Investing 102

[GregWeld]

Originally Posted by protour73

and Greg you should be proud, it's got to be a real kick seeing people get inspired!!

NOW having said that, so I open up an account and dump a chunk of my "recent windfall" into the Brokerage account.........that's where I fall off the "edge of the flat earth" .. I mean UNCHARTED territory!! I don't have a freaking clue how to actually pull the trigger on the actual first stock purchase. I assume the easiest thing to do is to take a check with me to open an account at my local Schwab branch and let a Schwab rep guide me through it.

and then there are taxes - and I remember reading this Weld-ism

I don't plan on selling any shares in year, but how do you handle dividends? I'd want to reinvest the dividends into more shares, but obviously in the beginning you'd have to bank those dividends (in the Schwab Checking account earning some interest) along with payroll deposits until there is enough $$ for more shares. Surely you're taxed on the dividends as gains right?

Dividends are taxed at a flat 20%.... and you should have them REINVESTED in the stock you've bought and just pay the small tax on them out of pocket.

Now -- that's in an ordinary taxable account ---- if you're opening a ROTH or an IRA -- then those are treated differently and a Schwab rep can help you with that.

Before you actually BUY anything - build your portfolio on paper... so first things first -- get a line up of names you wish to own... make sure you have some diversity -- make sure the percentages dollar wise work out... and then depending on how much you have to invest... either take the plunge -- or scale in.

See the problem is with someone telling you what to do -- is we don't know your situation -- how much you make - how old are you - is this retirement or just investing etc. Are you investing 1,000 -- 10,000 or 100,000 and there's just so many variables. That's why reading the thread --- and I know it's long and repeats itself -- will help to guide you so you can think thru these things on your own.


You're not going to lose out if you just put the money into an account --- then take a month or two months to learn and become comfortable --- then start. We're dealing in years here -- not weeks or months.

[WSSix]

Thanks for the back story on the guy. Makes me dislike him even more, lol.

[GregWeld]

Originally Posted by WSSix

Thanks for the back story on the guy. Makes me dislike him even more, lol.

It's why I didn't hesitate to tell the cop I'd kill him if I'd have shot him. I'd have made sure he was a goner...


One of his 20 plus year clients was a friend -- a retired doctor - ultra conservative people -- the kind of people that saved all their lives and stayed in the same house -- and drove simple cars... Henry was 70 when he got the call telling him he had NOTHING....

Think about that -- 70 years old -- happily retired enjoying life one day - the next day you're wondering if you can eat. Rhodes went to their kids college graduation -- and his wedding. He KNEW he was wiping him out.

THUS --- NEVER put your eggs in one basket -- which is why I'm not all in one brokerage even though it would be easier and cheaper. And why I invest in different stuff... real estate etc. Not just the stock market.

[glassman]

It makes me sick to hear stories like that. My dad taught me that nobody manages your money better than your self. Dont put all your eggs in one basket and diversify. It was good advice, too bad from 32 to 46 i "invested and forget it". I will promise to watch it like a hawk now that i'm 47. Got a nice base. I'm hopin to get at 1.5 to 2 by time i'm 62. Getting the kids done with college will be a major hurdle, two more years and that will be another 3k a month to put away. Right know were doing about 50k a year (15k for me and 15k for her from our company into its pension/401k) and another 20k into my Schwab stuff. Plus the asset's we have now, the house and business (which is "sellable", but its a specialized market so finding a buyer to "buy" a job isn't easy)...

[GregWeld]

Originally Posted by glassman

It makes me sick to hear stories like that. My dad taught me that nobody manages your money better than your self. Dont put all your eggs in one basket and diversify. It was good advice, too bad from 32 to 46 i "invested and forget it". I will promise to watch it like a hawk now that i'm 47. Got a nice base. I'm hopin to get at 1.5 to 2 by time i'm 62. Getting the kids done with college will be a major hurdle, two more years and that will be another 3k a month to put away. Right know were doing about 50k a year (15k for me and 15k for her from our company into its pension/401k) and another 20k into my Schwab stuff. Plus the asset's we have now, the house and business (which is "sellable", but its a specialized market so finding a buyer to "buy" a job isn't easy)...

HUGE!!!!

[GregWeld]

So the uphill battle is that everyone on TV is going to be talking about what a stellar year 2013 was. Not many years do we enjoy a 30% plus rise in just about everything we touch. Housing is snapping back in most areas... the hardest hit being the first to really come roaring back... etc.

Time and again - the question becomes so simple. Is NOW the time to put my money in the market (or elsewhere? Housing?)?

Here's the way I look at it. I think 2013 was the year that the USA finally was starting to get it's act back together. Nothing is really "great" or going gangbusters... But 2013 brought or started to bring a sense of -- it's not going down - might not be going full tilt either but things are looking up.

THE MARKET IS A FORWARD LOOKING MECHANISM. Always has been.

My sense is we'll see continued business and housing improvements. Not raging - but nice and steady... SO JUST BECAUSE 2013 WAS GANGBUSTERS doesn't make 2014 have to be crappy! What kind of thinking is that. OH! My business started to recover -- so next year everything ought to go to hell. That's NOT how people think! What most people do is relax just a bit... and look around at their situation and say -- well last year - sales came back to normal or almost normal -- so here we go! Let's kick some ass in 2014!

So just to say the market had a fantastic year - therefore - going forward it has to suck... well -- that's just made up bullpucky. While we can't expect 30% across the board gains... why should we just expect something to go sour -- when in my opinion we're just at the first few feet of a business rebound? THE MARKET is about business and earnings - forward looking sales and profit estimates etc.

In unison ---- Does it go straight up???


I can't hear you.....


Louder!


HELL NO!! It's like climbing stairs... and sometimes it two steps forward and three steps back - then four steps forward. What's the net result? We're 3 steps forward. Think about that -- because most of you did lousy math right there. You didn't come up with 3 steps forward did you!

The market moves in jerks. Any of you that have been in have certainly gotten accustom to that by now. Just about the time you're ready to throw in the towel - we get a 200 point day followed by a 100 point day... then a whole bunch of nothing mixed with a few poopie days.. then boom! Another big day. In the end the net result of 2013 was up about 30%.

As dividend investors --- and I'm going to get to my point here in a minute --- we're likely NOT going to see our accounts rise by the same as the market. The reason for that is that we're not invested in GROWTH. We're invested in TOTAL RETURN or DIVIDEND stocks. AND we're protecting our capital from DOWN markets by buying the best of breed companies - mixed with some steady eddies. These companies aren't the kind of companies that suddenly have a 40% sales increase. AND the fact that they yield a dividend can actually hold their prices back when things are going well. WHY? Because people look at the stock price rise -- which makes the yield comparison decline! It becomes an inverse measure... when the price falls the yield rises protecting us on the way down... but that same comparison holds us back a bit on the way up. So long term we get a better comp because we didn't loose as much as those around us - but we don't gain big time quickly either. We're the turtle not the hare. In the end we're the winners (historically dividend investing is the biggest bread winner).

What our dividend stock prices are competing with is interest rates.

What the MARKET wants (what is the market other than a group of people) is safety with a return. Those two are almost mutually exclusive - the higher the return the less safety. When "safe" rates on T-bills and the like rise -- those are super safe -- and when the return is 3 or 4% --- then they become "attractive" to the blue haired little old lady crowd (the ones with the most money!) because they're going to be compared with say COKE (KO) --- and when you factor in the tax free 3% vs the taxable 3% of a dividend... well the TBill becomes a temporary winner.

Now --- let's look at interest rates in the very most basic way.

Interest rates RISE - when what happens?

When people are WILLING to borrow rates rise. What is interest other than a sales commission on money? If nobody is buying I have to lower my prices -- if there is enough demand I'm able to raise my price a bit - but then I should see a leveling off as that demand slows a bit and adjusts to the new prices. If things go well - I might see more or continued demand --- or I might just have hit the ceiling and have to hold right here for awhile. Everything adjusts accordingly. Rates rise to quickly -- it kills housing sales -- and car sales.. and business balks... The WORLD has gotten used to damn near free money. It's going to balk at rising rates. Think about this in your own world. 4% or less money to buy a house... are you ready to look at 5% rates? NO..... that would piss you off. But over time -- 5% if you think it's going to 6% might start to be attractive enough that you take the plunge... and 3 years later -- you're the dude bragging about his cheap mortgage rate at the water cooler.

So if business is GOOD --- we'll see rising rates... and there will be some adjustments made. Rates cost business profits - they'll have to adjust (what's that? -- they raise prices! 'cause they're done cutting costs).

What's a guy to do?? Personally --- I'm looking at my lowest / slowest growth and dividend payers. And what I'm asking myself is --- OVER TIME --- not next week or next year --- am I willing to hold "X" and take "X" (low) dividend and maybe have little or no growth in capital but own a great company that has historically been just fine.... or do I trim that one just a bit --- and try to put a little more into the higher returning (dividend) stock to raise my income and compete with what I see is rising rates and perhaps rising costs...

As typical -- I'd done kind of a little middle of the road. I dumped McDonalds just because I really am average Joe and I find myself AVOIDING eating there as a choice.... and I've trimmed my Coke... because it pays a paltry but steady dividend... and I own it for BALANCE... and I've trimmed half my Wells Fargo right after the first of the year by half - because I had a HUGE gain in it... and it doesn't pay much (now) dividend -- so I took a little pocket money but I think there's still plenty of upside there... so I'm hedging my bet by holding half (10,000 shares is still a good chunk of change last time I looked)... I added a little to my Kinder Morgan Partners (KMP) because they just bought some tankers to add to their pipe business (I like that thinking) and the dividend is good or better because of the price decline in their shares.... and I'm looking for a raise in my own pocketbook this year (this new house is going to be expensive! LOL). The rest I parked temporarily until I get a clearer view or finally decide where I want to put it. I'm now holding WAY too much high yield corporate debt.. but that's just parking money and getting paid to do so.

ALL THE ABOVE JUST USED AS AN EXAMPLE.... WHAT I DO IS NOT WHAT YOU SHOULD OR COULD DO.... but we have to talk about something real and that's real. Period.

So this is a segue -- (not segway like I fell on my face with when I borrowed Charley's)... into what you should be doing this time of year.... it's called REVIEWING and trying to peer just a bit into the abyss we'll call next year and beyond. Look at everything you hold and examine it -- question it -- will you own it come hell or high water --- are you earning enough GOING FORWARD -- What's your GUESS on how your business's will do (you ARE AN OWNER YOU KNOW). This is NOT about getting scared of losing ------- this is about a simple examination or "taking stock" of where you're at.

My HOPE (and that's all it is) -- is that continued better business and housing -- offsets the rise in rates and the market goes with the thinking that better business conditions are okay countered by or tempered by rising overhead... and that maybe 2014 is a "wash" ---- and if it just holds steady -- then the 30% rise we just had -- AVERAGES out to 15% over the two years. I'll take it!!


See -- that's really where your head needs to be at. Think about that. 15% over two years in a market that has AVERAGED 10% over it's lifetime... and that 10% doubles your money every 7 years... and you're going to bitch about ONLY making 15% ?? Or maybe the chance to have just made 30% and maybe we just average 2014 and get the normal 10%.... BUT IF YOU'RE NOT IN -- THEN YOU'RE OUT and you get nothing. Brilliant strategy --- brilliant.

Like my cop buddy says --- your gun is in the nightstand and the bullets are in the basement... and the rapist is coming thru the door. Brilliant.


:>)


Ramble over and out.

[protour73]

Nice rant coach,..........making an appointment tomorrow to get into the Schwab office this week

Originally Posted by GregWeld

***so here we go! Let's kick some ass in 2014!

***IF YOU'RE NOT IN -- THEN YOU'RE OUT and you get nothing.


Ramble over and out.

[redefined]

Great post Greg.

I've got a few things I want paid off - school loans - BAHHH but I should be able to knock that out by May. After that it's all about saving for the new house and investments!!!!

Time to pick a few of the ones listed here and watch them for the next few months. Interesting that you dropped McDonalds.

[protour73]

so let's talk Roth IRA's . . . . Good idea?

[redefined]

Originally Posted by protour73

so let's talk Roth IRA's . . . . Good idea?

Are you married? Single? You'll have to go off of income here too.

Are you married and file jointly? Do you make more than $181k combined on the joint tax return? If so then legally, no Roth for you.

But now lets look at tax brackets. I believe by going over the $160k mark will put you into the next tax bracket. Because of this if you make over the $160 mark it's not worth doing the Roth and you should go Traditional - my opinion from my research and speaking with our Tax Accountant.

The basics between Roth and Traditional:

The money going into a Roth has already been taxed. Example, you get a paycheck, you then take the money that's already been taxed in said paycheck and place it into your Roth. When you retire and take money out you're then taxed just on the gains. You can also take the money you put into the Roth out at any time with no penalty.

Traditional comes out of your paycheck and goes into the IRA pre-taxes. So when you retire and you take this out you pay taxes on all of this.

With that being said, what is your tax bracket now? What will your tax bracket be when you retire? Higher tax bracket when you retire? Then do Roth now if you can, lower when you retire? Then do Traditional now? (with everything else said above in consideration)

If you CAN do a Roth, do it. I believe the max per year is also $5k per person for a personal Roth, if your IRA through work is a Roth there is no limit for coming out of your paycheck if not mistaking.