Investing 102

[GregWeld]

Seriously -- that's where getting a dividend REALLY REALLY helps - because it keeps pounding money in your pocket... where a pure growth stock does not. If I've learned ANYTHING over the last 30 years -- it's that.

[toy71camaro]

Originally Posted by GregWeld

Seriously -- that's where getting a dividend REALLY REALLY helps - because it keeps pounding money in your pocket... where a pure growth stock does not. If I've learned ANYTHING over the last 30 years -- it's that.

yeah.. when i first opened my investment account in roughly 2008, i got $50 free. So i bought $25 of google. (well, 21 after commission).. its worth a whopping like 30 today. sure would of been nice to also get a dividend during those years.

on the other hand, i also bought $21 worth of Apple, which is worth like $100 now. heheh. got lucky on that one. but, not enough to write home about. but it was a "success" story for me. but, ive flopped some too. But that was before i understood what we're doing here now.

[bdahlg68]

Originally Posted by GregWeld

Seriously -- that's where getting a dividend REALLY REALLY helps - because it keeps pounding money in your pocket... where a pure growth stock does not. If I've learned ANYTHING over the last 30 years -- it's that.

And for those that reinvest the dividends, it automatically averages down your cost / share. As an example with STD, I own 600 shares at an average cost of $7.50. They pay a dividend on May-09-2012 of $0.2291 / share. At the current price of $6.34, I would get 21.681 shares. My new average cost per share is $7.235. Assuming a similar dividend and price / share next quarter, my cost / share could be under $7 without doing anything. This is where the yield vs. cost basis becomes exponential. Extrapolate this out 5 or 10 years.....

[GregWeld]

Originally Posted by bdahlg68

And for those that reinvest the dividends, it automatically averages down your cost / share. As an example with STD, I own 600 shares at an average cost of $7.50. They pay a dividend on May-09-2012 of $0.2291 / share. At the current price of $6.34, I would get 21.681 shares. My new average cost per share is $7.235. Assuming a similar dividend and price / share next quarter, my cost / share could be under $7 without doing anything. This is where the yield vs. cost basis becomes exponential. Extrapolate this out 5 or 10 years.....

EXACTLY

[dhutton]

I have 12 stocks spread across several sectors in the Schwab account I opened in January. Now I want to invest some additional money. Some have done considerably better than others. A couple are down a few percent and I have a handful that are well above 10%. Should I invest the additional funds in the better performing stocks, or spread it evenly across the board? I also have a few that have done well in my 401k, would it be a good idea to add them to my Schwab account?

Thanks,
Don

[GregWeld]

Originally Posted by dhutton

I have 12 stocks spread across several sectors in the Schwab account I opened in January. Now I want to invest some additional money. Some have done considerably better than others. A couple are down a few percent and I have a handful that are well above 10%. Should I invest the additional funds in the better performing stocks, or spread it evenly across the board? I also have a few that have done well in my 401k, would it be a good idea to add them to my Schwab account?

Thanks,
Don

I would ALWAYS choose MORE diversification over anything else. It's easy to load up on the current winners.... but they won't always be the winners... a year from now the loser could be your big winner!

I'd like you to look at ALL of your investable funds as one giant account... and don't duplicate - and get the most diversification you can get taking into consideration ALL of your investments.

It's ALL your money! Just because they are in different accounts doesn't really make any difference. That should only be a consideration when you're looking at investments inside the IRA - because you don't need tax advantaged investments in there -- they're already tax advantaged!

[dhutton]

Thanks Greg. I appreciate the time you take to answer these questions. I've learned quite a lot and made a little money thanks to you and this thread.

Don

[GregWeld]

That's making my day right there Don!

Today I've Uninstalled the '32 roadster rear end -- made some money in my stock accounts (a nice up day) and helped somebody while I'm at it! That's a good day!

[bdahlg68]

Originally Posted by dhutton

I have 12 stocks spread across several sectors in the Schwab account I opened in January. Now I want to invest some additional money. Some have done considerably better than others. A couple are down a few percent and I have a handful that are well above 10%. Should I invest the additional funds in the better performing stocks, or spread it evenly across the board? I also have a few that have done well in my 401k, would it be a good idea to add them to my Schwab account?

Thanks,
Don

Another thing to consider is whether or not you will continue to have these chunks of money to invest and how big the chunks are. If you are going to continue to have these chunks of money to put in, pick one or two of the stocks you currently hold or a new one and put your money to work. With the next chunk pick one or two other stocks and just rotate through. If this is a one time chunk, diversification is really the way to go. Make sure you feel like you've got the best of the best. As long as you have the confidence in that like Greg is preaching you'll weather the bumps in the road much better.

As far as sizes of stock purchases, I like to keep the commission below 1% to get in. So if your commission is $7, buy at least $700 worth of stock. The lower you can keep this percentage, the better. Keep this in mind when thinking about the # of positions you may want to add to. In Greg's world, he is looking at 0.01%!

[GregWeld]

I got a good laugh out of the .01% commission comment -- but it is somewhat true I guess...

Here's the trade on Banco Santander (STD)

20,000 shares = $125,590.86 commission was $8.95 so total was $125,599.81


I think that works out to even less than .01%