Investing 102

[Flash68]

Originally Posted by GregWeld

That's not really high rate debt --- so what you have to gauge -- is if you INVEST -- what is your TOTAL RETURN going to look like -- vs -- just paying down the debt and maybe adding some to the principal from time to time as you can.


At 6.8% --- I'd lean toward trying to get total return on my investments. Now if it was above 10% then I'd pay it off asap.

Exactly. I just went through this talk with my wife. She has these law school loans she just wants to pay off ASAP because of the psychological burden she feels they are, but I explained we are certainly paying off the 8 and 10% loans but no way in HE!! we are paying off the 3% and 4% loans which make up a large bulk of it. It's not hard to beat that total return PLUS you have liquidity should you ever need some money.

[JKnight]

Not to mention the interest from student loans can be tax deductible up to $2,500 or something like that...

Try doing THAT with credit card interest!

[dhutton]

I put some money in this ETF to see how it will compare to the performance of my individual stock picks: VYM

I am curious to see how it will compare over time.

Don

[GregWeld]

Originally Posted by dhutton

I put some money in this ETF to see how it will compare to the performance of my individual stock picks: VYM

I am curious to see how it will compare over time.

Don

Don ---


As you know -- this isn't the stock pickers thread... but having said that -- I'd be real curious (not that you have to defend yourself) why you choose this particular ETF.

Is it inside an IRA? Or is it in a taxable account?

So -- the reason I ask this -- is that we use these names that people throw in as learning tools... discuss them - dissect them - and see what makes them tick and what the thought process is. That way others can glean some things to think about.

I know what I think of this pick -- but I'm interested in why you chose it.

[Flash68]

Originally Posted by JKnight

Not to mention the interest from student loans can be tax deductible up to $2,500 or something like that...

Try doing THAT with credit card interest!

[redefined]

Was googling something and ran across this. Made me think of this thread.

http://www.amazon.com/The-Dividend-G.../dp/B004JU1S6W

"How to Keep Your Retirement Income Doubling Every Five Years" Bold statement.

From one of the reviews:

1. Dividend growth shields investors from emotional turmoil of having your investments sink in value, since these stocks tend to stand up well and also because of the dividend income stream. This is very important if you have a low threshold for financial panic.
2. Dividend growth provides relatively small income streams at first, presumably when you don't need income (and when your taxes are highest), but it grows so that at retirement you will have a large annual income.
3. Dividend growth strategy should have much higher returns than bonds, since your dividend income will grow, while bonds pay static returns.
4. If you hold stocks in an IRA and just live off the dividends and pass the stocks to your heirs, it is a perfect tax shelter for transfering huge amounts of wealth, since all the capital gains on the stocks are not taxable when the stocks are inherited.
Ms. Klugman does mention in passing that Dividend Growth is not necessarily the highest return strategy, and probably will not even keep pace with an index fund. However, Ms. Klugman makes a very compelling case for this style of investing. In addition, her observations about the Wall Street in general are insightful and make good reading.

[dhutton]

Originally Posted by GregWeld

Don ---


As you know -- this isn't the stock pickers thread... but having said that -- I'd be real curious (not that you have to defend yourself) why you choose this particular ETF.

Is it inside an IRA? Or is it in a taxable account?

So -- the reason I ask this -- is that we use these names that people throw in as learning tools... discuss them - dissect them - and see what makes them tick and what the thought process is. That way others can glean some things to think about.

I know what I think of this pick -- but I'm interested in why you chose it.

Hi Greg. Well I picked it for a number or reasons. My stock picks to date have been pretty good but I also picked a couple of turkeys. I got to thinking maybe there was an ETF that focused on stocks that pay decent dividends. I noticed that this one had a lot of the names that I had considered as good picks. So I bought some in the interest of science and hopefully finding a way to pick up a reasonably decent dividend while reducing risk through the diversification of this fund.

Greg, I put this out there knowing that you would likely dissect it. I am interested to hear what you say and respect your opinion. I am pretty sure you will not particularly like it but I am curious to hear why. Is it because the dividend is too low, the growth too low or because there is some percentage of turkeys in there too? Or all of the above?

I do not have a significant position in this. I have a little in my Schwab account and a little in my 401k. I bought it to serve as a benchmark of sorts so that I could gauge my stock picking performance against it.

OK, I am ready, let's hear what you have to say...

Don

[GregWeld]

Wow -- I hope I'm not getting a reputation as the "stock ogre"!!


I love it when people use what they know and step up and put their hard earned money to work. That's the whole point of this thread IMHO!


Okay --- so a the price per share of this ETF -- above $60 a share -- it's only paying about 2.5%. It's growth last year (total return) mirrored the S&P 500 with 30%.

My old saying is "a rising tide floats all boats". Because pretty much everything does well (relatively) in a rising market.

I just wouldn't invest my money in much of anything that is only paying me 2.5% to own it. Coke pays more than that - McDonalds pays more than that BUT --- ALWAYS A BUT --- you got the growth (had you owned it) of the market (30% in 2013) so the 2.5% turned out to be a good return!

My problem with 2.5% is not a GOOD YEAR --- it's when we have poo years... and we're waiting for the market to come back -- THAT IS WHEN WE NEED TO GET PAID TO WAIT... because like the rising tide -- and down market takes everything down and that's when I need to be paid. With the 10 year Treasury bill hitting 3%... the 2.5% pales.

So that would be my only beef with this ETF particularly as it bills itself as a "high dividend ETF".

Originally Posted by dhutton

Hi Greg. Well I picked it for a number or reasons. My stock picks to date have been pretty good but I also picked a couple of turkeys. I got to thinking maybe there was an ETF that focused on stocks that pay decent dividends. I noticed that this one had a lot of the names that I had considered as good picks. So I bought some in the interest of science and hopefully finding a way to pick up a reasonably decent dividend while reducing risk through the diversification of this fund.

Greg, I put this out there knowing that you would likely dissect it. I am interested to hear what you say and respect your opinion. I am pretty sure you will not particularly like it but I am curious to hear why. Is it because the dividend is too low, the growth too low or because there is some percentage of turkeys in there too? Or all of the above?

I do not have a significant position in this. I have a little in my Schwab account and a little in my 401k. I bought it to serve as a benchmark of sorts so that I could gauge my stock picking performance against it.

OK, I am ready, let's hear what you have to say...

Don

[dhutton]

Originally Posted by GregWeld

Wow -- I hope I'm not getting a reputation as the "stock ogre"!!


I love it when people use what they know and step up and put their hard earned money to work. That's the whole point of this thread IMHO!


Okay --- so a the price per share of this ETF -- above $60 a share -- it's only paying about 2.5%. It's growth last year (total return) mirrored the S&P 500 with 30%.

My old saying is "a rising tide floats all boats". Because pretty much everything does well (relatively) in a rising market.

I just wouldn't invest my money in much of anything that is only paying me 2.5% to own it. Coke pays more than that - McDonalds pays more than that BUT --- ALWAYS A BUT --- you got the growth (had you owned it) of the market (30% in 2013) so the 2.5% turned out to be a good return!

My problem with 2.5% is not a GOOD YEAR --- it's when we have poo years... and we're waiting for the market to come back -- THAT IS WHEN WE NEED TO GET PAID TO WAIT... because like the rising tide -- and down market takes everything down and that's when I need to be paid. With the 10 year Treasury bill hitting 3%... the 2.5% pales.

So that would be my only beef with this ETF particularly as it bills itself as
a "high dividend ETF".

Not a stock ogre, a stock guru... Close, but different...

Marketwatch.com shows the dividend yield as 3.4% which is why I thought it was OK. If it is 2.5% then I agree, I picked another turkey, no argument. Any idea why the difference between the two yields?

I'm also curious what is considered a respectable yield. 4%?

Thanks again,
Don

[GregWeld]

Originally Posted by dhutton

Not a stock ogre, a stock guru... Close, but different...

Marketwatch.com shows the dividend yield as 3.4% which is why I thought it was OK. If it is 2.5% then I agree, I picked another turkey, no argument. Any idea why the difference between the two yields?

I'm also curious what is considered a respectable yield. 4%?

Thanks again,
Don

Well --- the dividend VARIES because it depends on what is making up the ETF during any particular quarter etc. but I see it as under 3% --- and that's primarily because the NAV (NET ASSET VALUE) has been rising --- when the share price - or in this case the NAV rises the % paid goes down.

By the way ---- if you have two different accounts -- NEVER buy the same names in each account. Remember that DIVERSITY means to diversify. Regardless of what account money is in -- it's still ALL you're money and you want to be diversified. So it doesn't make sense to double up like that. If you want to buy ETF's then buy one different one in each account.