Investing 102

[GregWeld]

Originally Posted by LS1-IROC

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.

Thanks! I'm just a hot rod guy - but I like helping other people... and would truly like to see AMERICA save and invest more because money isn't everything... but it beats the hell out of whatever is in second place!

If you're researching - there are really only a few things you need to look at...

Do you understand what the company is/does?

Do they pay a small dividend that has been paid over a very long time - and they have had stock price appreciation to make up for the smaller dividend?

Do they pay a larger dividend - but the price is "steady" over a long period of time (more like a utility) - and has their dividend GROWN over time. i.e., 5 years ago they paid .38 per share and they're now paying .61 per share... that means they're EARNING MONEY and returning it to the share holders. Not wrong or right just a different way to get there.

If the stock price dropped in HALF -- would you buy more of it? Because you understand their business... and you trust the product or reason why you bought it. So it's "outside forces" that crushed the price -- not because they screwed up the company.

[GregWeld]

Originally Posted by 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?

Well good for you -- you've at least got a start!

Okay -- stock by stock - you've got DIVERSITY - you have Apple (retail/tech) - you've got NIKE (retail) - Caterpillar (industrial) - Disney (entertainment) - Harley (manufacturer/retail/automotive).

I think Harley is too "faddish" for me to invest in... Sorry.

Don't buy anymore "retail" - you have enough exposure there. You really have 3 out of 5 that relies on some sort of CONSUMER buying at retail.

ALSO -- every one of these pays a dividend but they pay a very SMALL (under the rate of inflation) dividend... so on my screen they'd have to have a larger than normal stock price appreciation in order for me to buy them. So for your next investments try to pick a couple with higher dividends... AT&T -- VERIZON -- KINDER MORGAN PARTNERS - PHILLIP MORSE - ALTRIA... they all pay more than the rate of inflation AND have price growth...

[GregWeld]

Originally Posted by LS1-IROC

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

I'm not an advisor nor in the business - I'm retired... and never was in this business. I just run my own money.

Discount brokers are perfect for the "small" (and large) investor. They have very small fees... so your profit isn't eaten up with buying/selling commissions. They have useful tools on line - they walk you through if you need help you can go to their office or call 'em... or email me...

[GrabberGT]

All great and very appreciated info. Here's a new one... What are your thoughts on Roth IRA vs Whole Life Ins. vs the Dividend paying stocks model thats been outlined here. My only investment for my retirement so far is my 401k which I have maxed out at what my company will match. I'd like to start putting away some more for retirement and would like an unbiased opinion. The only opinion I have so far is the Life Ins company.

Thanks

[GregWeld]

Originally Posted by GrabberGT

All great and very appreciated info. Here's a new one... What are your thoughts on Roth IRA vs Whole Life Ins. vs the Dividend paying stocks model thats been outlined here. My only investment for my retirement so far is my 401k which I have maxed out at what my company will match. I'd like to start putting away some more for retirement and would like an unbiased opinion. The only opinion I have so far is the Life Ins company.

Thanks

Life insurance is a savings account for the beneficiary.

As an "INVESTMENT" it sucks bilge water.

A person should have enough life insurance to make sure their family doesn't suffer due to their loss. So if you have a 200K mortgage - and 50K more in debt - buy a 500K term life policy and that will insure the loved ones can live in the house debt free - pay off all other debts and have enough to bury your sorry ass. It's paid tax free - so it's a net net amount. Put the rest into savings/stocks/401K/RothIRA and hope you don't croak.

If you're a big earner - buy a $1,000,000 term life.... which will give the family enough to pay off debts and get started on a life without you. It's not an investment vehicle - it's an INSURANCE POLICY -- it's just there to help people get over the hump. As your investments grow and you age - reduce the face value unless you just like to pay insurance companies.

[CRCRFT78]

Thank you for the honest opinion Greg. I've been sitting on those few stocks for a year or so and the performance has been ok. I would like to get a little more involved in this as I feel I have a risk tolerance for this and would like to see some earnings. I hope you don't mind me emailing you with any questions I may have.

GREAT THREAD everyone. Definately a lot of good information, let's keep it going.

[GregWeld]

Originally Posted by GregWeld

Well good for you -- you've at least got a start!

Okay -- stock by stock - you've got DIVERSITY - you have Apple (retail/tech) - you've got NIKE (retail) - Caterpillar (industrial) - Disney (entertainment) - Harley (manufacturer/retail/automotive).

I think Harley is too "faddish" for me to invest in... Sorry.

Don't buy anymore "retail" - you have enough exposure there. You really have 3 out of 5 that relies on some sort of CONSUMER buying at retail.

ALSO -- every one of these pays a dividend but they pay a very SMALL (under the rate of inflation) dividend... so on my screen they'd have to have a larger than normal stock price appreciation in order for me to buy them. So for your next investments try to pick a couple with higher dividends... AT&T -- VERIZON -- KINDER MORGAN PARTNERS - PHILLIP MORSE - ALTRIA... they all pay more than the rate of inflation AND have price growth...

Hey -- Here's what I've been preaching! Look at a FIVE YEAR chart of NIKE --- Symbol NKE http://www.google.com/finance?q=NYSE%3ANKE

Expand this chart out 5 years... using the time choices in BLUE at top of the chart.

Check it out -- in 2007 the split 2 for 1 -- so if you owned 50 shares in December 2006 - you now have 100 shares! And they've increased the dividend payout along the way. They used to pay .19 per share per quarter and they're now paying almost double that! And the stock price has almost doubled in the same 5 year period!

So you have twice and many shares - paying twice as much dividend - and the price has doubled.

If you put the same $1,000 in the bank savings account 5 years ago -- you'd have about $1,010 now! WHOO HOO!

[GrabberGT]

Originally Posted by GregWeld

Life insurance is a savings account for the beneficiary.

As an "INVESTMENT" it sucks bilge water.

A person should have enough life insurance to make sure their family doesn't suffer due to their loss. So if you have a 200K mortgage - and 50K more in debt - buy a 500K term life policy and that will insure the loved ones can live in the house debt free - pay off all other debts and have enough to bury your sorry ass. It's paid tax free - so it's a net net amount. Put the rest into savings/stocks/401K/RothIRA and hope you don't croak.

If you're a big earner - buy a $1,000,000 term life.... which will give the family enough to pay off debts and get started on a life without you. It's not an investment vehicle - it's an INSURANCE POLICY -- it's just there to help people get over the hump. As your investments grow and you age - reduce the face value unless you just like to pay insurance companies.

Thanks. This covers Term Life. What about Permanent Life Ins. policies?

[WSSix]

Why do companies split their stock and is there anyway to know it's going to happen etc?


Also, I just noticed that Halliburton pays a dividend on their stock. Even though I've bought my stock through the ESPP, I should still get that dividend payment too, correct? I'm pretty sure I checked reinvest any dividends with my account but I'll have to look. I'm kind of excited since I've never known how to look up stock performance information before. Google Finance is pretty cool, lol.

[GregWeld]

Originally Posted by GrabberGT

Thanks. This covers Term Life. What about Permanent Life Ins. policies?

I'm just not a big life insurance guy -- but I'm in a lot different boat. I've only ever used Term life.

Look at life insurance this way -- you give money to someone else -- they manage it and make money off of it - and then they gamble that you're going to keep paying them for a bazzillion years (most don't) and they might have to give you some money back.

So - it might be considered "forced savings" for those that can't save but will "pay the bill".... but no matter how you cut it - it IS NOT a good "investment".

Use it for what it's for - and INVEST in stuff that will make you money.

Just my opinion.