Investing 102

[lmnop]

Originally Posted by GregWeld

Good info -- and for this forum is very good information for OTHERS.... as this can and does work. I'll "average down" a stock investment - which I've discussed in previous posts.

I have owned LARGE (300 plus units per building) class A apartment complexes... so I understand the rent reward capital depreciation etc. BUT -- big BUTT -- they are professionally managed and I just collect a check every 6 months. Again -- the risk/reward/work factor just isn't worth the 6 tenths of a percent differential of owning McDonalds or Annaly Capital Management. $600K in Annaly (NLY) gets you 35,000 shares of dividend paying stock - it pays .57 per share per quarter... or a total of $79,800.00 per year.

Do you see why I'm rich and you're not?

I agree about the hassle but you are not counting the 200 loss in your calculation. If you only had 600 total to invest and you had lost 200 on the condo you would only be able to invest 400 in the market. *And comparing NLY isn't a fair comparison as generally real-estate is more a steady eddy investment *like Mc Donald's. *So basically you have 400 invested in Mc Donald's instead of 600 in condo's. with basically the same % return in both investment your behind. You could always be richer right?*

Ray

[WSSix]

I truly believe that everyone can have a better life if they simply pay attention and make small steps that actually make their life better. I also do not believe in trying to exploit those people in society that have more or are "rich". Instead I believe we all can learn from them in most cases. Knowledge is NOT regulated to text books or a classroom. So, me wanting to expand my knowledge, make my life better, and continue to live what I believe simply thought I'd ask people within this group, that I am apart of, what they knew hoping someone could help. I never thought it would turn into what it has. I'm glad others are getting as much or more from this than I am. So you're welcome, but Greg and everyone else that has contributed have my sincere gratitude.

Now, it's only in the 40s but the sun is up so I'm going to partake in one of my pleasures that also makes my life better and go ride my Duc. See ya!

[GregWeld]

It is very hard to do a "recap" of INVESTING 102.... because there are so many variables and scenarios for different ages - differing incomes - differing situations... but what I will try to do here is to get people to think about some aspects of investing and try to shed light and alleviate some of the fears "newbs" might have about "investing".

#1 It is never too late to start! Time is a money multiplier. The old saying was that money doubled every 7 years. That was based on a healthy reinvested return of around 8 or 9% annually. Today - with the lower interest rates that double might be closer to 10 years.

#2 Take control of your investments/money. Putting money in the company 401 program is fantastic! BUT! You can not simply accept that doing so will get you where you need to be. YOU MUST examine where your money is - and what return (ROI - Return On Investment) you're getting. Many people pick a Mutual Fund(s) and plough money in weekly and never ever look at it. Some of these funds may actually LOSE money. Some are barely adequate - and a very few do "okay". YOU can do better than "okay" with just a simple understanding of the returns - the diversification - and your options for your investments.

#3 What to look for in a good investment. There are several very simple easy to understand terms that will help you choose one fund or stock over the other.

A) Growth - or Capital appreciation: At what percentage is the investment growing on face value. So if a share is at $10 - and it's 5 year growth rate is 10% (these numbers are easy to find using Yahoo or Google Finance) then you need to COMPARE that rate against some other choice until you are happy with the rate of return.

B) Dividends - Again - using a financial site look for whether or not the stock is paying a dividend. Dividends are generally paid quarterly and can greatly affect your TOTAL RETURN. They help bouy a stocks price in a down market. Reinvesting the dividend (automatically) can really snowball your return!

C) Total Return - this is harder to find information but is really really worth the effort! Total Return is the growth in capital and the dividend REINVESTED over time. Generally you can find 1 - 3 and 5 year Total Return information. T/R is CRITICAL and should be a deciding factor for most investments. This is the actual amount an investment has grown over the measured time frame. A dividend paying stock might look like a bad investment if it only pays 2% dividend - but with growth in the stock price - the T/R might be 100% in 5 years! I don't care what investment you are making -- The T/R is what you are after!

The Charts - Take any stock or mutual fund and look at the 5 year or longer chart. This is only a reflection of the share price growth (or dip - or decline). It is this long term "picture" that will help you to see that while the price might go down or swing up and down daily or weekly - or even for a year or two - but the OVERALL chart is going UP and the more UP the better! When the market turns against us - we need to re-visit these charts for assurance that our strategy is on the right track. They will help you get through the tough times.

Balance - Greed generally tries to tip us out of balance. We all want the hot stock... or the hot growth industry or the highest dividend payer. Trust me - that if you load the boat with this strategy it will tend to tip over. So try to curb your greed - it's okay to have a hot one, or the bigger dividend payer - but balance it with a steady eddy. A steady eddy is a stock that just plugs along - and when looking at it's chart - compared to another stock - it didn't GO DOWN nearly as much as the "market" did. No - it doesn't go up as fast either - but it's the DOWN that will kill you. Here's why. In a down market people tend to panic - they tend to SELL at the wrong time - They have FEAR... it's real - don't discount it... but if you have an account that has some steady eddies in it - they will help offset your big down stocks - so overall you're not down as much. Just not being down as much - is very comforting. Living with your investments long term is where you'll make your money. Selling in a down market is the way to lose the most.

Diversify - Depending on how much you have to invest - try to get as many different stocks as you can to a point. More than 20 is too much. So if you have 10 grand - try to buy 5 and when you have more dough add a 6th name and so on. But even if you have a million - 20 or so stocks is enough to get you diversified. It's called the 5% rule... no more than 5% in any ONE single investment. That is impossible to achieve until you get to around 100,000 invested. But the rule is simple enough to understand. If you have $1,000 buy ONE company - save another $1,000 and buy a second company and so on.

SIMPLE TO UNDERSTAND STRATEGIES

The old KISS principle to investing works for most people == they just never thought of it this way. Everyone wants to invest in the next hot stock (Faceybook? LOL) but in doing so they overlook real simple winners. Winners are stocks you can live with thru thick and thin... that have that magic Total Return... They are stock that you're familiar with... companies that you buy at, or eat at, or use. Names like McDonalds - Kraft - Coke - Pepsi - Home Depot - Lowes - Ford - Caterpillar - Google - Best Buy - Amazon - Costco - Chevron - Exxon etc. You do not have to look very hard or very far to find real good total returns. You don't have to do any Tom foolery.

I had written earlier - that if you want investment ideas -- drive down a busy commercial street - look around and jot down the names of the biggest business you see and that you know the names of and understand what business they're in. Then go look them up. Write it down - now go and compare them against known competitors. So -- if SEARS is a name you wrote down -- get their Dividend info - growth info - T/R info... now go compare them to other names in that 'sector' or industry. Compare Sears to Best Buy - Home Depot - Lowes - Target - Costco etc. What you're looking for is the education this will give you. Some names just don't do very well as investments - others are stellar... so what you're trying to find is THE BEST OF BREED

BEST OF BREED are the stocks or Mutual Funds that have outperformed their competitors OVER TIME... not 6 weeks -- but over a 5 year period of time. Why is this important? Because it means that their management is on the right track. Remember that when you buy shares -- you've become a partner in that business! Don't you want to partner with the best and brightest?

The real key to investing for the long haul - is to not get caught up in all the news on TV -- while you want to pay attention to the TRENDS -- i.e., is the FED going to raise interest rates -- are we going into a recession - or are we seeing information that is saying we're out of a recession... the rest is just OPINIONS. Opinions are what makes a market -- one guy is chicken little and selling - the other guy is balls out buying... neither one of these so called "experts" KNOW. They're making educated GUESSES.... and they're getting their face on TV. But in the end it's nothing more than their opinion. Since nobody can tell you when something is going to happen - you're best off INVESTING - pick your best of breed stocks with good long term charts - and if possible - the best dividends. Then kick back and watch your investments grow.

You don't need to be an investment professional... you just need to do a minimum amount of research and put your thinking cap on. Do you like COKE over PEPSI - look at their chart - do the Total return comparison - compare the dividend -- then just choose the one you like if there's not much difference... Stick to the basics of making money for yourself.... Names you know and trust - good long term chart - dividend or not - what is the total return... and try to diversify.

And remember the best number one rule ever in the history of the UNIVERSE..... if the grocery store clerk tells you about how much money they're making doing "X" (.coms - house flipping - gold).... RUN! By the time they're into it you're at the end of whatever "it" is.

[GregWeld]

Originally Posted by WSSix

Oh and I don't have a Star Fund I have their VTIVX fund. Still not great though. It gets good ratings from Morning Star et al though.

Either way == HORRIBLE returns overall....


10 year @ 37%

5 year @ MINUS 5%

The 3 year only looks good because of the trough it went in! OMG!

It is another Vanguard fund that invests in other Vanguard funds... sorry. That strategy is just dumber than dumb. What they have done is get you to allow them to create a buyer for their other funds. So it's really just a cash slush fund for them to buy shares in their other funds if they want to sell some... they have a ready made buyer. OMG..... RUN!!!!

[pw2006]

Great recap! Going to hit the print button and start watching the Super Bowl. Thanks Greg!

[CRCRFT78]

This is what I was working with on December 27, 2011.
Stocks
Apple (AAPL) P/E-14.75 Div/Yield-Not listed 10YR-+3788%
Caterpillar (CAT) P/E-14.03 Div/Yield-0.46/2.00 10YR-+256.89%
Disney (DIS) P/E-14.94 Div/Yield-0.60/1.60 10YR-+81.87%
Harley (HOG) P/E-20.28 Div/Yield-0.12/1.29 10YR--28.24%
Nike (NKE) P/E-20.94 Div/Yield-0.36/1.47 10YR-+248.03%

Mutual Funds
Fidelity Freedom Fund 2045 (FFFGX) 10YR--8.63%
Spartan Total Market Index Investor Class (FSTMX) 10YR-+23.73%
Vanguard Total International Stock Index Fund (VGTSX) 10YR-42.13%

Since then I have sold Harley (HOG), Fidelity Freedom Fund 2045 (FFFGX) & Vangaurd Total International Stock Index Fund (VGTSX). Unfortunately, I didn't jot down the numbers prior to my fire sale but I can tell you that I am much happier with my current portfolio. The performance has been steady and I plan on adding to it. Here is how it currently sits as of today.


Stocks
Apple (AAPL) P/E-13.09 Div/Yield-Not listed 10YR-+3666.33%
Altria Group (MO) P/E- 17.61 Div/Yield- 0.49/5.69 10YR-+151.05%
Caterpillar (CAT) P/E-15.40 Div/Yield-0.46/1.61 10YR-+351.07%
Consolidated Edison (ED) P/E-16.50 Div/Yield-0.61/4.11 10YR-+43.15
Disney (DIS) P/E-15.89 Div/Yield-0.60/1.50 10YR-+78.17%
Kinder Morgan Energy (KMP) P/E-539.96 Div/Yield-1.16/5.41 10YR-+152.38%
Nike (NKE) P/E-22.12 Div/Yield-0.36/1.39 10YR-+244.89%
PepsiCo (PEP) P/E-16.72 Div/Yield-0.51/3.09 10YR-+33%

Mutual Funds
Spartan Total Market Index Investor Class (FSTMX) 10YR-+34.73%

[Sieg]

Greg Weld - Thank you again for the time, energy and passion you have put forward in the this thread. Best example of a charitable contribution I've seen in a long time, you deserve a tax deduction for it.

[Bucketlist2012]

Originally Posted by Sieg

Greg Weld - Thank you again for the time, energy and passion you have put forward in the this thread. Best example of a charitable contribution I've seen in a long time, you deserve a tax deduction for it.

LMAO

GREG...I asked for a recap...Nice Job...

[WSSix]

I think the recap may need to be posted on page one, lol. Heck of a summation that's for sure.

[GregWeld]

Good super bowl....

Thanks for the kudos guys...

Sieg -- I'm going to see if my CPA agrees with your deduction idea...

Jose --- MUCH BETTER portfolio! Note by the way - of the stocks you HAD - the losers were MUTUAL FUNDS not the stocks! Glad your on a better track now.