Investing 102

[GregWeld]

Originally Posted by SSLance

BTW Greg, don't ever let up on what your are posting and preaching...

After thinking about what you said a bit today, I went ahead and made the purchases I was looking at making. No time like the present...

From what I'm seeing, Dividend Champion stocks don't really make big moves, they just kind of trod along...so it really doesn't make much sense waiting for dips to buy as the dips just aren't that big of a deal.

It really depends on the goals Lance... if the goals are to have total return over an extended period of time.... and if the goal is to own the best companies... and the goal is to get get paid every quarter... then buying down 50 cents or even 5%.... a guy can wait and miss an up 10% move - or miss a dividend payment.


I say just put the money in on a regular basis, i.e., the first of every month or the last Friday of every quarter or whatever. Just buy it - start collecting... don't freak out on down days or down periods. When ya get nervous - go back and look at the longer term charts.


Those payments they call dividends - that's why I can just go out and play and enjoy myself. 'Cause I don't really have to worry about what the market did "today" or this afternoon - or even this month. I TRUST my companies to keep plugging along and to send me my portion of the profits. :>)

[GregWeld]

In checking my accounts this morning - as I do EVERY morning.... I was reminded of the "should I buy now or wait for better prices" discussion was still fresh in my brain.

The account that I use for examples in this thread has 7.5MM in 9 names... and currently has a RED (negative) cost vs current value of 185K....


So PERFECT for this current topic right!?! I paid higher prices for the AVERAGE cost than where most of the names are trading. Kinder Morgan Partners (KMP) being the #1 underwater name... with a current (loss) of 211K on a investment of 1.82MM (22K shares). Some have green numbers but obviously not enough green to cover for the red! NORMAL investing. Over time these change and some of the "green" will come down or go red - and the red will change and go green or go more red.

Here's my point for the share this morning.


That account spins off 506K in dividend income. All the while (today) showing a "loss" of 185K in paper value. I don't care about the "loss" -- because it's not a loss until I make it a loss by selling. I'm not selling - so it's not a loss. And with that income - that loss is covered in less than 6 months of the income that is generated. The INCOME is my goal. If it was reinvested (as most all of you should be doing) then it would compound at better rates by automatically averaging down my costs. And the new shares that would be purchased at lower prices actually pay a dividend at a higher PERCENTAGE rate.

Now - that doesn't mean that I don't keep a keen (AWARE) eye on each name I own. Some of the names that are in that account are actually positive in other accounts I have. Confusing I know but I have multiple accounts - and as long as NONE of the investments in total are larger than 5% of what I have to invest... then it's okay to own them. Some of my accounts are inside trusts (for tax and death purposes). I'm laughing at this - because I wish all of you had such issues!

Anyway -- all I'm saying is -- think longer term - constantly review your holdings and WHY you hold them.... always question a loss.... why are they down? Is there an issue with the company? Is there an issue with the industry (let's compare BlackBerry (BBRY) vs the telecommunications industry) vs the companies performance? Etcetera....

If all is okay -- and you can't come up with a valid reason for selling at a loss... then sleep well. Don't fail to question... but don't freak out just because you're down 1% or .50 a share --- when they're sending you that much per quarter. But also don't hang on to a bleeder that you're worried about and can't explain to yourself WHY you own it.

[SSLance]

Hey Greg, thanks for posting the example. Just curious about one thing, if you don't plan on selling anything in your accounts (unless something changes with a company) why do you check your accounts every morning? What exactly are you looking for specifically?

Reason I ask is I'm trying to train myself to not look at the unrealized gain\loss number in my accounts every day in an attempt to change my way of thinking. I've got my holdings set up in SA and get notices from them on any breaking stories about my holdings (and companies I'm considering holding) and dividend investing in general, but I haven't yet broke the habit of watching the moves, up and down in my personal portfolios.

[GregWeld]

Originally Posted by SSLance

Hey Greg, thanks for posting the example. Just curious about one thing, if you don't plan on selling anything in your accounts (unless something changes with a company) why do you check your accounts every morning? What exactly are you looking for specifically?

Reason I ask is I'm trying to train myself to not look at the unrealized gain\loss number in my accounts every day in an attempt to change my way of thinking. I've got my holdings set up in SA and get notices from them on any breaking stories about my holdings (and companies I'm considering holding) and dividend investing in general, but I haven't yet broke the habit of watching the moves, up and down in my personal portfolios.

Doing something every day for 30 years is a hard habit to break. Besides that - I love this stuff as much as I do hot rods.

[ErikLS2]

Anyone see the 60 Minutes report tonight on the stock market? It's about how high frequency traders are beating nearly everyone to the punch and making a few pennies on most of the trades that take place each day. Some 30 year old kid from RBC discovered and has created a new "fair" exchange called IEX.

[GregWeld]

For those that care to read more detailed information on this subject -- here's a link to an article that explains what the 60 Minutes show was discussing.

http://www.cnbc.com/id/101537874



And here's my take on it --- this is only for TRADERS that are trying to game the system on a daily or hourly basis. They're trying to make PENNIES multiple times. I want to make DOLLARS for doing nothing - over a long period of time. I'll let them have their pennies.

I'm not trying to make it "nothing" but it's been going on for years. They're traders and that's how they try to make their living. I'm an investor... they're really really different strategies.

[GregWeld]

Interesting to me that Microsoft has hit a 14 YEAR high today... And this is interesting to Investing 102 only because nothing has changed at the company EXCEPT the CEO.

In fact - I would proffer that they currently have THE WORST operating system release since Vista.

So just an inside bit of info here --- my wife started working there as a Senior Director in 1984 (two years before they went public) -- when the company was quite small....

I used to work out (aerobics) with all of the senior people there... including Steve Ballmer... and I've been saying for YEARS that the man should have NEVER been appointed CEO. He's about as tech savvy as a 3 year old. His mouth far exceeds his talent or abilities -- and WALL STREET hates him. To back this up... go look at a long term chart of MSFT stock. One that shows a MOUNTAINOUS PEAK in December 1999/January 2000. The announcement that Ballmer would become CEO was made in December of 1999. From that point forward the stock began it's slide (forming that long downward slope of the other side of the mountain!).

The reason this is important for Investing 102.... is that we are always looking at OUR holdings for FUNDAMENTAL CHANGES. These changes can be GOOD or they can cost us money and thus - be bad. Something as simple as a change in the top management. Here's why this is a great example of a "fundamental change". The company has made a fortune during Ballmer's reign! Sales are gangbusters. Profits are stellar. The company "appears" to be well managed... These are all things we want in a company -- YET -- "the stock" has been completely disconnected from "the company".

Since Ballmer announced his "retirement"... which sometimes means an exec was finally pushed out the door... the stock has been on a stealth move upward. In full disclosure -- We own 10 shares. The same 10 shares that have been in the safe (we actually have the certificate) since 1994 which was Gwen's 10 year anniversary at the company (she spent 19 years there). As long as Ballmer was there - I wouldn't buy one single share. Frankly - I still wouldn't because I think their products stink - and I know about too much dysfunctional internal issues that bother me... and the dividend isn't worth the investment. However... if you were smart enough to buy on the announcement - you have a 40% gain. Stupid me! Hey - you can't own everything.... and you can't foresee everything... and that's not the reason for my post today.

The takeaway from this post is that as owners of a company (if you own the stock you're an owner of the company -- pretty fancy huh!).... be aware of FUNDAMENTAL CHANGES such as a top management change. That's not to say that a company announces the CFO is retiring (and he's 66 years old! He should be retiring!)... Or your company announces a large store closing... These are fundamental changes that should raise the hairs on the back of your neck if you own the shares.

Generally if WALL STREET likes the announced change -- they vote with their wallets and shares can get a nice pop! But beware Wall Street voting with their feet.... that's a sign to sell WITH the crowd and go find something else.

[Sieg]

So true.

I bought my first shares of MSFT on April 28, 1998 for $93.25 a share and a $29.95 commission for a total of $1,894.95. Currently I have 300 shares at a cost average of $32.62 a share.

[GregWeld]

Split adjusted Microsoft (MSFT) had an all time high of about $60....


Remember that when a company splits it's stock - the price is also adjusted. So if a company was trading at $100 a share -- and splits TWO FOR ONE (2:1) -- you'd have twice as many shares but at HALF the price. The new shares would trade at $50. You'd still have the EXACT same amount of money invested. But you'd have twice as many shares.

Splits add NO VALUE... but have generally been perceived as a "good thing".

Beware REVERSE splits -- which is when a companies shares SUCK -- and in order to not be de-listed they do a reverse split and (for example) take 10 shares trading at $1 -- and make ONE (1) share trading for $10.

[GregWeld]

Monday and Tuesday (so far) should be good reminders of WHY it's so hard to try to time the market... and I've learned after many years that I NEVER EVER EVER get it right. EVER. Thus - I just buy when I have the funds and want to add to my portfolio.

The only 'TIME' in timing is TIME. Over time you will be rewarded. I'm timing the market... I buy and let TIME gloss over my mistakes. LOL