Investing 102

[ErikLS2]

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.

Personally I think if you're invested in good companies with, and this is key, GOOD management, it won't affect them much. Well managed companies weather storms like this all the time and will find a way to adapt and continue to run their businesses profitably. McDonalds, who I don't like, is putting in kiosks to order food from. My guess is those kiosks work for a bit less than the current minimum wage we have now.

[ErikLS2]

Originally Posted by GregWeld

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

I would just remind everyone that this is the case if shares are actually bought at the lower prices. If you buy at a higher share price and it goes down, your yield doesn't go up. There are a lot of good 4% yields out there now right now.

I'm really thinking I shouldn't have posted away about my recent short term successes, might have jinxed myself. But, I do have some cash set aside for things like what is happening now, just sitting back and waiting it out for now. It's a little more than unnerving though that these first 4 days have never happened in history before though.

[GregWeld]

Originally Posted by ErikLS2

I would just remind everyone that this is the case if shares are actually bought at the lower prices. If you buy at a higher share price and it goes down, your yield doesn't go up. There are a lot of good 4% yields out there now right now.

I'm really thinking I shouldn't have posted away about my recent short term successes, might have jinxed myself. But, I do have some cash set aside for things like what is happening now, just sitting back and waiting it out for now. It's a little more than unnerving though that these first 4 days have never happened in history before though.

Yield is ALWAYS based on COST. The yield doesn't fluctuate (unless the dividend is cut -- or unless the divided is raised) on your cost basis.

There's many posts in here about calculating your yield.


NOW --- HERE'S the big reminder for the year!!!


Remember the saying "BUY LOW -- SELL HIGH" ?? I believe that buying LOW is the most important aspect of investing. Obviously - we never know if we are buying low at the time. This is purely a judgement call based on where you are mind set wise. Can you stomach the drops in prices AFTER you've bought? Are you able to buy MORE later if the price stays down or goes lower....

For the AVERAGE INVESTOR -- that is buying a relatively small number of shares at a time... I wouldn't worry about trying to figure out exactly when the market is low... Rather, I'd just buy at regular intervals and it should average out over time. The key is to be invested - and to stay invested.

[SSLance]

I'm in a bit of a quandary here... I have 11 holdings (12 if you count cash). Each of my 11 are currently valued at around 5% of my total except for 3 which are 2.5-3% of my total. As you can imagine, those 3 are oil related stocks.

So while looking to step in the market a bit more today, and balance the portfolio out...numbers say to pick up more of those 3 stocks.

Should I pay more attention to balancing my holdings back out...or add to those stocks that haven't got as beat up as the others? I still like and am holding XOM, ETP and KMI, I'm just not as enamored with them to keep on adding to them as much as I have already done during this slide.

I'm leaning toward adding 1% to the other 8 winners instead.

[CornHusker4Life]

Originally Posted by SSLance

I have 11 holdings (12 if you count cash). Each of my 11 are currently valued at around 5% of my total except for 3 which are 2.5-3% of my total.

Lance's post reminded me of a question that I have been wanting to ask. If Lance owns 11 stocks with each being 5% of his total wouldn't that be 55% total?

If I have $20,000 in the market and own 10 stocks with each having $2,000 value per stock my percentage is 10% per stock. How do I get down to 5% per stock without adding more stocks to get to 20 total stocks at 5% each =100%.

I hope this makes sense.

Thanks, Jarrod

[SSLance]

You forgot to add in my 12th holding... Cash...

[glassman]

Originally Posted by CornHusker4Life

Lance's post reminded me of a question that I have been wanting to ask. If Lance owns 11 stocks with each being 5% of his total wouldn't that be 55% total?

If I have $20,000 in the market and own 10 stocks with each having $2,000 value per stock my percentage is 10% per stock. How do I get down to 5% per stock without adding more stocks to get to 20 total stocks at 5% each =100%.

I hope this makes sense.

Thanks, Jarrod

jarrod, thats a good question, one that i'm interested in hearing the answer of, certain "common sense" things, i lack....

[slow4dr]

Originally Posted by GregWeld

For the AVERAGE INVESTOR -- that is buying a relatively small number of shares at a time... I wouldn't worry about trying to figure out exactly when the market is low... Rather, I'd just buy at regular intervals and it should average out over time. The key is to be invested - and to stay invested.

It always seems like you're speaking directly to me. I moved funds to my just opened Roth IRA this week. I've been watching every single one of my stock picks go down each day this week so I've been hesitant to pull the trigger. These are going to be long term holdings and I chose them specifically with that intent so I just need to sack up and jump in.

[Vortech404]

To get your stocks to 5% your either going to have to increase
Your cash or buy more stocks in different company's.

John

[GregWeld]

Originally Posted by CornHusker4Life

Lance's post reminded me of a question that I have been wanting to ask. If Lance owns 11 stocks with each being 5% of his total wouldn't that be 55% total?

If I have $20,000 in the market and own 10 stocks with each having $2,000 value per stock my percentage is 10% per stock. How do I get down to 5% per stock without adding more stocks to get to 20 total stocks at 5% each =100%.

I hope this makes sense.

Thanks, Jarrod

Jarrod ---- The 5% per investment is a "goal" -- this goal is very hard to obtain until you're at about $100,000 total invested. At that point - 20 stocks with about $5,000 gets you there.

Now --- Everyone needs to remember that this investment goal can include more than just stocks -- because what it's really trying to say to people is that you don't want to have too much RISK in any one thing that could possibly do real damage to your investments. If one 5% investment went to ZERO -- it's really not a huge loss -- versus if you had 35% in one thing... so it's really nothing more than a guiding point.