Investing 102

[GregWeld]

Originally Posted by slow4dr

Always a good read in this thread.

It's been a while since I've checked in so I figured I'd post an update. My Real Esate (rental) plans changed this year. The house we bought for our primary residence a few years back had appreciated enough to sell, cash out and pay off our rental plus have some extra to invest. It wasn't a decision made overnight but our long term, very good renter put in their notice so the timing was perfect.

The sell of the house took a little longer than expected and we had many sleepless nights. We ended up getting asking price(minus $5K in closing) even though we had lots of competition in our price range. The 45 day escrow ending up being about 65 with delay after delay. Finally, we closed and got funded.

We moved back into the rental house which is now paid off. We had lived in this house for 10 years previously. We always considered it to be our "Forever Home" so it was an easy transition. I am pretty excited to have my shop back too. It's got a 800 sq ft shop with 11' ceilings and A/C.


On paper, this financial move is only about a $400 swing in our favor. Which will dwindle considering no longer having the mortgage & rental writeoffs. Although, I think my stress level will be much less without the rental.

I know there is still a chance of going through this whole process again in the future. When the time comes we'll be confident in our ability to make it happen after learning so much this first time around. If the housing bubble pops again we'll be ready to pounce.

Great move!!!!


Now - let me ask you what you're going to do with the monthly payment you used to make - because in the long run - that decision will be the important one. In the sense of whether or not you just end up buying "stuff" (car payment etc) or you practice good finances and save most of it and invest it in "something".

I used to discuss "write offs" with my old accountant. His view was - If you make a dollar and you pay Uncle Sam 40 cents you still get to keep 60 cents.... If you spend a dollar to save 40 cents... which way will get you ahead?

[slow4dr]

Originally Posted by GregWeld

Great move!!!!


Now - let me ask you what you're going to do with the monthly payment you used to make - because in the long run - that decision will be the important one. In the sense of whether or not you just end up buying "stuff" (car payment etc) or you practice good finances and save most of it and invest it in "something".

I used to discuss "write offs" with my old accountant. His view was - If you make a dollar and you pay Uncle Sam 40 cents you still get to keep 60 cents.... If you spend a dollar to save 40 cents... which way will get you ahead?

Great point.....spending will never get you ahead.

I won't lie, we've already splurged on a new couch and I plan to put some new LED lights up in the shop. After that though we will take money out of each pay check and set it aside. I don't want to get analysis paralysis but I plan to take my time and research and finally take a dive into dividend stock shopping.

[SSLance]

Originally Posted by GregWeld

I used to discuss "write offs" with my old accountant. His view was - If you make a dollar and you pay Uncle Sam 40 cents you still get to keep 60 cents.... If you spend a dollar to save 40 cents... which way will get you ahead?

OMG! I've had that same conversation with so many people and it is amazing to me how many people just don't get it.

Fact...the only things that are really "write offs" are expenses that you never get back.

Even the depreciation write off typically doesn't work out because if you ever sell the depreciated asset, you have to reclaim every dollar that you had written off as regular income.

[GregWeld]

In markets like we are having or have been having the last few months.... you'll all discover the "comfort" from collecting dividends while you wait for the dust to settle.

These are the times when - if you're automatically reinvesting the dividend - that you actually want. WHY? Because those dividends are buying more shares... and that's how you get the snowball rolling!! Be happy! It will pay off. Trust me.

[markaaron80]

a lot of good info here

[GregWeld]

All the cash that is being pulled out of world markets -- will earn nothing (given the historically low interest rates) -- and will want to find a home (employees being put back to work). I know that I have over 4MM in cash in the account I use for discussion here. I won't try to catch a falling knife... I won't load the boat the minute I think we're headed higher... I'm patient. But that money is waiting to be put back to work.

Yields are RISING as stock prices go lower. I'm loving it.

[LuxurySportCoupe]

I finally got to the 100 page mark in this thread, and I didn't want to comment until I finished them all. But I got into a "discussion" last night on facebook that may be of interest to investing 102, or at least got me thinking about the effect on stock prices. The discussion was about people wanting to raise the minimum wage to $15 an hour (currently something like $8 here in Michigan). Since McDonald's has been mentioned a few times here, but it could apply to any retail/food company, I figured I'd ask, how do you guys think it would effect stock prices and dividend payouts? I would imagine dividend payouts would drop, at least initially, due to increasing costs, and therefore less profits. Not to mention the effects of every other sector that pays above minimum wage that may or may not give their employees a similar % increase in pay, and how much "disposable income" people in these sectors would then be willing to invest. If this becomes too political, feel free to delete it, the last thing I want to do is derail this thread. I just find it to be an interesting topic.

[sik68]

Food for thought. An article excerpt summarizing the market in 2015, from Liz Ann Sonders @ Schwab:

What drove performance … or lack thereof?

Remember, the S&P 500 is a cap-weighted index; and although it was about flat on the year, the average stock in the index did considerably worse—returning -3.8% according to Bespoke Investment Group (BIG), who took a look at what drove performance in 2015.

Market cap: bigger was better. The 50 largest stocks at the beginning of 2015 were up an average of 1.5% by year-end; while the 50 smallest stocks were down 11.9%.

P/E: growth was better. Price/earnings ratios were a factor, too; although perhaps not as you might think. The four deciles of stocks with the lowest P/E ratios (i.e., the cheapest stocks) were all down at least 5%; while the four deciles of stocks with the highest (or no) P/Es (i.e., the most expensive stocks) were all at least flat or up on the year.

Dividends: none or lower was better. For income-oriented investors, note that the decile of stocks which started the year with the highest dividend yields were down 14.6%, while the stocks which pay no dividends at all were up 3.9%.

Momentum: 2014’s winners won again. The top six deciles of stocks which did the best in 2014 all averaged gains in 2015. The 50 stocks which did the worst in 2014 were down another 28% in 2015. Buying the losers of 2014 was about as painful as it gets.

FANG stocks ruled. The “fab four” stocks, now nicknamed FANG—for Facebook, Amazon, Netflix and Google (now called Alphabet)—were up over 60% on a cap-weighted basis. Excluding those four stocks, the S&P 500 was down 4.8% last year.

It's a carazy market out there!

[GregWeld]

Originally Posted by LuxurySportCoupe

I finally got to the 100 page mark in this thread, and I didn't want to comment until I finished them all. But I got into a "discussion" last night on facebook that may be of interest to investing 102, or at least got me thinking about the effect on stock prices. The discussion was about people wanting to raise the minimum wage to $15 an hour (currently something like $8 here in Michigan). Since McDonald's has been mentioned a few times here, but it could apply to any retail/food company, I figured I'd ask, how do you guys think it would effect stock prices and dividend payouts? I would imagine dividend payouts would drop, at least initially, due to increasing costs, and therefore less profits. Not to mention the effects of every other sector that pays above minimum wage that may or may not give their employees a similar % increase in pay, and how much "disposable income" people in these sectors would then be willing to invest. If this becomes too political, feel free to delete it, the last thing I want to do is derail this thread. I just find it to be an interesting topic.

That's a very interesting question and has many many variables and sides to it. I don't know that anyone can say "this" will happen... or that something else will play out. I don't think we have any historical basis for such a large pay increase.

It's a good question -- and I don't really see a "political" discussion developing around it. It really is appropriate because it's a BUSINESS question - and it's also a FUNDAMENTAL change question.

[So Cal Camaro]

Yeah, will be watching for a while to see where this goes, waiting for stocks on my wish list to hit a good entry point....