Investing 102

[GregWeld]

A reminder to the newbs of investing....


You get up and the "market" is down 100 points... and your stocks are down 1 or 2% - IT'S DAYS and WEEKS like this that will make you thank yourself for investing in DIVIDEND payers. Because the dividend doesn't go up and down... it keeps paying you every quarter.

Actually -- in all honesty -- it's good that the market is down -- because your dividend will be re-invested at lower share prices - thus buying you more shares!

Think LONG TERM.... 10 / 20 / 30 or more years. Even if you retire at 65 - you're not going to die the next week! You're going to live another 30 years - and those dividends will just keep supporting you.

First thing this month AT&T (T) paid me $6600 bucks.... That's real money - and every 3 months they'll have to write that check - and I'll thank them and cash it.

[GregWeld]

Originally Posted by toy71camaro

So question....

With the "sell in may and go away" theory, that seems to be pretty consistent year to year... would now be a bad time to restructure/re-balance a 401k portfolio?

I wouldn't pay ANY attention to any of that kind of stuff. That's "trader talk". You're an INVESTOR. LONG TERM.... so a few percent one way or the other won't affect your total return in the long run.

Having said that - August is a good "bottom". And it depends on your question if your asking if now is a good time to SELL.... vs buy. Typically the market sinks through the summer. So BUYING sometime in the summer usually, on average, works out in the long run.

Remember the longer you wait to "do something" - the less time you have for compounding. Go back and look at the compounding posts -- IT'S NOT THE FIRST DOUBLE --- IT'S the LAST DOUBLE - that counts - and that means you have to be EARLY in order to get to that last double. That is YEARS away - so does a few days or weeks make much of a difference -- YEAH if you're buying dividend payers... because a dollar now -- might be 1000 dollars later.

[toy71camaro]

good point.. your right. a few % over the next couple months (ie. til fall) wont make that big of difference compared to not being in at all.

I need to put my big boy pants on and tackle the 401k. It makes me nervous as hell as there is SOOO many different choices, plus "diversifying" (i guess that makes me the most nervous). what % should go where.

[GregWeld]

Originally Posted by toy71camaro

good point.. your right. a few % over the next couple months (ie. til fall) wont make that big of difference compared to not being in at all.

I need to put my big boy pants on and tackle the 401k. It makes me nervous as hell as there is SOOO many different choices, plus "diversifying" (i guess that makes me the most nervous). what % should go where.

It should make you MORE nervous to have money sitting not growing or not paying you!

Stick to basic rules for diversifying. If you have 100K - 5% per investment
if you have 10k - then a couple thousand per name. Somewhere in-between if you have more or less.

If you have 100K -- finding JUST TWENTY great companies is the easiest thing you'll ever do!

[toy71camaro]

Originally Posted by GregWeld

It should make you MORE nervous to have money sitting not growing or not paying you!

Stick to basic rules for diversifying. If you have 100K - 5% per investment
if you have 10k - then a couple thousand per name. Somewhere in-between if you have more or less.

If you have 100K -- finding JUST TWENTY great companies is the easiest thing you'll ever do!

If i could do individual stocks, i'd be MUCH more comfortable... but these are all mutual funds., which is what makes me nervous about diversifying it.. Ive been on schwab and see they suggest a certain % in large cap, small/mid, euro, etc. but it seems the Funds all overlap.

[GregWeld]

Originally Posted by toy71camaro

If i could do individual stocks, i'd be MUCH more comfortable... but these are all mutual funds., which is what makes me nervous about diversifying it.. Ive been on schwab and see they suggest a certain % in large cap, small/mid, euro, etc. but it seems the Funds all overlap.

Not only will they overlap -- but they'll suck as far as total returns go. Mutual Funds are the great "average". They're killing Americans appetite for investing.

However....

I'd look at the crappiest performance THIS YEAR -- like EURO funds.... they've gotten killed -- so should have low NAV (net asset value) -- that will give you diversity (International) and you know that europe isn't down and going away - so they could come back a lot over the next 5 years once they get their act together.

Depending on your age -- I'd go for more growth and income over just growth... growth is a gamble -- if you're going to gamble on growth - at least get some income along the way.

I also like big cap in a retirement scenario -- they pay dividends - they're safe - and as we've shown over and over here - they also have mighty big TOTAL RETURNS over time.

The thing about mutual funds -- they're just giant baskets of stocks. So beyond the top 10 holdings -- you've just basically taken you money and put it in a savings account. A placeholder. If the market goes well they do well - but you're just along for the ride.

Nothing inherently wrong with that... it's just not going to allow you to get very much return or get you excited at how smart you are!

[Rybar]

Spent a bunch of time reading the thread and researching some companies. Have a list together now of stocks I'm going to buy once I dump my Mutual Funds out the window. Thanks for all the help and suggestions everyone, this is really interesting stuff, to research and learn and hey if you can make some money doing it that's a bonus.

[toy71camaro]

Originally Posted by Rybar

Spent a bunch of time reading the thread and researching some companies. Have a list together now of stocks I'm going to buy once I dump my Mutual Funds out the window. Thanks for all the help and suggestions everyone, this is really interesting stuff, to research and learn and hey if you can make some money doing it that's a bonus.

Awesome! good luck! let us know how they turn out

[67pro-street]

okay slow day at work today so i am going to try and set up my Schwab account. I remember seeing a commercial that said to "Call Chuck" when i was in college so i decided to prank call them and demand i speak to Chuck. Needless to say they were not as enthuised as i was about the call, so hopefully im not blackballed! HA!

[toy71camaro]

Originally Posted by 67pro-street

okay slow day at work today so i am going to try and set up my Schwab account. I remember seeing a commercial that said to "Call Chuck" when i was in college so i decided to prank call them and demand i speak to Chuck. Needless to say they were not as enthuised as i was about the call, so hopefully im not blackballed! HA!

LMAO I did mine on their website. If you setup the Investor Checking (i think thats what it was called) it came with the Investment brokerage account free. Otherwise you have to drop $1k minimum to open the brokerage account or something like that.

so, you can really get the Schwab tools for free doing it this way too.