(no subject)
Sep. 13th, 2009 05:54 pm![[personal profile]](http://s.dreamwidth.org/img/silk/identity/user.png){kind=small}
blackbyrd2Before I talk about what this is, let's talk about what it isn't.
This won't be a discussion on the mutual fund market, for the most part. Several people have already pointed out the advantages of index funds over other mutual funds (low-no fees, better returns, etc.) nor will bond funds play a major role in this blog, although all this is subject to change if I decide I need to say something about any of it.
Nor is this a beginner's guide to day trading, or, as it could better be called, going broke.
This will be almost exclusively about equities and long term investing. Well, actually, it's about me, my investments, and the decision making process involved.
So, let's start with me. I'm 53 (as of last August, thank you, thank you, yes, I'm ancient. Deal.) I have no pension, no retirement plan other than what I put together myself. Social Security might keep me from eating cat food, for a while, but I doubt it.
Previous 401k's have been less than exciting, even considering the time window, and until recently, my inability to invest more than nominal amounts in them due to expenses. They got rolled over into an IRA in about 2007, I think. Currently, there's enough in there to keep me in beer, as long as my drinking habits don't expand. I'm taking full advantage of the contribution limits for IRAs while I can, but unless they start doing spectacularly well, they're not going to fund my retirement.
Equities are more dramatic, and provide a better return than funds. The drawback being, of course, that they are also more risky. Let's get that out of the way right now. Drama and excitement is NOT something one usually wants in their retirement portfolio.
However, when one is pressed for time, one may have to accept a little risk in order to get a little better performance.
Finally, I'm self-taught here. No mentors, no classes, just what I've picked up from articles, commentary, etc. Just so you know. I'm NO investment professional and am not licensed to dispense advice. If you follow my advice, you are strictly on your own, and do so on your own responsibility. If, however, you make billions based on things I say, buy me something nice, won't you?
So, how does one measure performance? The traditional model, apparently, is total return, based on the value/price of the equity, plus any income or dividend yield.
We'll discuss the first part of that equation shortly, and I'll tell you why it shouldn't count, in my opinion. Right now, let's focus on dividends.
If a stock pays a 2% dividend, and inflation is 3%, how am I making any money in the stock market? I'm not even breaking even, and I get to take a risk with my money, which CDs do not present. (CDs are insured- even if your bank goes broke, your CDs are safe, as long as you have less than $250,000 in them, which, let's face it. If you have that kind of money in CDs, you don't need to be reading me.)
So, when I choose a stock, it ought to provide a yield from dividends which at least exceeds inflation, and hopefully exceeds what I could get out of a CD, right? But how do I know that XYZ stock, which pays a 18% dividend, is going to keep paying that dividend (and why, if it is, isn't it front page news?)
The short answer is, I don't. Equities can increase, reduce, or stop paying dividends at any time, without notice.
So, Rule number 1: You need to keep an eye on your investments. Buy and forget is not a strategy. It's giving your money away. (Somebody keep track of all these, would you, becuse I'm eventually going to end up with half a dozen rule #1 if I'm not careful.)
Seriously, I read news articles about the companies I invest in all the time. Most web sites which provide a 'portfolio' application usually include some kind of news/headline feed which searches for your stock symbol and lays out related headlines. Yahoo, for instance, when you search a quote, provides every article that mentions that stock, which includes when financial statements are posted, quarterly conference calls are scheduled, and yes, when dividends are declared.
This is all that Dreamwidth saved, which is about half the entry I was going to post, when the local hotel connection decided I needed to renew my IP lease, the bastards.
Maybe I'll try again later. Right now I just want to kill someone.
This won't be a discussion on the mutual fund market, for the most part. Several people have already pointed out the advantages of index funds over other mutual funds (low-no fees, better returns, etc.) nor will bond funds play a major role in this blog, although all this is subject to change if I decide I need to say something about any of it.
Nor is this a beginner's guide to day trading, or, as it could better be called, going broke.
This will be almost exclusively about equities and long term investing. Well, actually, it's about me, my investments, and the decision making process involved.
So, let's start with me. I'm 53 (as of last August, thank you, thank you, yes, I'm ancient. Deal.) I have no pension, no retirement plan other than what I put together myself. Social Security might keep me from eating cat food, for a while, but I doubt it.
Previous 401k's have been less than exciting, even considering the time window, and until recently, my inability to invest more than nominal amounts in them due to expenses. They got rolled over into an IRA in about 2007, I think. Currently, there's enough in there to keep me in beer, as long as my drinking habits don't expand. I'm taking full advantage of the contribution limits for IRAs while I can, but unless they start doing spectacularly well, they're not going to fund my retirement.
Equities are more dramatic, and provide a better return than funds. The drawback being, of course, that they are also more risky. Let's get that out of the way right now. Drama and excitement is NOT something one usually wants in their retirement portfolio.
However, when one is pressed for time, one may have to accept a little risk in order to get a little better performance.
Finally, I'm self-taught here. No mentors, no classes, just what I've picked up from articles, commentary, etc. Just so you know. I'm NO investment professional and am not licensed to dispense advice. If you follow my advice, you are strictly on your own, and do so on your own responsibility. If, however, you make billions based on things I say, buy me something nice, won't you?
So, how does one measure performance? The traditional model, apparently, is total return, based on the value/price of the equity, plus any income or dividend yield.
We'll discuss the first part of that equation shortly, and I'll tell you why it shouldn't count, in my opinion. Right now, let's focus on dividends.
If a stock pays a 2% dividend, and inflation is 3%, how am I making any money in the stock market? I'm not even breaking even, and I get to take a risk with my money, which CDs do not present. (CDs are insured- even if your bank goes broke, your CDs are safe, as long as you have less than $250,000 in them, which, let's face it. If you have that kind of money in CDs, you don't need to be reading me.)
So, when I choose a stock, it ought to provide a yield from dividends which at least exceeds inflation, and hopefully exceeds what I could get out of a CD, right? But how do I know that XYZ stock, which pays a 18% dividend, is going to keep paying that dividend (and why, if it is, isn't it front page news?)
The short answer is, I don't. Equities can increase, reduce, or stop paying dividends at any time, without notice.
So, Rule number 1: You need to keep an eye on your investments. Buy and forget is not a strategy. It's giving your money away. (Somebody keep track of all these, would you, becuse I'm eventually going to end up with half a dozen rule #1 if I'm not careful.)
Seriously, I read news articles about the companies I invest in all the time. Most web sites which provide a 'portfolio' application usually include some kind of news/headline feed which searches for your stock symbol and lays out related headlines. Yahoo, for instance, when you search a quote, provides every article that mentions that stock, which includes when financial statements are posted, quarterly conference calls are scheduled, and yes, when dividends are declared.
This is all that Dreamwidth saved, which is about half the entry I was going to post, when the local hotel connection decided I needed to renew my IP lease, the bastards.
Maybe I'll try again later. Right now I just want to kill someone.