Investing 102

[toy71camaro]

Originally Posted by GregWeld

The OFFSET is the growth in share price -- which is what gives you TOTAL RETURN. Do not discount this fact. Chasing YIELD only will have you being real upset with yourself and your account when we DO - and yes we will - get a correction. 4% dividend is good --- and coupled with growth -- it should be 9 or 10% a year. HUGE in this low interest rate environment.


Some of my core holdings are already UP 8 and 9% this year. Dude -- that's a whole years "growth" expectation in 6 weeks!! Will it last?? I'd love to think so -- but I also know why there are AVERAGES.... and if I hold on to the 8 or 9% to finish up the year - I'll be a happy man. So that means that at some point we're going to look like yo-yo's.... it can't just keep going up up up. Now that's not saying it can't go up 20% - but then my guess is we don't hold on to all of that. Love to.... but don't spend it.

Good point. that was in the back of my mind. I was explaining that to my GF last night over dinner, but when i wrote this, i didn't think about that.

The little man on wall street doesn't like me now that I rebalanced my 401k into and handful of diff mutual funds. Those are taking a hit. But he did seem to forget about my Investing 102 stocks, they're doing decent. lol.

And speaking of stock growth and total growth (stock + div), is there a way to calculate that? I'd like to keep track. Or is there a tool/page you use that gives you that basic info?

Edit: after a little further thinking about it.. to calc growth wouldnt you simply take your average purchase price and compare it against the current price? or would it be better to take your purchase cost, compared against the current value? If you do the 2nd option, then it seems you may be able to take your purchase cost and compare it against the current value + dividend payouts to get the total growth? Im not sure if thats right.. its been too long since math class. LOL

Edit 2: i think this explains it: http://stocks.about.com/od/evaluatin...ormualaeva.htm

[GregWeld]

Originally Posted by toy71camaro

Good point. that was in the back of my mind. I was explaining that to my GF last night over dinner, but when i wrote this, i didn't think about that.

The little man on wall street doesn't like me now that I rebalanced my 401k into and handful of diff mutual funds. Those are taking a hit. But he did seem to forget about my Investing 102 stocks, they're doing decent. lol.

And speaking of stock growth and total growth (stock + div), is there a way to calculate that? I'd like to keep track. Or is there a tool/page you use that gives you that basic info?

Edit: after a little further thinking about it.. to calc growth wouldnt you simply take your average purchase price and compare it against the current price? or would it be better to take your purchase cost, compared against the current value? If you do the 2nd option, then it seems you may be able to take your purchase cost and compare it against the current value + dividend payouts to get the total growth? Im not sure if thats right.. its been too long since math class. LOL

Edit 2: i think this explains it: http://stocks.about.com/od/evaluatin...ormualaeva.htm

YES -- that explains it.

[GregWeld]

For those of you with Charles Schwab accounts ---- that like to see how they're doing but can't do all the math.... There's a real easy way for you to see.


Log in to your Schwab account


Under the "Accounts" tab go to PORTFOLIO PERFORMANCE


Once there - it will take a bit to do it's calculations so give it a minute.


Now -- I take my cash in and out of here -- and I DO NOT re-invest my dividends so I CHANGE a setting that you'll find on the far right (Just below "Pinter Friendly" and "Spreadsheet"). Click on CHANGE -- and change the calculator to PERSONAL RATE OF RETURN... I also have this set as my default calculation - because now it calculates cash flow as part of the return (dividends).

From this point you can select what you want to see -- i.e., Year to Date - One Year - QTD (Quarter to date) etc.



So --- My Year to Date is 5.89% (over 11% using the Personal rate of Return calculation page) (obviously since we're in the first quarter this is the same as Quarter to Date). My three year is 62.24%

I'm posting this because I want you guys to see that it's not just all about the dividend --- in other words --- it's about the TOTAL RETURN -- growth plus that magic cash cow called the dividend.

Okay -- HAVE FUN! You might just be surprised about how well you're doing! I hope so!

[GregWeld]

So now that you're "there" in your PORTFOLIO PERFORMANCE



Note that there are other items you can select:


Returns is where we are currently but there is also "Health" and "Quarterly Portfolio Profile"


But more importantly under the RETURN tab

is

Portfolio Performance -- and Risk & Return -- and Asset Class Performance etc


Play around in here and just to use ASSET CLASS PERFORMANCE --- this tab will show you where you're invested --- and give you benchmarks -- and compares YOUR performance against that benchmark.



My account (this one Schwab account I use for this thread) shows me invested in:

56.9% Large Cap Equity

17.3% Small Cap Equity

19.9% Fixed Income

5.9% Cash (gotta have some cash dude!!)



So just play around with these pages and see that Schwab does a great job doing all this WORK for you.

[pw2006]

Thanks Greg! I have played around with most of the tabs, but never the change button. My 401k is with Schwab, and I like reviewing my Personal Rate of Return, but never found it for my other Schwab accounts. Very cool and thanks again!

BTW- I have way too much sitting in cash (20%) and fixed income (45%) right now due to a big sale in November. I have been adding to my holdings every Monday since Nov. Kinda hoping for a pullback so I can back up the truck and put these guys to work.

[GregWeld]

Originally Posted by pw2006

Thanks Greg! I have played around with most of the tabs, but never the change button. My 401k is with Schwab, and I like reviewing my Personal Rate of Return, but never found it for my other Schwab accounts. Very cool and thanks again!

BTW- I have way too much sitting in cash (20%) and fixed income (45%) right now due to a big sale in November. I have been adding to my holdings every Monday since Nov. Kinda hoping for a pullback so I can back up the truck and put these guys to work.

You never have to rush to put money to work. The stock market as well as other markets are open rather frequently.

Waiting for some "event" though - is generally not a very good long term strategy. For whatever reason - the market will run to the moon while you're waiting -- and then too - let's remember our time frames. If the market runs up 8% while you're waiting -- and then goes backward 10% -- do the math and we're not talking about a very large amount of money.

I had to laugh to myself - because some of you "think" like you're playing with millions of dollars and that 50 cents per share is going to make or break whether or not you have a profit/gain.... I had this same conversation with my trainer the other day. He asked "what should I be buying" because he had 10K ready to add to his account.... After a couple suggestions his next statement was that he'd watch the market and jump in on a pullback... So I grabbed pencil and paper and did some math for him. My basic premise - which was to rub his nose in his statement (since he kicks my sorry ass all the time) - was to make him realize the nonsensical point of his waiting. We're talking about someone who is going to scale in - and be buying 100 shares of something... a 1 or 2 dollar pullback was hardly worth the "wait". If he thought that a buck or two was important in the scheme of things.

Now --- a big pullback --- 10% or more... IF === HUGE IF === you're LUCKY and can catch that. Fantastic! But my guess is - when the market pulls back 10% -- you'll wait for 15%.... and so on.

Just saying.... that even myself - for an example - where I'm buying 10,000 shares or more at a time... I'm not waiting. Having said that - this next week with the sequester thing coming up - MIGHT BE - MIGHT BE - worth a wait. But we all know what can happen. The idiots do some kind of a "fix" and the market runs instead of falls back. Thus the age old problem of timing. It rarely works the way you thought. I hate that little man on Wall Street!

[GregWeld]

I read all articles like this with a bit of "jaundice".... because most writers have an axe to grind or an agenda of some kind. But if you read stuff like this and figure that some of it is actually CORRECT... it's just generally beneficial and particularly if you're NEW TO INVESTING. Because you haven't had the TIME to actually live through the ups and downs of a market -- and you may begin your investing life with many pre-concieved notions.

We have talked about rising interest rates and there direct correlation to the stock market. The generally accepted rule is that when rates rise - money comes out of the market - and goes in to interest bearing investments.

The problem with that is that it doesn't GROW your money... yeah you get the interest - but you lose the growth... and high rates are also when we generally have high INFLATION... so while 10% looks good on paper... it actually isn't.

Anyway -- Here's a "myth busting" article that has facts. Remember please -- the market rarely ever does what you think it will/should.... and all we can really do is ATTEMPT to have a better understanding of "things".


http://seekingalpha.com/article/1223...g_income&ifp=0