Investing 102

[LS1-IROC]

Originally Posted by GregWeld

Well -- keep liquid! Cash is king -- so don't go "all in" and then be a forced seller when the market is against you. Don't get greedy on me!

The market historically has never been down THREE years in a row in any three year period - or some such rule.... but I'll guarantee the minute you get in -- there's a little guy on Wall Street that yells to his buddies -- "he's in! Take 'er down!". And they squeeze and squeeze til you quit. Then he hollers uncle and the market goes up. If you sell when it's down -- he yells to his buddies "he's out! Take 'er up!" and the market goes up the day after you've just sold. You only beat him by staying "long". You can only stay long by buying GREAT COMPANIES - and getting PAID TO WAIT (the Dividend!).

Forget the stock buying "tip" you get at the grocery store....

Buy companies like:

Phillip Morse
Altria
Con Edison
Coke
McDonalds
Johnson and Johnson
Kimberly Clark
Pepsi
AT&T
Verizon
Proctor and Gamble

If you want some more "yield" with HIGHER RISK you can sprinkle in a little:

Showing SYMBOLS here.

HYG --- High yield government bond fund
JNK --- Corporate junk bond fund
NLY --- Mortgages


These are all names you can actually tell someone what they do! You don't need to be brilliant... you just need to win by staying in the game.

Thanks again! I enjoy reading your posts. You have a way of putting things in a language I can understand. I spent about 3 hours lastnight doing research on investing and it was mostly very boring dry reading, unlike your posts.

So.....what's the perferrred way to buy stock? Open up an online account and have at it, or best to go through an advisor that we can meet with face to face?
I think I got my wife on board with buying stock...we'll see

[CRCRFT78]

I'm also curious what's your take on buying stock for someone with little or no experience. For instance, I've got a couple of shares of Apple, Nike, Caterpillar, Disney and Harley (all 10 shares or less). Nothing that will make me rich but I wanted to get my feet wet. Other than recognizing the names of the companies I couldn't really tell you why I picked them or if they were even good choices to begin with. What's your take on this Greg?

[GregWeld]

Originally Posted by CRCRFT78

I'm also curious what's your take on buying stock for someone with little or no experience. For instance, I've got a couple of shares of Apple, Nike, Caterpillar, Disney and Harley (all 10 shares or less). Nothing that will make me rich but I wanted to get my feet wet. Other than recognizing the names of the companies I couldn't really tell you why I picked them or if they were even good choices to begin with. What's your take on this Greg?

Well good for you -- you've at least got a start!

Okay -- stock by stock - you've got DIVERSITY - you have Apple (retail/tech) - you've got NIKE (retail) - Caterpillar (industrial) - Disney (entertainment) - Harley (manufacturer/retail/automotive).

I think Harley is too "faddish" for me to invest in... Sorry.

Don't buy anymore "retail" - you have enough exposure there. You really have 3 out of 5 that relies on some sort of CONSUMER buying at retail.

ALSO -- every one of these pays a dividend but they pay a very SMALL (under the rate of inflation) dividend... so on my screen they'd have to have a larger than normal stock price appreciation in order for me to buy them. So for your next investments try to pick a couple with higher dividends... AT&T -- VERIZON -- KINDER MORGAN PARTNERS - PHILLIP MORSE - ALTRIA... they all pay more than the rate of inflation AND have price growth...

[GregWeld]

Originally Posted by GregWeld

Well good for you -- you've at least got a start!

Okay -- stock by stock - you've got DIVERSITY - you have Apple (retail/tech) - you've got NIKE (retail) - Caterpillar (industrial) - Disney (entertainment) - Harley (manufacturer/retail/automotive).

I think Harley is too "faddish" for me to invest in... Sorry.

Don't buy anymore "retail" - you have enough exposure there. You really have 3 out of 5 that relies on some sort of CONSUMER buying at retail.

ALSO -- every one of these pays a dividend but they pay a very SMALL (under the rate of inflation) dividend... so on my screen they'd have to have a larger than normal stock price appreciation in order for me to buy them. So for your next investments try to pick a couple with higher dividends... AT&T -- VERIZON -- KINDER MORGAN PARTNERS - PHILLIP MORSE - ALTRIA... they all pay more than the rate of inflation AND have price growth...

Hey -- Here's what I've been preaching! Look at a FIVE YEAR chart of NIKE --- Symbol NKE http://www.google.com/finance?q=NYSE%3ANKE

Expand this chart out 5 years... using the time choices in BLUE at top of the chart.

Check it out -- in 2007 the split 2 for 1 -- so if you owned 50 shares in December 2006 - you now have 100 shares! And they've increased the dividend payout along the way. They used to pay .19 per share per quarter and they're now paying almost double that! And the stock price has almost doubled in the same 5 year period!

So you have twice and many shares - paying twice as much dividend - and the price has doubled.

If you put the same $1,000 in the bank savings account 5 years ago -- you'd have about $1,010 now! WHOO HOO!

[James OLC]

Great thread - thanks to everyone for the great discussion and informative insights. Investing is such a fundamental life skill that it really should be part of a basic high school education.

My two bits and my "ten":

1. The easiest way to consistently and (relatively painlessly) invest is through work. take advantage of your companies retirement plan if you can but resist the temptation to just sit on it - sell what you can, when you can to avoid finding yourself over exposed in the company that you already depend on.

2. Try not to too emotional about your investments... Easier said then done but you have to try. This applies to buying, holding, and selling.

3. Find the balance that you're comfortable with... Decide what you can handle risk/return wise and try to avoid investing with regrets. Like Greg has advocated, over the last year I've "abandoned" most stocks that don't pay a dividend in favor of a low risk, "guaranteed" return.

4. Keep in mind that your broker has his own agenda and it's in his best personal interest to sell you specific stocks.

As I mentioned earlier, I've gone the low(er) risk route and have focused on dividend paying stocks. Long story short.... For 3 and a half years i bought in to my old company's retirement savings plan - they matched my contribution up to 11% - at anywhere from around $7 to $11. When I left they were at around $9.50 and my retirement holdings were almost all in the companies stock. After I left the stock tanked, reaching a low of $4.50 before the company was bought by the Chinese for $10.08 - saving my bacon and forcing me to reevaluate my strategy

Now I hold (not in any order):

Enerplus (TSE:ERF) - oil and gas exploration - pays 0.18 a month while trading at 25.90. Good foundation but not a bunch of upside; the yield makes this one work.

Artis Real Estate (TSE:AX.UN) - commercial real estate - pays 0.09 a month and trades at 14.11. Decent growth but again, the yield carries it.

Student Transportation (TSE.STB) - yellow school buses - pays 0.046ish a month and trades at 6.57. steady growth and a good yield.

NAL Energy (TSE:NAE) - oil and gas exploration - pays 0.07 a month and is trading at 7.90. The dividend cant be maintained at this level and has to come down. The stock price/performance reflects this... I dont like it but I'll take the dividends for now.

Parkland Fuel (TSE: PKI) - local refiner/gas station chain - pays 0.085 a month and trades at 12.86. good yield and is performing well over the last quarter.

Temple Real Estate (CVE:TR.UN) - commercial real estate - pays 0.04 a month and trades at 4.90. good yield but limited upside.

Liquor Stores (TSE.LIQ) - liquor stores - pays 0.09 a month and trades at 15.15. good yield and i understand the market.

Petrobakken (TSE.PBN) - oil and gas exploration - pays 0.08 a month and is trading at 13.02. They overpaid for some assets, got hammered by the market, and put together a solid quarter. The yield is lower than some but they're up 40% in the last month or so...

Mullen Group (TSE.MTL) - oil and gas services - pays 0.25 a quarter and tradex at 19.56. One of my weakest yields but sustainable if not exciting)

Americas Petrogas (CVE.BOE) - oil and gas exploration - no dividend but good growth potential. As Greg suggested earlier, i rode this one up 60%, sold the profits, and hope for another run.

With those I see a decent return on the dividends alone. My upside is probably limited on most and its always painful to watch some run up until exdividend date then drop like a rock the day after but it's about as reliable return as I could find.

[GregWeld]

James -

Nice dividend stream - but DUDE <spicoli style> you need some diversification!

However.... I also understand your trade and what YOU understand... and perhaps you even have an "insiders view" of the industry.

[mpozziCPL]

Greg and James ...

I'll PM you my investments, piddly as they are, as you've got a much better handle on managing this stuff than I do. I'm one of those that hands on to stocks much longer than I should and haven't looked at my 401K in almost 20 years. You mention investing in places you shop and I wonder if Summit and Ross Dress-for-Less are publicly traded ...

Add to this my broker just got popped for a DUI. Weaving, cops lit him up. Tried to run from the cops, blew through a red light, and wisely decided to stop before he got stopped. Didn't look as good on the TV mug shot as he did when we met and I transferred my investments over last spring.

Plan B ...

Mary P.

[Chad-1stGen]

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

[pw2006]

Originally Posted by Chad-1stGen

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

Hi Chad- The stock market has been a little rough the past 10 years or so. The S&P 500 is flat over the last year and last 10 years, with lots of volatility. Interest rates on govt bonds are so low right now, they are not keeping up with inflation. If you were to invest in 30 yr govt bonds to try and get some return (~3%), as soon as interest rates start to rise, your principle will drop (unless you hold them to maturity). Dividend stocks tend to be less volatile, typically drops less when the market falls and rises slower when the market rises, this is also referred to as beta. So, a lot of people are looking at dividend stocks that have a decent yield and less beta than the market.

[GregWeld]

Originally Posted by Chad-1stGen

I've been lightly looking into more dividend stocks in the last 6 months or so. However, I now see these threads popping up on every single site I visit regularly...

Reminds me when everyone was day trading and then everyone was in real estate.

Most stocks I've looked at still seem to have some compelling fundamentals but when everyone and their brother is talking about a dividend investing strategy it has to make you wonder.

Well -- the major difference is that these PAY YOU. They're not gambling that the price is suddenly going to double... or that you can trade them daily and get in and out... or borrow cheap money and sell something in a month.

The reason people are coming on board the dividend train is because the dividend percentage is a known calculated rate. When you compare this rate to other "interest bearing" investments - the rates are very compelling. Compared to Bonds - CD's - Money Market funds etc the return is huge... and the only reason they would be BAD is if the stocks go way up and the dividend as a % then would come down. That can happen - but it doesn't take away that long term steady march of dividends reinvested. Historically this is a great way to invest. It's not another get rich quick scheme that just popped up.

So let's put this into real life terms. I own 25,000 shares of Annaly Capital Management (NLY) @ an average cost of $16.88 - it's dividend this quarter is .57 per share. This stock went "ex dividend" on the 27th -- and I will get a cash payment of $14,250.... and I'll get that or similar in another 3 months - and so on -- so that dividend (provided the dividend stays at .57) will pay me $57,000 this year.

I don't care if dividends are the "hot money" or anything else - because that $57,000 per year is REAL MONEY and I get it. Even if the stock goes DOWN -- I still get that dividend - if the stock goes up - I still get that dividend and I'd also have capital growth... but what I L O V E is that check!

The reason I PREACH look at the historic chart -- is because the capital (stock price gains) have been going like this for YEARS.... if not - I don't buy 'em. I can only get a glimpse of the future by looking at the past. There is no guarantee that they will continue - or at what rate - or that they won't go down - but if they have a 25 year history of paying that dividend - I have to go with that. I don't really know what else I could do differently. I can't make any money on CD's... I could buy houses cheap and HOPE they are going up some time (my bet is that they will)... but that takes talent - and work - and involvement etc. I can do my stock and bond investing with my laptop... and so far... it's beating all the real estate I own... and I've been doing it for 30 years. Doesn't make me an expert. And remember -- this is Investing 102 -- not "let's pick the next Microsoft" (been there done that - LOL). We're talking COKE - JNJ -MCD - KFT - etc.....