Investing 102

[GregWeld]

Originally Posted by CamaroMike

Thanks! I am happy to hear that my employer is paying you well

They don't pay very well -- but I have $10 a share gain in the name! I expect that to go higher if and when they raise the dividend back to the percentage they used to pay.

[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.

Regardless of whether or not the shares are on the famous "Dividend Champions" list... or where they place on that list.. the beauty of dividend stocks in general is that they continue to spin off cash - which is either re-invested or used for some other purpose. That's the beauty of the simplicity of this type of investing.

For instance (another example only please!) Kinder Morgan Partners (KMP) has been down for awhile now... when it was one of my biggest gainers... but REGARDLESS of what it's trading for today or last week.... it pays me $9973 PER MONTH in dividend. It doesn't make any difference what that number is - each person has their own level of shares in various names etc - but for me - that is the number. Now.... when I look at the holding --- that's a very good cash return (over 7%) and my larger concern going forward is -- will they continue to pay this kind of return? So my larger concern is how is their business going and are they capable of earning enough to continue to pay me. As long as I see that their capable of continuing to pay -- then I'm happy. The share price will only become important IF I wanted to sell. Even then.... I'd have to say to myself -- WELL -- They've paid me $5.44 per year per share... I've owned them for 3 years and collected $16.32 in cash.... the shares are "underwater" (for example) $6.... Do I really have a loss in the shares if I sell??

I would have less of a return on a percentage basis -- but I wouldn't have a cash loss. The longer I hold and the more I collect... eventually they will have returned to me everything that I paid. At current prices I have to hold this name 13 years.... after that -- everything they send me is free money! We will ASSume that the share price is even and has no growth during this time period. That's not a bad return over time -- so once again the actual share price day to day becomes less important.

Does that make sense?

[GregWeld]

Just to be sure --- What I'm discussing above is more about a WAY TO THINK about prices - and when to buy and blah blah blah. The goal is important... the amount of time allotted to that goal. What is your purpose for investing. Is buying down .50 cents today more important than the long term goal?

I posted the "bull market" vs "bear market" charts to show the returns available over various periods of these kinds of markets.

Here's something that I've been shown in my own accounts time after time....


IF I'm up 100% over the last 4 year period -- and I'm now down 30% this year (example only!) -- I'm still ahead, right?

If I'm NOT in the market at the beginning of a bull market I probably lost part of that market's run. Example - if you waited until '10 to get back into the market after the '08 bear was done -- you'd have lost a huge part of the overall return. So look at it this way (made up numbers for example) --- '08 sucked you started with 100K and went down 40% - so you started '09 with a big loss and "only" had 60K invested....but since then you're UP (using the QQQ Dec 08 til today) 191%... You've made all your money back plus some! Had you sold and gone all cash and sat on your hands... you'd just have a huge loss. You'd have made .25% interest on a bank account.... versus the 4 or 5% dividend (compounded and reinvested in shares all along at cheaper prices) and blah blah blah.

Those bull / bear charts show the REMARKABLE rebound the markets make ----- and thus ---- my oft repeated the "chart is lower on the left and higher on the right". Over TIME you are rewarded. Over time - you WILL suffer pain and angst - and then be richly rewarded.

IF YOU'RE REALLY SMART -- YOU'll BUY LIKE A PIG WHEN THE MARKET IS AT IT'S WORST.... but who really does that? It's far more typical to buy when the market is doing well... regardless of whether we're buying stocks - or houses - or cars.

[CamaroMike]

Michael Lewis

[CamaroMike]

I feel more secure every time you post Greg.

[GregWeld]

Originally Posted by CamaroMike

Michael Lewis

Michael Lewis may have some good points with his discussion -- there's never ANYTHING wrong with putting something like this under the microscope. But his calling the market "rigged" etc -- is just book selling BS.

Anyone that knows anything about anything knows the market has always been in favor of the large institutions and funds that trade. They're the ones setting the price action. We are all just along for the ride. I'm perfectly okay with that. I never try to game what they're doing or try to get ahead of the big boys when their is possible news of a merger etc. When you try to do that - you'll get squashed. This is why I always say to just buy good stuff with a dividend and sleep well.

[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.

UP or DOWN.... That's why people don't think they're (dividend payers) worth investing in.... they're not Google or the OLD Microsoft.... where people (including me) got rich in months not years.

The part of dividend stocks that I like the best is that while the interest rates (rising) kill the stock market... the dividend payers are supported on the way down (their share price falling) by the dividend percentage. So let's say the interest rate market (CDs/Bonds/Treasuries) starts to pay decent rates (remember those?) they then compete for investment money with stocks... so if Altria (MO) is only paying 5% and a blue haired old lady can buy a 5% tax free bond.... the bond becomes more attractive (tax free 5% vs 5% taxable dividend) --- so the price of MO would then fall until that dividend rate equals the bond payout. But once they're pretty equal -- then MO would stabilize in price.

What people fail to add in to the mix is that the TOTAL RETURN, over time, will be far far higher (historically) on stocks. Just refer to the Bull vs Bear returns on stocks... pretty hard to go find a chart showing a 100% return on bonds... you get nothing but your money back on a CD...

Just remember that there is only "X" amount of money floating around -- and various investments all compete for that same amount of money. When one thing is "hot" there will be outflow from something else - and it ebbs and flows from various types of investments looking for the current best return. Right now - we're in a period where the market seems to be the best place. But it's also why we need to be vigilant about interest rates because they can't possibly go down from here.... and as long as you UNDERSTAND that and what it means to your holdings etc... then you're good. If you don't understand your investments - then you freak out - sell out (having bought high now you're selling low)... and thus loose out.

I personally agree with the FED --- they need to keep interest rates low for a decent period of time yet. People (some) are just now recovering from the great recession. Some are doing really well -- but the average man in the street is still in recovery mode... and the low interest rate will help housing... spurs investments by business... and all that trickles down to jobs/labor.

[GregWeld]

Originally Posted by 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.

This exact same account - with ZERO changes - is now only "red" (negative) 19K....


So there's the point I'm making all the time in this thread. Have some patience! Instead of freaking out and selling because "this week" your account has a couple bleeders in it... Next week they could be your account heroes!


I did absolutely NOTHING ---- and literally since that post and this one the change is UP 166K

[MX145]

Keep it coming! I read this thread every morning. It become more of a habit than the news.

[GregWeld]

Originally Posted by MX145

Keep it coming! I read this thread every morning. It become more of a habit than the news.

Thank you! I always wonder if I'm just talking to myself. So appreciate the feedback.