Investing 102

[WSSix]

Thanks Brian!

[GregWeld]

Well... coming in to the election -- the fiscal cliff -- europe -- we'll see how much you guys have learned -- and who goes shopping when they put things on sale.... and you can test yourselves EARLY in your investing cycle (while your piles of stocks are still relatively small - vs later in life when they're quite large!) to see if you really can stand gut churning pops and drops.

When things are good - investing is the easiest thing in the world. Everything works - you look brilliant - and only wish you'd have bought more....

When things go south - you hate to open your account - wish you'd bought something different - and question your very being.

I will tell you NOW... that what you should do -- is always have a shopping list ready - and have some entry point in your mind... save MORE... and strike when the lights go out.

Let's put this into car terms so you can get a better feel for the thought process --- because it WILL make a magnificent difference down the road.


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You're saving for a new motor for your build... it's 10K and you're saving 1K per month. You've set all your plans on this motor and your plans for next summers installation... you've bought headers - pan - accessory drive - and planned everything out. Life is good. Sadly though -- the motor is going up in price... what was 10K when you started is now 11K. The economy takes a little dip but your job is okay and you're still saving and planning... and all of a sudden - your motor guy puts everything on sale and your motor is 9K til the end of the month.

Here's your chance to buy something you've wanted "on sale".... would you hesitate? Would you think twice? Would you be excited about the great deal you just got? Or would you suddenly think there must be something wrong with the builder.... that maybe next week it will be on sale for 8500... or that maybe that motor isn't really the right one and maybe you'd better study it a bit more?


What if you weren't ready with the whole 9K? But some other items that you need were on sale as well -- and you could save 10% before a price increase...

REMEMBER --- do your homework --- take the emotion out of your investments. Know what you want and why. SCALE IN.... like buying parts for the motor/build... it's okay to buy just the headers -- it's okay to buy $500 worth when you plan to buy 1K worth... IT'S OKAY TO BUY ON SALE... and there will be sales in the future... and there will be price increases in the future.... and you'll never be fully ready and you'll never buy when the best sale prices of the century are presented. It's okay. It's INVESTING. You buy when you can.

Many of you have just gotten into investing. This has been one of the most remarkable UP markets I can remember in a very very long time. It reminds me of '96 '97 '98 and '99 when every morning you woke up the stock you owned was up a buck or 2 bucks - they never went down.... EVERYONE was brilliant and making money by the wheelbarrow full.... Most of the people that I know that were day trading then -- I haven't seen or talked to in years... they ALL lost their azzez. They really had no plan - they really did not understand anything except that when they bought at $10 the next day they had $11... the first time it went to $8 and then to $7 and then to $6 they were wiped out. They should have only played with money they could truly afford to lose -- and when it went to $8 they should have bought a little - and a little at $7 - and a little at $6.... and when it came back to $9 they'd have made a real killing...

Obviously it's never just this simple --- and we're talking MIND SET --- and I'm just trying to get people to THINK about a strategy and to prepare yourself for thinking when you're losing the game. Do you take your team and walk off the field.... or do you rally - plan - roll with it -- have confidence in what you are doing and modify your plans a little to take advantage of a weakness you see in the other team?

[toy71camaro]

Great post Greg.

Which also points out, I need a better "plan". I need to take some time and sit down and plan out what the "on sale" prices are that I'm happy with jumping in at again, plan on what else I need to be better diversified.. and plan out what to do with my 401k. My work was looking into switching into a different account status where i could invest in individual stocks, but nothing is happened yet. do i wait to re-balance my 401k, or do i re-balance now, and wait for that to happen (if it does).

I need to put my thinking and planning caps back on. I need more time in the day. Ugh. lol

[WSSix]

This is why I plan to only buy steady stocks for the most part. I'm in this for the long run. I'm not interested in gambling or being wiped out because I was foolish with my hard earned money. I'd just like my money to make some money. The more the better obviously but some is more than none.

[pw2006]

Great post Greg!

You've helped me narrow my brokerage acct down from ~38 positions to 14. Last night I logged into my brokerage account, looked at each position, knew the reason why I owned them and knew which ones I would add to if the blue light starts flashing. Having a plan, being diversified,owning solid names and having cash ready for a sale, will help in the coming months. Hard to believe that this thread is only 9 months old. Thanks again!

[Bucketlist2012]

Originally Posted by pw2006

Great post Greg!

You've helped me narrow my brokerage acct down from ~38 positions to 14. Last night I logged into my brokerage account, looked at each position, knew the reason why I owned them and knew which ones I would add to if the blue light starts flashing. Having a plan, being diversified,owning solid names and having cash ready for a sale, will help in the coming months. Hard to believe that this thread is only 9 months old. Thanks again!

Excellent...38 Wow...That was a lot...Yes, I am at 17 and 14 are Dividend payers..

Yes and cash ready for the sale is always good...I keep about 6% cash ready to buy on the bigger dips...

[GregWeld]

Annaly Capital Management (NLY) goes "ex" dividend today... thank you NLY!
Chalk up another .50 per share in the bank!

You don't get your money today -- it's just trading "ex dividend" today -- and I remind folks of this because if you check your account and see a big down (red) number -- stocks always trade off the amount of the dividend...

Ya don't get paid for days or weeks after a company goes "EX"....

[GregWeld]

On another note.... a buddy has just contracted to sell some property he's had for 40+ years... there was a bidding war for weeks going on by builders. It's a choice piece bordering 3 streets -- and will hold 19 houses... my point is more that there was a bidding war going on... and he (the seller) is a happy man.


Now.... we've been talking about this for weeks (he and I) as I've pushed him to finally move to cash out and use the money to improve his standard of living. I'd ask him -- dude!?!? Do you remember when you bought the property and he'd say, sure! I'd say - Why did you buy it? He'd say - it was a great investment. Then I'd ask him - when are you going to monetize (turn into cash) your investment? Do you have a plan? If you had X million in the bank - would it make a difference in your life? Or does owning / mowing / paying taxes on all that property make you happier?

He never formulated a PLAN for his INVESTMENT... there was no exit strategy. It was just "his property" but given his age and his retirement status - it was a burden. He'd never actually thought about turning it into real money. So a nudge here and there -- and I can tell you right now - this is one excited old guy! Now my problem has been to get him to stop figuring out all the crap he's gonna buy! OMG!

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So last night he calls. "How much could I earn on 1.5MM"? "Do I need a financial planner"? "What do they do for me"?


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Of course I go nuts on the "planners" - most cloaked in "planner" business cards but they're really just salesmen - and they sell crap products that only benefit themselves... and that are so complicated NOBODY understands what they've just bought ("bought" like a product - because they're not "investments").

After hanging up -- I sat down and started planning for him - figuring a list of 15 names -- 100K invested in each -- what they'd pay in dividends - what their 3 year growth rate was etc. And how much he'd get per month Gross and NET of 15% dividend taxes. When I was done - I put it into an Excel spreadsheet and emailed it to him.

Given that he is 75 -- gets SS and a small union pension... my guess is that the annual dividends are larger than he ever earned working. Think it will make a difference in his life?? Now we're working on the 32 Ford Tudor he wants to build (to keep busy)... I'm so happy for him I can hardly stand it!


Mind you -- this is just a quickie list to serve as an EXAMPLE of what he could anticipate. The actual investments should / can / will be modified once he fully understands what is going on.

[Payton King]

What a great story! You have to love a great outcome.

Thanks again for taking the time and providing great insights to all of us on the board.

I look forward to meeting you in person at SEMA.

[GregWeld]

Originally Posted by Payton King

I look forward to meeting you in person at SEMA.

Prepare to be underwhelmed.... I'm not a very exciting guy.

Oh! And look DOWN to find me....