Investing 102

[GregWeld]

In checking my accounts this morning - as I do EVERY morning.... I was reminded of the "should I buy now or wait for better prices" discussion was still fresh in my brain.

The account that I use for examples in this thread has 7.5MM in 9 names... and currently has a RED (negative) cost vs current value of 185K....


So PERFECT for this current topic right!?! I paid higher prices for the AVERAGE cost than where most of the names are trading. Kinder Morgan Partners (KMP) being the #1 underwater name... with a current (loss) of 211K on a investment of 1.82MM (22K shares). Some have green numbers but obviously not enough green to cover for the red! NORMAL investing. Over time these change and some of the "green" will come down or go red - and the red will change and go green or go more red.

Here's my point for the share this morning.


That account spins off 506K in dividend income. All the while (today) showing a "loss" of 185K in paper value. I don't care about the "loss" -- because it's not a loss until I make it a loss by selling. I'm not selling - so it's not a loss. And with that income - that loss is covered in less than 6 months of the income that is generated. The INCOME is my goal. If it was reinvested (as most all of you should be doing) then it would compound at better rates by automatically averaging down my costs. And the new shares that would be purchased at lower prices actually pay a dividend at a higher PERCENTAGE rate.

Now - that doesn't mean that I don't keep a keen (AWARE) eye on each name I own. Some of the names that are in that account are actually positive in other accounts I have. Confusing I know but I have multiple accounts - and as long as NONE of the investments in total are larger than 5% of what I have to invest... then it's okay to own them. Some of my accounts are inside trusts (for tax and death purposes). I'm laughing at this - because I wish all of you had such issues!

Anyway -- all I'm saying is -- think longer term - constantly review your holdings and WHY you hold them.... always question a loss.... why are they down? Is there an issue with the company? Is there an issue with the industry (let's compare BlackBerry (BBRY) vs the telecommunications industry) vs the companies performance? Etcetera....

If all is okay -- and you can't come up with a valid reason for selling at a loss... then sleep well. Don't fail to question... but don't freak out just because you're down 1% or .50 a share --- when they're sending you that much per quarter. But also don't hang on to a bleeder that you're worried about and can't explain to yourself WHY you own it.