Investing 102

[chichirone]

Lance, like you, we have fur kids. No college savings. No weddings. But also leaves us reliant on "other" resources to assist in our care when age and health requires it. Unlike our parents, we don't have 4 children to bail us out when we have a need or cannot afford our lifestyle choices.

The greatest challenge we face is the intermediate funds required to bridge our financial freedom over the next 20 years when we can obtain access to our IRAs and long term retirement accounts is quite the challenge, even at higher than average earnings. We work extremely hard, sometimes to a fault of fun and life enjoyment, requiring us to remind ourselves to not take ourselves too seriously and get out there with friends, family and our hobbies. It is amazing how a great laugh with friends makes you feel "richer" than any gains in a stock portfolio. Greg's $1M/$60k = $40k after taxes income calculation is a killer. To pay yourself $10k per month one needs around $3M in the bank. Thinking forward 20 years. $10k per month is going to go quickly with inflation and rising costs of everything. Healthcare will require an inequitable share of the available funds.

So this leads me to why we got so hooked on this thread, Investing 102, to begin with. Dividend investing offers us a tool to generate income when we hit our target number to be what we consider financially free. Greg described it as comfortable.

So after the diatribe, here is a question...what is better? A stock with a higher dividend %, higher potential growth rate, riskier investment profile or a proven player. Take PM vs VGR. I lean towards PM but the 7.29% yield of VGR is really attractive. 40% greater revenue on every dollar invested if it stays price neutral but the risk of loss makes me somewhat uncomfortable. What is the best way to evaluate the stock beyond the surface metrics? Curious how you look at this and what lens to add in an evaluation of peers in a group such as "sin" stocks?

[GregWeld]

Originally Posted by chichirone

Lance, like you, we have fur kids. No college savings. No weddings. But also leaves us reliant on "other" resources to assist in our care when age and health requires it. Unlike our parents, we don't have 4 children to bail us out when we have a need or cannot afford our lifestyle choices.

The greatest challenge we face is the intermediate funds required to bridge our financial freedom over the next 20 years when we can obtain access to our IRAs and long term retirement accounts is quite the challenge, even at higher than average earnings. We work extremely hard, sometimes to a fault of fun and life enjoyment, requiring us to remind ourselves to not take ourselves too seriously and get out there with friends, family and our hobbies. It is amazing how a great laugh with friends makes you feel "richer" than any gains in a stock portfolio. Greg's $1M/$60k = $40k after taxes income calculation is a killer. To pay yourself $10k per month one needs around $3M in the bank. Thinking forward 20 years. $10k per month is going to go quickly with inflation and rising costs of everything. Healthcare will require an inequitable share of the available funds.

So this leads me to why we got so hooked on this thread, Investing 102, to begin with. Dividend investing offers us a tool to generate income when we hit our target number to be what we consider financially free. Greg described it as comfortable.

So after the diatribe, here is a question...what is better? A stock with a higher dividend %, higher potential growth rate, riskier investment profile or a proven player. Take PM vs VGR. I lean towards PM but the 7.29% yield of VGR is really attractive. 40% greater revenue on every dollar invested if it stays price neutral but the risk of loss makes me somewhat uncomfortable. What is the best way to evaluate the stock beyond the surface metrics? Curious how you look at this and what lens to add in an evaluation of peers in a group such as "sin" stocks?

The "best" metric IMHO is TOTAL RETURN. It is - after all - what we seek. TR is the measurement of dividend (if any) and growth. The combination - regardless of the % of either (dividend or growth) is how you make money on your money.



Total Return for 5 years on Philip Morris (PM) is 90%


Total Return for 5 years on Vector Group (VGR) is 270%


Would you rather make triple or merely double on your money in the same timeframe? LOL



The key to ALL investments is DIVERSIFICATION -- you balance some risk with some "steady eddies". And what you'll always see is a horse race... if someone was calling it out at the track - it would be one horse leading - then falling behind or being passed by some other horse -- and suddenly (over long time periods) the horse in the way back starts pulling and passing.... THAT is why we want some diversity - some risk - some growth - some "sure things" in the mix.

[GregWeld]

Forgot to respond to your other question - about measuring stocks in a group against each other.

This is a "research" question - which I tell people to use... look up the name you're interested - and then (say on Google Finance) see the list of what they consider 'peers'.... start researching those... start with the names you are familiar with but didn't come to mind... look at their dividend - look at their TOTAL RETURN numbers... did their TR come from a great dividend or growth or some combination... is the company diversified.... is one pure tobacco or are they into other stuff... how do you feel about that? What's the risk / reward... a company with a single horse vs a company with a team of horses....

Depending on your investable resources --- you might end up splitting your SIN STOCK investment between two or three names... rather than one - or maybe this year you buy one name -- and pay attention to a couple others moving forward... get familiar with them - watch them - get comfortable (or not)... So when you have your next buy to put in - maybe you put some in the same one or maybe you add a name.