Investing 102

[Chad-1stGen]

Originally Posted by GregWeld

Chad -- Nobody here is going to debate WHAT YOU THINK and WHAT IS RIGHT FOR YOU.... I've said this time and again - and will repeat. You - the individual - must sleep at night with the decisions you made for your investments.... regardless of what that is.

Having said that... you left out the fact that IF and WHEN interest rates rise - your bonds are going to be just as hammered (capital)... and that interest rates tend to rise slowly and are WELL TELEGRAPHED by the fed. There is plenty of time to bail from whatever strategy you've employed.

I wasn't advocating bonds either. To me, my post still clearly states that its not good to own interest rate bearing securities (which includes bonds) in a rising rate market.

Bonds and Dividend stocks scare me a bit because I expect both of them to get hammered if interest rates rise rapidly.

I wished I owned a hell of a lot more bonds the last decade than I did (mostly 100% equity invested). As of now I have less than 10% of my money in bonds and have trouble significantly increasing a bonds position given where rates are at.

I was generally comparing dividend stocks to a total stock market index fund like VTSAX which has been yielding 2% and which I think has a much better chance of actually achieving the following statement you made:

Originally Posted by GregWeld

The market will (should) rise in a interest rate rising environment "at first"... because it signals strength in the economy - then inflation will set in - and yields will fall - and so to, will stocks.

Fair enough on debating what is right for each individual. I've seen this thread building for a while and thought it worth putting out some additional viewpoints on dividend investing that I haven't seen discussed. Namely the tax efficiency of it and its increased sensitivity to interest rates. At the end of the day I'm still very interested in getting some more dividend specific stocks and had been researching it quite a bit before this thread ever popped up but is why I've been following this thread. However, it is good to have different perspectives (the point of this thread) and you are extremely bullish on dividends

[GregWeld]

Originally Posted by Chad-1stGen

I was generally comparing dividend stocks to a total stock market index fund like VTSAX which has been yielding 2% and which I think has a much better chance of actually achieving the following statement you made:

Since this is an EDUCATIONAL thread - I will try - as I have been trying - to explain reasoning and thought process in all my replies. I'm not "debating" any actual thought process - rather - trying to open it up and just discuss these ideas and thoughts for the purpose of educating - and let the reader decide what the take-away points are for themselves. I'm also trying to be at the kindergarten level so when someone reads my posts - they can actually have an "ah ha" moment and actually understand, in a broad general way, what I'm saying.

I have stated previously that I fail to see the point of mutual funds and or other types of funds that attempt to just buy a basket of stocks and try to "emulate" some index (and they also have associated fees). The VTSAX that you mention does just exactly that. It's merely a basket of stocks - blended - and has a "dividend" of 2%.

So here's my educational pitch for individual stock selection and thus making your own mini mutual fund - which should - in absolute terms - provide a higher rate of dividend and that is made up of stocks the owner can actually "understand" and have some control over etc.

The VTSAX simply holds stocks to emulate "the overall stock market" -- and in good times that might be great - you'd get some capital growth - but the dividend spin off of 2% isn't sufficient to carry the investment thru the inevitable downturns.


Here's the funds top ten holdings:

Exxon Mobil Corporation (XOM)

Apple, Inc. (AAPL)

International Business Machines Corp (IBM)

Chevron Corp (CVX)

The Procter & Gamble Co (PG)

Johnson & Johnson (JNJ)

AT&T Inc (T)

General Electric Co (GE)

Pfizer Inc (PFE)

And here's why I'm trying to educate rather than try to just say "buy this or buy that or don't do this - do that"...

AT&T's current dividend is 5.83% ----- ALMOST TRIPLE what the VTSAX is paying out - and it's a holding of this index fund

GE's current dividend is 3.76% --- ALMOST DOUBLE what the VTSAX is paying - and is a holding of this fund

So with barely any research at all -- a person should be capable of getting a better dividend return -- and if all you want to do is emulate the stock market, any number of the biggest of the bigs will and have done that for years and years.

Now -- Please don't take me wrong - I'm not arguing with you. I am however - trying to educate people to help them see that they are perfectly capable of going out and "investing" and having a bit of fun doing so - and have a firm grasp on what it is they own, and their reasoning behind it.

If you had 10,000 to invest -- why settle for a market emulator that's going to go down with the market or up with the market and it's going to pay you less than the rate of inflation to hold on to it. A guy could just buy AT&T and at least triple his dividend rate and perhaps stay above the rate of inflation. I'm on a flight - so don't want to do the math - but a 6% compounded rate of return over time is going to be so far ahead of a 2% it isn't funny.

[Kingcater]

First post here as I mostly lurked enjoying all the builds I can't afford from afar. Never registered because I don't have a Pro Touring car yet ( but maybe this thread will help with that in the future )

Anyways, I was looking on google since I've finally found a long term career as I was and I'm getting to an age where I need to think about my financial future. I have to say the knowledge in this thread is very awesome and it also explains things in a manner pretty much anyone can comprehend. I've even forwarded it to many friends.

Who would've thought a Stocks/Investing thread would finally be the thing to get me to sign up to this site.

Once again thank you OP for making this thread. Also thank you Greg, PW2006, and others for continuing to post in this thread. I'm only 34 pages deep but I went out and bought a notebook to take notes.

I hope to have enough money saved up in the next 6 months to start diving into Investing. I was apprehensive as I didn't know where to start but this thread has really helped me!

[ErikLS2]

Originally Posted by Kingcater

First post here as I mostly lurked enjoying all the builds I can't afford from afar. Never registered because I don't have a Pro Touring car yet ( but maybe this thread will help with that in the future )

Anyways, I was looking on google since I've finally found a long term career as I was and I'm getting to an age where I need to think about my financial future. I have to say the knowledge in this thread is very awesome and it also explains things in a manner pretty much anyone can comprehend. I've even forwarded it to many friends.

Who would've thought a Stocks/Investing thread would finally be the thing to get me to sign up to this site.

Once again thank you OP for making this thread. Also thank you Greg, PW2006, and others for continuing to post in this thread. I'm only 34 pages deep but I went out and bought a notebook to take notes.

I hope to have enough money saved up in the next 6 months to start diving into Investing. I was apprehensive as I didn't know where to start but this thread has really helped me!

It will be the best thing you ever did for financial stability in your life when you look back years from now. Welcome aboard too!

[Kingcater]

Originally Posted by ErikLS2

It will be the best thing you ever did for financial stability in your life when you look back years from now. Welcome aboard too!

Thank you and you're absolutely right. I have a 2000 Camaro Z28 and a 2005 GTO.

I hope to have a Pro Touring C10 Square soon

[WSSix]

Welcome to the site! Glad to know you're finding this thread informative. Did it really show up during a google search?

I need to get me one of those high rod jelly beans, too. Love those cars other than the green radio screen.

[Kingcater]

It did lol surprised me then I couldn't stop reading. Aftermarket stereo FTW

[WSSix]

Wow, ok. Never figured a thread I started would end up in a Google search. Funny how the internet works.