Investing 102

[GregWeld]

Albert ---

I'd add to your big pharma/medical sector..... remember the aging population means more drugs and medical treatments etc....


Which company - I have no recommendations as we're really not into that part for this thread as you know. But you're pretty heavily weighted in CONSUMER so I'd try to get some more balance.

[toy71camaro]

Originally Posted by GregWeld

Albert ---

I'd add to your big pharma/medical sector..... remember the aging population means more drugs and medical treatments etc....


Which company - I have no recommendations as we're really not into that part for this thread as you know. But you're pretty heavily weighted in CONSUMER so I'd try to get some more balance.

Good point. I knew i was heavy on consumer, thats why i asked.

I got a touch into pharma/medical with a little bit of PFE and NVS, i didnt know which to pick at the time, so i did a little of each. lol. I'll need to revisit that sector and see what else is available at the top of it (best of breed. )

Thanks!!!

BTW, Killer helmet.

[Rybar]

I love this thread, thanks guys. Greg thanks for the KMP update. I yesterday added MO to my portfolio. The Sin stocks look to be kicking some ass I'm going to add more soon.

[Bucketlist2012]

I read a good one today..

A temporary loss of value becomes a permanent loss of capital if you sell..

That is why so many lost in 2008...They panicked and sold...So the temporary loss became permanent.

Also if you are positioned well, a 1% drop in the market only translated to a .1% drop for me..I plan more to lose less when the market goes down, than I plan to make it big when the market goes up.

[GregWeld]

To take a play on the "sold at a loss" theme that Mike just showed up in the previous post... Let's use McDonalds (MCD) as an example.

Here is a chart on Google Finance...

http://www.google.com/finance?q=NYSE:MCD


If you click on the "ALL" choice for the chart -- you'll see many "peaks" -- and also many "valleys". If you'd bought at one of the peaks --- pick any one of the MANY -- but in particular lets say you bought your first batch in 1999 and and sold in early 2003....

It is the lack of long term confidence that would have 'cause you to sell... and now look at how big of a mistake that would have been!

Not all stocks have a chart like this... but that is why you need to have real conviction in your choices TO START WITH... this is why you DO NOT buy some recommendation from the clerk at the grocery store when he gives you his "hot stock tip of the day". That will cost you money every time! Why? Because if it so much as hiccups -- you'll blow out of there at the very first chance and then you'll have taken a real loss.

If -- big IF -- you buy stocks in companies that you like - know - understand - are best of breed... then you'll buy MORE of them as the share price comes down and you'll lower your average cost and you'll sleep well at night with the understanding that in the long run - you'll come out a winner.

Investing -- that's the key term here -- takes time -- it takes commitment -- and most of all it takes some research and confidence that what you've bought is "good stuff".

Another example of this might be housing.

The people that bought houses at the peak -- then bailed or failed... they have a real loss... the guys buying them now... they might suffer for awhile.. they might even question why the hell did they do this... but you've got to believe that the prices will come back. When? Who knows? I have no clue. But I gotta believe that this is "temporary" - it's the scale of temporary vs. the longer term. We won't know what temporary was until we have a longer view, and that view needs time to develop. In the meantime - like a dividend paying stock - the renter of the house will pay towards the mortgage - and eventually you'll have a nice investment even if the price never recovers fully.

[glassman]

Housing is strange. Their building by my office (Dublin, ca) 700 to800k but just over the hill (20 miles away) the community of Mountainhouse continues to take it in the shorts (mid 150's)....(talking residentual)

The ability to collect proper rent is in the simple of supply and demand. I just dont see the jobs in the area to substansiate postive cash flow.

I used to like the idea of property (its how my dad made is money in the 80's), but i'm liking stocks more and more.....

Thank you for the education i am continuing to learn reading this thread...

[GregWeld]

Rentals - whether it's single family or multi - all have one investment strategy in common... someone else is paying your mortgage. In the long run - you should end up with very positive cash flow... even if, in the meantime, you had to replace the roof... paint... and carpet.. and fixtures. At that point - you had a bad tenant - it took you 6 months to evict - and he damaged the place... you're not very happy with that investment. BUT -- If you know that in the long run someone is going to pay off your mortgage and you're going to end up with positive cash flow... You'll fix the dump up - re-rent it - and keep on going. And that's my real point - and Mikes point... You must have a basic belief that you're on the right track and be willing to suffer sometimes for the bigger picture (the paid off mortgage or that trust in the long term chart!).

Stocks are very similar...


If you have one - and it goes south -- you're not very happy... but if you have 10 and some are doing fine - while others are sitting, but are okay - and one of them goes sideways... it's no biggie. There is no loss of capital unless you sell below your cost... so for the time being it's really only a mental challenge to trust your judgement as to why you bought in the first place.

I remind people time and again - when in doubt - go back and research your reasoning. Would you buy the stock again? Do you still think "X" is a leading brand - is it a good company - is the chart good - is the dividend good... Look at the details of the chart and see how many times it's gone UP and DOWN... Right now - you might be in one of those little down squiggles... If everything else is okay (no accounting issues - no legal issues etc) then instead of thinking about selling - maybe you should think about ADDING to your position and take advantage of the dummies that are selling!