Investing 102

[Sieg]

Put the helmet on and cinch down the belts.........http://finance.yahoo.com/blogs/daily...152145014.html

[GregWeld]

Just as soon as someone has it all figured out... it'll take a left turn... or not...


If I've learned ANYTHING with 30 years of investing... it's that I know nothing and NOBODY can predict anything.


So -- I buy things that PAY ME to own them. That may be real estate... it might be stocks... it might be corporate bonds... or muni bonds.... But regardless of what all the talking heads talk about ------- #1 rule is that my investments pay me to own them.

Remember that rule and you'll do well.

[Bucketlist2012]

Also don't read anything on yahoo...

Think for yourself, and stay the course.

Also always be ready for a dip...We have run up for a while now..good times..

But we are due for a dip. And that will be the time to add and buy...

And as Greg said, get paid to own something..14 of my 17 are dividend payers..3 are monetary policy plays...

[Sieg]

I should have put a smilie there also. No panick, I'm comfortable with my positions and it will be interesting to watch how the market reacts to all the noise in the next month or two.

[GregWeld]

I have multiple brokerage accounts --- and I get more friggin' memos and newsletters and "insider" info than I can even manage to read... but here's my take on most all of it.

ZIP


It's all just "info" and 100% of the time -- one brokerage's info will say "stay clear of X" and the next day I get a buy recommendation from the other one..
and two days later I'll get a hold recommendation from another. NONE OF THEM HAVE A CLUE.

So here's what I like....


I have 30,000 shares of JNK - pays me MONTHLY .23 or so per share... YEAH BUDDY... do I care that it goes up and down 50 cents. NOPE.

I have 11,500 shares of HYG - pays me MONTHLY .50 or so per share... ditto above.

Both of these can get slammed if INTEREST RATES suddenly go askew... but If I'm paying attention -- then I should be able to get a heads up.

I use the above to PARK CASH... not as a long term investment buy and forget it type deal.

My point is --- they pay me to own 'em! Period. If not - I'm not in it. Someone else can buy the Faceybooks of the world...

[GregWeld]

Just for fun this AM -- I checked out Facebook (FB) chart and technicals....


OH MY is about all I could come up with. WOW! Here's a real learning experience for newbs to investing. When you are absolutely CONVINCED that you just couldn't loose on some investment.... just go look at this bad boy.

Stretch the chart out to "ALL" and you'll see why I always reference these charts. This is a true "fell off a cliff" chart vs the low on the left and higher on the right that I preach. THEN I looked at a couple other metrics... and it gets worse! The P/E (price to earnings multiple) is 106! That means that the CURRENT price of their shares - even at these lower prices (only lower relative to the ridiculous valuation of the IPO).... that the share price is 106 times HIGHER than they EARN. Let's compare that to APPLES (AAPL) who's share price SEEMS ridiculous -- but their P/E is only 15.8!

I'm not a P/E guy but it does "matter". It matters when the P/E is HIGH --- because the company will have to GROW INTO the P/E... so they're going to have to have some stellar earnings GROWTH in order to get that ratio back to some normal point (whatever that is). It also matters when the P/E is low because that signals a complete lack of interest in the company by "the market" or that expectations for the company are for it (earnings) to SHRINK - and that's certainly no way to invest! It's why you can't just choose one metric to hang your hat on.

Here's the other big reminder. When they say "only invest money you can afford to loose"... it's because they're RIGHT. Because just when you think you've found the next Microsoft or Apple.... it might just bite you in the arse.

If I was a Facebook "fan boi" --- which I'm not because my kids have already moved on from it, and that spells death watch to me --- the play was to buy it -- and since it didn't 'work' right out of the box --- sell it --- and sit on the sidelines and watch and learn... then if you still were a fan -- buy it back at the lower prices and only buy the number of shares you had - not the amount of money you'd invested. SO you'd have bought at 40 - sold at 35 - and then bought back in at 19 or lower... and sitting on 500 shares at 19 is way better than 500 at 40 BUT that still might not work so you come back to that "don't invest money you can't afford to loose".

Look at Kodak...

[toy71camaro]

All great points.

I didn't want anything to do with it for multiple reasons:
1. I didn't have 'the money to lose". I HATE losing money.
2. I didn't think it would "do anything". What I mean is I've been a FB user for quite a few years now. I've seen it go from a "everybody HAS to have it" to "yeah, some people got it, but those that do, are generally disliking MUCH of what they keep changing". So, eventually, their gonna piss off enough people and everyone's going to jump ship to the next fad. Google+? heh

#2 goes back to what Greg said way way back in this thread. Own something you have an "inside" track to. Own the Home Depot because you shop there cuz your a contractor 4 times a week. When YOU notice its "going sour" in the store, best think about your shares, and if you think the company as a whole is sinking. That's what I "seen" with FB. It was going downhill already. Not jumping on a sinking ship here!

Honestly, they shoulda done something back in 2008-2009. THAT'S when it was at its peak. They were a couple years late. And still, I don't see the "business" model to make $$ over at FB.

[GregWeld]

I wasn't really just dumping on FaceBook -- just using it as an example of what can go south -- and just how quick it can go that way. It's real easy to stand to the side and examine the carnage.

Obviously -- had their IPO gone to the moon -- everyone would wish they'd gotten in.

BUT... That is the gambling lesson to be learned. And it's a hard lesson to learn! The excitement - the hype. It's like buying a lottery ticket when the prize is 300 million. Everyone is buying into it. But that's 20 bucks not 2000 or 20,000. So in my mind - 20 or 40 is fine to lose. But if you loose a grand when you've got 10 grand invested - that's 10% - and that's an ENTIRE YEARS performance down the tube.

[96z28ss]

So what is a good rule of thumb for some profit taking?

[GregWeld]

Good question. I'm not sure there's a quick or easy answer...

Let's examine a couple things.

Let's say a stock has doubled... okay... why? Great growth - new products - killer earnings...

Are you willing to take a double or take some off the table.... but what if it goes up 300% or 1000%...

I think it's up to each individual - their risk tolerance - their gut feelings etc. Personally I have several instances of multi hundred % gainers.... and I'd be a lot richer if I'd let 'em all ride instead of selling along the way...


BUT - there's always a big butt!


Nobody ever went broke taking a profit.

I'd say if you're not fully comfortable with your diversification... or your not comfortable having an outsized gain... then do what makes you feel good.

I'm never one to sell "all" unless something has fundamentally changed and I just don't want anything to do with the company. Scale in - scale out... so take 25% off the table or 15%...

The other big butt....

This question also depends on your tax situation - and don't overlook this detail. Is the gain long term or short term -- HUGE tax hits on short term.... AND is it in a tax account or an IRA/ROTH where taxes are deferred so have less impact.