Investing 102

[GregWeld]

Originally Posted by CRCRFT78

Catching up on a little reading and I thought I'd share this article in the December 12th issue of Fortune magazine.
http://finance.fortune.cnn.com/2011/...cks-investing/

Good article.... and is what I've been pounding here... remembering that this is Investing 102 -- not anything more or less.... because we can veer off and get into all kinds of investing/investments/hedge strategies etc. But that was not the OP question or direction...

I did go back and check out United Technologies (UTX) since it was mentioned here - and had been asked about in this thread.

I'm still not a "fan" for the reasons stated earlier.... which is -- in my portfolio --- the growth (18% over 5 years) doesn't overcome the relatively low 2.48% dividend. When I have a lower dividend - it's okay - if it's offset by better than average growth. In this case I don't think 18% over 5 years is worth the 2.48% cash flow. I think there are better opportunities out there when you do the comps.... Coke (KO) comes to mind -- with it's "low" dividend % of 2.79% but even this steady eddy has a 5 year growth DOUBLE that of UTX....

So remember... do your homework... no guessing. These comparisons are easy and just take a few minutes. And I'm using this as an EXAMPLE only of the way I personally think and do my investing. If there are OTHER REASONS someone wants to own UTX over COKE - I'm totally good with that -- that's their choice... and their reasoning. Just make sure if you're investigating companies to invest in - that you've done your own work and UNDERSTAND your choices. That's the key takeaway.

I compared UTX against a boring holding I have in the portfolio - Johnson and Johnson (JNJ) and the growth rate is "horrid" on JNJ -- it's actually DOWN 4% over 5 years.... and I mention this to make a point out of the above statement... I own this because of the stability it gives my account - and more importantly - my head. If you look at the long term chart - it (JNJ) don't go down much either. So for me - that's every bit as important. And here's why - to me - maybe we're in a funky market for 4 years or so and I'm down 35% overall -- and along comes a "deal" I want to do... I look around for available funds - and everything I own is down 35%... do I want to sell low? No! Am I getting good dividends off most of these "losers" -- YES! So here sits JNJ -- not much of a dividend - and it's only down 15%... guess where the cash is going to come from? I can sell JNJ - not be down "much" and won't loose much income either.... so it's what I call "parking" money... and everyone needs to have some money "parked".

[GregWeld]

So just for fun -- do a "visual" on my theory of "parking money".... remembering that all of us have different goals and different "means" etc... and trust me - I'm the first one that understands that.

Go to Google Finance -- pull up a 10 year chart of JNJ -- then in the COMPARE box at the top of the chart -- compare UTX - KO - GE

For years I used General Electric (GE) to "park" money. But as you'll see - if you didn't change that when Jack Welch retired (the GREATEST CEO) then that strategy bit you...

But what I want you to see is how "narrow" that line is of JNJ near the "ZERO" mark - so it isn't growing (above the line) but it doesn't go far below it either...and for that segment of "money" that has importance to me.

It's about BALANCE.... I want to balance the risk stocks with steady stocks -- Knowing that I might give up being the biggest winner in a competition had I put everything in the big risk/reward bracket.... but I'm not going to be the biggest loser in a down market either... and I might be able to take advantage of the big losers when they're giving away their apartment complex or building or hot rod etc.

[Woody]

Originally Posted by GregWeld

Good article.... and is what I've been pounding here... remembering that this is Investing 102 -- not anything more or less.... because we can veer off and get into all kinds of investing/investments/hedge strategies etc. But that was not the OP question or direction...

I did go back and check out United Technologies (UTX) since it was mentioned here - and had been asked about in this thread.

I'm still not a "fan" for the reasons stated earlier.... which is -- in my portfolio --- the growth (18% over 5 years) doesn't overcome the relatively low 2.48% dividend. When I have a lower dividend - it's okay - if it's offset by better than average growth. In this case I don't think 18% over 5 years is worth the 2.48% cash flow. I think there are better opportunities out there when you do the comps.... Coke (KO) comes to mind -- with it's "low" dividend % of 2.79% but even this steady eddy has a 5 year growth DOUBLE that of UTX....

So remember... do your homework... no guessing. These comparisons are easy and just take a few minutes. And I'm using this as an EXAMPLE only of the way I personally think and do my investing. If there are OTHER REASONS someone wants to own UTX over COKE - I'm totally good with that -- that's their choice... and their reasoning. Just make sure if you're investigating companies to invest in - that you've done your own work and UNDERSTAND your choices. That's the key takeaway.

I compared UTX against a boring holding I have in the portfolio - Johnson and Johnson (JNJ) and the growth rate is "horrid" on JNJ -- it's actually DOWN 4% over 5 years.... and I mention this to make a point out of the above statement... I own this because of the stability it gives my account - and more importantly - my head. If you look at the long term chart - it (JNJ) don't go down much either. So for me - that's every bit as important. And here's why - to me - maybe we're in a funky market for 4 years or so and I'm down 35% overall -- and along comes a "deal" I want to do... I look around for available funds - and everything I own is down 35%... do I want to sell low? No! Am I getting good dividends off most of these "losers" -- YES! So here sits JNJ -- not much of a dividend - and it's only down 15%... guess where the cash is going to come from? I can sell JNJ - not be down "much" and won't loose much income either.... so it's what I call "parking" money... and everyone needs to have some money "parked".

How about over a 10 year period which was what I was looking at. UTX up 143%, KO up 49%, JNJ up 12%.

That brings up a question. Depending on the time period you look at, one stock may look better over 5 years, but another may look better over 10 years. How do you decide what time period to use?

[GregWeld]

Originally Posted by Woody

How about over a 10 year period which was what I was looking at. UTX up 143%, KO up 49%, JNJ up 12%.

That brings up a question. Depending on the time period you look at, one stock may look better over 5 years, but another may look better over 10 years. How do you decide what time period to use?

Great question --- and I look at BOTH for my decision making...

And you're right on - because the more you try to compare - one stock vs the other... it begins to look more like a horse race.... ya know -- the announcer shouting out "blackie jack is ahead by a nose - now comes lucky lady... and making a charge from the back is two socks..."

IMPOSSIBLE....

This is where a small amount of brain power needs to be exercised and you just have to gather all the info - look at the time frames - and then fit them to your portfolio. I don't like to use 3 year -- because of the great "recession" killed EVERYONE... so the five year gives me the stocks ability to REBOUND... and then you go out 10 year for "track record" -- I want to see that they were climbing prior to the big dipper! The ability to rebound is it's "resilience" and I like a stock like that. It means that it was a classic case of "toss the baby out with the bath water" rather than poor management or poor product line etc.

[68 stang]

Thank you for all of the great information Greg. I took your advice and then applied it. I invested some money about three weeks ago and now it is up 4% overall and they have not paid me dividends yet, can't wait for that.

[GregWeld]

Good to hear!!!

I love a dividend check (actually just a deposit into your brokerage account) it's like getting FREE money....

[MoparCar]

Again what a great thread! Thanks to the OP and Mr. Greg Weld!!!

Regarding online discount brokerage firms, what are everyone's favorites?

I know Greg and a lot of you use Schwab. I would like to, but it appears you need to do 35 trades per year to be an "active" trader and thus have access to all the nice features of their site. How about the standard platform (not an active trader) how does it look? While 35 trades doesn't seem like many, if we are just diversifying into say 5-10 stocks and holding them for a long term investment (at least a year and a day for tax purposes) will I every get to 35 trades just doing some initial investing? The minimum funds are not a problem. How about using a MAC instead of PC---any issues?

Scottrade looks great and gets great reviews, but they do not offer a DRIP program (dividend reinvestment program). I would probably use them if they offered this since they have offices very close to me, no unreasonable fees for the first time traders, etc.---But no automatic reinvestment of dividends....

E-Trade also looks good, but some of the reviews state a lot of hidden fees for inactivity, etc. Plus their trades are a bit higher in price.

How about the others-TD, Tradeking, OptionHouse, Fidelity, etc? They mostly all have low fees, good platforms, etc. but no local office to speak of.

Also, how about funding the account. Any experience with good/bad of each regarding transfers, wires, etc.?

Opinions, experience? I gotta get this going and my money working for me soon!

Thanks for all the great advice on this topic!

[CRCRFT78]

My IRA retirement accounts are with Fidelity and they have been very easy to use. I also have a Schwab brokerage/investment checking account that I use for investing outside of retirement purposes. Both have been great to use, very easy and I haven't noticed any unusual/hidden fees. I've visited the Fidelity branch one time and felt they were useless once I left. I do everything online so the lack of an actual branch located to you shouldn't be an issue. If there is something I need I just call.

[GregWeld]

Originally Posted by MoparCar

Again what a great thread! Thanks to the OP and Mr. Greg Weld!!!

Regarding online discount brokerage firms, what are everyone's favorites?

I know Greg and a lot of you use Schwab. I would like to, but it appears you need to do 35 trades per year to be an "active" trader and thus have access to all the nice features of their site. How about the standard platform (not an active trader) how does it look? While 35 trades doesn't seem like many, if we are just diversifying into say 5-10 stocks and holding them for a long term investment (at least a year and a day for tax purposes) will I every get to 35 trades just doing some initial investing? The minimum funds are not a problem. How about using a MAC instead of PC---any issues?

Scottrade looks great and gets great reviews, but they do not offer a DRIP program (dividend reinvestment program). I would probably use them if they offered this since they have offices very close to me, no unreasonable fees for the first time traders, etc.---But no automatic reinvestment of dividends....

E-Trade also looks good, but some of the reviews state a lot of hidden fees for inactivity, etc. Plus their trades are a bit higher in price.

How about the others-TD, Tradeking, OptionHouse, Fidelity, etc? They mostly all have low fees, good platforms, etc. but no local office to speak of.

Also, how about funding the account. Any experience with good/bad of each regarding transfers, wires, etc.?

Opinions, experience? I gotta get this going and my money working for me soon!

Thanks for all the great advice on this topic!

Nobody can really answer all this for you -- you need to make a list of questions you want to have answers to - and discuss them with EACH BROKERAGE. Or visit their websites and see if you can easily find the answers your looking for.

Each brokerage has plusses and minuses.... and only you will be able to decide what fits for you.

I don't pay any fees at any brokerage... Not even for wire transfers etc....

[GregWeld]

Let me correct - so there is no misunderstanding --- that I pay TRADING FEES -- i.e., the $8.95 per trade -- but when I say "no fees" -- I mean I pay nothing other than the per trade fees all brokerages charge.