Investing 102

[Sieg]

Originally Posted by solarguy09

Congrats. Knowing the numbers is so important..

Yes, I never run my Wife's income or Social Security in my projections. Just me..

Also I never include my Home Equity. I do count it in my NET worth, but not for future living expenses..

That way I am excluding approx 300K of non liquid assets from my projection.
So we have that money for assisted living if ness.. later in life...or for whatever.

Seig, it really helps to run the numbers once a year. Also to calculate your NET worth to see where you are at..

Then once a year revisit to see if you are up or down...

Thanks you.

Regarding networth the only debt/liability we have is our home and it's $250K balance was refinanced two years ago on a 15 schedule so it will (should) be paid for the same time I hit age 65.

[Bucketlist2012]

Originally Posted by Sieg

Thanks you.

Regarding networth the only debt/liability we have is our home and it's $250K balance was refinanced two years ago on a 15 schedule so it will (should) be paid for the same time I hit age 65.

Very Nice...

I love this thread.... No really I do..

We can share and go over ideas and the different strategies we are using.

And some that are getting started will feed off our passion.

Well done Sieg..

To share, My only liability is a 4.5% fixed 30 year 150K balance( 330K value), everything else is assets , and they are in nimble, liquid, global Investments..

Mike V.

[ErikLS2]

This thread is moving too fast for me to even participate, lots of great info here. And Greg, what a great contribution you've made to a great many here.

Got to put in my 2 cents on Facebook, and you heard it here first, they are a short term fad soon to be replaced by the next short term fad. They are not Google, Microsoft or Apple who make products people have integrated into their daily lives. I know, Facebook is part of people's daily lives, but in an entertainment sense more than a practical use sense. I believe people are quite fickle when it comes to entertainment and can easily and quickly move onto the next hot thing. I heard recently, can't recall where, that there were more people leaving FB per month than joining. I believe usage on there has about peaked and will start to decline as people get bored with it. Anyone prone to get hooked by that type of thing probably already is and will eventually get bored with it. I would much rather own a piece of the companies that make the vehicle for getting on FB (and it's replacement), the cell phone makers and cell service providers. Websites and social media fad will come and go but the way people access those things will remain.

Anyway, this thread will certainly be still going when FB flops and I can then point everyone back a couple hundred pages and claim I called it.

I'm sure there's going to be some big short term bucks made on it though. Maybe I'll be one of those few shorting it after a huge upward run. (Gotta learn how to short stocks first though)

Sorry for the rant, just trying to contribute to the thought process of investing in my own corny way.

[ErikLS2]

Wanted to share two great websites for keeping track of all your financial stuff in one place, calculate net worth, etc.

http://www.yodlee.com/ymc_home.shtml

www.mint.com

[GregWeld]

^^^^^^^^ That's not a rant -- that's a very good honest opinion.... and all anyone need do is remember --- MYSPACE?? DOA
stick a fork in it... it's done! BLOCKBUSTER -- killed by the Netflix and Hulu
and whatever else... So it's always worth listening to others opinions.

Please though -- never short anything... ever. This would take a lot of explanation but that is gambling at it's very very worst.

[68 stang]

Greg you mentioned to never short anything. Is that because this class is Investing 102, or never at all even with WTH money? I just want to understand your thought process.

Have you thought about teaching a Investing 103 or a 201 class?

Thanks again!

[Woody]

Originally Posted by lmnop

Hi Greg
I have been researching some company's that I am familiar with on Google finance. just checking the charts and dividend payout. One thing I learned was to pay attention to the % of the dividend rather than the $ amount as it was confusing me. I was discounting some companies because the divined $ looked low but in reality the % was good. I am not ready to ask opinions on my choices yet as I need to do some better research but I have a question. How do I determine if a stock (company) is "higher risk"? I have been going through this thread trying to find the answer but I haven't found it. So I apologize if it is in here and I am being redundant. As a side This money is in my "if goes up great but if disappears I won't lose a lot sleep" bucket. So I would like a fair amount of risk.
Thanks
Ray

Ray, I have some imput on "risk" that may or may not be of interest to you.
There are complex models that have been set up in an attempt to measure risk. If you are interested, Google "risk and capital asset pricing models". (You will probably need a finance backround to understand them).


Another method of measuring risk is Beta. Beta is shown in Google Finance and Yahoo in the financial summaries of the stock. A Beta of 1.0 means that the stock moves in direct correlation to the overall stock market. A Beta less than 1.0 means the stock moves less than the overall market and may be less risky, while a Beta greater than 1.0 indicates the stock moves more than the overall market and may be more risky. The things that you have to understand about Beta is that it is based on past performance. Also, Beta is only a measure of the stock price movement. It does not take into account the impact of dividends. In other words you could have a very steady stock (low beta), that pays a large dividend and it could still have above average risk due to the potential for the dividend to decrease.

Along with using Greg's explanation about looking at the dividend (Generally the higher the return, the greater the risk), you can simply look at a historical chart and analyze the magnitude of the price moves. Riskier stocks will tend to move more than conservative stocks. In other words, the riskier stocks will tend to have the biggest price swings (on a percentage basis). They will have greater percentage increases when the market is going up and greater percentage declines when the market is going down.
Just remember these are generalizations.

As you probably know, the general rule of thumb is higher return potential = higher risk. I believe that is how this thread started out. How to get a higher return than what is currently offered by a "safe" low risk money market fund. Not much risk of a money market fund declining, but not much potential return (Currently 1.0% or less).

Just trying to bring another persective to the discussion. Hopefully, I have not overcomplicated the issuse.

[Bucketlist2012]

Originally Posted by Woody

Ray, I have some imput on "risk" that may or may not be of interest to you.
There are complex models that have been set up in an attempt to measure risk. If you are interested, Google "risk and capital asset pricing models". (You will probably need a finance backround to understand them).


Another method of measuring risk is Beta. Beta is shown in Google Finance and Yahoo in the financial summaries of the stock. A Beta of 1.0 means that the stock moves in direct correlation to the overall stock market. A Beta less than 1.0 means the stock moves less than the overall market and may be less risky, while a Beta greater than 1.0 indicates the stock moves more than the overall market and may be more risky. The things that you have to understand about Beta is that it is based on past performance. Also, Beta is only a measure of the stock price movement. It does not take into account the impact of dividends. In other words you could have a very steady stock (low beta), that pays a large dividend and it could still have above average risk due to the potential for the dividend to decrease.

Along with using Greg's explanation about looking at the dividend (Generally the higher the return, the greater the risk), you can simply look at a historical chart and analyze the magnitude of the price moves. Riskier stocks will tend to move more than conservative stocks. In other words, the riskier stocks will tend to have the biggest price swings (on a percentage basis). They will have greater percentage increases when the market is going up and greater percentage declines when the market is going down.
Just remember these are generalizations.

As you probably know, the general rule of thumb is higher return potential = higher risk. I believe that is how this thread started out. How to get a higher return than what is currently offered by a "safe" low risk money market fund. Not much risk of a money market fund declining, but not much potential return (Currently 1.0% or less).

Just trying to bring another persective to the discussion. Hopefully, I have not overcomplicated the issuse.

Woody... No overcomplication at all...Honest, opinions, and knowledge from you.Thanks..

This is an investment thread meant to get us to participate and share...Thanks

again, I am pleasantly surprised that this thread has a life of it's own...every other site i have been on and talked about money, the subject shifts to spending money , and never making it...True they are car sites but man, you would think they would care more....

Oh well....I know what is up, and Investing is what is up...

[GregWeld]

Originally Posted by 68 stang

Greg you mentioned to never short anything. Is that because this class is Investing 102, or never at all even with WTH money? I just want to understand your thought process.

Have you thought about teaching a Investing 103 or a 201 class?

Thanks again!

Shorting stocks - which can be done two ways -- a Naked short or a Short against the box....

Naked short means you borrowed the shares from the brokerage and sold them. The brokerage deposits the money into your account - but now you OWE the brokerage the SHARES. You can't pay back with money - you owe the SHARES you borrowed.

A Short against the box means YOU own the shares - but you put in a short sale - thus you get the cash - you still hold the shares in your account - and eventually you'll have to give up the shares OR buy shares to replace what you sold short.

The problem with going "Short" is that by the time the "man in the street" thinks it's time to short a company - which in essence means he thinks the company is doing poorly - the PROFESSIONALS on Wall Street are about 10 Zillion times AHEAD of you. And you get caught in the classic "short squeeze" trying to cover your short in a rising market. The more it rises -- the more "shorts" have to cover - the more the stock rises... so it's a toilet bowl way to try to GAMBLE on the stock market - which is complicated enough without trying to be cute.

If you think a company is going to do poorly --- why own it at all - in any form? The key that I've been trying to get across here (in 102) is that we want to own best of breed - great companies - ones we're proud to own - and like them enough that when they do go down (in sympathy with the market) we want to buy more of them so when they rise - we make money.

Shorting is playing a game of chicken against a stacked house. Let the pros with billions to play with do the shorting and hedging and euro dollar gold trades.

I've seen all too often - stocks the everyone is short - and you wake up one morning and the company has agreed to be sold to X company for X amount - or fires the CEO and hired the most famous turn around guy in the biz etc.... and you just get your arse handed to you. Rarely do you get a chance to have the CEO shoot himself in the foot - ala NetFlix CEO - where people are short (BIG TIME!) and the SOB delivered the perfect short to them on a silver platter. This is the polar opposite of playing the IPO game... for every 10 short positions you try - one will be a home run.... the same can be said about IPO's - one out of 10 will be a home run - so the odds are not very good.

My favorite saying has been - and continues to be - "better lucky than smart" . A guy can be real smart and just know that shorting X is going to be a winner -- but if he's not LUCKY -- something like I said above will happen and you get creamed.

[ErikLS2]

Pretty good jobs report just came out this morning. I'm far from an economist but to me this is very good news. It was much higher than the so called "experts" predicted and most measured areas saw an increase. Some prior months were revised up as well.

If this continues you can plan on seeing Obama back and I'm not sure interest rates will remain low as long as they had initially planned either. I don't have any big things to buy anytime soon so I say bring on the inflation. That's probably inevitable anyway with all this QE we've been doing to keep the ship afloat.

Here's the report if you want to read it:

http://www.bls.gov/news.release/empsit.nr0.htm