Investing 102

[SSLance]

Holey Crap... Nice run up today...

I've been busy shipping Christmas packages all week and haven't paid attention, what'd I miss?

[Woody]

Originally Posted by SSLance

Holey Crap... Nice run up today...

I've been busy shipping Christmas packages all week and haven't paid attention, what'd I miss?

FOMC meeting - no rate hike announced

Also, oil prices are actually up today.

[GregWeld]

I don't even know what to post in this thread as far as NEWBS -- i.e., 102 investing -- which to me - is entirely different than say - what "I" do.

You've all now witnessed the roller coaster ride the market can take you on. This is why I've preached to all --- buy great companies -- that pay dividends -- and then sit back and relax.

This last couple of weeks wiped half a million of gains (paper) from the account that I use here for examples. Did I sell or panic or freak out? NO. Why? Because I've seen it all before. WHAT DID I DO?? I began to look at where the damage was done -- and began to think about what I'd do differently or how I'd REBALANCE going forward should the opportunity present itself.

In other words --- I didn't act --- but I did put on my thinking cap.

There's an old old saying about "BUY THE DIPS -- SELL THE RALLY'S". I warn against this "trader" mentality. You should be thinking longer term - calm - steady - invest when you are ready. Not firing from the hip. If you're a seasoned pro -- then that kind of thinking "can" work. We're not seasoned pro's. We're investors in this thread -- just working our way to retirement - looking for ways to get us there over time.

Now - in full disclosure - I thought about where I'd lighten up and I waited for this mornings rally (I had no idea the market would fall so quickly - nor did I think we'd have a two day rally that snapped a lot of stuff back so quickly!) - and pulled the trigger on some trades. I have really large positions. When you're holding 10 or 20 or 30,000 shares per name -- you can lighten up by 5 or 10,000 shares while still maintaining a healthy investment. It's year end -- I see some losers that could be trimmed if we got a rally where I could hide (cover) those losses with trimming some gainers. That's what I did. I also had some stuff in very small positions that weren't paying much dividend that I looked at and thought --- okay --- going forward is it really worth it to me to have less than a 2% dividend, and in such small amounts (500 or 1000 shares). When I could just take that gain - and reinvest it going forward in something that will pay me north of 5%. I answered that question with the sell button.

Now I have way too much cash -- so I'll discuss with my banker dudes some of their ideas (an email was already sent)... and I'll see what's what going forward.

Now -- I pay attention to this stuff big time! You could say that I make my living paying attention to the market, because I do. I'm already retired -- and the gains and dividends I get from the market are what puts fuel in my race cars. So what "I" do is different than what YOU should be doing if you're a long way from retirement or your money is inside a retirement account. There - you just keep putting money in - come hell or high water - you plug that money in!! The LAST THING you want to do is to quit putting money to work because this week the oil complex tanks... THAT IS HOW NOT TO REACH YOUR GOAL!!

[SSLance]

Greg, I have to tell you...during these last two large drops and subsequent rallys the DOW has taken...I've just sat back and watched smiling the whole time. Watching the charts from this different angle that I now see things from has been so much easier to stomach. These quality companies this thread has helped us pick just don't take the violent rides the rest of the market does. They also seem to be the first ones to recover as well.

I briefly thought about dribbling some more in during this last drop, but I was busy MAKING MONEY at the shipping store and by the time I got a break, the dip was over. No biggie, I'll get them next time.

Merry Christmas everyone!!

[toy71camaro]

Merry Christmas to you too, Lance.

And everyone else. Enjoy the holidays with the fam, let the market do its thing.

[GregWeld]

Really good to hear this Lance... it is an "attitude" and it's a learned attitude. While we need to "respect" the market... once we understand the ebbs and flows -- we can start to see the beauty versus fear.

Merry Xmas to everyone!

Originally Posted by SSLance

Greg, I have to tell you...during these last two large drops and subsequent rallys the DOW has taken...I've just sat back and watched smiling the whole time. Watching the charts from this different angle that I now see things from has been so much easier to stomach. These quality companies this thread has helped us pick just don't take the violent rides the rest of the market does. They also seem to be the first ones to recover as well.

I briefly thought about dribbling some more in during this last drop, but I was busy MAKING MONEY at the shipping store and by the time I got a break, the dip was over. No biggie, I'll get them next time.

Merry Christmas everyone!!

[GregWeld]

So here's why it's important to not just throw a dart at the stock market dart board. I always say to invest in best of breed companies that pay you a decent dividend - the dividend is the gift that keeps on giving even when the stock price isn't particularly going your way. AND you want to invest in companies with HIGH HISTORIC TOTAL RETURNS. While this TR won't be a guarantee of the future - it is a "metric" (measure) of what the market thinks of the investment over time.

There's steady eddies -- there's high beta (volatile) -- there's high risk that pays high dividends -- there's ETF's that are baskets of stocks that cover every conceivable category -- there's even higher risk IPO's (initial public offerings)... and this is what confuses people. There's just so many choices. Pick the wrong ones and they can kill your investment nest egg... while getting "lucky" could make you a millionaire. My feeling there is you might as well go out and buy $300 a month worth of Lotto tickets. I'll wave to you while you're dining in the food line. LOL


We've used ALTRIA (MO) many times as a steady eddy that pays a decent dividend. It's a SIN STOCK (Booze and smokes). It's very unsexy.... it's even hated for what it is! But it's GROWTH (share price increase) this year is like 33%.... all the while paying out a 4% dividend.


IBM (IBM) meanwhile is DOWN almost 16% while paying a paltry 2.7%


These are just examples I'm going to pick on -- to show why I use the history of their TOTAL RETURN to help guide my investment decisions...


IBM has a 1 year TR of DOWN 9.6% a 3 year of DOWN 8.8% and worse yet is a 5 year TR of UP 35.6%.....

MO has a 1 year TR of UP 39% -- a 3 year of UP 97% and a 5 year TR of UP 231.5%

Which one would you have rather invested in?? So my point is -- don't just pick names that you know (like IBM) because you THINK they're best of the best... do just a tiny bit of research and really make those important comparisons!

So just using the TR as a guiding light.... I would have bought the Altria (MO) over IBM.... and IF I'd done that - I'd have made a better return in ONE year with MO than 5 years with IBM. That's HUGE guys -- just huge. Is that metric 100% accurate? No. Nothing is.... but it's a pretty decent place to hang your hat. I ALWAYS use it as another point of reference before I hit the buy button.

[68Cuda]

Originally Posted by GregWeld

We've used ALTRIA (MO) many times as a steady eddy that pays a decent dividend. It's a SIN STOCK (Booze and smokes). It's very unsexy.... it's even hated for what it is! But it's GROWTH (share price increase) this year is like 33%.... all the while paying out a 4% dividend.

I love my MO stock and I do not smoke or drink. I started managing my own 401k at the end of 2010. Here is a cross-section of my holdings (some of which I sold) along w/ total return, hold period and APR. I have about 5-6 others I have bought and sold, and a few I picked up recently that I am not showing. I also took a bath on Bank of America somewhere along the line. But, overall, I am averaging a bit over 17% annual return.

You may also notice a trend, most of these are big boring companies that pay decent dividends. I just looked for them to be on sale (high dividend rate for the sector) then bought them. Of course the stock market is doing well this year, that makes all of us look smart.

[68Cuda]

Originally Posted by GregWeld

IBM has a 1 year TR of DOWN 9.6% a 3 year of DOWN 8.8% and worse yet is a 5 year TR of UP 35.6%.....

It also helps to learn a little about the company before you throw money in just looking at a chart. I work in the same industry as IBM and 14 years ago was a design engineer at a factory building tools to sell them for their NY and VT factories. IBM used to be one of the 4 companies we partnered with on semiconductor process development. I have a lot of respect for where they have been. In recent history though, they have suffered. Their semiconductor MFG has been bleeding red for a while and the CEO has been under pressure to offload it.

They recently made a deal with a foundry to take the semiconductor MFG group, a large amount of their intellectual property, and gave the "buyer" $1.5 Billion in cash and a deal to buy chips from them. That is why the stock has suffered. So, when you see a company's stock drop, make sure you do a little research and find out the backstory before you just dive in! Now, looking forward, can they do well without the in house MFG? Historically some companies, like Qualcomm, have, others, not so much. Sometimes owning the MFG can be a competitive advantage (just ask Intel and Samsung). Their stock could take off, time will tell. For better or worse I will stay away from this one.

An article on the IBM deal:
http://www.bloomberg.com/news/2014-1...chip-unit.html

Generally I stay out of the semiconductor stocks, I am too close to it if that makes sense to you. The Intel deal I picked up on early last year was too obvious to pass on. I then sold it when I thought it was back in line, still made me nervous to hold on to it.