Investing 102

[Vegas69]

Greg, Thanks for the humility buddy.

[GregWeld]

Originally Posted by Vegas69

Greg, Thanks for the humility buddy.

Welcome! Just don't get used to it! LOL

[GregWeld]

Many people ask me "when should I sell"? Good question... and maybe a harder one to answer than "when should I buy"? So this mornings coffee and reading - while the sun comes up (it's truly glorious here in the valley).... I came across an article on Seeking Alpha. The author is attempting to set up a strategy for buying on the dips and for when to sell. In a nutshell he's selling 25% of his stake if the shares rise 50% and he's selling 50% of his stake if they double.

Here's my problem with a strategy to sell WINNERS..... They're usually winners for very good reason(s). They're doing things right and making money and investors want to own them. So my question would be - why would you sell? Just to take profits? You pay taxes on profits - either long term capital gains - or if you're not careful - short term capital gains. You pay ZERO taxes on gains that are paper.

Here's my other problem with selling winners.... now what do you do with the money? You want to keep invested... so if you're not selling because you need money to buy a house or apartment building or something like that... you're just selling because you have a profit. So now you have to come up with another winner. That's usually harder to do than you think.

We've been in a market where the saying is "a rising tide floats all boats". Pretty much everything is going up - mostly because the market has nowhere else to put their money and make anything on it. Remember a market goes up when there is more buyers than sellers. It's really just that f'n simple. Right now - nobody wants to put their money in a 1% bank account or a 2% bond. But here's the thing to remember. If you've gone up 40% -- and the market takes a downturn (who knows for what reason and it doesn't really matter)... and it goes down 15%... it's down 15% but you had a 40% increase - so it's really still up HUGE.

People love to sell when the market is "down"... but if you keep your head on straight - and really look at the numbers - you've made a pretty nice gain even when it's down. That's usually when I'm a buyer not a seller. And I almost never sell my winners.

Look at a chart -- stretch it to 10 years -- if you'd have bought 10 years ago - how many doubles would you have now in that name (whatever you choose to look at)? If you sold at the first double - where would you be? And that's my point for this morning. Sell for a good reason - not just because you enjoyed a superior gain.

[glassman]

This might be a dumb question, as sometimes i'm rather slow.

Where can i find or what sectors are there? in other words, from this list , what am i missing?

Manufacturing
Technology
Bio tech
Transportation
Food (and entertainment?)
Communications
Global stocks?
Energy (types? differences between say Chevron and KMP)
Property stocks (REITS?)

Im trying to build a well diversified dividend portfolio if you will...So as i research and grow. I am slow to the game in building all this.

Im averaging in every month...and currently only have Food and Energy stocks so far (besides my Roths, 401k and biz and property).

Were trying to build a pension for the company (us and our few employees) and what a pain in the a$$) so many different opinions and bs, everybody keeps pointing me in different directions....Any advice out there while doing this?

[GregWeld]

Mike,

You've asked a really loaded question with a whole bunch of answers.

There's MANY MANY ways to "diversify" your investments without trying to own each category in the S&P...

#1 -- It's not about just owning something in every category. There's sub categories... such as large cap or small cap - or even micro cap... within each category.

#2 -- I firmly believe too much diversification only leads to poor performance

#3 -- To be really diversified only means that you don't have all your eggs in one basket. That could also be defined as everything in stocks!

#4 -- Diversification depends on how much money you have. A guy with 10 grand can be somewhat diversified by just owning 5 different investments. He could own a bank - oil - drugs - retailer - and a food stock. For 10K I'd call that about as diversified as he/she should get.

#5 -- That wouldn't be nearly enough diversification for a guy with 100K or 1MM


#6 -- Just pay attention to QUALITY over trying to spread out "just because".

+++++++++++++++++++++++


RE: Pension


Only discuss this with a qualified Pension pro. There's so much to know and understand about pensions. And remember -- once you're involving other people - such as your employees... now you're taking on a fiduciary responsibility and you put yourself / company at risk if you don't do things right.

Personally -- in today's litigious environment - I'd never involve myself taking on that responsibility unless I had a really large company. I used to have to deal with this when I owned a company in NYC -- and also as a Board Director
at Seattle Yacht Club... it's a nightmare. No thanks!

[glassman]

Originally Posted by GregWeld

Mike,

You've asked a really loaded question with a whole bunch of answers.

There's MANY MANY ways to "diversify" your investments without trying to own each category in the S&P...

#1 -- It's not about just owning something in every category. There's sub categories... such as large cap or small cap - or even micro cap... within each category.

#2 -- I firmly believe too much diversification only leads to poor performance

#3 -- To be really diversified only means that you don't have all your eggs in one basket. That could also be defined as everything in stocks!

#4 -- Diversification depends on how much money you have. A guy with 10 grand can be somewhat diversified by just owning 5 different investments. He could own a bank - oil - drugs - retailer - and a food stock. For 10K I'd call that about as diversified as he/she should get.

#5 -- That wouldn't be nearly enough diversification for a guy with 100K or 1MM


#6 -- Just pay attention to QUALITY or trying to spread out "just because".

+++++++++++++++++++++++


RE: Pension


Only discuss this with a qualified Pension pro. There's so much to know and understand about pensions. And remember -- once you're involving other people - such as your employees... now you're taking on a fiduciary responsibility and you put yourself / company at risk if you don't do things right.

Personally -- in today's litigious environment - I'd never involve myself taking on that responsibility unless I had a really large company. I used to have to deal with this when I owned a company in NYC -- and also as a Board Director
at Seattle Yacht Club... it's a nightmare. No thanks!

THanx Greg, its very important to me as an employer to take care of the people and spread around the wealth a little, and yes wat a clusterfuc. And thats what my accountant keeps saying "fiduciary responsibility/liability", so yeah, things need to be done right. We used a good pension company, have a good accountant, and attorney. So I'll just keep doing my homework and sell as much glass and aluminum and service as I can.....and keep digging away.....

Anyways, thanx for your input. I really respect your opinion, even if you are just full of sh$t lol....

[JKnight]

Mike,

Are you guys going down the path of a pension plan, as in defined benefit, or something like a profit sharing plan (defined contribution)? The defined contribution plan might be quite a bit easier from an administration standpoint, but everything Greg said above would still apply. Just clarifying terms as it might be important to make the distinction in your conversations with the pros.