Investing 102

[GregWeld]

Originally Posted by Vegas69

I bet Greg will say not to catch the falling knife. It's awful early in the cycle.

I started this deal two years ago and I'm still very happy I did. I have 8.5% more dinero than I would if I left it in the bank before dividends. I got lucky with some good companies that are doing well.

I recently listened to a cd that claimed that 97% of mutual funds are outperformed by the S & P 500. Mutual funds are glorified savings accounts. I see the value of a Roth IRA or a match 401k, but mutual funds are to safe to hit a home run with.

Now you know why I HATE Mutual Funds.... I'd only ever invest in them if they are the only thing you can get in your company matched retirement program.

Yes - Todd - It might be a bit early for Volkswagon.... but I don't think it's a falling knife. My guess is - most of the damage to the share price is probably done. It's a good company overall... and NOW has a decent dividend payout. Not great - but the 4% and the possible recovery upside is a decent "bet".

[JKnight]

It's only one metric, but the P/E is looking pretty good relative to peers...

[SSLance]

Couple of days ago I did a little 18 month portfolio performance comparison, mine against my business partner's which is managed by a big high faluting wealth management planner.

After you take out the 1% management fee he pays, my portfolio beat his by a couple of tenths of a point...and I'm still less than 50% invested, the rest in money market cash.

You should have seen the look on his face when I shared. lol...

And that doesn't take into consideration the income tax consequences of the odd trade here and there the wealth planner did (probably to make it appear as if he knows what he is doing). And oh yeah, the fees...added up to over $45,000...so while the advisor made $45,000 managing his money, he was basically even over the last 18 months.

[GregWeld]

Originally Posted by SSLance

Couple of days ago I did a little 18 month portfolio performance comparison, mine against my business partner's which is managed by a big high faluting wealth management planner.

After you take out the 1% management fee he pays, my portfolio beat his by a couple of tenths of a point...and I'm still less than 50% invested, the rest in money market cash.

You should have seen the look on his face when I shared. lol...

And that doesn't take into consideration the income tax consequences of the odd trade here and there the wealth planner did (probably to make it appear as if he knows what he is doing). And oh yeah, the fees...added up to over $45,000...so while the advisor made $45,000 managing his money, he was basically even over the last 18 months.

Sad isn't it?!?!?!


The whole reason behind this thread is to keep the investing SIMPLE -- Easy to learn and understand - and to show that you can EARN money on your money without having to micromanage, or make a bunch of trades. It's just simple investing - more like buying rental real estate. Sure there are the occasional hiccups and worries... just like when the renter moves in the middle of the night. But overall - nobody needs a professional.

I have an entire team just at Wells Fargo... We have the big table meetings on occasion - and go to lunch - and play golf etc. I can tell you without hesitation they don't know one single thing more than I do. Ditto on the VC (Venture Capital) money... which is nothing more than a group of people that have too much money... we pool some cash and choose some investment opportunities. It's a complete crap shoot. Luckily - it only requires one hit to cover up the 9 bottomless pits... The VC at least puts people inside the investments in an effort to help the companies - and also to use connections - and create synergies if possible, and to find the right people when needed.

[GregWeld]

Originally Posted by JKnight

It's only one metric, but the P/E is looking pretty good relative to peers...

I ASSume you're referring to Volkswagon (VLKAY).


Investors will look at the larger picture... and decide whether or not the company as a whole - pimples and all - will be able to recover or not. The issue to me would be -- buying too early and suffering for awhile... while collecting 4%... or waiting for the turn up (if) and perhaps missing it altogether. Yesterday the stock was up $1+..... and that was UP 6.5%

I like to look at the percentages rather than the actual dollar amount.

[SSLance]

I put the theories learned here to another test earlier this week. The wife and I were offered the opportunity to "invest" in a local wine club that is opening a new location. We know the owner, have been members in his other wine clubs in the past, and were invited to a dinner where the new opportunity was floated.

Basically the investment was setup as a no recourse loan, 10% interest paid on the loan, and wine club benefits such as purchases at 10% above cost during the life of the loan.

That is all fine and dandy, but being no recourse I looked hard at the chances the loan will actually be repaid and I jumped back to Greg's rule about how I feel about the actual business. We dropped our membership in his other "club" because the personal feel of the establishment had gone away, a couple of the partners had a falling out and just an overall feeling of not being wanted when visiting the establishment.

If I stopped paying my membership fee in his other club because I didn't like the direction it was heading...why would I loan him a large sum of money to start the same thing only different in another spot?

Thanks Greg!!

[Sieg]

Originally Posted by SSLance

...why would I loan him a large sum of money to start the same thing only different in another spot?

Thanks Greg!!

Because HE needs YOUR money!

[GregWeld]

Originally Posted by SSLance

I put the theories learned here to another test earlier this week. The wife and I were offered the opportunity to "invest" in a local wine club that is opening a new location. We know the owner, have been members in his other wine clubs in the past, and were invited to a dinner where the new opportunity was floated.

Basically the investment was setup as a no recourse loan, 10% interest paid on the loan, and wine club benefits such as purchases at 10% above cost during the life of the loan.

That is all fine and dandy, but being no recourse I looked hard at the chances the loan will actually be repaid and I jumped back to Greg's rule about how I feel about the actual business. We dropped our membership in his other "club" because the personal feel of the establishment had gone away, a couple of the partners had a falling out and just an overall feeling of not being wanted when visiting the establishment.

If I stopped paying my membership fee in his other club because I didn't like the direction it was heading...why would I loan him a large sum of money to start the same thing only different in another spot?

Thanks Greg!!

Good call!!


It's so simple. LOL

[GregWeld]

Frankly --- these down days - weeks, months, or even a year or two... they're good things. We all can hate them. But in the longer run - they'll teach you a lot about who you are as an investor. Patience... buying low instead of when the market is high... Holding rather than capitulating the week before they start the next leg up. Collecting dividends, and having them reinvested which will buy more shares at lower prices... AND when the market turns around, which it WILL... you'll be right back to thinking how smart you were!


Kind of like that old sports intro they used to run --- "the thrill of victory and the agony of defeat".


The key is to learn. Watch and see which stocks suffered the most that you were certain were never going down... and what held it's own... and the reason behind diversity. And more importantly what TIME does for you. Pick a couple of names out that you don't currently own - write down where you think they're headed - and why - and then see if you're right about your 'hunch'. Make a note of when you'd buy them.

We've just talked about Volkswagon -- what's your hunch? It's the perfect name right now to see if you would be right or wrong. You don't have to buy it - just learn from it and see if you can pick the nuggets out of the news - and which way and how many times you'd be a "flopper" on it. LOL

[sik68]

Here's my $0.02 on VLKAY, fwiw.

So far, it has 'only' crashed ~50% since the news was released. The timeline on this recovery is likely very long...it certainly won't be a bounce. So the first opportunity cost question: is there another company to invest in, without the baggage, that could outpace VLKAY?

I'm sure the retrofit of the 09-14 cars will be relatively economical, and the fines will be manageable... I would still be a buyer of their stock if those are the only headwinds they face. BUT the worst thing they did for their business was scare finicky customers. I think their near term sales will be in the toilet (fear) and long term sales will suffer (conquest sales by other brands). The PE will get back to normal... but it will be due to the E.

That says, if it goes substantially lower (another 20%?), I'd think I'd be a buyer.