Investing 102

[WSSix]

Jose congrats on the nice portfolio! I'd personally split the money simply because I don't like putting all my eggs in one basket. I'd definitely go KMI but I'd also put T and CAT in there, too. I'd simply expect a lower return on that money that I put into those two. I think I would invest the majority of the $3800 in KMI and not split it into 3rds. Say 50/25/25 KMI/T/CAT. Tough choices sometimes. I wouldn't sweat it too much whatever you decide so long as you put that money to work.

EDIT: I went back and looked at your screen shot again. I don't think I would buy T now since you don't already own it. I own both T and VZ and if I was starting over, I think I would buy VZ first. Personally, I'm considering adding to my T portion simply because it's down from where I bought it and I'm heavier on VZ so I want to balance my T out now. I'd maybe also look to add to some of your other current holdings. I put money into GIS and HAS right before they jumped a couple months back. They were already doing well, and I just wanted to add to my position as I normally do. I got lucky they jumped the way they did. Point being, in another week, your current price on a particularly stock may look like or be a bargain. Do note that I routinely add money to my account every pay check and typically make purchases once a month. I don't want to stress over my purchases so I simply add to a position as I go through the year without trying to time anything.

[GregWeld]

Originally Posted by CRCRFT78

Thank you for the insight Greg. I didn't think to look at it from that perspective because the bleeders don't scare me into making any irrational decisions (buying high selling low). I'm in this for the long haul and given my time line I believe KMI & CAT will/should recover. One reason why I was considering buying ATT to add to my positions.

Just to make sure I'm understanding what your explaining to me. Buying shares at a lower cost per share will bring my average cost per share down which should help speed up my recovery IF the stock price rises and does not decline further because now the gap has become smaller between my losses and breaking even. Selling the long-term shares of KMI will eliminate the higher cost per share keeping the new shares at the lower cost basis allowing my gains to become more substantial IF the share price rises by not having to make up as much ground to recover.

I think I just repeated what you said but I need to make sure I'm understanding it.

Yes --- you're following perfectly.


This is only one opinion... and you need to follow what YOU want to do. Not what I suggest. I'm just tossing this out here because it's a good subject for Investing 102. Just ways to think about stocks... and we've not been in a period where people are experiencing losses. The market has mostly gone UP since we started this whole thing. So I actually like this new "issue"... and it is a good subject. What to do when things aren't going your way.

[GregWeld]

Trey -- Good points -- and you show a healthy understanding of investing. The focus shouldn't ever be "today" --- or next month. Investing is best done with discipline. Steady, routine... up market or down market. Just keep plugging away.

The harder part comes when people are looking at red... So I think these questions are fantastic. They're gut wrenching. Do you throw more money after bad - is it really bad or is it a longer term opportunity - what's the thought process behind putting more money into losers... etc.

The part I like the best about dividend reinvestment is that it automatically buys shares every quarter - come hell or high water... and over time this automatically helps because more shares are bought when prices are lower and fewer when the prices are higher.

The KEY to all of this is to look at your accounts/positions and be comfortable owing what you do. Then it's easier to roll with the punches.

[CRCRFT78]

Ok so here is where the mental part of investing comes into play and tricked me.

I was thinking of adding a new position but also wondered if I should add to KMI & CAT because they were in the red. With the gains I've incurred already I didn't think it was feasible to add 5, 10, or 15 shares here and there to positions already held. Spending that amount on one stock would get me more shares (almost 100+ in T), giving me a higher dividend amount, and eventually getting me more shares at a faster rate. Mentally tricking me into believing I got a better value with my purchase just because I would be looking at a bigger number of shares.

Although KMI & CAT are in the red, I know this is a long-term investment with plenty of time to recover (I hope). Thinking about adding 100+ shares of T kept me from looking at the big picture and considering other options.

Thank you to Greg and Trey, not for suggesting what I should do but for giving me another perspective on how to invest and think about investing.

[GregWeld]

In full disclosure --- I recently added 5000 shares of KMI and now hold 25,000 shares. This position is underwater for me as well - but pays a great dividend - is a company that has a proven track record of raising the dividend payout. I will - if the price stays low - add more to my holdings. I always scale in or out of a position - meaning - I tip toe.

[WSSix]

The mental part has always been my struggle, Jose. I overthink things too often. I finally got to the point a while ago that I decided to not overthink my purchases and just do it almost mechanically every month. I pay attention to why I own a company more than its current share price.

[GregWeld]

Originally Posted by WSSix

The mental part has always been my struggle, Jose. I overthink things too often. I finally got to the point a while ago that I decided to not overthink my purchases and just do it almost mechanically every month. I pay attention to why I own a company more than its current share price.

That's a winning strategy!

The investing game - regardless of what you choose to invest in - is mostly all mental. Those that bought houses when nobody wanted them - have made a killing now. Those that buy the market when it looks terrible... make the biggest gains. It's the exact opposite of buy high and sell low. Most people only invest in something when it's all sunny and roses. Then they panic and sell when it drops. Those people NEVER win.

[CRCRFT78]

Overthinking is also my problem. After not paying attention to this thread for over a year I read it to the end and am now motivated again. I also bought 100 shares of KMI today bringing my Total Gain/Loss down to -6.11% from -28.34%.

[GregWeld]

Originally Posted by CRCRFT78

Overthinking is also my problem. After not paying attention to this thread for over a year I read it to the end and am now motivated again. I also bought 100 shares of KMI today bringing my Total Gain/Loss down to -6.11% from -28.34%.

Okay -- now -- remember that is 6% of a much larger number.... but now you need to be on your game and when you feel it's time - bail on the old shares.

Remember - and this goes for everyone... You have to look at your money as a total pot --- some winners -- some losers -- variable all the time - up and down... but you have to look at the pot as a whole! If you're UP overall == and that percentage is good - then that allows you to gain some confidence -- and the longer you're invested -- the bigger that pot grows... so much so that eventually you're almost immune to down markets. Hope that makes sense.

[GregWeld]

Originally Posted by GregWeld

Always hardest to put money into the bleeders... but that's what you do if you still think the company is solid - that the dividend is solid - and if you believe the share price is down for some reason other than the company is going to hell. Remember that if you simply bought the same amount of shares that you have - it's only going to cut your loss a little. That would be called "doubling down".

In your case - let's take KMI:

You have 31 shares @ $41.35 per share cost basis. So if you bought 31 more shares at todays price of $29.63 --- your new cost basis would be 62 shares @ $35.49 per share. That is closer to where it's trading - but not really close enough for "me"... If it was me I'd want to get my share price down to maybe $32 ish. That way it has less to recover before I'm made whole - or I take a loss and turn it into a gain. So I might buy 100 shares of it. Your position would then be 131 shares @ $32.47

Note that the close of KMI today was it at $31.79


Now you see how this can SOMETIMES work out.