Investing 102

[GregWeld]

My kids and my nieces grew up on the boat... Desolation Sound... Puget Sound... we used to spend the entire month of August on the boat. We had the dingy - two kayaks - and an 18' Grady White that I dragged... we looked like a friggin' bunch of sea gypsies when we'd anchor up! Kids would go ashore and hike and play on the beach... or we'd go skanking around in the little boats... crabbing and shrimping... swimming and water skiing... Your only worry was what we were going to have for our next meal. Great times! I miss it terribly but I don't think it would be the same without the kids.


Entering Desolation Sound (Canada EH!) The water there is "brackish" and because it's snow melt - it heats up as it flows down the rocky mountain sides and the general top four or five feet of water is 70ish degrees and "fresh" -- it sits on top of the MUCH colder salt water... makes it fun when you jump off the boat and break thru that nice warm water and into the colder stuff!!

[Bucketlist2012]

That sounds great...I know I will take the memories to my Grave..My Dad's passion was Boating...

Sounds like good time's Greg.. Something that will stay with you forever..

Thanks for reminding me of the good times...I have been a little peeved the last few days....You know why...

You have a great night...I am off to snuggle with the wife and enjoy some down time..

I may never leave the bay area because of all the memories..Angel Island, Sausalito, Farallon Islands...My Childhood was on the water before I went off and did other things.I wish i would have spent more time with my Dad after growing up....TTYL

[GregWeld]

I stumbled on a story in the Seattle Times by the Financial writer... about his Father and the lessons that Dad had taught him... I thought "hmmmmm.... sounds similar to what I've been trying to "teach". I just cut and pasted the basis for the story without the underlying story.

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• A “perfect fit” is better than an “optimal portfolio.” My dad liked to know and understand what he invested in; when he looked through the holdings of a mutual fund and saw a host of names he didn’t recognize, it made him nervous. As a result, no small-cap fund ever passed his sniff test. Every time he talked to the portfolio advisers he worked with at Fidelity and Vanguard, they told him exactly what I had said, namely that he had “a hole in the small-cap space.” They found other “suboptimal problems” too.

My father understood diversification, but he also understood comfort. Missing out on small-caps might have dampened the returns of his portfolio compared to the perfect asset allocation, but it never threatened his ability to reach his financial goals. Meanwhile, he slept well every night knowing what was in his portfolio.

If you have the choice between an optimal portfolio or an optimal night’s sleep, enjoy the nap.

• “Don’t mess it up” is a good investment mantra. Because my father was so risk-averse for so long, he lucked out when the 1990s came and helped him catch up for the years when he was more focused on his day job than his retirement savings. That said, once the oversized returns of the Internet bubble got him to the point where he was “set for life,” he was more concerned with protecting his nest egg than growing it. The security it gave him was priceless.

Having secured his don’t-mess-it-up-money against real loss, Dad felt free to take more risks with the rest, or just to spend it. Mostly he saved and invested the money, but he never worried about his strategy — or a market event like the financial crisis of 2008 — turning his life’s work into daily worries about running out of cash.

• All that matters is where you are, and what happens next. My father had a remarkable ability to remember his financial mistakes — so that he did not repeat them — but to never linger on them or to let them change his next move.

Over the years, he bought a few stocks that were duds, and had some others that he gave up on too soon, before they rebounded or went through a big buyout that could have lifted his returns significantly. He never let the rare mistake bother him, which is why he typically moved quickly to the next success.

“I can’t have that one back,” he told me recently, after I told him that a bank he had held for years — but that he gave up on in 2011 — finally had found the long-awaited buyer and the price pop he always envisioned. “There’s no sense thinking of what might have been. I’ve got what I’ve got, and I’d rather focus on that.”

• Seek counsel, but make your own judgments. My dad was big on “trust, but verify,” so whether he was getting financial advice from the pros or from his son — whether it was a new counselor or someone he had dealt with and followed for years — he took in suggestions, examined the research and came to his own conclusions. Taking that responsibility meant he had no one to blame but himself if things went wrong; given his natural cautious tendencies, it was a solid safeguard.

“I’m the one who has to live with the results,” he said, “so I’m the one who should make the decisions, even if all I am doing is confirming that [someone else’s] idea is the right move for me.”

• There is no one “right way.” Slow-and-steady won the race for my father, but that didn’t mean someone couldn’t go hard-and-fast or big-and-bold and get to the same place. They’re just different approaches to the same problem, but too many people jump from one strategy to the next and those changes leave them forever playing catch-up.

My father taught me that financial success is less about finding the proverbial “best strategy” than about coming up with “the best strategy for me.”

• The easiest way to make sure you get more out at the end is to put more in at the beginning. Since he couldn’t control the markets and wanted to mitigate risks, Dad worked hard at what he could control, saving more so that he could afford to manage the money conservatively, in keeping with his personality. He felt that savings was an accomplishment unto itself; watching it grow to where it could care for his loved ones was an achievement. In that way, he was an accomplished man who achieved his financial goals.

You could learn some things from a guy like that; I sure did.

[WSSix]

Good post. That's the strategy I'm going to follow.

[Bucketlist2012]

Great Post Greg...

[GregWeld]

So during this "choppy" market - which I fully expect to to be - and have said so on several occasions. I'm not "smarter" than you guys... I don't have a crystal ball... but I do have common sense. If you listen to the news (financial news programs) surely you can judge by the truly smart peoples statements that we "need" to fix the fiscal cliff before markets can continue their climb. It's the old - markets don't like uncertainty...

BUT here's what I want you to do. If you have Schwab - or Google Finance website... Pull up a chart of Kinder Morgan Partners (KMP). I will remind you - that I'm not pushing KMP - I do have a holding in it which is why I look at it - but it's a great example of what I want you to look at...

Look at this chart in YTD (Year to date)....not a great chart - in fact it's down YTD. Now look at it 1 YEAR chart... it's lumpy and bumpy but in the end it's UP 7% over that period -- NOTE THE DIPS -- Now look at a 3 year chart... Wouldn't you have loved to bought in the dips? OH and by the way - Wouldn't you have loved getting $4 per year per share in dividend ($12 over the 3 year period)? Now look at the 5 year chart... Remembering that even if you'd have bought at the very peaks you can find - that you'd have also received $20 in dividends during this period.

Now ask me "when should I buy?" And what's my answer? Buy when you can IF you're truly a long term investor... because I can't see when the next dip is going to be - and even if the stock dips - would you have missed out on the dividends it's paying? They'll pay 1.26 on Wednesday... and in 3 months they'll pay that again.... etc.

This is what you really need to look at. LONGER TERM... the fiscal cliff will be something we talked about. (I hope).

[Payton King]

If everone is thinking that dividends will be taxed at a higher rate, say 25% instead of 15%. Would you change your strategy? I know you are living off the dividend stream, but would you change the dividend to purchase additional shares instead of taking the cash payment?

[bdahlg68]

Payton - I think you'll get a lot of people who say yes they would back out of dividend plays and others who would not. Simply - the change in tax rate creates an unknown. And it's a lot bigger than the tax rate itself. What does it do to stock prices? Would they drop, creating capital decay at least on the short term and therefore a lot of nervous investors? Keep in mind there is a large portion of these dividend stocks owned in tax-deferred accounts. And, that many people have them simply reinvested. While there is power in numbers, the people living off the income stream are the big dogs - and they can have a significant impact on the situation (and in some cases may influence the companies themselves). From the investing standpoint, I'd much rather pay 1-2% more in income tax the see these big changes on capital gains / dividends. That's just me thinking that long term - I want this income stream to be available and significant enough to make a difference when I'm retired. 25 years from now (if I'm lucky), the 1-2% I pay now in extra income tax would have been long forgotten about. Just my humble, semi-ignorant opinion.

[bdahlg68]

So as NLY gets pummeled again, I read this article. And although it's quite speculative, it got me thinking that now might not be a good time to move money out....

http://seekingalpha.com/article/1002...nings-releases

I also looked at the NLY chart going back to October 1997 and shrugged my shoulders... seems it's been like this before and recovered a number of times... in fact many years saw 20% swings it seems (2002, 2003, 2004, 2005 (yikes), 2008, .... and now 2012?). I'm going to be keeping a close eye and sitting tight for the time being. I have lots of time.....

[toy71camaro]

Originally Posted by bdahlg68

So as NLY gets pummeled again, I read this article. And although it's quite speculative, it got me thinking that now might not be a good time to move money out....

http://seekingalpha.com/article/1002...nings-releases

I also looked at the NLY chart going back to October 1997 and shrugged my shoulders... seems it's been like this before and recovered a number of times... in fact many years saw 20% swings it seems (2002, 2003, 2004, 2005 (yikes), 2008, .... and now 2012?). I'm going to be keeping a close eye and sitting tight for the time being. I have lots of time.....

I'm curious as to this as well. I was going to post up a question on peoples thoughts of their current situation. With the passing of their main man, feds changes, and now buyout, is it a desperation move, or a good move. They expect the stock to hit the $13ish mark now. I bailed (last week) before this last big dip because i didnt fully understand it and wasnt comfortable with it. I took a $3 loss. So I'm ok with that. LOL.

But I'm curious to see what their future holds (or what people expect).