Investing 102

[JasonElvisHeard]

Originally Posted by GregWeld

That wouldn't be the above post about some failed stock that now trades in Mexico... LOL

my point was more about the unusual aspect of how markets work. What was in essence a failed stock is now posting increasing profits in a different market. If I were to say that Dish was going to take blockbuster to mexico and make over 100M in 3 quarters I'm sure you would have the same response (me too), but they did and it seems the platform is doing really well down there.

I just noticed it because it was unusual, something that failed here is growing and posting increases in revenue / profit. Only time will tell how long this can be sustained but the parent company knows the market very well along with several ideas on how to increase revenue / profit (because revenue is nothing without earnings).

I'm also not saying go and buy it now, simply pointing out that undervalued situations can pop up anywhere. Ill check it in a few months to see how things are going. It is very unusual that something can fail so bad here then come back so strong in a different market with a refined product offering.

[GregWeld]

If you read your post about this -- it sounds like a troll pump and dump. Not dissing you personally - and you make some decent points. But this is investing 102 --- which means people just getting started. There's no room for sophisticated research -- or gambling -- or foreign holdings..... this is SIMPLE investing -- dividends - some growth - safety - reliability - understanding the fundamentals. When people have 2 or 3 hundred thousand dollars in investments -- then that's a different thread... where people can stretch a bit or gamble a bit. At that level - they should be getting 10 or 15 or 20 thousand dollars a year in dividend income.... and the compounding starts to really take hold...

If you're playing with 10,000 total investable dollars -- why try to make it 2,000..... money is too hard to come by to gamble with it. That's not to say some people win the lottery.... that's not to say someone might gamble 10K and wind up with 100K... but more often than not -- that 10 becomes 2. I'm trying to get people to TRUST in the stock market and take baby steps - and get some solid rewards - and be able to live thru the ups and downs - without getting ulcers or bailing out.

Originally Posted by JasonElvisHeard

my point was more about the unusual aspect of how markets work. What was in essence a failed stock is now posting increasing profits in a different market. If I were to say that Dish was going to take blockbuster to mexico and make over 100M in 3 quarters I'm sure you would have the same response (me too), but they did and it seems the platform is doing really well down there.

I just noticed it because it was unusual, something that failed here is growing and posting increases in revenue / profit. Only time will tell how long this can be sustained but the parent company knows the market very well along with several ideas on how to increase revenue / profit (because revenue is nothing without earnings).

I'm also not saying go and buy it now, simply pointing out that undervalued situations can pop up anywhere. Ill check it in a few months to see how things are going. It is very unusual that something can fail so bad here then come back so strong in a different market with a refined product offering.

[Rick D]

Ok Greg, I've got a question and tried to look through here but this tread has gotten so big it's harder to find some of the info.

I've got some cash to start investing and I think I've i got a good idea from in here as what to do

My question is what can I do to make my 401k work better and grow faster? I've done what their web site has told me todo but it really doesn't do much from a growth stand point, sure it grows from my and my company's matching contributions, but only a little (from what I can tell) from the investments?

If this has been covered already then maybe someone can show me the post?

Thanks Newbe invester!!!

[GregWeld]

Originally Posted by Rick D

Ok Greg, I've got a question and tried to look through here but this tread has gotten so big it's harder to find some of the info.

I've got some cash to start investing and I think I've i got a good idea from in here as what to do

My question is what can I do to make my 401k work better and grow faster? I've done what their web site has told me todo but it really doesn't do much from a growth stand point, sure it grows from my and my company's matching contributions, but only a little (from what I can tell) from the investments?

If this has been covered already then maybe someone can show me the post?

Thanks Newbe invester!!!

The reason for the 500 f'n pages is because people come and go - and ask the same questions repeatedly. So things get covered over and over... Which is perfectly fine as far as I'm concerned.

Okay -- your - and most peoples - 401K's are usually MUTUAL FUNDS... mutual funds are the pablum of investing. They're built on some basis such as one can label --- Growth Fund... or Income Fund... or Large Cap or Small Cap. The FUND then invests the money in the shares that meet that criteria. They are not allowed to invest in anything outside the preset criteria. So if you're into a fund that is "Small Cap" --- and small cap is out of favor this year.... and that fund sucks... and it will offset the growth of the other fund you may happen to own which is doing okay.

FUNDS --- Are generally loaded up with the "Top 10" names in their investing criteria... and then have maybe 90 or more names in the fund. The problem with this type of investing is that the top 10 might be the lead horses - but they're trying to drag along the 90 dead horses. They also have management fees - as they have salaries to pay to manage the 90 dead horses... and your company has costs associated with managing the plan etc. These all affect your return. Negatively not positively!

My deal here - which has been repeated a gazillion times is that all a guy has to do is to research what the top 10 are of the fund he's thinking about... and just buy the couple top ones in there -- and build your own mutual fund - that isn't dragging along 90 dead names with it.

Now -- there's more to it than that. Some company plans won't allow you to invest in individual stocks. Some will. Some make you ask the plan administrator to allow you to do this. Depending on the size of the company etc that can be a big hassle... or not.

My advice is that if you get a matching amount --- then depending on that information - put in the amount that gets matched --- and then open a ROTH IRA or an Individual IRA outside of the work plan and start to contribute to that as well as your company plan. This all depends on how much you have to work with - what your income level allows you to do (there are IRS limits) etc.

The brokerages - such as TD Ameritrade - or Schwab - or some other discount broker usually are pretty well versed in what you can and can't do and will help you setting up and getting started etc.

WHAT you invest in depends on your age - income - tolerance - goal - family. A single guy making 200K a year that's 30 years old can afford to toss some money in chasing the big score... Alibaba - or FaceBook - or GoPro of the world. A guy with half a million bucks invested already that has 3 kids approaching college age and he's 50 -- should be thinking more safety and compounding. Safety SHOULD NEVER be confused with DEAD MONEY. That's where people tend to screw themselves. We want to invest long term - for growth of our capital and as large of TOTAL RETURN as possible.

Remember that you might retire at 65 but you don't stop living then. You probably will live another 25 or 30 years....so if a guy is 50 now -- he's got 40 years of INVESTING ahead of him. People start to buy bonds and other stupid "SAFE" investments that don't grow and then they find themselves running out of money 5 years after they retire. F that!

We have INFLATION. We have property taxes that go up every year. We have medical costs that are out of control (thanks to the dickhead in charge). We have roofs that need to be replaced and houses that need to be painted. When I was in high school - gas cost .21 a gallon.... now I pay 20 times that!

Without some details of what you're already in to... it's hard to look at a more detailed explanation. Feel free to PM me or get my email <preferred> from a mutual friend here... and I'll show you how to look at your mutual funds in detail if you don't care to post them here. Nobody needs amounts -- just names or trading symbols.

[toy71camaro]

Great summary Greg.

My company doesn't allow individual stocks in my 401k, so I printed up the details sheet on EVERY option we were allowed to choose from, then i went and reviewed their top 10 and based my choices on them, as well as some paid a dividend.

[GregWeld]

Beware the "GoPro Syndrome".... WTF is that?? You ask.

That's guys thinking that they "missed" making a huge fortune by NOT buying into GoPro (GPRO)... so the very next chance they get to buy an IPO they go double or triple what they "woulda / shoulda". That IPO then blows up and they get spanked.

Not saying to not go into whatever "it" is that you feel you want to invest in - I'm saying beware the syndrome that sucks you into trying to place catch up...

I'll say this as well. The "market" isn't regulated by the talking heads on TV. I've heard half a zillion discussions about "this is over priced" - "the valuation is too high" - "they'll have to grow into this share price". IN THE MEANTIME THE SHARES KEEP GOING HIGHER.

If you'd have never invested in Microsoft (MSFT) back in 1986/7/8/9 etc - because of those same "ideas"... then you missed one of the greatest investments in the history of the stock market.

The "MARKET" is about more people wanting to own than wanting to sell. PERIOD. All the other metrics are crap. But remember to go back and read the "priced for perfection" posts. The higher things go up - the faster they go up - if they "miss the whisper number" or "growth" is 500% but the market "expected" 525%... you can get hammered in a big hurry. Just play with money that's COMFORTABLE... That is all.

[GregWeld]

RE: GoPro (GPRO)


I'm not discussing whether or not to buy or sell this particular stock! It's just a great example for Investing 102.. that is "Current". I wish I'd have been smart enough to buy some - and flip it out up 100%... but I stay away from this stuff because of my own personal situation. EVERYONE needs to do what is RIGHT for THEMSELVES given their age - their guts - their situation.


I found this - which is WAY TOO COMPLICATED FOR INVESTING 102.... but what I'm using this for is to try to explain that there are many more things "behind the scenes" than we really need to know for our purposes here. WE HAVE NEVER DISCUSSED SHORTING a stock - because I don't think it's appropriate for INVESTING. Shorting is "trading".


Interesting......



As the current authors discovered, borrowing the stock proved to be extraordinarily expensive. Demand for shares to short was so great that security firms were charging a fee of 100% per year to borrow the stock. This fee essentially eliminates the possibility of pure arbitrage. Such massive fees are also further evidence that the market for the stock is not functioning properly.

The bottom line is that the option market is flashing warning lights that say investors should approach the stock with great caution. The combination of a sky high price relative to earnings and the dramatic rise in the cost of put options compared to put-call parity suggest that a sharp drop in the stock price is a distinct possibility.



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



A "PUT" is the ability to BUY A PUT --- or SELL a PUT --- which allows you to PUT your shares to whomever is on the other side of the trade...


Let's say you buy a put on GPRO:


You'd buy a "PUT" when you think the price of the stock is going DOWN... essentially betting that the FUTURE price at some date - is going to be lower than it is now... and you get to PUT that stock to the other side at that price that was stated in the put ----

So let's say you bought a put at a strike price of $100 that expires on Dec 1st... and the shares are at $90 today. Rather than sell at 90 today - you buy the put - which says you can get $100 for the shares on that future date as the buyer MUST take the shares regardless of the price -- even if the shares had fallen to $75. The PRICE or COST of the PUT is determined by the risk... or what people are willing to bet one way or the other.

The opposite of this market is called a CALL OPTION.... that's where you'd buy the right to BUY shares at "X" price in the future... betting that the shares are going up to "X" by X date (the strike price and the expiration date of the option).

A quicky example is that you might buy 100 share call option - betting that on Dec 1 they're going to be $100 -- and the right to be able to do that transaction is going to cost you $10 per share. You'd only have to pay $1000 for the "right" to be able to buy 100 shares at $100 ($10,000)... and if the shares are trading at $125 when your call is dated (the expiration date).....well you just paid $11,000 for a stock that's worth $12,500.... and you only "risked" the $1000.


It's of course much more complicated than all of this.... and it's a traders market -- and there is an "options" market that does nothing but trade these puts and calls -- it's completely different than the INVESTING we're talking about here.


My old boat was named "Options".... and I should have named the dingy "puts and calls".... as the dingy is often used for taking people to shore or picking them up.... HAHAHAHAHAHAHAHA




OPTIONS:















The boat I should have named "Puts and Calls":

[WSSix]

Naming your boats that would have made for a great conversation starter, Greg.

[GregWeld]

Originally Posted by WSSix

Naming your boats that would have made for a great conversation starter, Greg.

The funny part is that the "O" in options was the original Microsoft "blibbet" (which only early MSFT people would recognize)... and the "Options" was for the MSFT options we had... and the boat gave us "options" other than sitting at home. Nobody got it - everyone thought I was an Options trader.

[XLexusTech]

Originally Posted by GregWeld

The funny part is that the "O" in options was the original Microsoft "blibbet" (which only early MSFT people would recognize)... and the "Options" was for the MSFT options we had... and the boat gave us "options" other than sitting at home. Nobody got it - everyone thought I was an Options trader.

Continuing the boat theme .. When my brother retired as a fund manager he left with a bunch of what they called "Deferred compensation". Part of his plan was to establish primary residency in Fla.. which is free of state income tax... He did everything right but still ended up in court defending his freedom from state income which totaled approaching 6 figures in state tax.. He won... purchased and 32 foot Boston whaler outrage... Named it "Happy Returns" for the tax return he eventually got which was 100% of the money back...