Investing 102

[GregWeld]

Originally Posted by chichirone

Still reading as well Greg. Your goading is what got me hooked in the first place and now the repetitive goading is pushing me to do more. Keep it up man. It's much appreciated and educational. Just to read how you look at the stock beyond the charts is beneficial not only in stocks/market but in everyday business dealings.

On another note, I have been wondering what tools are beneficial on the Schwab site? They have all kinds of links on the right hand side of the research page which I just get lost in...corner stock of the day, highlights, pick lists, Morningstar, etc. Most of this seems to be "noise" to me. I have delved into some of it but not sure if you have any suggestions on how to use these links or continue to focus more on the charts, screeners, and comparison tabs.

I have become "comfortable" navigating these tabs but was curious if there was any additional tools or ways to use them you would recommend to us as we look at the research page.

I only use Schwab for looking at charts of companies I'm interested in - and for comparing choices by overlaying one or two companies to see if they march in lockstep or ??

And I use them for the TOTAL RETURN which they show if you know where to find it. Total Return over a period of time tells me pretty much everything I need to know... So I use the chart to make sure it's low on the left side and climbing to the right side -- and the Total Return numbers to help me see and compare one choice over another. Other sites have these tools - but I know where they are and can navigate quickly on Schwab.

Since moving to Sun Valley -- I've only kept a very small amount in Schwab since they have no local office here.... and I use their site over other sites because I like their tools.

I have used their "finders" tools in the past - but usually just for research. I don't - NEVER - blindly buy some company just because I read about them or found them on the top of some list. That's the kiss of death! If you don't KNOW the company and are familiar with it - stay away! I don't care what the number say. The reason for that is you'll be what's called a weak hand holder. The first time the stock hiccups -- you'll tend to sell.... and that's when you lose money. This is one of my top recommendations about investing. You can't buy and hold and add money to your holdings if you're not familiar with them and feel totally comfortable long term.


So if I want to invest -- I look for a couple categories -- pull up a name I'm most familiar with -- then alway scroll down (using Google Finance) to see what other names are considered to be in the same category -- and I start poking around and comparing the 2 or 3 I know - to see if I can find a better "version" of what I started with.... it's how I learn -- and expand my horizon... but even if I find one that has better numbers - if I'm not familiar with them I don't buy. I'll buy the one with slightly lower numbers used for reference and stick with it.

It's like this oil slump we're in now.... everyone got hammered and suddenly. You'll lose money only when you freak out and sell because of being a "weak hand" --- but if you're comfortable with the name - you might tend to stick some more money in when it's DOWN ---- and reap the reward of the rebound.

[GregWeld]

Originally Posted by captainofiron

Hows everyone doing on oil?

I must say I was tempted to sell back when I was under ~25%

But I didnt and instead threw a grand at it from my former companies 401k

so far looks like it helped, with the lower cost basis as of this morning I am "only" -1.6%

Just wanted to say thanks to Greg and the other financial wizards posting on here, if not for you guys, I would have sold it when the pressure was on

So this is exactly what I just wrote about when I responded to Jay's question above. You AVERAGED DOWN your cost -- getting them closer to where the stock is currently trading. This way it only has to go up a little to get your loss smaller or maybe even turn it into a gain. THIS DOES NOT ALWAYS WORK THIS WAY. Trust me -- I've lost plenty of times trying to catch the falling knife!! But you have to TRY -- and you have to have CONVICTION about the name and be willing to take some risk like this once in awhile. It's HOW YOU FEEL about the names your investing in - that keeps you from folding like a blubbering little school girl when things aren't so rosy! That's when you make some money!! Is it HARD to do? Oh hell yeah. Will you lose sometimes? Oh hell yeah! But we have to look at our pile of money as just that -- the pile -- if the pile is growing overall --- then we're okay. So if you're winning on 6 out of 10 investments -- and even on 2 - and losing on 2 - it's okay! You'll rarely if ever have all 10 firing all at the same time.

[GregWeld]

Originally Posted by GregWeld

So this is exactly what I just wrote about when I responded to Jay's question above. You AVERAGED DOWN your cost -- getting them closer to where the stock is currently trading. This way it only has to go up a little to get your loss smaller or maybe even turn it into a gain. THIS DOES NOT ALWAYS WORK THIS WAY. Trust me -- I've lost plenty of times trying to catch the falling knife!! But you have to TRY -- and you have to have CONVICTION about the name and be willing to take some risk like this once in awhile. It's HOW YOU FEEL about the names your investing in - that keeps you from folding like a blubbering little school girl when things aren't so rosy! That's when you make some money!! Is it HARD to do? Oh hell yeah. Will you lose sometimes? Oh hell yeah! But we have to look at our pile of money as just that -- the pile -- if the pile is growing overall --- then we're okay. So if you're winning on 6 out of 10 investments -- and even on 2 - and losing on 2 - it's okay! You'll rarely if ever have all 10 firing all at the same time.

I'm going to have to add to this ----


ALWAYS go back and redouble your research before investing more!! Go back and really make certain this is a company that's "okay" and you're comfortable holding. Make sure there's not news you missed about the companies outlook etc.

In other words --- DON'T JUST GAMBLE. Don't just make a bet that you'll buy more on the dips and it will reward you!! You'll feel way better about investing if you've atleast done your homework and think that you have a really good understanding of where you're money is going to work. If you still feel it's a good investment - then go ahead and add to your holdings while it's down.

[chichirone]

Thanks Greg for the guidance on research tools and how to best use the resources to educate oneself.

How do you feel about holding 2 of the top 3 or 4 companies in a segment when the indicators show positive growth charts (low on the left and higher on the right) for the segment?

For example: does it make sense to hold both Verizon and AT&T as they both are fighting for the same/similar marketshare, have slow to moderate growth outlook and an above average dividend yield around 4.5-5.5%? It seems they trade punches but continue to expand the overall market, re-invest in infrastructure (bought, built or rented) and pay a decent dividend. Definitely a longer term holding but not sure if its better to select one or carry both, since competitively, they seem to make one another stronger. Thoughts?

[GregWeld]

Originally Posted by chichirone

Thanks Greg for the guidance on research tools and how to best use the resources to educate oneself.

How do you feel about holding 2 of the top 3 or 4 companies in a segment when the indicators show positive growth charts (low on the left and higher on the right) for the segment?

For example: does it make sense to hold both Verizon and AT&T as they both are fighting for the same/similar marketshare, have slow to moderate growth outlook and an above average dividend yield around 4.5-5.5%? It seems they trade punches but continue to expand the overall market, re-invest in infrastructure (bought, built or rented) and pay a decent dividend. Definitely a longer term holding but not sure if its better to select one or carry both, since competitively, they seem to make one another stronger. Thoughts?

Great question Jay ---- and it's one that has an "it all depends" answer. Depends on how well you think you are diversified overall... accounting for your TOTAL investment portfolio.

I used to hold both... mostly because of the dividend payout and safety I think they BOTH offer. But my personal investments are one to two million per name -- and at one time I had about 1.7 million in these two.... and realized that I wasn't really "gaining" anything. So I cut Verizon (VS) simply because I'm a long term AT&T customer (the go with what you know).

To me -- it's like owning Coke and Pepsi.... or Altria and Lorillard.... I just think you're better off owning the one you like the best --- and then pick some other area to cover.

[Rick D]

So I've got my old 401k just sitting from my last job. I'm working again and thought it's time to do something with it?? But what or where do I start??

P.S. The new job does not offer a 401K at this point, well not one that makes any sense to get into anyway. So if I want to move my old 401K and keep adding to it what's the best way to go about it??

Signed Lost and confused!!!

[GregWeld]

Originally Posted by Rick D

So I've got my old 401k just sitting from my last job. I'm working again and thought it's time to do something with it?? But what or where do I start??

P.S. The new job does not offer a 401K at this point, well not one that makes any sense to get into anyway. So if I want to move my old 401K and keep adding to it what's the best way to go about it??

Signed Lost and confused!!!

Super easy!!! Go to the brokerage of your choice -- and ask them to do a ROLL OVER for you.... Bring the info (Statement) from the "old" so you have account numbers and all of that info... and they'll help you with filling out the paperwork and they'll do all the rest!

Some times they can "bring" the account over "in kind" --- just transferring all the holdings.... Some times they can't bring over the holdings and then they're all sold and converted to cash -- and they bring over the cash. Either way there's no taxes involved so it's not a big deal. Then you can start fresh! Buying whatever you want to in a "self directed" retirement plan.

[Rick D]

Originally Posted by GregWeld

Super easy!!! Go to the brokerage of your choice -- and ask them to do a ROLL OVER for you.... Bring the info (Statement) from the "old" so you have account numbers and all of that info... and they'll help you with filling out the paperwork and they'll do all the rest!

Some times they can "bring" the account over "in kind" --- just transferring all the holdings.... Some times they can't bring over the holdings and then they're all sold and converted to cash -- and they bring over the cash. Either way there's no taxes involved so it's not a big deal. Then you can start fresh! Buying whatever you want to in a "self directed" retirement plan.

Greg is it better to go to the brick and mortar or can it be done online?? Does it really matter which brokerage house??

[WSSix]

I called Fidelity on the phone and spoke with them about this when I started my new job. However, my old and new company both used Fidelity. I am happy with them so there was no reason for me to shop around. It's a fairly straight forward thing to do so I would imagine speaking on the phone would work fine so long as you know who you want to use for this service. Biggest thing to keep in mind is that at no point should you allow the money from the account to pass into your hands. It must go between institutions or you'll face taxes.

I would try to roll it into a Roth IRA if possible. Not sure if it is considering the different tax structures of the accounts. I just happen to like the tax structure of the Roth better than the 401K. You're limited to $5500 a year contribution though and you have income limits you must be below to qualify. So it might not work as well for you.

[toy71camaro]

I would discuss the Roll Over options with your Accountant.

You CAN roll it over to a Self Directed retirement account. Generally speaking, a Rollover IRA. With no penalties, tax changes, etc. AS LONG AS THEY do the roll over.

You CAN roll it over to a ROTH IRA, but your hit with taxes due to the fact your retirement account was a PRE-TAX account, and the ROTH is a POST-TAX account. Depending on the penalty, it "might" be worth doing this, but you'd really have to crunch the numbers. The ROTH IRA you will NOT pay taxes on the money when you pull it out for retirement. Since you paid taxes on it when you put it IN the account.

So, need to really crunch numbers to see what's better. Simpler option would just be to roll it over to an IRA and be done with it. Buy your stocks, and pay your taxes at the time you pull it out when you retire.

GOING FORWARD, I would suggest opening/using a ROTH IRA. Max that puppy out each year. At least until the company offers a decent 401k option WITH a company match (= free money). Put enough in the company 401k to get the FREE match, then everything else goes back into the ROTH.

Hope that helps. You should also be able to do this all over the phone/online with the brokerage of your choice. I use Sharebuilder, but its because I'm a costco executive member and they give a discount on fee's and sometimes a bonus when you open your account. I use Schwab too, but only for research tools.