Investing 102

[SSLance]

Mr Market's response today should be interesting... I'm looking to buy this dip as well but the oil stocks drawbacks are typically a bit longer lived so there shouldn't be any hurry to start tip toeing in.

I have a feeling the retail stocks are going to do well this quarter. We've been busy shipping a lot of Christmas presents here and the mood from the customers this year so far seems pretty joyful.

[GregWeld]

I have really tried to avoid the discussions regarding an individual and an individuals stock picks or pans.... that's a bottomless unrewarding pit. The reason I say that is because the very nature of any "market" is that one person wants to own something and the other wants to sell - and they both may have very valid reasons that SUIT THEMSELVES AT THAT TIME. Each of us has different views of the world - have different levels of wealth - disposable income - savings needs etc. So that's a long disclaimer.

Having said all of that ---- I think you should be feeling pretty rosy TODAY having NOT sold your CASY.

Just to make this into an example... I had stated in an earlier post that the day you sell - the market will go bonkers (I didn't use those words) and it will go up. Today - for CASY is a prime example of that.

Now then -- this line of thinking, while hypothetical at best -- can get you into trouble when you really want to sell something but are afraid to pull the trigger because you're absolutely sure it will go up 15 minutes after you sell. GET OVER IT. Go back to the charts - refresh your brain looking at the SQUIGGLY line. It goes up and down like a yoyo. You'll never get it right - you can only do the best you can do at the time.

Use the squiggly line to either confirm or deny your thoughts. While it might be squiggly - is it on the general glide path UP ----- or has the line turned decidedly south and it's squiggling down. I'm talking about using the line as a general reference here. A longer term (albeit historically) view if you will.

Now -- I tend to also look at how much that line tends to "oscillate". I use that to show myself visually that perhaps this particular name (whatever that name is I'm looking at) is "volatile" if the squiggles are large... or it's a pretty steady eddy and the line has small oscillations in price. If I see this - then maybe it correlates with what's freaking me out at the time --- i.e, the stock is volatile as seen in the graph and the price fluctuation is pretty "normal" for this particular name.

Go to whatever platform you (when I say YOU -- I mean anyone reading this) and pull up a chart --- YEAR TO DATE -- and plug in GoPro (GPRO) and then add to the chart (using comparison function) Altria (MO). Keep this at Year to Date so you have a visual of the stock price movement.

I have always warned about KNOWING YOURSELF in investment. Look at the movement in GoPro vs Altria. Sure GoPro has really moved up huge since it's debut -- that's not what I'm talking about here --- What I'm talking about is COULD YOU STAND THE GIANT NASTY PRICE SWINGS.

It's easy to see that had you bought GPRO early -- you'd be way up -- but that's hindsight. Would you have been able to put your hard earned money in and then have it down 4 or 5 dollars two days later??

Okay --- I'd use this chart to help me understand that a name like GPRO is VOLATILE... and that maybe these big price swings are "normal" for a stock like that..... but looking at MO -- I see super steady -- and then if there was a big whoop-te-do downward in the chart THAT would make me nervous and I'd have to go research to see what happened because thats not normal for this name.


The short answer or reason for this post is that --- make certain you do a little "work" before you buy and before you sell. Make certain that you truly understand the particular stock you're looking at. The trend - the trend vs the market in general - the "action" of the name (big swings or steady). The reason for that is for your MENTAL STATUS because your mental status is about 90% of the battle. Panic and sell or buy too quickly without doing the right amount of work will kill your long term performance.

Originally Posted by silvermonte

I would like to ask some theoretical questions. Lets say a year or even 2 years from now a stock has has no growth and the dividend payout has not increased at has been a low value. My money could be put to better used in a best of breed. Now assuming the company is not doing anything wonky behind closed doors, what would be a reasonable time frame for a person to wait on a stock to start doing something again?

I can use my CASY stock as an example. I bought in 2 years ago and it has had great growth and I'm well in the green on it. So if for some reason it was to just go stagnant and nothing would change for a year, how long should I wait if there is no news coming in from their side on what is going on.

That's not what is going on with this but I was just using it as an example. I could see myself saying well I've made X and if I wait a bit longer I might make more. That would be the emotional side taking over with investing. What clues should a person look for to know its time to move to greener pastures?

[GregWeld]

Here's a VERY GOOD article.... It's well worthwhile reading.



http://seekingalpha.com/article/2747...-capital?ifp=0

[gearheads78]

Well it now been a little over a year since I started reading this thread and about 9 months since I rolled over my 401K and started a IRA and opened a roth. I had about $25,000 to put in and my account currently sits about $27,000. I was quite a bit higher a few months ago but about 20% of my holdings are in two big oil stocks that have taken me down a lot. I'm not worried about either one bit since I have a 20-25 yr time line.

I just want to say how happy I am they this thread is hear and the information Greg and others have shared. Its going to change mine and my families future.

I do have one quick question. This week I opened a new taxable account since I can add to the IRA and the Roth is maxed for the year. Tax wise is there any rule about re-buying a stock you are taking a loss deduction on?

Lets say for example I own and love XYZ stock at the end of next year. It' down but I believe in it and I still want to own it. Can I sell it to take the loss but jump right back in it?

[GregWeld]

Originally Posted by gearheads78

Well it now been a little over a year since I started reading this thread and about 9 months since I rolled over my 401K and started a IRA and opened a roth. I had about $25,000 to put in and my account currently sits about $27,000. I was quite a bit higher a few months ago but about 20% of my holdings are in two big oil stocks that have taken me down a lot. I'm not worried about either one bit since I have a 20-25 yr time line.

I just want to say how happy I am they this thread is hear and the information Greg and others have shared. Its going to change mine and my families future.

I do have one quick question. This week I opened a new taxable account since I can add to the IRA and the Roth is maxed for the year. Tax wise is there any rule about re-buying a stock you are taking a loss deduction on?

Lets say for example I own and love XYZ stock at the end of next year. It' down but I believe in it and I still want to own it. Can I sell it to take the loss but jump right back in it?

Joe.... You are why I pour my heart and soul into this thread. It's my Democratic way of being a Republican... in other words - I like to give back. I'm so happy you're having some success!


Now -- I have at least 2.5ish million in "oil and oil related" stocks. They're not helping my annual performance one bit. I'm getting ready to buy more. I think there is more downside so I'm waiting until I'm pretty certain they've hit bottom - maybe another quarter. But the dividend payouts are JUCIY and getting better by the day!!

OKAY -- On to the larger picture/question!


The rule is called "a wash sale". Yes you can sell anytime you want to - remembering to take the loss in the tax year you're in - and take a loss. There are tax rules about the size of the loss etc --- and you NEED TO DISCUSS this briefly with your tax guy so you have a very clear understanding what that all looks like. Like most things - it's never as simple as you "hear".

Okay -- the "WASH SALE" rule says you must wait 60 days or more before you buy the same stock you just took a loss on if you want to be able to write off the loss.

There is NO RULE that says you can't sell Chevron (CVX) at a loss on Friday and buy Exxon (XON) on Monday. They're not the same company.




SO HERE'S A VERY IMPORTANT NOTE - Make damn sure you understand what a capital loss can be written off against!!! It does NOT reduce ORDINARY INCOME dollar for dollar... and lots of people think that's the way this works! It does NOT! Capital gains are offset with capital losses... and there's a way that is done according to tax law.



Capital losses from the sale of stock are claimed on Schedule D, which is attached to your Form 1040 tax return. Capital losses offset capital gains of the same type, then capital gains of the other type, and then other income. So, if your stock loss is a short-term loss, it first offsets your short-term gains for the year. Any remaining short-term loss would then be used to offset long-term gains. Finally, if your loss from the sale of stock was greater than the total of your combined long- and short-term capital gains, up to $3,000 in capital loss can be used as a deduction against other income. - See more at: http://wiki.fool.com/How_Much_to_Wri....IXvneuzk.dpuf

[GregWeld]

I sat here thinking about this --- and for a new investor there's a lot of things they've heard about "investing" that are just so wrong.

I get into lots of conversations with various people - and I love to hear a guy bragging about the big "write off" he's going to take on something. I smile knowingly. I know this guy doesn't know squat about investing or taxes and that he's bragging about something that most likely didn't or isn't going to happen anyway. He THINKS this is the way all the rich guys talk so by mentioning it - he too must be one of them. He's also the same dipsh!t that in the next sentence is going to tell me he pays his VISA off every month.

TAX LOSSES are used to OFFSET (cancel or reduce) GAINS. Those losses and gains have to be what's called REALIZED. You can't have a gain in your account on paper that you haven't actually realized (sold the shares and taken that gain!) and try to sell some losers and "account" for that gain. You have to have sold the gaining shares - and then figure out what you've gained - and then sell some loser shares for the offset.

You CAN NOT - just sell some shares, for let's say 100K loss -- and then try to completely offset your entire years income from working (Ordinary income). It doesn't work that way!!

The tax man doesn't live in a cave somewhere... they write all manor of rules to keep people in line! LOL.

At the end - or coming up to the end - of the year... you'll hear about TAX LOSS SELLING. Yeah -- this is done all the time and is normal... but that selling is only done to reduce (tax wise) the amount of GAINS taken in the same year. It's simply a way to reduce your tax bite on those gains. So in other words you would have had to have realized gains - and then realized losses... This is NOT a way to make a ton of money and write it all off like the big shot bragger dumbass is trying to tell you he's going to do.

[69hugger]

Originally Posted by GregWeld

He's also the same dipsh!t that in the next sentence is going to tell me he pays his VISA off every month.

Greg,
I love this thread. I am in awe of your level of knowledge about this very complicated subject. And is willing to share it here... a car site. More than cool.
The line above gave me pause. Are you suggesting it isn't wise to pay off your credit cards monthly? Or are you saying you'd bet he really has CC debt because his previous statements demonstrate his BS level, so you wouldn't believe anything he says?
Just curious...

[GregWeld]

Originally Posted by 69hugger

Greg,
I love this thread. I am in awe of your level of knowledge about this very complicated subject. And is willing to share it here... a car site. More than cool.
The line above gave me pause. Are you suggesting it isn't wise to pay off your credit cards monthly? Or are you saying you'd bet he really has CC debt because his previous statements demonstrate his BS level, so you wouldn't believe anything he says?
Just curious...

THIS! LOL

[glassman]

Originally Posted by GregWeld

I sat here thinking about this --- and for a new investor there's a lot of things they've heard about "investing" that are just so wrong.

I get into lots of conversations with various people - and I love to hear a guy bragging about the big "write off" he's going to take on something. I smile knowingly. I know this guy doesn't know squat about investing or taxes and that he's bragging about something that most likely didn't or isn't going to happen anyway. He THINKS this is the way all the rich guys talk so by mentioning it - he too must be one of them. He's also the same dipsh!t that in the next sentence is going to tell me he pays his VISA off every month.

TAX LOSSES are used to OFFSET (cancel or reduce) GAINS. Those losses and gains have to be what's called REALIZED. You can't have a gain in your account on paper that you haven't actually realized (sold the shares and taken that gain!) and try to sell some losers and "account" for that gain. You have to have sold the gaining shares - and then figure out what you've gained - and then sell some loser shares for the offset.

You CAN NOT - just sell some shares, for let's say 100K loss -- and then try to completely offset your entire years income from working (Ordinary income). It doesn't work that way!!

The tax man doesn't live in a cave somewhere... they write all manor of rules to keep people in line! LOL.

At the end - or coming up to the end - of the year... you'll hear about TAX LOSS SELLING. Yeah -- this is done all the time and is normal... but that selling is only done to reduce (tax wise) the amount of GAINS taken in the same year. It's simply a way to reduce your tax bite on those gains. So in other words you would have had to have realized gains - and then realized losses... This is NOT a way to make a ton of money and write it all off like the big shot bragger dumbass is trying to tell you he's going to do.

Greg thanx. I'm still learning all this and your way of putting it really makes me understand it (well most of it).
I'm still having a hard time "settling in" with managing my portfolio with transforing my 5 mutuals, while running a successful company and three kids in college. I'm currently "dumbing" down my positions as i can't "do" a spread sheet. My wifey is brilliant at this (spreadsheet management), but she won't spend the time to "manage" it, which will hurt both of us later on if I dont manage it. Right know we're prospering (the biz is worth a fair amount of coin, same with the equity we have in the house, but thats for much much later, which will come sooner than we think).
So for me, reading this when people post new questions or have different perspectives than I do, much education occurs,

In the mean time, The pension i did last year for my company and its employees, has a tax accountant, a third party pension administrator, and will soon be going to a management company to help with managing the growth of the account. I looked into where Schwab's advisors have put the pension monies (mutual fund, and man, the diversification just in the financial sector its like 300+/- banks.
So while I have to do this because of the laws regarding fiduciary responsibility, I advise all my employees to start a Roth IRA, and to read the basic fundamentals of this 102 class....

So, everybody remember a couple of things:

"Its not what you make, its what you keep that matters"
"Its not "timing the market, its time in the market"

If any body doesn't believe that last one, look at the chart before, during, after the great depression, the market came back stronger than before, it just took 15 years...

[ErikLS2]

Originally Posted by GregWeld

Okay the "WASH SALE" rule says you must wait 60 days or more before you buy the same stock you just took a loss on if you want to be able to write off the loss.

Greg, did the time frame change? I know the last time I checked it was 31 days to repurchase and be ok, but that was a long time ago.