Investing 102

[GregWeld]

Originally Posted by FatfreeGTO

That's the truth, although your problems aren't exactly bad ones to have I agree though it needs to be simplified, but then what about all the CPAs and other tax pros they sure don't want to see that happen

We'd still need accountants... They just wouldn't be going crazy every April...

My accountant is busy all year working on "stuff" other than tax forms.

[GregWeld]

Originally Posted by FatfreeGTO

Another good item to talk about for people is what to do if they actually have a little bit of a nest egg... Most people just assume that if they die their spouse, kids etc will get the money. Well that is not true, I'm not an estate planner but there are some basics that I'm aware of.

-Most common way someone could potentially die? Car accident probably. Who is usually sitting right next to you in the car? Spouse. Who is usually the beneficiary? Spouse... Well now we have a problem... Your both dead who do you think will get the money? Kids... WRONG!! Minors cannot be the beneficiary. Your money will get tied up in a huge legal battle where the children will be the biggest loser.

You need to setup some sort of a Living Revocable Trust. Minors can inherit that money and take control of it at a time that you laid out in the details. Since this is a "living" trust you can modify it at anytime while you are alive. It really is something that should be thought about and discussed with a pro, well I'm sure Greg can add some insight to this subject

Good addition!

There are beneficiary designations on all your brokerage accounts... most of these you can choose percentages to give to different people etc. and a Primary and secondary(s).

I hadn't redone our wills etc (or estate planning) for 10 years.... but as part of the sale of Isilon to EMC -- the execs (my wife not me - I'm too stupid to have a job) -- got estate planning and wills etc paid for provided they were completed by 2011. In our case - that can (is/was) several thousand dollars worth of a "freebie". There's all manor of new rules... passthroughs... etc etc. I learned a ton... and it was fun as well as 'hard'. Hard in the fact that our kids are now 21 and 25... so if we're both croaked - how do we manage our money for them. We're not raising any trust fund brats! So we had to have a family discussion about what we were thinking and why - and what they thought about that etc. It was very productive -- and ONCE AGAIN -- it's NOT something most families do! We should all talk about this stuff. Do your kids have any idea of how you'd like to be handled if you die? Buried? Where? Cremated? Etc... Heck -- for that fact - does your wife? Do you know what she's thinking?

[Bucketlist2012]

Originally Posted by FatfreeGTO

Another good item to talk about for people is what to do if they actually have a little bit of a nest egg... Most people just assume that if they die their spouse, kids etc will get the money. Well that is not true, I'm not an estate planner but there are some basics that I'm aware of.

-Most common way someone could potentially die? Car accident probably. Who is usually sitting right next to you in the car? Spouse. Who is usually the beneficiary? Spouse... Well now we have a problem... Your both dead who do you think will get the money? Kids... WRONG!! Minors cannot be the beneficiary. Your money will get tied up in a huge legal battle where the children will be the biggest loser.

You need to setup some sort of a Living Revocable Trust. Minors can inherit that money and take control of it at a time that you laid out in the details. Since this is a "living" trust you can modify it at anytime while you are alive. It really is something that should be thought about and discussed with a pro, well I'm sure Greg can add some insight to this subject

Another excellent point.. I forgot to mention it..

DON'T DO LIKE ME........ ARE YOU READING THIS..

So I have all this wealth, and I am 50 and feeling frisky. It is 2008, I have seen the mess coming , positioned my chips and I am on top of the World..Don't need a Will or a Trust yet.. We will do it soon...Uh oh...

So when I Stroke/Seizured due to a Major Heart Infection due to a malformed Heart Valve, which caused a Brain Lesion and partial paralysis..

So, My Wife and I call the Trust attorney for other Family trusts, they travel immediately through rush hour traffic at 380 dollars an hour and he and the Notary come to my BEDSIDE next to the priest, and we notarize my Will and Revocable Trust... We made it on time...And i lived. Had i died in the Kitchen of my home, what would have happened ? Hurts to think I could have screwed my family out of all the hard work..

PLEASE make sure you have one, otherwise Uncle Sam, the greedy man, will get it..

The above story is as true as it gets...

[GregWeld]

A few posts ago -- we discussed Limit orders - Stops etc.

I normally use a "limit order" if I'm buying on a down day -- like today -- in a position that I don't really care if I get or not.

I've bought Banco Santander (STD) on and off for a couple years. It pays a nice 10% dividend -- but remember that it's paying that high dividend rate not for any other reason that the STOCK PRICE SUCKS.... remember this inverse correlation! The dividend is a set amount - so as the price declines the percentage of dividend goes up and conversely as the stock price goes up the percentage goes down.

I wanted to mention this "limit order" to show why -- for Investing 102 -- it's really not very important. The fact that I use it from time to time is due to the larger amount of shares I deal with.

So -- I put in a 10,000 share purchase with a limit at $8.54.... the ask was $8.57 so had I put in a "market order" I would have gotten the shares at $8.57 or whatever was available at whatever price. Some may have been bought at $8.57 and some might have been bought at higher or lower prices.

So here's the key to this for Investing 102..... the .03 DIFFERENCE between the "bid" (me) and the ASK (seller) on 10,000 shares is a whopping $300 on a $85,000 purchase. Whoo hook.... that ought to make or break a profit on this investment shouldn't it?

But -- if I was a trader? That $300 saved - in multiple trades per day -- over the course of a month or a year - would be huge!

I did it because I don't want to pay "up" on a down market day. If I used it in a rising market -- I might not get the shares -- because I was being "cheap" -- and then they might have risen .50 a share after lunch! I'd have missed out on that move. So it is - like all things - subjective and it all "depends".

[Sieg]

Originally Posted by FatfreeGTO

-Most common way someone could potentially die? Car accident probably. Who is usually sitting right next to you in the car? Spouse. Who is usually the beneficiary? Spouse... Well now we have a problem... Your both dead who do you think will get the money? Kids... WRONG!! Minors cannot be the beneficiary. Your money will get tied up in a huge legal battle where the children will be the biggest loser.

Correct me if I'm wrong on my assumption............
The children will be left fighting the State and Federal governments for rights to your assets.

[FatfreeGTO]

Originally Posted by Sieg

Correct me if I'm wrong on my assumption............
The children will be left fighting the State and Federal governments for rights to your assets.

Basically the estate will end up in Probate court with a judge deciding who gets what money etc. I would rather see you decide the fate of your kids rather then some judge...

Just think of family members that would come forward trying to appeal to that judge to get a piece of your pie, would they really have the best interest of your kids at heart...

[James OLC]

Originally Posted by GregWeld

A few posts ago -- we discussed Limit orders - Stops etc.



So here's the key to this for Investing 102..... the .03 DIFFERENCE between the "bid" (me) and the ASK (seller) on 10,000 shares is a whopping $300 on a $85,000 purchase. Whoo hook.... that ought to make or break a profit on this investment shouldn't it?

But -- if I was a trader? That $300 saved - in multiple trades per day -- over the course of a month or a year - would be huge!

I did it because I don't want to pay "up" on a down market day. If I used it in a rising market -- I might not get the shares -- because I was being "cheap" -- and then they might have risen .50 a share after lunch! I'd have missed out on that move. So it is - like all things - subjective and it all "depends".

This is one area that I struggled with for a while - both on the buying and selling side - and a lot of the time it was simply an "emotional" misjudgement (that more often then not caused more disappointment than it avoided). It's especially true when looking at higher valued stocks. Somehow our brains focus on the two digits after the decimal and we (I) sometimes miss the big picture. You hate to miss an opportunity to buy or sell (something that you want to) over a couple of pennies. It's obviously different if you have your mind made on a value or if you're on the fence about something. Especially if you are following Professor Weld's "don't be a trader, be an invester" strategy.

[Sieg]

Originally Posted by FatfreeGTO

Basically the estate will end up in Probate court with a judge deciding who gets what money etc. I would rather see you decide the fate of your kids rather then some judge...

Just think of family members that would come forward trying to appeal to that judge to get a piece of your pie, would they really have the best interest of your kids at heart...

I've seen family greed and entitlement too many times. Thankfully we've kept our will's reasonably current, our kids are 10 & 13 so they currently can't fend off the wolves by themselves.

I've been very surprised at the caliber of individuals I've known over the years in their 40's and 50's that have procrastinated or ignored implementing even basic asset protection measures. I quit gambling at 40.

It takes far less time to protect it than it does to make it.

[GregWeld]

The more you have... the more this is true.

All of our assets go into trusts -- and are all run by a local firm here called Laird Norton Tyee... and that's all they do. The trusts state what the kids get and when and how... etc.

We chose to set them up with annual payments (not enough to live off - but enough to make a substantial difference in "how" they'd live if they're earning a decent income already) that are indexed for inflation and also increasing in 5 year increments... so one amount each year at 25 and a higher amount each year at 30 etc. Until they're 50 years old - then the trusts turn over to self administered trusts (they can run their own trusts then) but we also choose an amount to fund each childs retirement which they can access at 65... which is in separate trusts so if they blow through all the rest - they can at least have one final safety net.

The trusts are set up so that with trust approval they can access additional funds for schools - buying houses - babies - weddings etc.. Trust automatically protect them from divorce - bankruptcy - lawsuits (think OJ Simpson here) and that kind of thing. So even if they're complete idiots the trusts are protected.

[FatfreeGTO]

So this thread did get me looking at some divided stocks and here is what I'm thinking. Looking at the following which have all been mentioned in here I believe. STD, NLY, BMY, CLX

STD- Interesting stock, not for the faint of heart 10% dividend is awesome and its up 13% year to date. I'm interested to see what happens if the stock hits $9.10 or so a share... Risky stock may be overbought at this point, time will tell.

NLY- Another risky one even better dividend of almost 14%! Looking at the charts on it hard to say where it could go from here. I feel it has a better chance of down then up at this point. (my opinion only) If I were looking for a place to park some cash until another long term investment came along I would consider this one but would have to watch it very closely. But man that 14% guaranteed just can't be beat...

CLX- Great stock, long term play, nice 3.5% div yield. Could be getting ready to have a nice upswing in the stock price. Don't think you can really go wrong with this one. Current price is a nice entry point.

BMY- Another great stock 4%+ yield, has had a nice pullback in stock price so far this year. Relatively limited downside in this one in my opinion.

Now seeing as I do not currently have any pharmaceuticals currently in my account I am thinking that BMY is going to be my pick. Its also my pick because of the safety of it compared to the first 2 and also because CLX is too similar to other stocks I currently own. Although I may consider dumping MCD to buy CLX... I will think about it over the weekend and pull the trigger next week.

I have been on autopilot since last spring and I'm sure glad I found this discussion. I enjoy technical analysis and it was fun to actually open up some charts and do some detective work. Although that is not investing 102 stuff.