Investing 102

[CRCRFT78]

I just read through the last 10 pages after being away for awhile and its so refreshing to see the thoughts and insight from all of you. I have been neglecting my accounts, although they have been making money, due to a lack of funds. However, I just paid off my motorcycle and will apply that extra $300 towards my savings and investments. The comments about purchasing new cars and such makes me cringe. Having to make monthly payments on something I see as a luxury and not a necessity has changed my perspective on buying "new" from dealerships. As much as I would love a newer vehicle I believe that monthly payment is better spent towards accruing future income that will help improve my lifestyle and not the portrayal of a lifestyle I wish to have by riding around in something new.

I guess what I'm trying to say is that I am glad to have eliminated some debt and look forward to adding to my investment income. Like Todd mentioned when Greg questioned our lack of participation in this thread. For once I have decided not to disrupt the class and actually listen to what is being taught. Thank you to all that educate us in this thread.

[preston]

And don't forget our collective blind spot - I've always paid cash for cars and haven't had debt in 20 years and save pretty good. But I've also spent well over $100k on my car project over the last 12 years and all I have to show for it is a project car that *might* fetch $20k if I'm lucky. Would I change that path if I could go back ? Yes, I would.

[toy71camaro]

Still check this multiple times a day. Although I dont post much. Glad to see a few other names in here chatting it up.

I agree with the "good debt" as long as you understand it and use it to your advantage. Which, unfortunately, a lot of people dont understand it and it hurts them more than they realize.

[Vegas69]

Great discussion guys...

I doubled my retirement contribution today. It's 11% of my NET income. The only reason it's not 15% is due to my goal to acquire 1 more property in the next 5-7 months. Once I have a tenant in that property, I plan to increase my investments and work on paying off my primary in under 15 years. Hoping no later than age 50 to have 3 free and clear rentals and primary residence. My long term goals include 2 more rentals for a total of 5 free and clear investment properties by 55. That should create 6k in monthly income based on today's numbers which will accommodate financial independence with no debt. At age 65, I can start drawing on my Roth, SEP, Life Insurance, and Social Security. I anticipate a 1031 exchange on my properties in that ball park to a new market or a commercial interest. Time will tell..... Kelli has a government pension and is investing around 15% of her gross income into a Roth IRA and Life Insurance product on top of her existing 403b. We are very diversified. The rentals and the pension reduce the dependency on timing the stock market at retirement age. The Roth/Life Insurance, allow us to pull on them in our high income years to decrease our tax bill.

One of the major lessons to be learned from that video I posted is the fact that it doesn't matter how much money you make. If you invest 15% of your gross income into investments and curb your spending, you can achieve financial independence at an early age. I can tell you for a fact after reviewing countless financial worksheets that it doesn't matter how much money someone makes, they'll spend more. Take control of your finances today, so you can live like a King later.

[toy71camaro]

Originally Posted by Vegas69

Great discussion guys...

I doubled my retirement contribution today. It's 11% of my NET income. The only reason it's not 15% is due to my goal to acquire 1 more property in the next 5-7 months. Once I have a tenant in that property, I plan to increase my investments and work on paying off my primary in under 15 years. Hoping no later than age 50 to have 3 free and clear rentals and primary residence. My long term goals include 2 more rentals for a total of 5 free and clear investment properties by 55. That should create 6k in monthly income based on today's numbers which will accommodate financial independence with no debt. At age 65, I can start drawing on my Roth, SEP, Life Insurance, and Social Security. I anticipate a 1031 exchange on my properties in that ball park to a new market or a commercial interest. Time will tell..... Kelli has a government pension and is investing around 15% of her gross income into a Roth IRA and Life Insurance product on top of her existing 403b. We are very diversified. The rentals and the pension reduce the dependency on timing the stock market at retirement age. The Roth/Life Insurance, allow us to pull on them in our high income years to decrease our tax bill.

One of the major lessons to be learned from that video I posted is the fact that it doesn't matter how much money you make. If you invest 15% of your gross income into investments and curb your spending, you can achieve financial independence at an early age. I can tell you for a fact after reviewing countless financial worksheets that it doesn't matter how much money someone makes, they'll spend more. Take control of your finances today, so you can live like a King later.

AWESOME! Great plan too.

[GregWeld]

Well..... looks like you believers in Faceybook (FB) might finally be getting it right. Big day for them yesterday. That might just be the inflection point where people come back to the stock.

+++++++++++++++++++++++++++++++++++++++


On another note:


Rodger Lee (Ironworks) was up here (Bellevue, WA) so he and I could take a three day rally driving school called DirtFish. That fact has nothing to do with investing except that we discussed the difference in cost of real estate between Bakersfield and Bellevue. He was taken back by the high cost of houses and land here. To which I said "here's what drives that market".... "we" have a huge number of very large companies that pay (on average) large salaries --- which drives the price of housing. THAT got me going down a list of who's in the great Pacific NorthWET.

BOEING
MICROSOFT
AMAZON
STARBUCKS
NORDSTROM
PACCAR (Kenworth and Peterbuilt trucks)
EXPEDIA
T-MOBILE
COSTCO --- probably the lowest average pay by far
NINTENDO
ALASKA AIRLINES
HOLLAND AMERICA LINES
ZILLOW
WEYERHAEUSER
PEMCO
DENDREON
ZYMOGENETICS

These are just the ones I could think of offhand.... and for the most part -- they're located in the greater Seattle area. That's a pretty powerful group of companies for a "smallish" town/state. And I'm certain I'm missing some names!

Now to another point.... there's about a half a gazillion companies up here (mostly tech but certainly not all) that began life here ---- and managed to go public and make a lot of people a lot of money.

[64G-lark]

Hi Greg, First this is a great thread with some good advise. I ran across it and have been reading for days. I have not read every post but enough to know I am ready to make some changes.
Im new to stocks and tired of my companies 401k plan that invest in mutual funds that I do not even know what companies they contain. I have done some investigating and I have the option of opening a self directed brokerage account within the plan that allows me to purchase stocks of my choice. I have been looking at various stocks and looking at the long term trends. The part I dont follow completly is how to tell the dividends they pay and the frequency. Can you explain more on this?
I would also like to understand more on order types. The options are Market, Limit, Stop, Stop Limit, Fill or Kill, etc. I know these are probably some basic questions but you always seem to have a way of putting things in laymens terms.
Im ready to redirect some of my investments and put them to work for me. Thanks in advance for your help.

[GregWeld]

Originally Posted by 64G-lark

Hi Greg, First this is a great thread with some good advise. I ran across it and have been reading for days. I have not read every post but enough to know I am ready to make some changes.
Im new to stocks and tired of my companies 401k plan that invest in mutual funds that I do not even know what companies they contain. I have done some investigating and I have the option of opening a self directed brokerage account within the plan that allows me to purchase stocks of my choice. I have been looking at various stocks and looking at the long term trends. The part I dont follow completly is how to tell the dividends they pay and the frequency. Can you explain more on this?
I would also like to understand more on order types. The options are Market, Limit, Stop, Stop Limit, Fill or Kill, etc. I know these are probably some basic questions but you always seem to have a way of putting things in laymens terms.
Im ready to redirect some of my investments and put them to work for me. Thanks in advance for your help.

#1 -- If you go to GOOGLE FINANCE.... and put in a search for an individual stock... it will pull up a chart and top left promently display the current "quoted" price and whether it's up or down... if you follow across the top of the chart to your right -- you will see a bunch of info as below




Range 83.16 - 84.75 ------ This is the DAYS trading range in price
52 week 74.76 - 92.99 ------ this is the 52 week trading range
Open 84.46 ----- where it opened for trading today
Vol / Avg. 1.16M/1.49M ------ how many shares change hands on average
Mkt cap 31.72B ---- The number of shares outstanding X's the price -- ='s companies total market value.
P/E 38.86 ----- This the current stock price divided by it's earnings per share over the last 12 months... a higher number is telling you that you're paying a lot for those earnings -- lower number means you're paying less. This is just a relative number and I place very little meaning on it.
Div/yield 1.32/6.34 --- this is where you see the ANNUAL dividend and the PERCENTAGE of the current price in "yield" (think "interest rate".
EPS 2.14 ---- EARNINGS PER SHARE (used to calculate the P/E ratio (above)
Shares 380.84M ---- how many shares there are issued
Beta 0.38 ----- think of this as volatility measurement against the "market" as a whole. Another relatively useless measurement IMHO
Inst. own 16% --- What percentage of the outstanding shares are "institutionally" owned. I like a higher number here -- which means that less "retail investors" own the stock (you are a retail investor). What I like about this number is that the "BIG MONEY" likes the stock. Other than that - it's useless.



DIVIDENDS are "generally" paid per quarter... but some stocks or ETF's (exchange traded funds - which are similar to mutual funds - but hold specific stocks or bonds) pay monthly.... some pay semi-annually.

Easiest way to see this for a stock you're interested in ---- go to the CHART in GOOGLE FINANCE -- for the name you're looking at -- and expand that chart to "1 yr" ---- or "5 year" ---- and you'd see a "block" with a D in it. If you hover on that block it will give you the date and payment info. Obviously if they pay 4 times per year -- then the dividend is paid quarterly.

Companies operate in FISCAL years - not calendar years.... so it depends on when they begin and end their year... so not all companies begin on Jan 1st and end on Dec 31st. In fact - I'd say most of them don't.... you have to look at the dates they pay on an individual basis name by name.


If you want to see what an ETF looks like --- Google Finance -- JNK or HYG. These are ETF's tied to a specific bond type (one is JUNK BONDS and one is just Corporate bonds). Bonds are what companies issue -- when they don't want to borrow from the bank. They can issue a bond and pay interest on it.. but not we're getting complicated.

[GregWeld]

A separate reply to the buying terms you asked about.




A "market order" is an order that says you'll just pay whatever the seller is asking for. Kinda like going to the store and just buying stuff --- you don't dicker for the price -- you just pay whatever the seller wants. MOST people use a market order... because unless you're buying lots and lots of shares -- it really doesn't make much difference if you pay a penny or two "more or less".


A "limit order" is what I prefer to use. I buy shares 5,000 or 10,000 or 20,000 at a time. A few pennies on orders like this adds up. So ------ when you place an order -- the question will come up (in a box) what type of order you want to place. If you place a LIMIT ORDER then you must fill in the MAXIUM price you are willing to pay per share. You can match to current ask -- or you might chose to "bid" a penny or 2 -- or even 10 cents less!

Now -- you can modify your limit order with "good for day" or "fill or kill".... so if you use good for day then your bid is "open" until the market closes.... and you might sit all day -- and then 10 seconds left in the trading session and some seller decides he's going to accept your offer and fill your order (maybe only partly or in whole).

The FILL OR KILL --- means you have a very short fuse and are willing to only accept a FULL order fulfillment and it must be filled RIGHT NOW no waiting for the end of the day crap.... and if not - you want the order killed.




The above is very basic..... so if you really want to dig into the nuances of trading (I do not recommend trading -- I like to INVEST).... you can find good detailed answers to just about any market info here:



http://www.investopedia.com

[CRCRFT78]

Nice little write-up Greg. Tutorials like this help to keep the spark lit and turn it into a flame again.