Investing 102

[67pro-street]

Originally Posted by GregWeld

This is why I say ---- stay the course. Don't try to game the market because the market will beat you like a bad dog. Be aware - be thinking - be prepared - but don't be gamed out or in. Buy great stuff - collect your dividends - keep putting aside money for your next buy, and buy when you're ready. Sometimes you'll buy high - sometimes you'll buy low... but buy you must. 20 years will go by - and you'll look back and you'll have a nice pile of dough that's paying you a nice income. Fail to do this strategy... try to beat the market... try to get rich quick by plowing into the next big sure deal... and you'll join the ranks of all the people that are waiting on the government to take care of you.

Well said Greg! I know people have said this in previous posts, but you should really consider writing some sort of investing book, "Investing for Motorheads" or something. Seriously, before finding this thread i would have never actually opened up a brokerage account and started investing. Sure, i would have thought about it, but never actually done it because i was too scared of what i didnt know!! You have knack for explaining things in simple terms that are easy to grasp understand. THANKS to you and everyone else who helped make this thread what it is!!

[GregWeld]

Originally Posted by 67pro-street

Well said Greg! I know people have said this in previous posts, but you should really consider writing some sort of investing book, "Investing for Motorheads" or something. Seriously, before finding this thread i would have never actually opened up a brokerage account and started investing. Sure, i would have thought about it, but never actually done it because i was too scared of what i didnt know!! You have knack for explaining things in simple terms that are easy to grasp understand. THANKS to you and everyone else who helped make this thread what it is!!

Thanks!


I can explain simple -- because I AM simple!


It's taken me years to get a full (okay maybe half) an understanding for how this stuff works... and therefore it makes it pretty easy to "condense" -- especially if we keep it to "investing 102" style. Because - it really is "just that easy".

Brokers - and people like that... they want you to be fully dependent on them! They make it SOUND complicated so that you think they add value... thus pay them.

My true honest to god opinion of that is - what a load of crap!


If you can brush your teeth - you can pick good companies to invest in.

[WSSix]

I'm right there with you, Brian. We're at similar points in our lives. At times I get concerned, especially since I still don't own a home. Other times though, I have to remind myself it's going to take time, and while I'm not there yet, I'm doing alright.

[GregWeld]

While this is NOT a stock pickers thread... I still like to use single names (stocks) for educational purposes.

Watch APPLE (AAPL) shares...

This is another stock that falls in that "priced for perfection" category (IMHO)... and here we have the iPhone 5 release and now there is a strike at a plant that makes them.... so will that affect their earnings and sales numbers? Long or short term? Blah blah blah.

The strike isn't a big deal - stuff like this happens all the time... we're certainly not unfamiliar with strikes or other hiccups that affect a company or industry... but WHEN YOUR STOCK IS PRICED FOR PERFECTION --- then we have another matter entirely. And we have an educational event to watch.

I'm personally happy to NOT be invested in Apple... and I have made a bunch of dough off this stock. BUT as it reached a price point where a 1000 shares cost $650K to play - that became a point for me to just "move on". It became a percentage game to me... again -- explaining my thinking so that you all can gain some different ways to think about stuff on your own -- a 10% move UP from $650 a share is $65 -- so you have to ask yourself at that point - are you really investing - or are you just gambling and hoping like hell that someone else is willing to buy your shares at the higher price. Here's my personal take.... I'm joe average guy in thinking power.... and I'M having double and triple thoughts about buying it at $650 (in fact I wouldn't / didn't). If I'm having that thought - don't you think others are too? And if you'd bought at $450 or $550... and now have a HUGE gain.... are you thinking about buying more -- or are you having thoughts of SELLING and locking in an outsized gain. If it moved up another $65 to $700+ would you think about selling?

That's what I want you to watch and learn from. This is a "market" -- I don't give too hoots about "metrics" and P/E ratios - and whether or not the talking heads come on TV to tell you all manor of financial facts. In the END -- it's people making a personal decision about their money. PERIOD. The thinking is about when is enough profit in a stock, enough? Not so much about how much you "might" leave on the table if you sold today rather than next month. You start to worry about LOSING that profit. The minute the shares go backwards --- more people start thinking (and seeing!) the "loss" even though that "loss" is only a small percentage of their outsized gain. We're all GREEDY!

So --- just like cars (or houses!) -- when everyone is paying way too much for ordinary cars on Barrett Jackson --- things are good..... BUT when the prices start to fall --- and they fell FAST.... and then people start thinking -- "well... my car was worth $200 grand -- and now I'm seeing bids of ONLY $125 grand -- I better sell while I can still get that much money!". Doesn't matter that they didn't sell at $200 --- it matters what they might miss if they don't sell now. FEAR sets in! Fear and Greed make markets. Regardless of what anyone says. Learn from it. Learn when to be greedy and sell.... and learn when fear drives your decisions... I love to buy when everyone else is trembling (thus selling) and you need to learn to SELL when they're all greedy and buying. You also need to watch and control you're own fear and greed... That's why old adages like "pigs get fat and hogs get slaughtered"... and "buy low and sell high"...

I'm not saying that APPLE will go lower - or higher - or won't be the perfect DIP buying scenario.... What I'm saying is that if you're not invested in it - use it's swings to learn from it. Ask yourself how or what you'd be doing "IF". Then that's a reference for your actions when you're ready to take the plunge in some other name. Are you buying in greed mode or are you selling out of fear - are you investing or are you gambling? Learn to check yourself it will make a difference in your investing.

[GregWeld]

Okay -- this is difficult -- but I want people that are following this thread to be really on their toes... and that means really being ready. Nobody - and I mean NOBODY can tell you where the stock market is going - either up or down... and if you go back and read this thread - you'll see time and time again warnings about what happens when things go south and how you might react to that.

If you're a TRUE investor.... and you own the kinds of stocks we've discussed here (not just the actual names - but the KINDS)... Then what you're set up for is the dividend stream - and if you're re-investing that dividend then you actually do better in the long term if stocks go down. Why? Because your dividend buys more shares - and the actual calculated percentage the dividend pays, goes UP..

If you're investments are in 401's / IRA's / ROTH etc... then you're invested for the long haul. Not only is this the time TO retirement - but for as long as you live AFTER retirement. Your money doesn't just suddenly stop earning on the day you retired. You just became Chairman of the Board and you have your "employees" still out there working hard for you every day! Stay the course.

If you're saving/investing/gambling money that you might need SHORT TERM.... Then I'd say you might become more defensive. More defensive means to take some profits if you have some... and to sell anything that you might have bought "just because" and you think maybe it's going to give you a short term gain.

Having CASH is always being KING.... Having CASH allows you to breathe easy and allows you to buy at lower prices etc. Nobody ever went broke taking a profit. Remember that this is for investments OUTSIDE of the above ROTH/IRA/401. We're talking taxable accounts.

I've raised my cash hoard substantially. What I've personally done is to take the cash out of the places I "park" it... which are high yielding bond ETF etc.
With the elections undecided - the world seems to be saying there is slowing growth or no growth - China's slowing... I want to be READY to be able to buy real good companies at lower prices. I want to be ready to add to my Coke and my Con Ed and my McDonalds etc... If I'm WRONG... then the worst thing I've done is have cash to buy at higher prices - which will give me lower yields going forward.

Those of you that have gotten in the market "recently" -- probably don't have gains - or have very slim gains... But if you invested in DIVIDEND paying stocks then that is where your gains are going to come from!

What I'm talking about here (as far as my selling recently is concerned) are those names where I've just used cash to generate outsized dividends in speculative stuff. That's why I've said at the top of this post that this is going to be difficult. There's a distinct difference of where you go to raise cash. I've posted many times the names I use for this purpose... and all I'm saying now - is that I'm going to UNPARK it in those and actually hold the cash because I think there COULD BE/MAY BE a buying opportunity going forward.

Does this make sense?

What I'm SENSING is that people that have huge gains -- which is anyone that's been in the market in the last TWO years.... they may be taking some of those gains off that table. I'm seeing/sensing this in Apple and Google and some of the other big gainers... and frankly - it's what I'd be doing if I owned those. We know the tax rate for THIS YEARS long term gains - we don't know what that's going to look like going forward... at 15% LTCG - This is the year to be taking them. Especially if you're a "1%" earner... and the market is where those earners put their money.

I personally think the USA is on the upswing! Everyone I talk to says business is good! If you're a realtor it's GREAT! Car sales are good... housing sales are good...

So I hope what I'm trying to say is not misunderstood -- I'm just saying that I think I might get a buying opportunity... but I have not sold my steady - great name - dividend payers.... I've just sold the cash parking positions.

Of course I fully expect those to take off to the moon now that I've done that. The man knows - and WILL work to make me look like an idiot.

[nicks67ca]

Greg what address should I use to just mail you my paychecks? Seriously though your insight has made me add to my strategy. I think at my age I can park "extra cash" in the dividend paying stocks and re-invest the dividends. I think the important thing that i am realizing is that no matter what the dollar amount invested now I have the next 30 years to make it work for me.

Thanks again for your insight and experience in this tread!

Nick

[GregWeld]

Originally Posted by nicks67ca

Greg what address should I use to just mail you my paychecks? Seriously though your insight has made me add to my strategy. I think at my age I can park "extra cash" in the dividend paying stocks and re-invest the dividends. I think the important thing that i am realizing is that no matter what the dollar amount invested now I have the next 30 years to make it work for me.

Thanks again for your insight and experience in this tread!

Nick

HAHAHAHA


Nick --- That is EXACTLY the kind of thinking I'm trying to promote. Forget todays price - or next weeks - or next years.... Just get in - put more in when possible - and you'll be richly rewarded in the future.

[WSSix]

I understand what you're saying Greg and I agree. I intend to buy more stocks soon in a brokerage account that's outside of normal retirement accounts. Right now, I'm just waiting for the outcome of the election and to see what Congress intends to do about the fiscal cliff or whatever made up term they are calling it today. I figure I might "lose" 3-4 months of investing time but I'd rather be patient and see some resolution to these concerns. Besides, I'm not really "losing" anything. My future stock purchase money is sitting in a savings account making 1%. I've never seen a negative interest rate on a savings account. So I can't lose. I just won't earn a lot.

I'm glad you're at ease and like what you're seeing in the economy for the most part. You understand this more than me and are more connected and informed as well. So that helps me feel better because frankly, I'm not so confident in what's going on right now. I'm confident it will get better eventually, but how long until eventually becomes now though?

[GregWeld]

Originally Posted by WSSix

I understand what you're saying Greg and I agree. I intend to buy more stocks soon in a brokerage account that's outside of normal retirement accounts. Right now, I'm just waiting for the outcome of the election and to see what Congress intends to do about the fiscal cliff or whatever made up term they are calling it today. I figure I might "lose" 3-4 months of investing time but I'd rather be patient and see some resolution to these concerns. Besides, I'm not really "losing" anything. My future stock purchase money is sitting in a savings account making 1%. I've never seen a negative interest rate on a savings account. So I can't lose. I just won't earn a lot.

I'm glad you're at ease and like what you're seeing in the economy for the most part. You understand this more than me and are more connected and informed as well. So that helps me feel better because frankly, I'm not so confident in what's going on right now. I'm confident it will get better eventually, but how long until eventually becomes now though?

Excellent!

Markets don't like "uncertainty" -- they will SELL OFF when there is uncertainty - because people don't like standing (possibly) in front of a train.
Nobody knows if there is a train - but they don't want to stand on the tracks just in case.

For the average investor - it's futile to try to "time" events... in fact - it's IMPOSSIBLE. Thus the "just stay the course".

BUT if people have suddenly decided they should invest some "quick money" recently... then my advice would be to stand down.... let the political and economic uncertainty become clearer... then pounce if it turns out to be a good entry point.

The market is always a "percentage game" --- 10% is a big move...

10% on a grand isn't much money... we spend that going out to eat... but 10% on the kind of cash that I'm playing with - that buys a house! So I'm "on it" all the time.

[mdprovee]

Greg,

I wanted to let you know the help you and this thread have given me.

I made some changes yesterday on my account, and I am up 11.5% from a year ago. As an example...my AT&T went from $4900 at the start to $6000 yesterday. I know that was a great year, and I dont expect that always, but I will take a good year.

I owe you a steak dinner.