (10 years or 5 years) chart - and I see that - over time that line is low on the left and higher towards the right. Then I "skip the dips"... and I am reassured that I'm on the right course - OVER TIME.

There's all kinds of ways to get there -- you MUST just choose something that you can live with and JUST DO IT! That way there's no right or wrong way.

[CRCRFT78]

I think I need to go to the WELD SCHOOL OF INVESTING! I wish I understood my investments a little better. All good info that I will look over again once I have my portfolio in front of me.

[WSSix]

Thanks Greg. You're correct, this is my savings and I feel I have enough to play with as well as keep on hand should an emergency arise. That's why I called it investing 102. I felt like I had my retirement stuff set up correctly and in their appropriate accounts and wanted to venture into the next thing which I consider less conservative or more risky. Yet, I don't know squat about that stuff so I figured I better ask. This is money I will eventually spend on a house or car stuff I believe so I don't want anything risky. I just want better than 0.80% lol. Besides, who knows how long it'll be before I can actually spend it on a car or house. By that time, I may just leave it well enough alone and start the car fund over again.

For what it's worth, my Roth IRA is through Vanguard and it's their Star account which is a very low management fee mutual fund. I'd have to look it up as to how it's diversified through stocks, foreign and domestic, and bonds. I couldn't begin to tell you what particular companies or bonds the money is in though. Its doing just fine for me though considering it's a long term deal.

Also, I'm 31 and started the Roth at 26 but didn't necessarily max it out at 5k every year.

I'm glad to see others getting some information and knowledge out of these posts as well. That was my intent and I'm glad it's working out that way.

[RECOVERY ROOM]

This thread is a better read than most. Better than most stock watch sites. Easy to understand advice from a person who lives it not someone trying to sell it. Thanks Mr Weld....more please LOL

[CRCRFT78]

I have a question about "The Asset Play". While reading Peter Lynchs book, One Up on Wall Street, he mentions looking at the the assets a company may have in its possession when researching stocks. One thing that comes to mind is the land owned by the military branches being turned back into civilian property. There are a lot of old bases being handed back to the surrounding communities to build houses on for residents of those cities, Concord California being an example of one. Are there possible investment opportunities in this in the form of government bonds, etc?

I understand we are trying to keep this Investing 102 but one constant I keep hearing when starting out is to look for the investment that is right in front of you that you normally may not consider. With the redevelopment of the bases back into civilian life, are there investment opportunities in this and what types?

[GregWeld]

Jose --

Kudos to you for keeping your eyes open - and your ear to the ground!


#1 - Let me address your "bond" question.... because that is a good Investing 102 subject.

None of you should be in any type of "bonds" at your ages... and even more important -- not inside of any retirement account.

If you can buy high grade CORPORATE BONDS -- just for the ultra high dividend some of them pay - that would be okay.... but (big butt in the room) what you're going to give up with BONDS is CAPITAL APPRECIATION! Very important part of investing is to get a dividend AND the capital appreciation over time.

I have bonds -- but I'm OLD (will be 59 this summer) and I'm retired... so bonds are okay for me - and I STILL DON'T LIKE THEM. They are a "vehicle" to keep my taxable income "down" (that's a laugh by the way)... but I will hold these bonds for 1 to 5 years and have absolutely ZERO capital growth.. so like most things, there's a trade off in here.

++++++++++++++++++++++++


Okay -- Now on to the other question. I have no idea what is available to invest in regarding these properties. I know that Alameda County got the Alameda Naval Air Base back -- and there's been lots of discussions with what to do with it. There's waterfront - there's acreage galore... and as you all should know -- the county / city / state -- want these to become tax revenue not overhead.

Here's the caveat I'd use for all Investing 102 readers..... Generally when people get into investing trouble -- it's when they step into something they're not knowledgable about. Overreaching in any style/type of investment is a big mistake. So I'd just look to see if there is developments (not necessarily property development - but "developments" as in what's coming down the road). Let's say you operate a local gas station -- then you might want to see if there's going to be a location for one in the newly developed "area".

My "sage" advice however is to always remember -- when you invest with "others" ---- they're just people ---- and your investment is then with other people. They'll paint a rosy picture... and everyone will be all jacked up about the "can't lose" proposition... This is when you have to stick to your guns and only invest what you can lose... because more often than not -- it will be a loser. I've done enough of them that I can say that with certainty.

If you want to play "housing" development ---- the best way to do that is investing in an LLC = so just buying a share or two when the developer / owners make it available. Typically you need to be what's called an Accredited Investor -- with a sizable net worth -- in order to be legally allowed to invest in stuff like this... because they're highly illiquid... so they want to make sure you have "other money". But they spin off nice % of income and can have huge upside appreciation when the group decides to sell.

I would check with the building department to see what plans have been in the hopper --- and then just see what/who is doing them then make contact -- then REALLY REALLY check them out.

I've done lots of these kinds of investments as an investor (apartment LLC's) and they've been very lucrative. I invested in a 344 unit Class A apartment complex in Tucson, AZ and it returned 117% capital appreciation in 4 years! I'll take that kind of money any day!

But there's many ways to play real-estate --- and sometimes it's a lot less nerve wracking to just invest in one of the big publicly traded REITS (Real Estate Investment Trusts) that pay nice dividends and have upside potential as well. You can find lots of 'em searching Schwab etc. I have one now - called National Retail Properties (NNN).. that pays a great dividend (6+%).

Or if you think housing is ever going to come back -- now might be a good time to bottom feed on the big builders -- Lennar - Pulte - etc.... But do some good research and pay particular attention to WHERE they are building.

[CRCRFT78]

I'm not sure where I'm trying to go by asking that, its definately out of my investment range, both financially and based on my knowledge level. I'm really looking for that outside of the box type of investment. The problem I see with this is that the market adjusts almost instantly to any type of investment news. So unless I had some sort of insider information, I'm positive there are others thinking like me.

With that said, I'm comfortable applying what information I do have and putting that towards my retirement accounts. I'm now trying to think about those investments where I won't have to wait for retirement to enjoy. I'll be 35 in July and I would like to start enjoying my investments (granted they're positive) by 45 while gradually slowing down having to work for someone.

On another note, forgive me for drifting, when it comes to the redevelopments of these old bases or the building of new football stadiums (Santa Clara County), should I look at the developers and see if they are traded publicly or part of a REIT? Along with doing my homework to make sure they are worth investing in of course.