101 Investing Tips

25) There’s a difference between investing and speculating.
When you invest it is the same as buying into a business. When you speculate you are betting on the greater fool theory.

26) Earnings drive stock prices.
Remember the ups and downs but to not forget that stock prices follow the path of corporate earnings.

101 Investing Tips

23) Nothing tops the 401(k).
The great triple threat: no taxes on the contribution, matching dollars from employer, and tax deferral on gains. But look for the 401K Roth this could be the best especially for younger workers.

24) Watch what you watch.
Stay away from the TV investing shows and infomercials. They typically promote systems and overtrading. Nothing beats good old fashion value investing

101 Investing Tips

20) Don’t rely on the regulators.
Do not count on the big brothers to oversee your investments. Just look at the debacles we have had in then last five years. Remember the regulators are the same bunch that run the government. Remember how bad they handle it.
21) Never let tax considerations be the main driver of an investing decision
Enough said

+It is not often you see real insight from a military techno thriller, brain candy, escapism novel. The following is a quote from Harold Coyle's "Pandora's Legion" I felt it summed up my attitude about the two parties.
"Well, it's like this, Doctor. The Democrats want illegals in our country. They talk about Mexicans doing work that Americans won't, but that's just a smoke screen. A guest worker program could handle that problem. No, those illegals who get the right papers are eligible to vote---some of them vote anyway---and they nearly always go Democratic. That's because they know the liberals provide funding and dispensation. On top of that, our constitution says that any child born in the U.S. is automatically a citizen. Even if the mother is there illegally. That's insane. But it'll never change."
"Then what about the Republicans? Don't they ever...."
"No, ma'am. Hardly ever. See, they mess their diapers at the thought of being accused of racism by the Democrats. And the Demos know that, so they use it like a club to beat the Goopers down."
"Goopers?"
Keegan laughed. "Oh, that's my expression. I sort of made it up. GOP: Grand Old Party. The Republicans." He shrugged. "Goopers."
The Brit shook her head slightly. "I still do not understand, Terry. If the Republicans--your Goopers--have the majority, why do they cater to the illegals and the political opposition? I mean, those people won't support the party anyway."
"I guess you'd have to ask them, ma'am. I'm a former Gooper myself, for a lot of reasons. Probably the biggest, though, is that the Republicans don't really stand for anything, except election. They want to get along with the Democrats, and the Demos are bent on destroying the country."

101 Investing Tips

19) Some things are best left to the pros.
Do not be lulled into a sense that you can or will achieve the returns that professionals make. They have a much lower transaction cost and can react quicker and make more informed decisions that then average investor.

20) When you buy a stock, you think it’ll be a winner. But you’re buying it from someone who’s happy to let it go.
There is always a buyer and a seller. Each made their own decision , probably for much different reasons.

More to Come.

101 Investing Tips

17) Save more
This dovetails with “Start Early” An extra $50 per month is worth $132,000 at retirement. Who can not give up a cup of coffee per day.

18) When planning for long-term goals, assume that your overall portfolio will earn 5% to 6% a year.
Every once in a while we all have to take a reality check. You hear about making 10 to 20% a year. What people want to do is overlook is the drawdowns (losses). The other factor is taxes. For every gain there is an offsetting tax. History has the stock market averaging 9% over long periods of time. Subtract a 20% tax and you are left with 7.2%. There is also the uninvested cash or interest bearing accounts. These all make up your “Portfolio”. Try for more but have realistic expectations

I am not a big fan of having lots of employees because they are so hard to keep up with. We do have a lady that did something yesterday that we could all learn a lesson from. She had made an error of omission about a month ago. It materialized again yesterday.

The omission was not a big deal but there were a couple of frustrated customers. When asked about the problem she said, "I forgot, it was my mistake, it will not happen again and here is how I will make sure it doesn't happen again". Who could ask for anything more. She did not try to shift the blame. She did not try to cover it up. She did not make excuses.

We all make mistakes but it shows a lot of character to own up and take responsibility.
We need more individuals with that kind of character.

101 Investing Tips

15) When planning for long-term goals assume that your overall portfolio will earn 5% to 6% a year.
This is pretty arbitrary but it does take in account that there are ups and downs. A 10% return in one followed by a flat year has a simple average of 5%.

16) Start early.
This one of the most important recommendations that I can ever emphasize. If you start at age 25 and put away $50 per month until you are 65 and earn a 7% compound return that portion of your retirement nest egg will be $264,000

101 Investing Tips

13) There’s more to the stock market than the DOW.
Investing in the DOW is not relevant to investing in an individual stock or the Wilshire 5000.
14) The rule of 72.
This is probably the very best tool for estimating returns and performance of investments. Divide 72 by the annualized percentage return. The answer gives how long ( in years) it takes for the investment to double. You can also work backwards to get an approximate yield.