Investing 102

[68454RS]

Originally Posted by dhutton

Best advice I can give you is to go back to the beginning of this thread and read what Greg had to say. Reading and following his advice was a game changer for me. Retired early at 58 thanks to him.

Don

Thanks, That was some good reading. I'm small beans right now but i've been putting about 20% in my company 401K.
I just dabbled a little and bought $500 worth of Kinder Morgan and $500 worth of AT&T. already had $1000 worth of the GMGI.
I know this is pretty much nothing in the real world but, I'll play more every week as I feel more comfortable.
If nothing else, my daughter might see some returns when she inherits my accounts.

[Vegas69]

Originally Posted by GregWeld

Okay -- only because Tracy said I had to chime in -- I will do as I'm told.


So -- this answer is one that I say to you -- well.... it all "depends". So without writing a book -- let's take a real BASIC look at savings.

A person needs to think of savings as various BUCKETS of money.

A bucket of money needs to be for "emergencies" -- and this bucket - just like the other buckets we'll get to - needs to be 'adjusted' to meet the needs of the owner. I don't need an emergency bucket. I have plenty of money. Most need some kind of "quick and easy to get to money" -- that needs to be taken care of first. Whether it's $500 or $5000... is up to you. This really needs to be funded by the people that can afford it the least - i.e., the guy with maxed out credit cards!

Another bucket is the retirement bucket.... you seem to be working on that. BTW -- Don't be afraid to put more into this bucket. You do not need to be limited to the 15% you're doing at work. The only thing you're doing to fund more than your limits is that you're putting in AFTER TAX money. Dude - when you retire - and you're all set for life - you won't give a damn what you're living on - the point is that you will have it! So max your workplace and then see if you qualify for a ROTH IRA... which is after tax savings that comes OUT tax free...

THEN -- you really asked about INVESTMENTS.... again - this depends - real estate is ILLIQUID... so unless you have a bunch of dough and are just looking to diversify - fugedaboudit. If you want some liquidity -- with GROWTH in your capital - and get paid to "wait" - get yourself a Schwab account - or some other discount broker - and buy yourself some big cap dividend paying stocks. The rule of investing is to never put more than 5% of your TOTAL INVESTABLE MONEY (all of your investable money not just what's in this particular account!) into ONE investment. That way - if you lost it all (all of one investment) you're not hurt. Pigs get fat - hogs get slaughtered. Ask the builders that loaded up on dirt before the real estate crash - because they ain't makin' any more of it they'd tell ya! Dumbasses...

I'd buy STOCKS for dividend AND growth... so look at a CHART of any company you're interested in... see that over the LONG RUN (like 10 years) the chart is lower on the left and rises as it goes to the right! Forget about the dips in 07/08 - every stock you look at will have that. But lets look at Kinder Morgan Partners - NYSE symbol KMP - there is a nice chart... AND it pays 5.86% (based on todays price) which is $1.16 per share per quarter. So if you bought 50 shares - every 3 months you'd get a dividend of $58 (you're getting paid to wait - you're waiting for the share price to appreciate!). Yeah I own it.

I'd also look at AT&T (symbol T) - pays about 6% dividend. Is "steady" price wise. Great place to park money and be relatively sure it's going to still be there - good market or bad. Again - you get paid to wait. Yeah I own it.

So that's what I'd be doing. Diversify - don't buy TWO oil stocks -- buy ONE - Then get a consumer food stock -- Coke (KO) or Pepsi (PEP) or McDonalds (MCD). Funny -- people laugh when I tell 'em to buy McDonalds -- the stock is UP 125% in the last 5 years! AND you get a .61 a share per quarter dividend! So here's the deal -- it's what I ALWAYS look for.... if they don't pay a dividend - I'm not a buyer - and if the dividend is "low" (like MCD's is) then I want the growth to be there.... I'll take STEADY (AT&T) but then I want a higher dividend. Does that make sense?

Then --- DO NOT GET CAUGHT UP IN TRADING - DO NOT PANIC - DO NOT LISTEN TO THE GROCERY STORE CLERK TELLING YOU ABOUT THEIR LATEST BIG MARKET HIT.... RUN AWAY from those people! DO NOT BUY GOLD... IF THEY MAKE A TV SHOW ABOUT SOMETHING (House flipping?) RUN FOR THE HILLS... DO NOT INVEST IN IT. YOU'RE ALREADY TOO LATE!

There is no get rich quick scheme. Steady Eddy whens the race. LONG TERM is not 15 minutes. Buy good quality big names that you know and understand - with good charts and good dividends. Then sit back and laugh at the losers when they're broke and you're not.


Oh -- and make sure you check the little box when you buy "REINVEST THE DIVIDEND". That way every time they pay you - they buy more of their stock automatically for you - more shares - more dividends - which buy more shares which pay more dividends...

If you buy a stock and it's value DOUBLES (just an example) then sell the "gain" and buy something else. Nobody ever went broke taking a profit. It helps you to diversify - and keeps each investment in that 5% bracket.

There's a lot more to it -- and more details etc - but them's the basics. Stay thirsty my friend!

The best advice is always seems to be the simplest. Thank you for the wisdom Greg and for the reminder Don.

[Roscoe03]

This thread and Greg's wealth of knowledge and him taking the time to contribute to this thread for newbies like myself is what go me started in stock investing. That was 10 years ago now and I still employ his ideas every time I make an investment.

[68454RS]

if they don't pay a dividend - I'm not a buyer

I read that and then wonder about a stock like Tesla which shows no dividend payout but i'm hearing it's a good stock to buy in if you can catch it in a dip.. am I not understanding things?

[dhutton]

Originally Posted by 68454RS

I read that and then wonder about a stock like Tesla which shows no dividend payout but i'm hearing it's a good stock to buy in if you can catch it in a dip.. am I not understanding things?

Basically the thinking is there is a difference between being an investor and a stock trader. Investors pick steady rising stocks that pay a decent dividend and hold them while reinvesting the dividends versus stock traders chasing the next hot stock.

Don

[srode1]

Originally Posted by 68454RS

I read that and then wonder about a stock like Tesla which shows no dividend payout but i'm hearing it's a good stock to buy in if you can catch it in a dip.. am I not understanding things?

avoiding non dividend or low dividend paying stocks will ensure a person misses cycles where there is a huge opportunity for investment growth. I think the key to stocks like this is making sure they are an appropriate portion of your portfolio considering your time horizon and rebalancing your portfolio periodically to make sure they don't become overly weighted when/if they take off.

The FANG stocks over the last few years have been a great opportunity as an example and none of them pay much of a dividend. I'm retired and I own some of those as individual stocks and inside funds. I've rebalanced a couple times in the last 2 years because they became too large a portion of my investments and I think their growth will slow.

Tesla is an interesting stock that I haven't invested in unfortunately, I still think it's overvalued though and won't go after it especially with the rising competition. While I could be making a mistake on that one, I'm sticking to my guns on that choice.

[SSLance]

I also have this thread and GW to thank tremendously for our portfolio's growth over the past 7 years or so.

I had dabbled in the market quite a bit before and had my arse handed to me several times as well as made a bunch of money and was fed up with the market and sitting 100% in cash when I stumbled upon this thread.

Here I learned how to do Dividend Growth investing the proper way and have been making that happen ever since. The past few years have been outstanding for us and I don't see it stopping any time soon. I still sleep soundly every night and even Covid didn't sway me from our strategy...it's that sound.

I will say that I've ventured out and invested some of the other cash we had laying around in different investment avenues recently, but this was purely a way to diversify a bit more and I didn't take any Dividend Growth money out to play these other fields.

[dhutton]

Originally Posted by srode1

avoiding non dividend or low dividend paying stocks will ensure a person misses cycles where there is a huge opportunity for investment growth. I think the key to stocks like this is making sure they are an appropriate portion of your portfolio considering your time horizon and rebalancing your portfolio periodically to make sure they don't become overly weighted when/if they take off.

The FANG stocks over the last few years have been a great opportunity as an example and none of them pay much of a dividend. I'm retired and I own some of those as individual stocks and inside funds. I've rebalanced a couple times in the last 2 years because they became too large a portion of my investments and I think their growth will slow.

Tesla is an interesting stock that I haven't invested in unfortunately, I still think it's overvalued though and won't go after it especially with the rising competition. While I could be making a mistake on that one, I'm sticking to my guns on that choice.

Sounds like you didn’t read what Greg wrote. Keep in mind is that his advice and this thread is for relative newbies as opposed to well heeled seasoned folks who can tolerate a higher level of risk.

Maybe you guys who want to go more advanced should start your own Investing 103 thread….

Don

[srode1]

Originally Posted by dhutton

Sounds like you didn’t read what Greg wrote. Keep in mind is that his advice and this thread is for relative newbies as opposed to well healed seasoned folks who can tolerate a higher level of risk.

Maybe you guys who want to go more advanced should start your own Investing 103 thread….

Don

Good point, I spoke without understanding the context of this thread well, my bad. I did read it, and it's quite good. Just offering my opinion in response to the Tesla question, a stock with Zero dividends. I do think Tesla is not a great choice for a fairly new investor to - it certainly doesn't match the advice Greg has given earlier in the thread which is great.

[ricer]

I have a slightly different question. My in-laws sold a rental property they had for a long time and decided to give the money to our two kids. They are only 13/11 yrs old and already have a college savings account for them. My wife and I were thinking of putting into a trust account with all the typical stipulations about using it for additional schooling if needed, house purchase, etc before 25yrs old and can do whatever after that. Ideally it would be nice to have the account grow even larger for them but don’t want to risk the money since it’s a substantial amount and it gives them a huge head start in life.

Does anyone have any other options that may be more beneficial on the growth side with low risk?