Investment Strategies

[Wake]

I'm 26, and use Scottrade to invest. It'd be accurate to say I'm an amateur investor.

Currently the only stock I own is GRHpC, and I've been wary since then. That stock is a preferred stock, giving dividends, and the overall value increased quite a bit since half a year ago. That's just being fortunate; there's a reason I haven't bought up more stocks. I fear I'd lose money on bad investments.

So, I'm thinking. It's tough trying to think of stable investments. What I'd like to do is start a dividend reinvestment program utilizing preferred stocks that pay high monthly dividends. The dividends I would have received are instead automatically used to buy even more of that same stock. That way my stocks will keep buying more of themselves, and then, when it's switched back to normal dividend payout, the reward will be greater. The risk in doing that, however, is constantly buying more stocks automatically in a company that eventually goes bankrupt.

Since I'm young, and am considering the odds, should I instead buy 5 preferred stocks at $300 each, and wrap each one into a DRIP? That way even if one or two go belly up the others would succeed. My knowledge in investing is little. More than some reading this not only have more knowledge, but valuable experience, too.

What do you reckon would be wise here?

 

[sameech]

I'm 26, and use Scottrade to invest. It'd be accurate to say I'm an amateur investor.

Currently the only stock I own is GRHpC, and I've been wary since then. That stock is a preferred stock, giving dividends, and the overall value increased quite a bit since half a year ago. That's just being fortunate; there's a reason I haven't bought up more stocks. I fear I'd lose money on bad investments.

So, I'm thinking. It's tough trying to think of stable investments. What I'd like to do is start a dividend reinvestment program utilizing preferred stocks that pay high monthly dividends. The dividends I would have received are instead automatically used to buy even more of that same stock. That way my stocks will keep buying more of themselves, and then, when it's switched back to normal dividend payout, the reward will be greater. The risk in doing that, however, is constantly buying more stocks automatically in a company that eventually goes bankrupt.

Since I'm young, and am considering the odds, should I instead buy 5 preferred stocks at $300 each, and wrap each one into a DRIP? That way even if one or two go belly up the others would succeed. My knowledge in investing is little. More than some reading this not only have more knowledge, but valuable experience, too.

What do you reckon would be wise here?

You won't make money just off dividends. You need to look for stocks with growth (or keeping ahead of inflation) potential. If nothing else, pile your money into your savings, wait until a solid company that will be around forever has some bad news that drives its price down, and then leap on its stock for awhile until it recovers. I personally like stocks that have a lot of tangible assetts behind them like buildings, equipment, etc, as opposed to them making their money off somebody else making money (i.e. financials)

 

[SteadyMercury]

wait until a solid company that will be around forever has some bad news that drives its price down, and then leap on its stock for awhile until it recovers.

This is easier said than done, nobody knows when the bottom of a company's stock price is and nobody knows if it will ever recover. Many once solid companies that were a staple of the US economy in their day have either gone bankrupt (GM, American Airlines, etc.) or seem to be on slow death march to it like Sears.

 

[sameech]

wait until a solid company that will be around forever has some bad news that drives its price down, and then leap on its stock for awhile until it recovers.

This is easier said than done, nobody knows when the bottom of a company's stock price is and nobody knows if it will ever recover. Many once solid companies that were a staple of the US economy in their day have either gone bankrupt (GM, American Airlines, etc.) or seem to be on slow death march to it like Sears.

Investment in any stock involves risk of loss. That is just how the market works. It goes to your tolerance level. For instance, a friend of mine has made a boatload of money daytrading stocks that are teetering on bankruptcy. A few cents gain on a lot of shares of a $6 stock offers a better ROI than one can get off a comparable gain in Google of Apple. I don't have the guts for that kind of investing (and I am a cheapskate because I don't like paying fees to trade and don't trade huge volumes to make that a negligible cost)

 

[Wake]

I've been reading more into investing, and four things grab my attention.

1) Allot a few thousand or so towards DRIPs. Especially those that pay every month.

2) As Sameech said, wait for companies that have been around forever to suffer a blow that brings down their stock value a bit, then load up on it while it's cheap. Chaos creates opportunity.

3) Get into index funds. I'm looking at health care, real estate, and scientific research index funds. I want to diversify, and I'm feeling confident that, with an increasing population, health care stocks will continue to increase in value. Of course, I'm no financial master.

4) Buy up preferred stocks in real estate that have an APY of 10%-13%+. Maybe. I don't know. RE seems stable... I think. I'm thinking of putting $600 towards that with time and further reading.




I have another $850 sitting in my Scottrade account, and am unsure whether to invest or withdraw it. Fretting and sweating with worry over any accidents like a transmission going out. Tortured myself a bit last night watching "Bizarre ER" videos on YouTube, too, so worrying a bit more than usual. People aren't nearly as durable as they think they are.

 

[fiza200]

Well, these strategies are useful for people to invest money in business.

 

[Wake]

I've considered mutual funds, but it's been said that the costs involved in paying the mutual fund manager are a detriment to one's investment over time. Index funds, however, have less cost associated with upkeep, because a machine keeps track of the changes in the whole index instead.

Currently the only stock I own has gone up 38% since last December. However, this probably doesn't mean anything, because it can change abruptly. I'd like to dabble in various index funds, and pt some high-integrity (solid) stocks into a Dividend Re-Investment Plan (DRIP). Later this week I'll be searching through whatever Scottrade offers for index funds.

 

[Pennywise]

Get Jim Cramer's book. You need to diversify your investments, not only by company but by sector.

 

[Pennywise]

And Scottrade is an awesome investment tool. I use them as well.

 

[Moonglow]

Long term investments in power companies, food and water are good investments with lower risks..

 

[Wake]

Absolutely. I want to invest in various sectors when it comes to index funds. Start with $1000 in a health care index, one in utility, one in real estate, and one in scientific research (the latter option being riskier). It would probably be wise to start up a Traditional IRA while I'm a young 26, and sock away $5G each year, too. Currently I've paid off $6,000 in school debts with my own work, and am angling to pay off the remaining $7,000 soon; I want to be debt-free before I get heavy into investments. Otherwise the interest on those debts would eat me alive.

 

[boedicca]

Suggest you check out Vanguard funds. They have various index funds and are no load. Putting all your money in one stock is generally not a good idea.

 

[Wake]

I've heard about Vanguard, but I am inexperienced when it comes to using multiple online investment tools. I'm ignorant of what "no load" means. The goal is to put chunks of money into various sectors. Never all in one, because that basket could spill and my future omelette ruined. I would rather put $1G in four different index fund sector, than 10+ different stock types, because Scottrade's cost of $7 each and every time you purchase or sell a stock will eat into my finances. Rebalancing index fund stocks is another idea on the mind, bt going about it raises questions...

 

[boedicca]

No load means that you aren't paying someone a couple of points to manage your money.

Vanguard has a great deal of information at their website; you can search through funds based on risk tolerance, etc.

 

[sameech]

I've heard about Vanguard, but I am inexperienced when it comes to using multiple online investment tools. I'm ignorant of what "no load" means. The goal is to put chunks of money into various sectors. Never all in one, because that basket could spill and my future omelette ruined. I would rather put $1G in four different index fund sector, than 10+ different stock types, because Scottrade's cost of $7 each and every time you purchase or sell a stock will eat into my finances. Rebalancing index fund stocks is another idea on the mind, bt going about it raises questions...

Depends on how long you want to hold the stocks. Most funds have fees whether they are trading fees or not. T. Rowe Price used to eat me alive with monthly management fees when I spread my money into different funds.

 

[MHunterB]

Wake, do you have a 401K available through your workplace? If so, I suggest you try to put in the maximum the company will match - even while you're still paying off that 7K in debt.

The magic of compound interest is best seen through time. If you had 10K invested already, in another 40 years you'd have close to a million even if you never added another cent of contributions. I know that sounds impossible but check it out: Compounding

That's the argument to do it now. Most of us earn more year by year, and so can afford to contribute more in later years - but then you're also likely to acquire more financial obligations with time. The longer you wait, the more per month you've got to shovel into savings to catch up.

We are currently shoveling in every last penny we're allowed to into our 401 K - but that's only 22.5 K a year. Oh, it sounds like a lot, but not if you're expecting to retire in only 3 more years. We probably have enough to retire on right now - but another $100K or so couldn't hurt!

We have been extremely lucky: husband got hired the last 2-3 months before each company stopped giving pensions! Otherwise we'd need a hell of a lot more in our nest egg: it takes roughly $300K in assets to produce $1K/month of income (at 4% which is about what a 'guaranteed' rate of return tends to be).

If I were starting now, I'd look for a 'no load' mutual fund from someone like Fidelity that was aimed for people retiring in about 35-40 years from now. That's one way to get a pretty diversified investment base when you've got a very tiny portfolio. You've got DECADES: you can afford to make a few mistakes and you'll have time to make up for them.

Oh, very important detail: FEED THE SAVINGS FIRST! Every raise, bonus, or windfall should increase your savings. It's like 'found' money when you get a raise: if you put half of that into savings of some form or another, you'll never have a chance to miss it. We used to do US savings bonds because you had to wait 6 months to cash 'em in and you could buy one for $12.50......

In a few years, re-evaluate your situation: How secure is your employment, are your savings on track for your goal, what major expenses will there be in the next year or so. OH, and that's AFTER you've stashed 3-6 months of living expenses somewhere fairly liquid..... Do NOT!!! buy life insurance unless someone else is depending on your income. And when you DO buy, buy term and invest the difference. (And the one area of car insurance to 'splurge' on is......medical payments.)

Now, if you've got some assets from raises, bonuses, windfalls - that's when you pick a stock and buy a block (100 shares) if you can. You buy it for the DRIPs and to hold.......forever. We're the third generation to enjoy ownership of a lot of Niagara-Mohawk and Proctor & Gamble - and we hope to pass that on to our son.

If you've met your regular investment goals, there's nothing wrong with getting a little wild 'n' crazy with a couple of penny stocks or whatever - just don't get too greedy or quit your day job : ))

There are a lot of 'automated' programs available to assess your risk tolerance and your goals and point you towards a good mix for your particular style and situation. We've used the 'Motley Fool' one and also 'Financial Engines'..... any of them can give you some general idea of what might be appropriate for you now : ))

 

[DriftingSand]

I'm 26, and use Scottrade to invest. It'd be accurate to say I'm an amateur investor.

Currently the only stock I own is GRHpC, and I've been wary since then. That stock is a preferred stock, giving dividends, and the overall value increased quite a bit since half a year ago. That's just being fortunate; there's a reason I haven't bought up more stocks. I fear I'd lose money on bad investments.

So, I'm thinking. It's tough trying to think of stable investments. What I'd like to do is start a dividend reinvestment program utilizing preferred stocks that pay high monthly dividends. The dividends I would have received are instead automatically used to buy even more of that same stock. That way my stocks will keep buying more of themselves, and then, when it's switched back to normal dividend payout, the reward will be greater. The risk in doing that, however, is constantly buying more stocks automatically in a company that eventually goes bankrupt.

Since I'm young, and am considering the odds, should I instead buy 5 preferred stocks at $300 each, and wrap each one into a DRIP? That way even if one or two go belly up the others would succeed. My knowledge in investing is little. More than some reading this not only have more knowledge, but valuable experience, too.

What do you reckon would be wise here?

I'm sorry to say that I had a 401k with lots of money in it at the end of 2008. When the economy began to crash in early 2009 my 401k steadily dropped in value until I panicked and removed what I had left. I had to pay substantial fees and penalties for early withdrawal and ended up losing about $25,000.00 when it was all said and done. As a result, I no longer trust the stock market. Others have fared much better than I so you probably don't want to take advice from me.

I recently decided to open another 401k but very tentatively. After a few months I started getting checks from the investment firm who handled the account. I had no idea why they were sending me checks when I hadn't requested it. I contacted my human resources department and they didn't have any answers either. So ... instead of messing with it I cancelled any further deposits/investments out of pure distrust of the system. I now take a portion of my check and put it into a safe and I buy silver when I can. The majority of investment gurus would tell me that I can't possibly save up enough for retirement but retirement doesn't sound that exciting to me anyway. If I'm fortunate, I will die of a heart attack before wasting away in an old folks home.

 

[SteadyMercury]

I'm sorry to say that I had a 401k with lots of money in it at the end of 2008. When the economy began to crash in early 2009 my 401k steadily dropped in value until I panicked and removed what I had left. I had to pay substantial fees and penalties for early withdrawal and ended up losing about $25,000.00 when it was all said and done. As a result, I no longer trust the stock market.

I don't understand why you didn't just learn from your lessons of what you did wrong and be a smarter investor instead of just saying never again. I also don't understand why you removed your money, almost every 401k has some sort of stable value fund that doesn't return much but is very low risk.

Either way lesson learned = don't sell low.

I now take a portion of my check and put it into a safe and I buy silver when I can. The majority of investment gurus would tell me that I can't possibly save up enough for retirement but retirement doesn't sound that exciting to me anyway. If I'm fortunate, I will die of a heart attack before wasting away in an old folks home.

Having 100% of your retirement funds in a single precious metal commodity is far more volatile than when you were just tossing it into your 401k.

 

[SteadyMercury]

I've heard about Vanguard, but I am inexperienced when it comes to using multiple online investment tools.

Vanguard is just an very low cost investment management company, it isn't so much about online investment tools as it is a company with a wide selection of mutual funds across all asset classes with no load and low expense ratios.

They aren't the only one, Fidelity, Schwab, etc. fees for ETFs and mutual funds are quite low today compared to 20 years ago you really can't go wrong with any of the large discount firms.

Good luck.

 

[DriftingSand]

I'm sorry to say that I had a 401k with lots of money in it at the end of 2008. When the economy began to crash in early 2009 my 401k steadily dropped in value until I panicked and removed what I had left. I had to pay substantial fees and penalties for early withdrawal and ended up losing about $25,000.00 when it was all said and done. As a result, I no longer trust the stock market.

I don't understand why you didn't just learn from your lessons of what you did wrong and be a smarter investor instead of just saying never again. I also don't understand why you removed your money, almost every 401k has some sort of stable value fund that doesn't return much but is very low risk.

Either way lesson learned = don't sell low.

I now take a portion of my check and put it into a safe and I buy silver when I can. The majority of investment gurus would tell me that I can't possibly save up enough for retirement but retirement doesn't sound that exciting to me anyway. If I'm fortunate, I will die of a heart attack before wasting away in an old folks home.

Having 100% of your retirement funds in a single precious metal commodity is far more volatile than when you were just tossing it into your 401k.

At this point in my life? I just don't care. Whatever will be will be. Many of the investment funds these days are being invested in foreign interests (China, India, etc.) so it doesn't bother me that I'm not helping America's financial adversaries.