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Thread: What are some *good* investments?

  1. #26
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    Default Re: What are some *good* investments?

    Quote Originally Posted by BringOnTheMen View Post
    This may sound like a stupid question, but how much money should one invest when it's their first time? Is it even worth it to invest, say, $100?
    Yes, it is. In 1935, a secretary at Abbott Laboratories purchased $180 worth of Abbott stock, and never sold them. 75 years later, those shares are worth $7 million.

    http://bettertrading.blogspot.com/20...shares-of.html

    While results like this aren't typical, investing $100 in a stock, and holding it for a long period of time can result in a significant gain. With most banks paying less than 1% interest on savings or checking accounts, investing your money makes even more sense.

    There are some brokerage firms that only charge around $5 a trade. One I can think of is zecco.com. If you invest approximately $100 in a stock that offers a 5% dividend, using a brokerage firm that charges $5 per transaction, you'll get your purchase transaction fee back your first year, in dividends. If you hold onto this stock for 20 - 30 years, it could be worth a significant amount of money, in addition to the dividends you would have collected.

    Another alternative is "Dividend Reinvestment Plans (DRPs)". These are plans where you can buy stock directly from a company without paying brokerage fees. In addition to this, the dividends are automatically reinvested in the company stock. Some companies require that you own at least one share of their stock before you can join their Dividend Reinvestment Plan. For this, you would need to buy a share from a broker, and the share would have to go under your name. This might cost a bit more than a regular transaction. If I remember correctly, it's about $15 - $20, but I don't know for sure. Once you purchase the stock in your name and enroll in the program, you can buy stock directly from the company without going through a brokerage firm. While this may cost you more initially, you will save money if you want to make future investments in this company stock. If you pay a $20 brokerage fee, so you can enroll in a DRP, and invest $80 now, six months from now if you want to invest another $100 in this same company, you can buy the stock without having to pay any brokerage fees. If you're planning to start investing with a small amount, and sporadically invest small amounts in the future, I think investing in a company with a Dividend Reinvestment Plan that offers a dividend of 4 - 5% or more is a good way to go.

    Here's an article from Motley Fool on Dividend Reinvestment Plans:

    http://www.fool.com/school/drips.htm

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  3. #27
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    Default Re: What are some *good* investments?

    ^^^ DRIPS are one of the exceptions I mentioned above. They indeed have the advantages that eagle2 describes.

    IMHO they also have the large disadvantage that there is no way to quickly liquidate stock shares held in DRIPS in the event of a company / market downturn. Companies offering DRIP programs will sell you shares directly, but they usually will not 'buy them back'. Thus if a replay of the recent 2001 or 2008 stock market swoons were to happen, stock shares held in DRIPS could experience a loss of 1/4 or 1/3 or 1/2 of their value in the days or even weeks it could take to A. physically get your hands on the shares held by DRIPS, B. open a new brokerage account, C. transfer the shares into that new brokerage account, and D. actually have the broker sell them to avoid additional losses !

    Again IMHO DRIP programs made sense in the 'good ol days' when 'buy and hold' was a workable paradigm i.e. 'stocks will always go up in value'. But these days that paradigm has changed to the point where any investor who is limited in their ability to liquidate stock shares in a timely manner ( via DRIPS, via limited trade 401k's etc. ) is shouldering major risk of loss by participating in such limited programs.

    ~
    Last edited by Melonie; 09-19-2011 at 03:13 AM.

  4. #28
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    Default Re: What are some *good* investments?

    Quote Originally Posted by Melonie View Post
    ^^^ DRIPS are one of the exceptions I mentioned above. They indeed have the advantages that eagle2 describes.

    IMHO they also have the large disadvantage that there is no way to quickly liquidate stock shares held in DRIPS in the event of a company / market downturn. Companies offering DRIP programs will sell you shares directly, but they usually will not 'buy them back'. Thus if a replay of the recent 2001 or 2008 stock market swoons were to happen, stock shares held in DRIPS could experience a loss of 1/4 or 1/3 or 1/2 of their value in the days or even weeks it could take to A. physically get your hands on the shares held by DRIPS, B. open a new brokerage account, C. transfer the shares into that new brokerage account, and D. actually have the broker sell them to avoid additional losses !

    Again IMHO DRIP programs made sense in the 'good ol days' when 'buy and hold' was a workable paradigm i.e. 'stocks will always go up in value'. But these days that paradigm has changed to the point where any investor who is limited in their ability to liquidate stock shares in a timely manner ( via DRIPS, via limited trade 401k's etc. ) is shouldering major risk of loss by participating in such limited programs.

    ~
    and people who were using a "buy and hold" strategy did better than those who liquidated their holdings after the market downturns in 2001 and 2008, assuming their holdings' performance was similar to the overall market. 'Buy and hold' is still a workable paradigm.

    I invested in a DRIP in 2000, and I held it through the 2001 and 2008 downturns, and today my holdings in that company are worth more than twice as much as what I originally invested. That's a lot better than I would have done if I let the money sit in a bank.

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    Default Re: What are some *good* investments?

    Quote Originally Posted by mikef View Post
    Assuming you aren't going to be moving any time soon...... This would be a great time to buy a home using a 30 year fixed rate...... Paying off this loan with cheaper dollars over the lifetime of the loan will seem a no brainer in the comming years.

    Capital appreciation over the next few years will be nil..... But locking in a fixed living cost will pay dividends...... And once prices finally bottom...... Inflation will help the price.
    I'm not buying a house unless I'm over 35 (not anytime soon at all), can pay at least 70% or so upfront, and when I know for sure where I want to live. Considering the only places I've lived and will consider to live are literally the most expensive in the country, I'm really not too eager to buy a house. I'm one of those people who don't really mind if I own or rent. I feel like, when I buy a house, I'm pretty much going to buy it outright. So that wouldn't be til I'm much, much older.

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    Default Re: What are some *good* investments?

    Quote Originally Posted by GlamourRouge View Post
    I'm not buying a house unless I'm over 35 (not anytime soon at all), can pay at least 70% or so upfront, and when I know for sure where I want to live. Considering the only places I've lived and will consider to live are literally the most expensive in the country, I'm really not too eager to buy a house. I'm one of those people who don't really mind if I own or rent. I feel like, when I buy a house, I'm pretty much going to buy it outright. So that wouldn't be til I'm much, much older.
    I fully understand the debt free approach..... It is better than most, and I applaud your point and how it works in your life...... If a person would like to own a home, and cannnot afford, or do not wish to save for decades... paying off a low fixed rate term loan with cheaper money is a good investment.

    After all, this is an almost stated goal of policy of this country.

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    Default Re: What are some *good* investments?

    I invested in a DRIP in 2000, and I held it through the 2001 and 2008 downturns, and today my holdings in that company are worth more than twice as much as what I originally invested. That's a lot better than I would have done if I let the money sit in a bank.
    True, but ... had you sold those shares at the beginning of the 2008 downturn, and repurchased them at much lower price levels 6 months later, today they'd be worth FOUR TIMES your original cost in 2000.

    The only point I am making is that, with today's increased economic volatility, being 'trapped' owning stock shares that are declining in price does constitute a far greater risk of loss now than has traditionally been the case.


    If a person would like to own a home, and cannnot afford, or do not wish to save for decades... paying off a low fixed rate term loan with cheaper money is a good investment.
    Another point which was valid in the past but which may no longer be true today. These days, one must factor in the potential loss of home resale value from the original purchase price versus a 'fixed' amount of mortgage loan principal. One must also factor in rising future home ownership costs such as higher income taxes ( proposed elimination of the mortgage interest tax deduction ), higher local property taxes, higher local school taxes, new / higher mandatory home insurance costs ( flood insurance ), and several other variable costs which must also be paid in addition to the mortgage payment itself.

  8. #32
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    Default Re: What are some *good* investments?

    Quote Originally Posted by Melonie View Post
    True, but ... had you sold those shares at the beginning of the 2008 downturn, and repurchased them at much lower price levels 6 months later, today they'd be worth FOUR TIMES your original cost in 2000.
    It's very easy to say this after the fact, but the reality is, nobody knows for sure when a downturn is about to happen in the stock market, or if it does, how long it is going to last. If you try to time the market, you can just as easily end up missing big gains as missing big losses. Even during a market downturn, there are still days where there are big increases. If I had sold right before a big upturn, I could have ended up with 1/2 as much of an increase as I have so far. Please don't say that it is easy to tell when a downturn is occurring, because there have been a number of times you posted articles predicting downturns and crashes that never happened.

    Another issue with trying to sell at the beginning of a downturn and then buy again at the beginning of an upturn is taxes. If you sell your stock, and don't buy again within a certain amount of time, you will have to pay taxes on your gains, and then you will have less money to reinvest.

    Quote Originally Posted by Melonie View Post
    The only point I am making is that, with today's increased economic volatility, being 'trapped' owning stock shares that are declining in price does constitute a far greater risk of loss now than has traditionally been the case.
    Market volatility is even more reason to invest in DRPs. With DRPs, you're constantly reinvesting dividends, so when the stock goes down, you're buying more stock at a lower price, so if the stock just goes back to where it was before the downturn, you'll still come out ahead. During the economic downturn, the stock I invested in, lost approximately 1/3 of its value, but I was buying more stock with my 5% dividends at the lower cost. Since then, the stock has gone up above where it was before the downturn, and I had a nice increase on the stock I bought with the dividends during the downturn.
    Last edited by eagle2; 09-19-2011 at 10:31 PM.

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    Default Re: What are some *good* investments?

    Quote Originally Posted by eagle2 View Post
    It's very easy to say this after the fact, but the reality is, nobody knows for sure when a downturn is about to happen in the stock market, or if it does, how long it is going to last. If you try to time the market, you can just as easily end up missing big gains as missing big losses. Even during a market downturn, there are still days where there are big increases. If I had sold right before a big upturn, I could have ended up with 1/2 as much of an increase as I have so far. Please don't say that it is easy to tell when a downturn is occurring, because there have been a number of times you posted articles predicting downturns and crashes that never happened.

    Another issue with trying to sell at the beginning of a downturn and then buy again at the beginning of an upturn is taxes. If you sell your stock, and don't buy again within a certain amount of time, you will have to pay taxes on your gains, and then you will have less money to reinvest.

    My 401k would have a lot more money in it had I used use the 50 day and 200 day moving averages to transfer money out of the SP500 fund and into the treasury bond fund when the 50 day moving average dipped below the 200 day average, and move the money back to the SP500 when the 50 day average moved above the 200 day average.

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    Default Re: What are some *good* investments?

    the so called 'death cross' i.e. when the 50 day moving average drops below the 200 day moving average has been a long time 'classic' analysis / forecasting tool. There are other tools based on technicals that are arguably far better. But the point remains that you realize that 'buy and hold' has now become a far riskier investment strategy than it used to be ( and you have the 'lumps' to show for it by 'buying and holding' stocks through the 2008 downturn ).

    Again my biggest 'complaint' about 401k's is that employers typically don't provide any 'contrarian' options ... thus the best you can hope for in times of a downturn is to minimize losses via a bond fund or a money market fund.


    PS I see that ( as expected ) today's FED announcement led to a significant pop in longer term US T bond price levels ( TLT up 4% today ) ... and your 401k's medium term bond fund AGG gained 1% or so. Hopefully you completed your 401k transfer in time.

    ~
    Last edited by Melonie; 09-21-2011 at 12:38 PM.

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    Default Re: What are some *good* investments?

    Real estate bought at tax sale.

    First sale, bought 3 units for $6000 total.
    sold one for 5k, other 2 cost me a net $1,000 and gross that a month in rent

    2nd sale,
    bought 4 units for $10,000
    Sold them for $25,000 a month later.

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