Investing 102

[WSSix]

Congrats Don! Best of luck to you in your retirement.

I had some extra bonus money I decided to dump into my brokerage account instead of savings. I'm looking at making some purchases today.

[GregWeld]

Originally Posted by WSSix

Congrats Don! Best of luck to you in your retirement.

I had some extra bonus money I decided to dump into my brokerage account instead of savings. I'm looking at making some purchases today.

I don't want to be a sooth sayer trying to say what I THINK the market will do.... but there are some dynamics that will come into play.

#1 --- this thread is about INVESTING. There is so much more to a market... but we're trying to build long term - cash creating investments.

So --- Here's some dynamics in a wild ass market like this. Many people are SHORT the market waiting for an opportunity to cover. What does this mean?? It means that a SHORT SELLER can sell a stock he doesn't own.... collect the cash from the sell -- and hopefully wait to buy the shares at lower prices than he sold at --- because he OWES the brokerage the shares he sold. If I was a short seller -- I'd have been covering all my shorts this morning... and making very nice gains on the spreads.

A short in NFLX --- just a "scenario".... guy sells 1000 shares short at $122..... and covers the short today at $99.... he makes 23K on that trade (minus interest expense etc).


#3 --- In my old days of trading.... Anything I bought this morning I'd be flipping out this afternoon (and then go play a round of golf!). Let's take a normal name ---- Altria (MO) --- was down under $50 early this morning. If you'd have bought 5000 shares at $50.50 ---- and it's back to $52 this afternoon ---- that's a buck fifty times 5000 shares -- or a quick $7,500 "gain".


SHORT TERM TRADES (GAINS) INCUR MAX TAX RATE!! So we're talking GROSS gains here.

[WSSix]

What I've been doing with my money these last few years is saving through the year to be able to dump the max I can into my Roth on January 1 each year. I also keep adding extra instead of spending it.

I started looking at everything I have going on in my life and where I am with my different accounts, too. I already have my rainy day fund and house down payment fund. I also have general spending in there for the car. So I thought to myself, why should I put this bonus money into a 1% savings account when I already have my Roth covered for the next year? I could just as easily put it into AT&T and with no capital gains in the stock price make 5% on the money. AT&T could go down 3% and I'd still make more than if I had it in savings.

So that's what I did. Only I looked at the long term charts and picked Hasbro and General Mills over AT&T. Lower dividend payments but the long term charts for both kill AT&T by a huge margin. I got lucky that I had put this extra money into the account only recently so I wasn't waiting around for this to occur. I'll take a simple 2-3% drop in price and feel like I've won the lottery any day. I just wish I could add more money to my Roth because I have some good companies in there, JNJ and MO for example, that I would have liked to be able to add to but oh well.

[dhutton]

Originally Posted by WSSix

Congrats Don! Best of luck to you in your retirement.

Thanks Trey. And thanks for starting this thread. It has really made a difference. Looking forward to reading of many more retirements and success stories.

Don