Investing 102

[Sieg]

Originally Posted by GregWeld

Can you tell I like this stuff??

Why didn't you beat this into my head 25 years ago?

Thanks for taking your time to share your knowledge to benefit others willing to pay attention and apply themselves. If this thread doesn't have a positive impact on at least a few individuals futures I'll eat a Pilot Power.

[GregWeld]

Two separate posts here -- will respond to both in this one:

REAL ESTATE --

I own "shares" of an apartment house LLC -- I own 2/3rds of it - it is professionally managed - I do NOTHING but collect the interest payment every 6 months. Usually these LLC's will accept investments of around 50K per "unit" (share). Sometimes they'll sell a 1/2 a unit if they have two people that only want half each. It's a good way to be in real estate WITHOUT THE HASSLES.

Downside - totally illiquid... but many of these are "flipped" in about 10 years when the tax benefits run out. Just something to think about.


COLLEGE --

Start early enough - invest in big cap dividend payers -- in 20 years (starting at birth -- they'll spin off enough income to HELP pay the tuition and you'll probably end up with a nice college graduation "gift" in the form of still having some capital left after 4 or 5 years of school. AND OR - if they choose a different path -- you can use the money for something else.

Do the MATH FIRST -- if you have a 3 year old -- you have 15 years to pound some money away. If you can save $400 per month -- that's $4800 per year -- 15 years -- you'll have 72 GRAND IF YOU HAVE ZERO CAPITAL GROWTH (this scenario is almost impossible!) which should spin off about 6% dividends or $4300 a year... so then if you took $5000 grand a year from capital -- and a little "out of pocket" -- you're good to go for a state school. Private school?? You better hope you have real good DNA and he/she gets a full scholarship! Both my kids are "out of state" tuition -- and the living expenses on top of that - figure 35 to 40 grand per year - took Alex 5 years - and Adrienne is right behind him - he's out - she's in (they're 4 years apart).

Student loans are just for those folks that didn't SAVE now -- so they'll pay much much more LATER. I want to BE the bank not OWE the bank. But that's a personal issue!

[GregWeld]

Originally Posted by pw2006

I live in CA and have 2 little ones (2 and 5). I set up 529s out of Utah when they were born (Utah has one of the lowest fee structures and there are no tax benefits using a CA 529). There are some limitations and/or penalties with 529s if the funds are not used and/or withdrawn (like if you overfunded the acct, kid decides not to go to college, life throws you a major curveball and you end up needing those funds due to illness, etc). You can roll any unused funds over to another family, but frankly, I am setting this bucket up for my kids' education. I am currently targeting a balance of ~$100k for each when they are 18. However, $25k per year may not be enough to cover an education when they are ready. So, I am supplementing the 529s with CA muni bond ladders. Personally, I would rather be underfunded in the 529 and have the flexibility of the bond ladder if needed. Just my 2 cents.

Good info but you'll be far better off if you buy some good dividend paying stocks and choose to re-invest the dividend. That way you "SHOULD" have capital growth and collect the dividend.

A school "savings account" like this really needs the growth component to it to help you get there... bonds don't "grow" but are bought for SAFETY. You also don't need the tax free status of the bonds. That is just giving you a lower return and you need a higher return - COMPOUNDED - to also help you get there. So just using McDonalds stock as a well known example -- whatever you'd have put away 5 years ago -- would be MORE THAN DOUBLE what you put away.... already! Where as your bond would still be the exact same value (if you're holding to maturity). If you're not "comfortable" with all stocks - then do half and half....

Put the account in the childs name with you as joint owner -- that way the dividends are taxed at THEIR rate which can be ZERO.

[pw2006]

Good call Greg! I will look into the joint accounts for the little ones, and the dividend plays are more interesting than my muni approach. Sorry, I'm a cpa and have ultra conservative tendancies. Can you send me more info on the mgmt co for your LLC? Our mgmt fees in Hawaii are outrageous, and I don't have a lot of time to deal with tenants. However, you LLC sounds intriguing!

[LS1-IROC]

Thanks for the info Greg! The stock route sounds more appealing to me. I'm a total newb at this. The only investments I have are in a 401k. My wife and I have been saving money since we got married and now is the time to invest instead of letting the money sit in a savings account.

[GregWeld]

Originally Posted by pw2006

Good call Greg! I will look into the joint accounts for the little ones, and the dividend plays are more interesting than my muni approach. Sorry, I'm a cpa and have ultra conservative tendancies. Can you send me more info on the mgmt co for your LLC? Our mgmt fees in Hawaii are outrageous, and I don't have a lot of time to deal with tenants. However, you LLC sounds intriguing!

No point in me sending you LLC info -- but they are on the internet.

http://www.suhrco.com/

I don't think they do anything in Hawaii!

But there are many, I'm sure, outfits in Hawaii that do this very same kind of deal. There you just need to look around and get references and have meetings with them to see if you do business the same way. I'm a "pride of ownership" guy - I want my buildings looking tip top - and I want them run with integrity.... Some of these outfits are all about ROI - and never put anything back into the building... they just milk it. That's not my style and I'm not doing business with anyone that runs stuff that way.

I also am BIG - in fact - HUGE on big money downs... and NO REFI's -- put 35 or 40% down -- and fixed financing. That's the steady eddy way to make money. SO all those things are important to me.

[GregWeld]

Originally Posted by LS1-IROC

Thanks for the info Greg! The stock route sounds more appealing to me. I'm a total newb at this. The only investments I have are in a 401k. My wife and I have been saving money since we got married and now is the time to invest instead of letting the money sit in a savings account.

Well -- keep liquid! Cash is king -- so don't go "all in" and then be a forced seller when the market is against you. Don't get greedy on me!

The market historically has never been down THREE years in a row in any three year period - or some such rule.... but I'll guarantee the minute you get in -- there's a little guy on Wall Street that yells to his buddies -- "he's in! Take 'er down!". And they squeeze and squeeze til you quit. Then he hollers uncle and the market goes up. If you sell when it's down -- he yells to his buddies "he's out! Take 'er up!" and the market goes up the day after you've just sold. You only beat him by staying "long". You can only stay long by buying GREAT COMPANIES - and getting PAID TO WAIT (the Dividend!).

Forget the stock buying "tip" you get at the grocery store....

Buy companies like:

Phillip Morse
Altria
Con Edison
Coke
McDonalds
Johnson and Johnson
Kimberly Clark
Pepsi
AT&T
Verizon
Proctor and Gamble

If you want some more "yield" with HIGHER RISK you can sprinkle in a little:

Showing SYMBOLS here.

HYG --- High yield government bond fund
JNK --- Corporate junk bond fund
NLY --- Mortgages


These are all names you can actually tell someone what they do! You don't need to be brilliant... you just need to win by staying in the game.

[frankv11]

very informational thread. I'am also in the real estate investment side of it. I purchase properties at trustee sales auction , fix and sell them but its not as simple as it sounds. most people think you got to auction buy a house, work on it the next day and put it out on the market in a few weeks, the way they show on TV.
sometimes it could be a long process and a bit of a gamble. it can be a real gamble because there are no (zero) warranties as to what you are buying. at auction you are pretty much buying the deed of trust from the bank and you really have to do some homework or can end up paying big bucks for a piece of paper.
example you go to auction because there is a said property going up for sale.
you show up, fight the rest of the bidders , you get the winning bid, pay for it in full there and then ( you have to show proof of funds in cashier checks in order to bid) they collect as soon as you get winning bid. so you think you bought your self a piece of the rock, but some time later you find out you have bought a 2nd deed of trust or 3rd with the 1st going on sale tomorrow which in turn will completely wipe yours out. so you get NADA but a huge headache.
on the other side of the coin do your homework and you can get some good deals at trustee sales auction. sometimes you can get about 30% to 40% profit from initial investment in about 6 months. so flipping can still get you some money its just not a walk in the park and a bit of a gamble in a lot of aspects.

[LS1-IROC]

Originally Posted by GregWeld

Well -- keep liquid! Cash is king -- so don't go "all in" and then be a forced seller when the market is against you. Don't get greedy on me!

The market historically has never been down THREE years in a row in any three year period - or some such rule.... but I'll guarantee the minute you get in -- there's a little guy on Wall Street that yells to his buddies -- "he's in! Take 'er down!". And they squeeze and squeeze til you quit. Then he hollers uncle and the market goes up. If you sell when it's down -- he yells to his buddies "he's out! Take 'er up!" and the market goes up the day after you've just sold. You only beat him by staying "long". You can only stay long by buying GREAT COMPANIES - and getting PAID TO WAIT (the Dividend!).

Forget the stock buying "tip" you get at the grocery store....

Buy companies like:

Phillip Morse
Altria
Con Edison
Coke
McDonalds
Johnson and Johnson
Kimberly Clark
Pepsi
AT&T
Verizon
Proctor and Gamble

If you want some more "yield" with HIGHER RISK you can sprinkle in a little:

Showing SYMBOLS here.

HYG --- High yield government bond fund
JNK --- Corporate junk bond fund
NLY --- Mortgages


These are all names you can actually tell someone what they do! You don't need to be brilliant... you just need to win by staying in the game.

Thanks again! I enjoy reading your posts. You have a way of putting things in a language I can understand. I spent about 3 hours lastnight doing research on investing and it was mostly very boring dry reading, unlike your posts.

So.....what's the perferrred way to buy stock? Open up an online account and have at it, or best to go through an advisor that we can meet with face to face?
I think I got my wife on board with buying stock...we'll see

[CRCRFT78]

I'm also curious what's your take on buying stock for someone with little or no experience. For instance, I've got a couple of shares of Apple, Nike, Caterpillar, Disney and Harley (all 10 shares or less). Nothing that will make me rich but I wanted to get my feet wet. Other than recognizing the names of the companies I couldn't really tell you why I picked them or if they were even good choices to begin with. What's your take on this Greg?