Investing 102

[GregWeld]

Originally Posted by ironworks

That's great. But the world wide web is pretty big and a link would really help me out there BIG BOYEE.

Originally Posted by sjaroslo

LOL! But my thoughts as well. Linkey?

WHINERS!!! LOL



http://seekingalpha.com/article/3148...-kinder-morgan

[GregWeld]

I've stated in this thread many times that I HATE BONDS.... The reason I hate bonds is because they are sold to people as being the end all be all SAFE investment. Well.... That's very true as long as you plan to buy the bond and hold it for it's maturity, and if you're happy with ZERO growth in your money. Since you'll hold the bond to maturity and only receive you're money back. Buy a 10K bond = hold it for 10 years = collect the yield = Get your 10K back.

Now -- here's why I really hate them. Because they're NOT SAFE. Hell no! Right now -- if you'd have bought a bond that paid under 2% (less than the rate of inflation!) and you wanted / needed to sell... you're going to get clobbered on the price of the bond. Remember that the YIELD rate is fixed on the bond.... so in order to get more YIELD - the new buyer needs to PAY LESS than you did - in order to RAISE the yield to whatever the current levels of new bonds are yielding.

So you hold a 2% bond - and a guy can buy a new bond tomorrow that pays 2.5%.... in order to have your bond yield the equivalent of 2.5% the buyer would only offer you "X" (well below your 10k).

Your CHOICE would be to take the loss or to continue to hold the bond til maturity.... so let's say you bought it last year... you now have 9 more years to hold your "safe" bond -- collecting your lousy 2%.... and in the meantime the yields rise to 6% (more normal rates).... and you're only going to get your face value back 9 years from now. That scenario is pure LOSER.

My MIL got talked into bonds and annuities 30 years ago -- I guess that's why we help support her today. Sad. Don't be that guy.

I love it when people tell you to buy stocks and then as you near retirement you should switch to bonds and "safer" investments. REALLY?? So wait -- let me think about this.... I've been investing in stocks for 25 years - and I've tripled my money and I'm getting a 8% yield on my cost basis.... and I'm planning on being retired for another 25 years.... WHY WOULD I ABANDON A STRATEGY THAT HAS MADE ME NOTHING BUT MONEY for something that is going to lose me money and the ability to stay well ahead of inflation?? WHY?? Because someone wants a commission... oh -- and that someone is still working for a living. IF they were so F'n smart with their money - why are they 63 years old and still working?? (okay - that's cruel.... but is the question I'd love to ask them).

[SSLance]

Only time I've ever been involved with ANY success in regards to bonds was back in the early 2000s. Our company's defined benefit pension plan was completely overfunded because of our very successful aggressive investing strategy and the actuary specialist told us that no matter how much more money we made inside the plan, Uncle Sam was going to get it all... So we switched everything over to Treasury bonds to ride out the rest of the term within the plan. This was just a few months before the dot com bust...

Sometimes it's better to be lucky than good...

I got beat up pretty good in the high yield municipal bond market during the 2008 CDO debacle... Again, they were sold to me as the safest way to create steady income with the added benefit of avoiding income tax on the dividends. The municipal bonds themselves held inside the funds weren't hurt by the mortgage scandals, but they got drug down in the mud with them as they were in basically the same market...some of which still haven't gained their value back 7 years later now.

Greg is spot on with his assessment above...

[glassman]

^^^^, as usual.

So true though, the phrase "if it ain't broke, don't fix it" comes too mind. And i dont think that assessments "cruel", just stating a fact. Alot of people (financial salespeople) dont "figure it out" till late in life, better late than never i guess.

Heck, i'm still having trouble assembling this spreadsheet of stocks...

[ironworks]

Seems like an interesting topic for this thread.

http://www.brainjet.com/random/5642/...es-they-goofed

[GregWeld]

Having been to the Monaco Grand Prix (Gwen and I went to the 75th running).... everything this guy writes, is spot on about the event! The money that attends is WORLD CLASS... the cars are world class... and the yachts are the biggest I've ever seen ANYWHERE (200 footers are TINY - I'd be embarrassed to be on one).... but it's the way the author rolls right into an analogy of racing and INVESTING that caught my attention and thus sharing here. LOL



http://www.uncommonwisdomdaily.com/w...race-car-20567

[GregWeld]

This IS NOT good news from McDonalds (MCD).... Think about it this way. If your sales are going gang busters you WANT people to know about it! It's good for shareholders... it makes the news (free advertising) etc. When your sales SUCK... then you hide the info. No thank you. Too many other good, growing, companies out there to invest in with better dividends.



http://www.bloomberg.com/news/articl...me-store-sales


I post this because I always discuss FUNDAMENTAL CHANGES. This is a fundamental change that someone should be concerned about. These are all the little details you need to learn to avoid land mines in investing.

[Evil_s10]

While watching part of the Chevrolet Detroit Belle Isle Grand Prix race today, I saw this e-trade commercial and it really solidifies the mentality that Greg has been trying to emphasize.

https://www.youtube.com/watch?v=cXYO0DBb-sM

[Vortech404]

What do you all have started for your children?
My son is 1 1/2 years old. Did you guys start a 529 college fund
Or is there something else I could start for him. As I understand
He cannot start a Roth because you need to have earned income.

Can I gift money into that?

Thanks
John

[WSSix]

John you may want to sit down with an accountant for something like this. I'm not sure about the Roth but that may be the case with him having no income. The reason I say sit down with an accountant is because you mentioned the 529. If your goal is to save for college, it's a potential source for such a goal. However, there are tax implications involving the 529. Your state may give you a tax break for investing in a 529. Or, it may be better to invest in another state's 529. I know Utah has or had one of the best 529 plans in the country for a while.

The other issue in general is you're doing this for someone else. It could get tricky and you'd want to make sure it's shielded as best as possible now and for when he comes of age. There's also the issue of what happens to it should something happens to you, death or a law suit even. Maybe I'm going overboard but I think putting money away for someone else is not easy to do correctly. Too many what if's.

Good luck