Investing 102

[GregWeld]

Okay "newbs" --- time to start to put on your YEAR END REBALANCING hats.

What is that? It's a review of your portfolio with an eye to tax efficient trades IF -- BIG IF - your accounts are taxable. Tax trades inside a IRA shouldn't be concerned as all those trades are tax deferred. This is about people that will pay taxes on their gains (or taking tax losses) for 2014.

#1 --- Assets should be looked at as a "whole". If you invested 10,000 and you now have 12,000 you are AHEAD. Don't be afraid to sell something at a "loss" when overall you're way ahead!

#2 --- It is nearly impossible to have "everything" working well. When you look there are probably a couple "employees" (stocks) pulling most of the wagon... and one or two that are sitting on their ass.

#3 --- Rebalancing in taxable accounts is merely a look to see where you have gains (and maybe want to pare that down) and offset those gains with sales of losers. That way you offset the gains with loses and then have no or minimal taxes due.

#4 --- Don't forget to check the dividend EX dates before selling anything. It's stupid to hold something for months only to sell it a few days or weeks before it pays it's dividend.

#5 --- Don't SELL anything just because you have a nice gain in it... or to offset a loss. DO examine every holding with the thought process of where it's going long term. Just because I have a 20% gain in Altria (MO) doesn't mean I'm looking to capture that. I have to really like the shares long term -- and if I sold to lock in a gain in this name -- where else would I invest that money to make an even better gain going forward.

#6 --- Year end rebalancing accounts (TAXABLE) can be a chance to prune gains - offset losses - and expand your diversification.

#7 --- BEWARE the long term cap gain vs the short term cap gain!!! Long term is ONE YEAR AND ONE DAY.... short term is anything less than that! The tax rate difference can be huge. In my case the difference is 40% vs 20% (on LTCG)

[captainofiron]

This is a pretty good article about 401k vs IRA

thought I would post it for any newbs that are lurking this thread but dont want to read it all (BUT YOU SHOULD)

http:// lifehacker.com/should-i-put-...t-o-1665628446

[GregWeld]

I haven't added to this thread -- because frankly - there's not much more to add to it.

This morning I got an email from a buddy asking about whether or not now is a good time to put more money to work - or was the market too high. I think I get this same style question hourly. I also respond to it the same way.

I.E.,


The longer you wait for just the right moment to invest - the longer you're out of collecting the dividends. The longer you wait - in an UP market - the more gain you loose out on. Will it go down from where you get in today or tomorrow. ABSOLUTELY. Are you investing for next Saturday, or for 10 - 15 - 30 years?

I hate this question because it shows me the "asker" isn't really committed to INVESTING -- they're only committed to instant gratification. They'll be the first people to sell when the market goes down - losing money - and throwing in the towel. The minute they're "out" the market will go on a 10 year tear upward - leaving them behind - when everyday they once again think the market is "too high". If it wasn't going UP for the last 40+ years.... nobody would have ever invested in it. LOL

[96z28ss]

Anyone here invested in KMP. Have you received your payout and swap to KMI already?
I haven't received it yet, but I know someone who has already.
I even had more shares than they did. I wonder how they determine who gets switched over first.

[GregWeld]

Originally Posted by 96z28ss

Anyone here invested in KMP. Have you received your payout and swap to KMI already?
I haven't received it yet, but I know someone who has already.
I even had more shares than they did. I wonder how they determine who gets switched over first.

Smart traders took their profits (in my case a quarter million bucks) in KMP right after they made the announcement.... and bought the KMI shares.

It's just book keeping and think of the MILLIONS of shares to be handled and payments made. They'll get to you.

[WSSix]

So, I'm sort of in the middle of a dilemma and am unsure what to do. Since I used to work for Halliburton and they had a fantastic ESPP set up, I took full advantage of it and now have a very lopsided portfolio. I'm not at all worried about that honestly. I took advantage of an opportunity that was only available to me because I was an employee at the time and it has paid off greatly.

Until this current and unforeseen drop in oil prices, my attitude was to simply let the shares sit there and make money. I no longer get the discount as an employee, and I'm very lopsided so I don't need to invest any more in that position were my thoughts. I'm now questioning those thoughts because the stock has dropped so much in value. My dilemma is do I take advantage of what is, I believe, a great buying opportunity and continue to make my portfolio lopsided, or do I just stay patient, let my shares ride, and continue to work towards a more balanced portfolio? My cost basis is such that I'm still sitting pretty with great returns right now even with the price down so much.

Thoughts? Opinions?

[GregWeld]

DIVERSIFY. ALWAYS.


Nothing wrong with keeping and holding what you have - but try to broaden your positions until you have 10 or 15 or 20 great names.

Originally Posted by WSSix

So, I'm sort of in the middle of a dilemma and am unsure what to do. Since I used to work for Halliburton and they had a fantastic ESPP set up, I took full advantage of it and now have a very lopsided portfolio. I'm not at all worried about that honestly. I took advantage of an opportunity that was only available to me because I was an employee at the time and it has paid off greatly.

Until this current and unforeseen drop in oil prices, my attitude was to simply let the shares sit there and make money. I no longer get the discount as an employee, and I'm very lopsided so I don't need to invest any more in that position were my thoughts. I'm now questioning those thoughts because the stock has dropped so much in value. My dilemma is do I take advantage of what is, I believe, a great buying opportunity and continue to make my portfolio lopsided, or do I just stay patient, let my shares ride, and continue to work towards a more balanced portfolio? My cost basis is such that I'm still sitting pretty with great returns right now even with the price down so much.

Thoughts? Opinions?

[68SS2]

I have read every post in this thread over the past couple years and it has been very helpful to me, so thanks to all the contributors and specifically Greg. We have talked a lot about mindset and how to view your investments and the market with some discussions about the how.

I would like some opinions about which online brokerage firms people are using and why. I have been doing most of my investing within Vanguard and some real estate, but I would like to have access to more information and specifically be able to closely track my investments and returns (I'm an engineer and love data). I don't buy or sell very often, as this is investing and not trading...so the difference between $7 and $9 trades is secondary to how well their website works for me, but some thoughts on what drove you to a firm would be helpful.

Thanks
Doug

[Woody]

Originally Posted by WSSix

So, I'm sort of in the middle of a dilemma and am unsure what to do. Since I used to work for Halliburton and they had a fantastic ESPP set up, I took full advantage of it and now have a very lopsided portfolio. I'm not at all worried about that honestly. I took advantage of an opportunity that was only available to me because I was an employee at the time and it has paid off greatly.

Until this current and unforeseen drop in oil prices, my attitude was to simply let the shares sit there and make money. I no longer get the discount as an employee, and I'm very lopsided so I don't need to invest any more in that position were my thoughts. I'm now questioning those thoughts because the stock has dropped so much in value. My dilemma is do I take advantage of what is, I believe, a great buying opportunity and continue to make my portfolio lopsided, or do I just stay patient, let my shares ride, and continue to work towards a more balanced portfolio? My cost basis is such that I'm still sitting pretty with great returns right now even with the price down so much.

Thoughts? Opinions?

If it was me I would definitely diversify for the exact reason you are discussing. An unforeseen event has significantly impacted your major holding. I had a friend that worked at WorldCom several years ago. He used to brag to me how much money he was accumulating in his retirement account. I don't know if you were following the market when WorldCom went bankrupt, but his entire account evaporated because he had all of his money in one stock. The same thing happened to people at Enron.