Investing 102

[GregWeld]

Originally Posted by XLexusTech

Read daily and holding on to my hat... if I had one question it would be... will FB ever get near 40 again? I have a good chunk and it drags down my portfolio.

Well --- so far you're only down about 50%.... my guess is that you could go lower.


This kind of stock is pure speculation - it's not really "investing".... it's just a pure gamble on an unknown. I sold the shares I had the minute it didn't do what I expected it to. Cut and run on that kind of stuff 'cause bad can easily go to worse.

Having said that -- it's a good lesson that people have to learn for themselves. You set a price - you set your expectations - and if that goes against you - then you MUST be prepared to take the loss and move on.

People have been waiting for 12 years for Microsoft to rebound.... think about that -- a DECADE of dead money.

[XLexusTech]

Originally Posted by GregWeld

Well --- so far you're only down about 50%.... my guess is that you could go lower.


This kind of stock is pure speculation - it's not really "investing".... it's just a pure gamble on an unknown. I sold the shares I had the minute it didn't do what I expected it to. Cut and run on that kind of stuff 'cause bad can easily go to worse.

Having said that -- it's a good lesson that people have to learn for themselves. You set a price - you set your expectations - and if that goes against you - then you MUST be prepared to take the loss and move on.

People have been waiting for 12 years for Microsoft to rebound.... think about that -- a DECADE of dead money.

Sound advice... i have a sell in @ about 25 ish.. hopefully i can level out..

[GregWeld]

Originally Posted by XLexusTech

Sound advice... i have a sell in @ about 25 ish.. hopefully i can level out..

It sucks but it is what it is... It is also the reason people always sign that caveat -- Don't gamble with money you can't afford to loose... The problem is - NOBODY thinks they're going to loose! I've bought real companies with real profits and good histories and have lost - and lost big... so just because this is Faceybook doesn't make it any better or any worse. I wish I could say -- oh - just hold it 'cause it will come back. Well - yes it can... but you're still just gambling then -- now you're gambling that it will come back...

You do realize that the week after you sell it - it will gain 10 points....

I'm sorry - really am - there's just not much help anyone can offer - because regardless of the advice - it'll be wrong. Hold it and it goes no where - sell it and it'll go up - sell half and hold half -- and maybe you have dead money AND a loss... there's just no crystal ball.

[96z28ss]

I have learned a lot on this thread and hope it continues.
I'd like to share that since this thread started, I have seen my investment grow.

I took Greg's advice and took money out of a previous employer 401k and transfer it into an self directed IRA. It only allowed mutual funds and they were just underperforming.
Since April 17th till today, taking Gregs advice from this thread, Im in the GREEN 5.30%. This all in a stock market that is up and down constantly. Still I collect on dividends.

The sad part about this is I have virtually the same amount of money in my current employers 401k plan (again mutual funds). During the same time period with me contributing money every 2 weeks to it. It was down $800.
I may have to switch jobs so I can move the 401k money into my IRA.

[sik68]

I'm still reading , Greg + all....thank you for continuing to keep the wheels turning in my head!

Thanks to "the dividend method" I have grown my IRA by 2.0% in dividend earnings ALONE in 9 months! Awesome! You are supporting the next generation of investors here, Greg!

[GregWeld]

Okay -- thanks for chiming in guys....

When there's no comments - or questions - etc I start to question if I'm posting to a vacuum. Not that this thread is about "me"... I'm just trying to use my experiences to help - no different than we do on our projects.

I guess - in the real world - that's the problem with "finances".... lots of people have experience (good and bad) but we don't share them. I don't get it - but it is what it is.

We've been pretty lucky throughout this thread with the market pretty much going our way. It remains to be seen if all of you "newbs" (anyone that is just now paying attention to their investments as well as those just starting out) can gut it out when things turn south for awhile. Nobody can tell you when that's going to happen - or for how long - or whether or not you can take it mentally... but I will tell you this (the reason for this post this AM).... I've always made MORE MONEY in a down market than I have in an up market.

The key is to try to buy LOW and sell HIGH... or if you don't sell high - you at least have nice paper gains (a feel good sort of drug). You need to LEARN this trait. You need to train your brain that the stock market (investing in general regardless of stocks or houses etc) is no different than anything else you buy.... People are trained to buy cars when they're on sale -- they're trained to buy clothing when it's on sale -- Your Mother only bought sheets and towels during the annual "white sale".... Here's the big glitch in our brains with STOCKS and HOUSES --- the average RETAIL investor only buys during the peaks of the market. WTF is with that? Why would we be running out to pay top prices for something? Would you offer a guy full price for his car? Hell no! Would you feel better if you bought it below what he was asking? Oh yeah!

Remember this little info when things go south (look at it as going on sale!)... that is the time to buy like a pig. Don't be like most retail investors and STOP investing when everything is on sale or sell when you bought high. Look at this as a GIFT.... you can now average down by adding to your position... or you can get in at lower prices (thus better dividend yields!).


EXAMPLE:

I can think of several but this one is easy to see because it's pretty fresh.

McDonalds (MCD)... it was at $100... now it's at $87 and the yield is rising as the share price drops... where will it drop to? I don't know... nobody knows. But if you AVERAGE IN.... over time... you will be rewarded (not recommending this stock - just using it because it's a perfect example). There is nothing wrong with the company... there is weakness in the markets they're in... there is a temporary mismatch perhaps of the cost of product and the price they can charge. Whatever the "issue" is -- regardless of the company you're talking about - you must make sure that there isn't a fundamental change in THEIR business (think JC Penny - or NetFlix -- where they're struggling and losing market share - no thank you!) That is this quarter - or this half - or maybe this year... but that isn't the larger story and you want to be a little longer term investor than 'this week'.

The biggest returns happen when you average in over a long period of time - that's why you want to re-invest the dividend - it automatically buys on a regular basis regardless of the price. You'll buy less shares at high prices and more shares at lower prices... more shares pay more dividends so those buys get more and more shares. Then you look at that long term chart and it's way lower on the left than it is on the right and you're the winner!

[GregWeld]

Just poking around... and I thought of something else I wanted to add to my post above.

Again - please do not use my EXAMPLES as a reason to invest in that particular company. I have to use something as an example... so just picking on this one.

When you blow up McDonalds (MCD) 5 year chart on Google Finanace.... notice something that I think is VERY IMPORTANT for ALL STOCKS....

In 2008 this company paid a .38 share quarterly dividend.... in 2011 they were paying a .70 share per quarter. That is almost a double in the dividend.

That's just HUGE! Had you paid the highest price for the shares in '08 - $65 - and held - you'd be getting $2.80 a year per share in CASH...

Annual dividend divided by the share price.... 2.80 / 65. = 4.30%

Forget the 43% growth in your investment! I'll take a 4.30% dividend on a steady Eddy any day!

So again -- this is just an example of some things to think about and look for when you're investing.

OH --- And BTW --- Had you paid $65 a share in September of '08 -- you'd be real unhappy when the shares dipped to $52 in May of '09...... that is -- unless you viewed this as a buying opportunity and added to your position! Because that $52 a share "investment" is paying you 5.38% and you're gain is even larger!

I'll repeat -- don't just look at this stock -- I'm explaining how to THINK about any of the stocks you own already -- or stocks you're planning to buy. This is about teaching you to fish - not catching you a fish.

[Bucketlist2012]

Well said as usual Greg.

I really believe in the averaging in no matter what the market is doing.

For some, they will never open up a personal account, and they will rely on their 401K plan.. Not the best way, but at least they are Investing.

I do recommend putting 15% of your pay into a self directed plan, and taking advantage of any company match that is offered. First you are getting free money from the company, and second, as long as the plan is and investments are directed by the individual, they are continuing to Invest , even in the down markets.

People say how can I Invest 15% ? Well you don't even miss it. Since it comes off the top, you find a way to budget the rest of your money. It is just a way to kind of force people to Invest and dollar cost average.

Now i will say that I personally like a Personal Investment Plan, and only 10% of my money is in a 401K, only because I have the attitude to Invest the other 90% into a personal Investment plan, which i so much prefer over 401K's.

But for those that just won't open an account, at least take advantage of Taking the paycheck money before you get it, and Invest with a company match...Then you will be buying at all times, and every two weeks, no matter what.

But If you have the right attitude, only invest up to the company match and then Invest more into a personal account. But life gets in the way, and bills pop up, and you want car parts,and the Wife and the kids need this or that, so after taxes, your paycheck may get swallowed up..You need to force yourself to Invest no matter what.. Time and Compound interest will reward you..

[WSSix]

Good info as always Greg. You're correct in that it will be tough when the market goes down again for most people to just sit there and ride it out. I'm not looking forward to that point but I think I'll be ok. Not only have I chosen mainly steady eddys but I make plenty of money to live on at this point in my life so I am by no means stretching myself to save or invest. In the mean time, I'm saving the rest in a general savings account that I can easily access and use to buy stocks when the market goes down or I simply have money to lock away. I also use that savings account to store my money until the beginning of the next year when I can max out my Roth. I have no idea if it helps or has any effect positive or negative but I like to max out my Roth for the year during January. I figure the sooner I can get it in there, the sooner it can be earning tax free. Sounds logical to me and I hope that it works out that way.

[GregWeld]

Originally Posted by WSSix

Good info as always Greg. You're correct in that it will be tough when the market goes down again for most people to just sit there and ride it out. I'm not looking forward to that point but I think I'll be ok. Not only have I chosen mainly steady eddys but I make plenty of money to live on at this point in my life so I am by no means stretching myself to save or invest. In the mean time, I'm saving the rest in a general savings account that I can easily access and use to buy stocks when the market goes down or I simply have money to lock away. I also use that savings account to store my money until the beginning of the next year when I can max out my Roth. I have no idea if it helps or has any effect positive or negative but I like to max out my Roth for the year during January. I figure the sooner I can get it in there, the sooner it can be earning tax free. Sounds logical to me and I hope that it works out that way.

RIGHT ON! Good planning -- and good thinking!!