Investing 102

[James OLC]

Originally Posted by GregWeld

James -

Nice dividend stream - but DUDE <spicoli style> you need some diversification!

However.... I also understand your trade and what YOU understand... and perhaps you even have an "insiders view" of the industry.

Yeah... I hear you buddy... I'm just not good at (a) change and (b) stuff I'm not hands on with every day.

I do have some gold and minerals (mining) in the portfolio but they are not dividend paying stocks and I bought them for tax purposed more than anything. I had some conventional golds in the mix but some of them funded the OLC build back in the day and the entry point seems a bit too tenuous at this point...

I also have a green tech stock (gasification tech) that is my "stock I love to hate" but never seem to do the right thing with. I first bought in about 5 years ago at $2 about 6 weeks later than I should. I grinned when it went to $3 but held on because I was drinking the kool-aid. When it dropped to $1 a tried to ignore it and when it hit bottom around $0.5 I (somewhat reluctantly) averaged myself to something that made sense. I then grinned last month when it to $0.8 but again... I held on... no... I don't know why why... Today it's back at .5 (dammit .475)... It's been a "good learning experience" but that's about it.

[GregWeld]

Originally Posted by James OLC

Yeah... I hear you buddy... I'm just not good at (a) change and (b) stuff I'm not hands on with every day.

I do have some gold and minerals (mining) in the portfolio but they are not dividend paying stocks and I bought them for tax purposed more than anything. I had some conventional golds in the mix but some of them funded the OLC build back in the day and the entry point seems a bit too tenuous at this point...

I also have a green tech stock (gasification tech) that is my "stock I love to hate" but never seem to do the right thing with. I first bought in about 5 years ago at $2 about 6 weeks later than I should. I grinned when it went to $3 but held on because I was drinking the kool-aid. When it dropped to $1 a tried to ignore it and when it hit bottom around $0.5 I (somewhat reluctantly) averaged myself to something that made sense. I then grinned last month when it to $0.8 but again... I held on... no... I don't know why why... Today it's back at .5 (dammit .475)... It's been a "good learning experience" but that's about it.

Oh -- If you read this thread - you'd think everything I ever touched turned to gold.... HA! Far from it.. the key is to have more winners than losers because we are ALL going to have plenty of losers. It's just part of the way the world turns.

Back about 15 years or so ago --- I used to do more "trading" - not day trading but just lots of "movement" in and out of stuff. Sort of always chasing the flavor of the month (or week). I had enough dough that I USUALLY could buy my way out of a bad investment - and by this I mean - I'd average down the position. So newbs -- please don't do this - but here's what I'm talking about.

Say you bought 300 shares @ 10 and then went down to 8 - so you'd buy 300 more @ 8 - this gives you 600 @ 9.... so "on paper" at least you're current cost is closer to where it's trading... then let's say she's holding at 9 - so you buy another 600 @ 9 -- now you have 1200 @ 9.00

So the "theory" here is that I'm now holding the shares that are closer to the current price -- Works great IF -- BIG IF -- they come back to $9.50 or so and you can then scale out..... BUT -- BIG BUTT IN THE ROOM -- They can also (more likely! LOL) continue to decline -- so you buy even more...

Short story of this kind of idiocy - I lost 93K in one name and only lost $1 per share! The "first loss" I was trying to buy my way out of was maybe $5 grand.... But this "method" had worked so well for me in the past that I just kept chasing it down!

And - it is too long ago to remember - but my guess is -- a half hour after I sold and booked the loss -- the little man on wall street hollered to his buddies "The Dumbass is out -- take her up"!! It never fails.

So the minute you sell your .05 shares - the next week they'll announce an all cash buyout of $15 a share.

[68 stang]

Greg,

How do you know when to sell. Say you bought a stock and it had a good history of paying a dividend and went up in price over the long term. But it does not do that and falls in price. Or quits paying the dividend. How do you know when to fold and walk away.

How about cashing out some the stock, so if there is a 100% price increase over a year. What now?

Thanks

[GregWeld]

Good questions!

There's some old sayings on Wall street - that can, and do, make "some" sense... as in "nobody ever went broke taking a profit".... True enough -- but -- Always seems to be a big butt right?

So your question is multi faceted and really complicated - but also somewhat easy --

If a company reduces or suspends paying a dividend - YOU SELL IT! FAST! That is the kiss of death because that means they don't have the profits to continue to share with YOU the guy that owns the company (via stock ownership).

When a stock is going down - you need to understand WHY it's going down - a sales slip? A shrinking profit margin? Accounting fraud? There's so many things that can cause a stock to slip -- or is it the "SECTOR" the stock is in and all in that sector are going down? Or is it just that we're in a bear market and EVERYTHING is down? That's why that is a hard question to answer because there are so many reasons. Having said all of that --- there's a lot of money to be made buying the "best of breed" stocks in a bear market.... and that's when I personally do my best "shopping" -- because it's like every stock in the universe just went "on sale". I love to buy when stuff is on sale!

Now -- the other question was "what if a stock went up 100%" --- Buddy! Your mouth to gods ear! 'Cause that is what everyone is looking for! But -- there's that butt again - you always need to "rebalance" the portfolio... and if the stock has gained so much that you're out of balance - you want to sell some of it and buy something else (diversify!).... Yeah -- it can keep going -- and you'll kick yourself for not having held every dime when it doubles again.... BUT that's where the old saying "pigs get fat and hogs get slaughtered" comes from. Better to be a profitable pig. Think about it this way as well - if you had a double - and sell half - the balance is "house money". That is a very nice place to be!

NOW -- all of this "depends" -- depends on how much money you have - how old you are - how familiar you are with why the company is going gangbusters etc. I've had stocks that have been at .56 - gone to $28 - and gone back (faster) to $1.70 - and then gone back to $35.... Those are RARER than a ZL1 -- and not for your average Investor 102 class. So taking some of the profit off the table is the "prudent" course... even if you live to regret it. Scroll back and read my post about the 20 million dollar yacht (boat) I owned. But I've never looked back and have been happy taking the gains and using them to live another day.

Wanna look at a real life - recent - scenario? Look at the chart of NETFLIX (NFLX), there's a stomach churner! And that all came about because the CEO shot his mouth off... So to speak. One day you've got a 3Xr and in a manor of a few days and weeks - you're looking at a loss! But if you'd bought at 100 and sold some at 200 - and sold some more at 300 - you'd be "okay" holding here at 65 (I'd have bailed completely).