Investing 102

[Bucketlist2012]

So the update is that my 401K has limited options.

I am getting 4.5% out of it, and it has gone up... So that is good news..

So I may just leave things for now, and put together 10K Of Mad Money/Investing 102 , some other way..

[GregWeld]

Originally Posted by LS1-IROC

Thanks for the additional info Greg! I'm pretty comfortable with the $10K investment, but I might stagger in like you suggest.

I think I'll keep my current 401K where it's at now for retirement purposes and use this additional money to invest as I see fit and be more liquid. If I can grow this investment I'd like to eventually split some of it off to help my (unborn) child with education. Is that a sound idea, or should I start a separate fund all together for the child?

Well -- I'm a "buckets" kind of guy. I like control -- and I like to see results -- and I don't like to commingle. So for my kids - I opened separate Schwab accounts for each one - with mom and I as joint tenants... It's easier to see your progress -- and depending on their ages - you may want to be much more aggressive in their accounts than you would your "retirement" bucket.

So - for instance - I might buy a 5 year old - $500 worth of Pandora... or Facebook when it comes out... which are stocks I'd NEVER buy for myself... but these are SMALL purchases that can have big upside potential... and if you have 13 or 15 years before college year one -- you could hit a lucky one.

For me - different "goals" different mindsets - Different accounts...

So now you have 9K for you to play with and 1K for beginning school savings bucket!

I just put two through OUT OF STATE college. The real costs are not just the tuition -- it's the LIVING expenses... they have to eat - drive - books - live somewhere... have a pizza once in awhile... and they have to come home once in awhile or you go there.... Even if you live 5 blocks from the college - they won't want to live at home... Trust me. You won't WANT them home past the freshman year.

[GrabberGT]

Alright, its taken me 2 days but Im now caught up on this thread from having taken a holiday break. I have a couple questions:

How about a little investing advise rearding fund selection. I already understand your viewpoint towards funds in general (Why paysomeone else to make selections you could make foryouself) but my Fidelity 401k provides only Funds as selections. I'm 37 with 30 years till retirement so I can afford to play with the riskier stuff. Rather than just throw a dart at a list of stock based funds, what should I look for? Highest annual return over the life of the fund with the lowest expense ratio? Fund information is limited. Its easier to look up the fund on Google. If a fund pays a dividend, (Not shown on Fidelity) do I get that dividend or does Fidelity?

Next step is to open a Roth IRA. What should I look for in a broker for my IRA. From Fidelity's page: "Investment choices - A wide range of mutual funds, stocks, bonds, ETFs, and FDIC-insured CDs" This leads me to believe that my choices, though wide, are limited to a selection. Are all brokers like this? Which one has the widest range of choices?

Thanks. I Love this thread and have learned a lot.

[GregWeld]

Originally Posted by GrabberGT

Alright, its taken me 2 days but Im now caught up on this thread from having taken a holiday break. I have a couple questions:

How about a little investing advise rearding fund selection. I already understand your viewpoint towards funds in general (Why paysomeone else to make selections you could make foryouself) but my Fidelity 401k provides only Funds as selections. I'm 37 with 30 years till retirement so I can afford to play with the riskier stuff. Rather than just throw a dart at a list of stock based funds, what should I look for? Highest annual return over the life of the fund with the lowest expense ratio? Fund information is limited. Its easier to look up the fund on Google. If a fund pays a dividend, (Not shown on Fidelity) do I get that dividend or does Fidelity?

Next step is to open a Roth IRA. What should I look for in a broker for my IRA. From Fidelity's page: "Investment choices - A wide range of mutual funds, stocks, bonds, ETFs, and FDIC-insured CDs" This leads me to believe that my choices, though wide, are limited to a selection. Are all brokers like this? Which one has the widest range of choices?

Thanks. I Love this thread and have learned a lot.

You need to find their TRADING SYMBOLS... and then do the exact same research using Google or Yahoo Finance as you would with stocks... look for the best long term track record... or best total return over the long haul.

For diversification -- you can buy Large Cap - Mid Cap (this is the size of the companies they invest in) etc -- or you can also get some "International" exposure in various geographical regions - such as "Asia" etc... and they're also usually "Growth" or "Total return" or "Growth and Income"... The PROBLEM is that just because they have the "Growth and Income" label - doesn't mean they're invested in the right stuff to actually EARN their names!

Did I mention that MUTUAL FUNDS SUCK? They're designed to lull the masses into hibernation while they make massive fees for doing nothing... Don't even get me started...

IF THE FUND GETS DIVIDENDS -- they're reinvested. So yeah -- you get 'em -- and it will be reflected in the total return of the fund.

Did I mention that MUTUAL FUNDS SUCK?

Here's the other problem with mutual funds. You buy their "NAV" -- Net Asset Value" on any given day... but that can go DOWN just because maybe some company lays off half a zillion people - and those people MOVE their IRA's into Rollover IRAs and cash out of the stinkin' mutual fund they were all forced to be in.... so the mutual fund has REDEMPTIONS -- CASH they have to pay out - so they SELL shares of stock to cover the redemptions. They're not in control -- and more important - NEITHER ARE YOU.

But treat them as if they were individual stocks -- research them - look for the best PERFORMANCE over the longest period of time.

+++++++++++++++++

ROTH IRA -- Just pick ANY of the BIG NAME discount brokers.... Schwab - Fidelity - TD Ameritrade etc... I have a Fidelity account -- I don't particularly like them -- or their website - but you can buy/invest in anything there that Schwab has. I prefer Schwabs website. But I actually have accounts about half a dozen DIFFERENT brokerages. One for bonds... Wells Fargo for an IRA (they have a division that if you're a big enough customer they'll hold "private paper" for you - most brokerages won't)... but for just good old fashioned information and ease of use... I like Schwab. It could also be that I've been using them for years... so I'm familiar with their website etc.

[Bucketlist2012]

Originally Posted by GregWeld

You need to find their TRADING SYMBOLS... and then do the exact same research using Google or Yahoo Finance as you would with stocks... look for the best long term track record... or best total return over the long haul.

For diversification -- you can buy Large Cap - Mid Cap (this is the size of the companies they invest in) etc -- or you can also get some "International" exposure in various geographical regions - such as "Asia" etc... and they're also usually "Growth" or "Total return" or "Growth and Income"... The PROBLEM is that just because they have the "Growth and Income" label - doesn't mean they're invested in the right stuff to actually EARN their names!

Did I mention that MUTUAL FUNDS SUCK? They're designed to lull the masses into hibernation while they make massive fees for doing nothing... Don't even get me started...

IF THE FUND GETS DIVIDENDS -- they're reinvested. So yeah -- you get 'em -- and it will be reflected in the total return of the fund.

Did I mention that MUTUAL FUNDS SUCK?

Here's the other problem with mutual funds. You buy their "NAV" -- Net Asset Value" on any given day... but that can go DOWN just because maybe some company lays off half a zillion people - and those people MOVE their IRA's into Rollover IRAs and cash out of the stinkin' mutual fund they were all forced to be in.... so the mutual fund has REDEMPTIONS -- CASH they have to pay out - so they SELL shares of stock to cover the redemptions. They're not in control -- and more important - NEITHER ARE YOU.

But treat them as if they were individual stocks -- research them - look for the best PERFORMANCE over the longest period of time.

+++++++++++++++++

ROTH IRA -- Just pick ANY of the BIG NAME discount brokers.... Schwab - Fidelity - TD Ameritrade etc... I have a Fidelity account -- I don't particularly like them -- or their website - but you can buy/invest in anything there that Schwab has. I prefer Schwabs website. But I actually have accounts about half a dozen DIFFERENT brokerages. One for bonds... Wells Fargo for an IRA (they have a division that if you're a big enough customer they'll hold "private paper" for you - most brokerages won't)... but for just good old fashioned information and ease of use... I like Schwab. It could also be that I've been using them for years... so I'm familiar with their website etc.

Did I mention you are right... Mutual funds and most 401K plans SUCK..

That is why approx. 10% of my investments are there . I used my old company to match me for the time i was there, and 90% of my Investments are in Schwab, which i control, and the Fees are plain..

Did I mention that i agree that Mutual Funds Suck, and most 401K's are POO...

[Woody]

Greg,

You have really opened my eyes to investing in stocks. Up until now I have been investing most of my retirement funds in mutual funds. I own six funds right now and have my money evenly divided between small cap, mid-cap and large cap funds. I was just doing some research on the ten year performance of my funds. The ten year total returns (including dividends) has ranged from 22% to 147% with an average return of 68%. That equates to roughly 6.8% per year (simple interest).

Just for comparison sake, I took 12 stocks, most of which have been mentioned in this thread and calculated ten year total returns (including dividends) The stocks included were HD, PFE, CVX, MCD, MO, KFT, JNJ, KO, T, KMB, PG and CAT. Ten year returns ranged from -2% to 383% and averaged 143% which is approximately 14.3%, more than double my mutual funds average return.

I have reviewed the stock holdings of my mutual funds and I believe I own all of the stocks mentioned within the mutual funds. However, the funds also own 100+ other stocks, some of which I have no clue as to what they do.

Anyway, this has been a real eye opener for me. Thanks again for your insight.

[GregWeld]

Originally Posted by Woody

Greg,

You have really opened my eyes to investing in stocks. Up until now I have been investing most of my retirement funds in mutual funds. I own six funds right now and have my money evenly divided between small cap, mid-cap and large cap funds. I was just doing some research on the ten year performance of my funds. The ten year total returns (including dividends) has ranged from 22% to 147% with an average return of 68%. That equates to roughly 6.8% per year (simple interest).

Just for comparison sake, I took 12 stocks, most of which have been mentioned in this thread and calculated ten year total returns (including dividends) The stocks included were HD, PFE, CVX, MCD, MO, KFT, JNJ, KO, T, KMB, PG and CAT. Ten year returns ranged from -2% to 383% and averaged 143% which is approximately 14.3%, more than double my mutual funds average return.

I have reviewed the stock holdings of my mutual funds and I believe I own all of the stocks mentioned within the mutual funds. However, the funds also own 100+ other stocks, some of which I have no clue as to what they do.

Anyway, this has been a real eye opener for me. Thanks again for your insight.

Fantastic work Woody!!

This really is so simple ANYONE can do it -- but somehow we'd rather "leave it alone" or ignore it altogether...

So you just summed up WHY I THINK MUTUAL FUNDS SUCK.... because they're not going to buy anything you can't on your own... but there PERFORMANCE will be pulled down because of DILUTION.... They can't just own the best of breed -- they're just going to buy EVERYTHING... because most are simply set up to mimic some "standard" -- whether it's the S&P 500 or some other index. Then they churn the stocks -- and charge you fees for all this... and in the meantime you have no idea what's what.

If you can buy 10 to 20 top stocks - you have a mutual fund. No fees. And you are in control.

Mutual funds were great for people -- they get a job -- and they can "save" $50 or $100 per paycheck... so they have a "place"... but you can do better on your own as soon as you have 10 grand or so.

[Bucketlist2012]

Originally Posted by GregWeld

Fantastic work Woody!!

This really is so simple ANYONE can do it -- but somehow we'd rather "leave it alone" or ignore it altogether...

So you just summed up WHY I THINK MUTUAL FUNDS SUCK.... because they're not going to buy anything you can't on your own... but there PERFORMANCE will be pulled down because of DILUTION.... They can't just own the best of breed -- they're just going to buy EVERYTHING... because most are simply set up to mimic some "standard" -- whether it's the S&P 500 or some other index. Then they churn the stocks -- and charge you fees for all this... and in the meantime you have no idea what's what.

If you can buy 10 to 20 top stocks - you have a mutual fund. No fees. And you are in control.

Mutual funds were great for people -- they get a job -- and they can "save" $50 or $100 per paycheck... so they have a "place"... but you can do better on your own as soon as you have 10 grand or so.

Again I am still learning, so bear with me. I really hate 401K and the Mutual Funds in them... Fees and terrible choices....

But in my Schwab self run plan, I do own , along with many other things, these Mutual Funds. I am not saying to buy them, remember , I am a novice, but I picked Great performers, but i am not sure if it is the best route..

I have the following

OIBAX,LSBRX,TGLDX,TPICX,SAMIX,TGINX,PTTDX,

I did the research, and these picks crush the similar funds of others.. But they are really cut up into a thousand investments..

But I am going to have to do so much homework after reading this thread...

[RECOVERY ROOM]

I now what you mean, Im looking at everything now because of the info hear....WOW. ( I take it that GW hates funds)

[Bucketlist2012]

Originally Posted by RECOVERY ROOM

I now what you mean, Im looking at everything now because of the info hear....WOW. ( I take it that GW hates funds)

Yes.. I truly believe that just doing the investing and research, and networking like we are doing, will be more than most will ever do...

With study and Smart work, we will do well...But with a little more effort and research, we can do even better, without being greedy...IMHO