Investing 102

[RECOVERY ROOM]

Originally Posted by Sieg

To reinforce Greg's advice:
11:16 AM Among the stocks making new 52 week highs as year end approaches are faithful big-caps across a number of industries: Wal-Mart (WMT), Pfizer (PFE), Verizon (VZ), and McDonald's (MCD). All yield more than the 10-year Treasury and likely have more adaptive managements than that in D.C. What's not to like?

Its kinda addicting isn't it... .

[GregWeld]

Here's what is addicting.... my Schwab account is UP over 100 grand in the last two days... and I just sat here watching CNBC and blabbing on Lat G....

Now - those are "paper gains" -- but over all -- my account in that particular brokerage (I use a few) -- is UP "on paper" more than I've spent this year... That is CAPITAL GROWTH.

Some days the account is DOWN -- some days up a little -- some days it's up OMG... but overall -- that "chart" I'm always referring to is low on the left and climbing to the right.

Here's another little "funny". I invested in a company (start up money) 7+ years ago. Bought a bunch of shares dirt cheap -- they are not "liquid" because they're not publicly traded so it's really "dead money".... then the company went public -- and "on paper" that investment was HUGE (imagine buying at .56 a share and watching it go to $28 a share!)... then the "market" had it's hiccups -- and I watched those shares "on paper" drop to $1.70 a share.... oh the horror -- right? But I still had a 300% gain on them at that low ridiculous price! So I watched millions turn into "not much".... but I didn't spend those "paper gains" -- I didn't borrow on those "paper gains" -- and when those "paper gains" weren't so much - it was just a sigh.... Then a year or so more of time goes by and the shares are at $5 -- then $10 -- then $17... then somebody buys the company out and those paper gains are REAL MONEY paid in cash.... @ $34 per share....

My point -- it took lots of TIME (7 or 8 years!)..... and there was lots of "paper gain" (which means nada!) and there was lots of "woulda/shoulda/coulda".... but I knew the company - believed in the original investment -- so rather than selling at the bottom - I just held on.... and bingo THE LUCKIEST MAN ALIVE comes knocking...

The other "point" is that you have to take the good with the bad --- the highs and lows - keep your wits about you - don't panic - UNDERSTAND what you have invested in and WHY.... (in this case it was some "gambling" money so I was okay with them being down and the investment being worth zip).

Had I NOT played the game (think of an ante in a poker game - can't play if you don't ante up!) I would never have gotten the reward. And trust me - for every "winner" I can tell you about MANY losers!

BUY GOOD STUFF -- DO NOT GAMBLE -- UNDERSTAND WHY YOU BUY -- GIVE IT SOME TIME (not a half hour!).

I have enough NORMAL investments that I can afford to dabble in RISKY stuff.... DO NOT GO THERE because you will LOSE more than you will make. This thread is about SAVINGS and INVESTING - not gambling and getting rich quick. Please don't lose sight of that. It's also about THEORY not actual names to invest in. Do your research - KNOW WHY YOU BUY -- have the investments meet YOUR requirements - and that depends on age - knowledge of the industry your investing in - what type of account it is, i.e., is it a retirement account or an account for college for kids - or are you just wanting to play around and TRY to make some money (please don't tell me about this!)....

[Sieg]

Numbers like that make me giddy.

My shinning star of the day even after it dropped big:
Oracle - 480 $12,369.60 $25.77 -$3.40 $2,789.95 +$9,579.65 +343.36%

It's one of the few stocks I timed and bought right.

[GregWeld]

Originally Posted by Sieg

Numbers like that make me giddy.

My shinning star of the day even after it dropped big:
Oracle - 480 $12,369.60 $25.77 -$3.40 $2,789.95 +$9,579.65 +343.36%

It's one of the few stocks I timed and bought right.

Stuff going UP always feels better than stuff going DOWN.... and for every 10 stocks invested in - 2 will be winners - 3 will be "okay" -- 2 or 3 will be even -- and 2 or 3 will SUCK!

The winners will make up for the losers and the "okays" will be your real gain... Trust me folks - you will NEVER get all 10 stocks "right". But if you're in 10 stocks you'll be in the game!

Good call on the Oracle. One stock I've never bought - since I live in the land that Bill Gates owns and he and Larry are mortal combatants! But it's been a great stock over a very long period of time!

This brings up some RULES -- and I don't know what they are -- other than I've heard them mentioned from time to time. Something along the lines of "the stock market advances on 3 or 4 DAYS in a year - and if you're not in the market on those days - your annual gains will be next to nothing". Don't quote me on the number of days etc - but it's a very small number of days that the market move up BIG... and those days - are to me - the days that remind you why you are in the market (and not OUT of the market). Those days WILL come the week right after you sell.... and you just watch them slip through your fingers.... Trust me - I've experienced that pain.

[Sieg]

Originally Posted by GregWeld

"the stock market advances on 3 or 4 DAYS in a year - and if you're not in the market on those days - your annual gains will be next to nothing". Don't quote me on the number of days etc - but it's a very small number of days that the market move up BIG... and those days - are to me - the days that remind you why you are in the market (and not OUT of the market). Those days WILL come the week right after you sell.... and you just watch them slip through your fingers.... Trust me - I've experienced that pain.

How did you know I had lunch today with the guy I bought those 100 shares of Nike from? I live in the land of Nike and still have issues wearing their shoes, partly because their lasts are a little narrow.

Back to a positive: Do you have any PCL?

[GregWeld]

Originally Posted by Sieg

How did you know I had lunch today with the guy I bought those 100 shares of Nike from? I live in the land of Nike and still have issues wearing their shoes, partly because their lasts are a little narrow.

Back to a positive: Do you have any PCL?

I can't wear Nike either... for the very reason you point out. Well -- that and my buddy is the CEO of Brooks...

Nope -- no Plumb Creek.

[LS1-IROC]

Been looking at some stocks this last week...correct me if I'm wrong Greg...but wouldn't it be a good time to by Coke?

[GregWeld]

Depends on why you're buying it.

I own Coke (KO) for "stability" in the account... sort of a ying/yang thing -- which is the way I run my accounts. It counters the HYG and JNK and NLY I own - and I own A LOT of them... so I balance that with Johnson and Johnson (JNJ) and Coke (KO) etc.

Remember -- everything in investing needs to suit the account owner. What I do is not suitable for someone else. I LIVE off my yield - not my TOTAL yield... so I'm not looking for growth (per se). I already have "enough". I don't reinvest the dividends -- I SPEND 'em!

So a couple points here.... Coke is slow steady growth (42% over 10 years) and pays a smallish dividend (2.7%) so to me - it's more like a BOND - I'm not going to double my money in 3 years BUT it won't go down much either. Thus the "steady" statement. If a guy drinks PEPSI -- it's the same story with a slightly higher dividend. SO if you want stability - and get paid to wait - and sleep well at night - then choose one of these for those reasons.
Counter that steady eddie with something and you have a higher yield and a bit faster growth in capital... it's all about balance - not getting greedy - and being happy with what you own.

[OLDFLM]

Originally Posted by GregWeld

I can't wear Nike either... for the very reason you point out. Well -- that and my buddy is the CEO of Brooks...

Nope -- no Plumb Creek.

Tangent... Brooks are the only running shoes I could wear on active duty for PT! If you have stocks with them I contributed 4 pairs a year during my career! LOL

[GregWeld]

I forgot to make the second 'point'....

You asked "isn't it a good time to buy...."

I don't "time" the market. I just pick the names I want to be in - get my reasoning hat on - and take the plunge. I can never figure out when is a good or bad time.

Personally = since I buy much larger positions than any of you are going to do - I do things a bit different in that I scale in and scale out of stuff. But you can't really scale in and out if you're buying 100 or 200 or 50 shares. If you're buying 1000 shares or 10,000 shares - then you can take a bite of 50% of the buy and then another quarter and so on - same on the sale side.

So pull up that LONG TERM chart -- and you tell me when you would have gotten "in".... I can see in retrospect/hindsight when it was the right time - but danged if I can tell you in the future when it's coming! So this brings up the scaling in thing just for a little "class time here".

Lets say I want to own 10,000 dollars worth of a stock. I usually have been watching it for awhile (months sometimes in my case) and I am aware of where it's been trading... let's say $50 ish.... so I take down $5,000 worth. AS USUALLY HAPPENS it will GO DOWN 5 seconds after I get into it... it doesn't matter what IT is.... I will check the news on that stock to see WHY it went down - I will research it a bit - I will look at that chart again - short and long term to remind myself WHY I BOUGHT - and if it was down "with the market" and there is nothing BAD news wise - I might take down another $2500. Think about this as a "sale". You'd be all over sale in the store for Levis! You know they cost 25 a pair and suddenly they're 20 a pair... so buy an extra one! You'd love it! AND THE PLUS HERE IS -- If I bought 100 shares at 100 dollars - at 10% dividend yield.... and bought 50 more at 95 I now own 150 shares at an average cost of 98 and the yield went UP just a smidgen... if it goes down to 90 I buy MORE... and sometimes when it does that I'll double up (or as they call it - double down)... I might buy 150 shares which is double what I already had ----------- NOW ------- I have plenty of cash on the side lines --- and I've been doing this for a very very long time ---- I'm just explaining this for guys that are getting started and want to learn a bit......

What I've done is to bring my position down CLOSER to where it's currently trading. And when (and IF) it goes back - then I scale out of that and get the position back down to the DOLLARS that I wanted to originally have in it. This gets complicated with TAXES and the FIFO rules --- FIRST IN FIRST OUT.... so the first SALES are going to be of the shares that I paid 100 for! So I don't want to be selling those at 90 for a loss --- I'm going to sit on this position (remember I'm also getting that wonderful dividend!) and when they're back to 97 or 98 or 99 --- I start getting out. I will have a SMALL loss --- but I will be left holding the cheaper shares! Thus I'll have a very nice gain in those!

Hope I made sense! It was a bit of a rambling reply.