Investing 102

[GregWeld]

So here's a good question --- and probably needs addressing....


"What if someone only has $1,000 to invest?"


First -- make CERTAIN this isn't money you're going to need -- and isn't the money you're really saving for vacation... It needs to really be "investing" money.

With $1,000 you can't be worried about being "diversified"... what you really need is relative safety with a solid "return" - so that you feel good about ADDING when you have more to invest. So if it was my kids money -- I'd buy Altria (MO) or similar stock. I'd try to find a great stock where the price is less than $50 a share - so you can actually get some shares -- and I'd want it to be a STEADY EDDY -- and I'd want an above average dividend... so you could see some results. Let's be real --- $1,000 - even at 6% -- you're only going to get about $60 a year in dividends -- but if that's buying 2 more shares per year -- it starts to gain a little steam about 5 years into it.

IF I ONLY HAD $5,000 to invest -- I'd buy TWO steady eddies - per above -- but buy $2,500 each.

IF I ONLY HAD $10,000 to invest -- I'd buy FIVE -- steady eddies per above and make sure they were in 5 different sectors.... and out of the 5 -- I might buy ONE riskier stock -- such as an Annaly Capital Management (NLY) just to TRY to boost the overall account. So I'd look for great companies -- keeping the share price at the $50 or less price -- and I'd want to get that bigger dividend.

The reason I'd stretch for the dividend is to gain a little traction "early on"...

So just a SAMPLE for an EXAMPLE:

65 shares of MO @ $28.91 - div is 5.67% -- Tobacco

65 shares of T @ $29.76 - div is 5.91% -- Teleco

120 shares of NLY @ $16.28 - div is 14% -- risky mortgages

75 shares of NNN @ $26.83 - div is 5.74% -- retail property - shopping ctrs

60 shares of EEP @ $32.93 - div is 6.47% -- pipelines

So the average dividend percentage is 7.558% -- so you can see what the ONE high yielder (NLY @ 14%) can do to an otherwise pretty average dividend. Which is why I tossed it in there. Put this all inside the IRA/401K and you're going to get those dividends and share growth compounding TAX DEFERRED -- so for years you'll have no taxes to pay - which allows your compounding to work at warp speed.