Investing 102

[GregWeld]

Here's another thing I think about whether it's buying or selling.


Make a list of what you want to do -- a PLAN -- Put down important things like your average cost -- what the "EX" date is for the next dividend... Making sure you put a "MUST BUY" or MUST SELL before whatever dates you plan to use. There's no rush generally to buy or sell.... so if you have a plan in place that you can look at to keep you on track it will help.

Why sell a stock 5 days before you were to get a dividend of .40 a share?

Why not try to buy a stock either just before it's EX date - or After it trades EX and either pick up the dividend -- or buy it on the dividend "dip" effectively collecting the dividend via the discount.

Check for their EARNINGS ANNOUNCEMENTS.... I'd never buy a stock like Amazon just before their earnings announcements. You can get crushed overnight... so be patient and wait to find out what they're saying about going forward (the most important part of earnings!). If it jumps up so what - things are fine and earnings are good and they say the future looks bright. Better than than buying in and they miss earnings and say going forward sucks and you get killed 15% in one day.

[GregWeld]

Okay -- I'm a post whore.... but I love this stuff -- and a mixed market - or down market gives me new stuff to talk about. Last year became difficult to find anything new to discuss because the market just went up day after day.


This morning - if you'd have looked at your accounts - you'd have had a frown on your face... EVERYTHING was red. While waiting on Adrienne (my daughter) to make breakfast... I noticed that the market was down 188 points or so -- yet I had 4 stocks green.... and frankly - the stocks that I own weren't down very much... I like that - and my theory that dividend paying big names hold up better in selloffs has always been true - and it's showing that in my accounts.

Within a hour or so --- I note the DOW is down 122 points -- but every single stock I own is GREEN...


I thought back to 1997 or so and remembered how I would have reacted to the big down red day --- I'd have SOLD everything losses be damned! Only to turn around and pay higher prices for the same shares a day later when they went green. What a fool's play that was. Now -- I look - shrug my shoulders - look to see if there's something I should be BUYING....

[Stuart Adams]

I think Walmart is getting torched by dollar stores.

[Vegas69]

Interesting info and I always like your common sense, fundamental approach. This quote fits nicely, "Success is a refined study of the obvious".

I'm certainly not saying this was obvious to me but it's not some mystical game either. I'll take your advice, do my research, and place my bets.

I go into Whole Foods for lunch quite often and I run into a gentleman in his mid eighties. Many times, we discuss life and philosophy. Today we got off on stocks. I discussed with him your common sense approach and he agreed that it was a winning approach for growth. He then admitted that he had been burned a majority of his life chasing the get rich quick stocks. It was clear that he had some serious resentment. I'd say that if he could rewind the tapes 30 years, he'd be the turtle, not the hare.

[GregWeld]

Originally Posted by Vegas69

Interesting info and I always like your common sense, fundamental approach. This quote fits nicely, "Success is a refined study of the obvious".

I'm certainly not saying this was obvious to me but it's not some mystical game either. I'll take your advice, do my research, and place my bets.

I go into Whole Foods for lunch quite often and I run into a gentleman in his mid eighties. Many times, we discuss life and philosophy. Today we got off on stocks. I discussed with him your common sense approach and he agreed that it was a winning approach for growth. He then admitted that he had been burned a majority of his life chasing the get rich quick stocks. It was clear that he had some serious resentment. I'd say that if he could rewind the tapes 30 years, he'd be the turtle, not the hare.

Investing really is "obvious". I think deep down everyone knows what they should be doing. Doing it - is the part where most people fail.

Numbers don't lie. There's hundreds of websites that will tell you how much you need to retire with. Plug in age - savings amount - how long you expect to live and how much annual income you'd "LIKE TO" retire on. The amount you need is usually staggering. I think what happens is that nobody can actually see themselves ever getting that much money. So they just ignore the advice and keep on buying useless crap they don't really need at the peril of their own retirement in the future.

Let's face it - lots of people get lucky and pick up a nice chunk of change when their parents pass on. Their parents were smart enough to have a paid of house and some savings... Parents were luckier than we are - because many worked at jobs with pensions and great healthcare benefits. Most of us get NOTHING...

Investing can be a bumpy and discouraging road. Fears - greed - wanting only success and never being let down... Freaking out at the first investing disaster. Never learning about WHY they had a disaster.

Let's face it -- even if a guy buys a rental house - and he gets a good tenant that pays like clockwork. The next tenant can move in the middle of the night and cause lots of damage to the property. Suddenly there's 10 grand in carpet - paint - doors fixed - and appliances to replace. It sucks - but in the long term that's just a hiccup. 25 years go by and the house is paid for and becomes a cash cow. The 10 grand fix up becomes a tiny dip in the road.

ALL INVESTING has it's ups and downs. But if people just invest - understand that ups come with downs - and that the down part is just that - a part - in the end they'll become winners.

Investing has to be a holistic approach. At some point people need or want to quit working. In order to do that you have to have some income producing investments - but you also need to have the expenses in line. It's not rocket science to know that in order to spend 5 grand a month - you need to have at least 5 grand a month in income. Cut that expense to 3 grand - and bingo - you need less income. So "SAVING" and INVESTING... can and should be paying off the mortgage BEFORE your retirement - that might take making extra payments.... and you've got to put "X" amount away every month in income producing (compounding) investments to make your money grow.

Funny -- a friends father just passed away. The father had a condo here in Sun Valley... the friend figured it's paid for and they just got a nice freebie.... Well -- it wasn't paid for - in fact it's worth less than the mortgage. Now the friend is saddled with the house payment as well as the condo fee etc. Brings up my favorite saying: Life is what happens to you while you're busy making other plans...

[Sieg]

My hunch is that the last few generations of Americans with kids born in the late 80's forward who've been living the dream leveraged well beyond their means will put the self-titled Money Managers/Trust Fund Babies of today near extinction or a rare commodity compared to those born in the 50's and 60's.

[Vegas69]

That's why setting goals with a real game plan is so crucial. Most don't set written goals, let alone with a real plan of action. In this case, long term financial goals. "I want to be rich" How? What books are you going to read, what voice of value are you going to use to form your philosophy, what vehicles are you going to use?

It doesn't have to be real taxing either. Once you set a goal and put the game plan together, get a majority of it on auto pilot.

For instance:
My IRA & Life Insurance deposits are auto withdrawn.
The money I invest monthly into stocks is automatically transferred into Scottrade on the 15th. I just need to do some research and trade.
My rental mortgage payments are on auto withdrawal with the additional principal paid to pay them off in 15 years.
My primary residence payment is on auto withdrawal with additional principal to pay it off in just over 15.

I have a spreadsheet that breaks my budget down to replacing cars, clothes, and on down the line and includes net worth. I know approximately how much my net worth gains EVERY MONTH. Clearly, the additional funds have to be available to invest aggressively enough to achieve financial independence. That means you must live well below your income. If you don't, get into a more economical situation, pay off debts, or work harder. Even if you are living below your means, if you wish to achieve your goals faster, that may mean a move down in financial lifestyle. It's not going to take care of itself.

The key is to break it down. If you need $2,000,000 to retire, that seems like a daunting number. When you break it down to a monthly budget, it seems more manageable.

"Invest your money and spend what's left"

[GregWeld]

Originally Posted by Vegas69

That's why setting goals with a real game plan is so crucial. Most don't set written goals, let alone with a real plan of action. In this case, long term financial goals. "I want to be rich" How? What books are you going to read, what voice of value are you going to use to form your philosophy, what vehicles are you going to use?

It doesn't have to be real taxing either. Once you set a goal and put the game plan together, get a majority of it on auto pilot.

For instance:
My IRA & Life Insurance deposits are auto withdrawn.
The money I invest monthly into stocks is automatically transferred into Scottrade on the 15th. I just need to do some research and trade.
My rental mortgage payments are on auto withdrawal with the additional principal paid to pay them off in 15 years.
My primary residence payment is on auto withdrawal with additional principal to pay it off in just over 15.

I have a spreadsheet that breaks my budget down to replacing cars, clothes, and on down the line and includes net worth. I know approximately how much my net worth gains EVERY MONTH. Clearly, the additional funds have to be available to invest aggressively enough to achieve financial independence. That means you must live well below your income. If you don't, get into a more economical situation, pay off debts, or work harder. Even if you are living below your means, if you wish to achieve your goals faster, that may mean a move down in financial lifestyle. It's not going to take care of itself.

The key is to break it down. If you need $2,000,000 to retire, that seems like a daunting number. When you break it down to a monthly budget, it seems more manageable.

"Invest your money and spend what's left"

A written plan and sticking to it. Once people see that they're on their way to actually doing something --- they'll get better and better at it.


Here's my question to anyone. If you can't live on what you're making NOW.... how do you suppose your life will be when you're not working at all? So that law of "averages" comes back into play. Better to have a nice long AVERAGE lifestyle all the way until you die - than to live like a baller now and a pauper later.

The key is to get started EARLY so the compounding can start to take affect.

[Vegas69]

I'm going to do a Greg Weld here..... ha

When I laid my game plan, the first order of business was to manage my income to it potential. I looked at my debts and began to eliminate the excess or eliminate the bill depending on the circumstance. Between paying off a car, eliminating some bills, and buying two income producing properties, I was able to change my balance sheet by over $20,000 a year in the black. With the new discretionary income, it enabled me to invest in my game plan. Let's say I invest only half of my additional discretionary income in the market for 30 years:

$10,000 initially
$833.33 a month
10% Interest
After 30 years: Over $2,000,000! Look at that compound interest kick butt after 20 years.

[GregWeld]

EEEEEEEEEHHHHHHHHHAAAAAAAAAAA!!! Now that's a f'n' plan!!




The compounding is why I always say -- START EARLY -- because it's the later years when all the magic happens!


It's the complete opposite of a mortgage where you pay all the interest at the beginning and the principal get's paid off last..... Compounding for investing purposes is principal first -- and then comes the interest income later which is exactly when you need it!


Someone just saving $500 a month can be a millionaire when they retire.