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PostPosted: Sun Apr 29, 2012 11:12 pm 

Joined: Sat Apr 14, 2012 11:15 pm
Posts: 83
Location: Bay Area, CA

I have begun the "wtf to do with my extra savings/money?" step (investing), which for me thus far has been tons of reading online and reading books. I have read "Dhando Investor" and will be finishing "The Intelligent Investor" today. I have a reading list a mile long, already have money piling up, etc . . .


I don't want to ask you to tell me what I should do, when I should start putting my money in, etc . . . I would like to know how all of you got to where you are currently at with investing; the steps you took and where you're at now. I learn well from other people's journeys to figure out my own.


For example:


-1 year stashing money into normal savings account while reading/learning/doing fake trades


-began dividend investing X%, building CD ladder, following X investing strategy


-changed to Y strategy, liquidated CDs and put 100% into Tech stocks


-lost my shirt, changed to Z strategy after reading X book


-where you're at now


. . . Care to share?




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PostPosted: Mon Apr 30, 2012 9:41 am 

Joined: Tue Sep 20, 2011 3:49 am
Posts: 231

Great idea for the thread, I'm in the same boat as you, would love to know where people are at in a bit more detail than just "the PP" and a bit less detail than "I bought $1400 of share x"!




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PostPosted: Mon Apr 30, 2012 10:04 am 

Joined: Mon Aug 09, 2010 3:37 pm
Posts: 148

I just did about 30 solid dividend paying stocks. xom, pg, jnj, kmb, lmt, mcd, t, vz, wag, ba, cpb, gis, cag, utx, pm... I have roughly equal amounts in each except overweight in t, vz and xlu.


Instead of buying a bunch of separate utility stocks I bought xlu. At the time my average yield was close to 4%. After this recent run up its closer to 3%.


It's tempting to sell now and try to buy lower later...




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PostPosted: Mon Apr 30, 2012 11:38 am 

Joined: Sun May 08, 2011 2:37 pm
Posts: 63

Dividend Growth Investor here. I think the core portfolio should be comprised of good, strong dividend paying companies who raise their dividend every year to beat inflation. Less volatility, faster recovery after market swoons. It's "buy and hold", or, "buy and monitor", but not necessarily "buy and forget" investing. After living through and being invested in the 2000-2001 market and the 2007-2008 markets, this has become my investing goal.


SWR (Safe Withdrawl Rate) investing make no sense when you can get good solid dividend companies paying as much or more than your capital gains selling will net you and your nest egg is going to grow even during market downturns. Much safer and let's you sleep at night, too.


These articles should be read by everyone seeking to invest for retirement:


Retirements 4% rule: Why Mr. & Mrs. Income don't need it (Part 1):

http://seekingalpha.com/article/290289-retirement-s-4-rule-why-mr-mrs-income-don-t-need-it-part-1


Retirements 4% rule: Why Mr. & Mrs. Income don't need it (Part 2):

http://seekingalpha.com/article/290294-retirement-s-4-rule-why-mr-mrs-income-don-t-need-it-part-2


A very good read!




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PostPosted: Mon Apr 30, 2012 1:07 pm 

Joined: Tue Sep 20, 2011 3:49 am
Posts: 231

Really interesting articles. Thanks for the linkage!




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PostPosted: Mon Apr 30, 2012 1:17 pm 
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Joined: Sun Jul 03, 2011 2:20 pm
Posts: 2701
Location: Stepford USA

@Z—Keep up with the reading list. You might feel like most of it doesn’t apply, but it’s like reading the classics in lit class—you’ll understand the references (boglehead, 4% rule, PP, etc.)


I started with all tax-deferred money in Vanguard’s Wellington fund and a savings account. I think I could have stopped there except I would put some of the savings into CDs, I bonds, or TIPS for more yield (not a money market—my cash goes into something guaranteed). It’s not the best plan but it’s simple and will get enough yield over time.


My next step was to add 4 funds: (US) large cap, mid cap, small cap and total bond fund. I only put 10% in each of those and left the rest in the Wellington fund. I watched those funds daily. I wasn’t concerned about the balance, but I wanted to see how those funds reacted to bullish or bearish news. It taught me a lot about when the bond fund would go up or down, or why the large cap fund would go up but the small cap would remain flat. I eventually did this with other types of funds.


Once we made enough to max out our retirement accounts and had sufficient funds in emergency cash, I started a brokerage account. I started with broad sector funds so I could watch how they reacted to news as well. Maybe I lost some yield this way but I did ok and I learned so much in the process. It’s much easier to do this now with cheaper sector ETFs. My long-term brokerage account currently has some individual stocks in it (when I know enough about a sector to have some preference) and a couple of sector ETFs for sectors I don’t know enough about yet (healthcare is one).


It’s a little more complicated than that, but that’s the basics. Investing has just become a hobby of sorts now. I admit most people here could learn everything I did from books instead of buying funds and watching them work, but I’m a hands-on kind of person and needed to see for myself if what I was reading was accurate.


+1 on the articles celliott listed. I think they do a great job of explaining dividend investing.




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PostPosted: Mon Apr 30, 2012 7:30 pm 

Joined: Thu Jul 22, 2010 10:43 pm
Posts: 505

Ten years ago, all I had was 5.8 years of service credit in a government pension (equating to $5700 per year at 55 y.o.) and no debt. My savings were negligible and I had no long-term goals.


I started a non-government job that included 401(k) matching, so I contributed 10% of my salary, invested entirely in an S&P500 index fund. I also started saving my excess (i.e. after expenses) income in an ING savings account that was paying north of 4% at that time.


A few years later, I was maxing the 401(k). The favorable dividend tax treatment led me to fund a Roth IRA and buy some dividend stocks. I also opened a taxable trading account. Soon, I had a mix of individual stocks and some ETFs like DIV, XLF, EFA & VWO, TIP, VAW; trying to get some exposure to international companies, bonds and commodities.


So, from around 2004-2008 it was lather, rinse, repeat -- just trying to buy value-oriented dividend stocks with every spare dollar I had beyond a six-month emergency fund at ING (which was slowly decreasing the interest paid as the housing crisis unfolded).


With the crisis in 2008, my portfolio lost around 45% of its value, and some of my dividend payers, like BAC, became dead weights. I continued to max out the 401(k), but at that point, I also started thinking about preserving capital and trying for more modest but less volatile future returns. I began researching various investment systems in earnest. I was still most familiar with dividend plays, but by 2010 stocks in general seemed overvalued (which continues to seem the case). And I was, as many probably have become, more hypersensative to bubbles. At that point I began to seriously kick the tires of the Permanent Portfolio, reading Browne's book and absorbing the threads at Crawling Road. http://crawlingroad.com/blog/


Despite my hesitations about having such a significant allocation to gold, which produces no income and has some irrational adherents, I began early this year to transition to a PP-style porfolio. At present, I am about 20% in a classic 4-asset PP and the other 80% is probably 40% a mix of 25 dividend growth stocks and 60% VTSMX. The latter fact is entirely due to the very poor choices available in my 401(k) plan. I really won't be able to achieve my ideal allocation until I leave employment and roll the 401(k) into a self-directed IRA.


So, going forward I plan on a two-fold approach: first, rebalancing my PP semi-annually and adding to it so that every six months I have a larger PP relative to my other investments; second, continuing to buy dividend stocks at appropriate valuations that are targeted to yield at least 3%.


Edit: I should also add that the PP has performed just as I'd hoped, maintaing almost no downside while yielding about 3-4% upside. Even with inflation, this type of performance will support an adequate 3% SWR in my retirement once my entire portfolio is converted. I do intend to retain a 10% Variable Porfolio to try for a Black Swan or two.




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PostPosted: Mon Apr 30, 2012 11:34 pm 

Joined: Sat Apr 14, 2012 11:15 pm
Posts: 83
Location: Bay Area, CA

Thanks Maus, that was really helpful, actually.


As I am just starting to finally put in the effort to learn investing basics and the popular strategies, it is easy to start getting caught up in the "beat the S&P!!" excitement and forget about the REASON why I'm saving so much effing money over a short period of time: attaining necessary SWR, not to try and wildly maximize and quite possibly wildly lose my money instead.


I've been meaning to read about PP since seeing it referenced so much on here. I will add it to the list now.




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PostPosted: Tue May 01, 2012 3:02 am 

Joined: Sat Oct 01, 2011 6:40 pm
Posts: 51

For those who are dividend investors, what books would you recommend reading?




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PostPosted: Tue May 01, 2012 4:43 am 

Joined: Wed Jul 28, 2010 3:28 am
Posts: 2658
Location: Orygun

@karim - skip the books... go to seekingalpha.com and read the dividend growth writers (David Fish, David Van Knapp, David Crosetti, Dividend Growth Investor, and Chuck Carnevale). Visit http://dripinvesting.org/tools/tools.asp and download the dividend champions spreadsheet (Champions, Contenders, & Challengers).




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PostPosted: Tue May 01, 2012 10:10 pm 

Joined: Thu Jul 22, 2010 6:58 pm
Posts: 392

teen's: 6% CD rates

I did not spend time understanding other investing methods.

Looking back, maybe I shouldn't have, and just locked into 30 year CD's at 8%! ;)


20's: 100% in stocks (large, foreign, small, Reit) "in for the long haul" (excluding emergency money)

Everything eventually goes up based on American history...right?...right? Sure... unless we go the way of Japan or experience a greater derivative explosion. After all, there are only around 812 trillion in currency and credit derivatives. I am not sure, but I believe that is 100 or 150 more than the last time I looked (WTF?).


http://www.usdebtclock.org/


30+: 55% in stocks (large, foreign, small, Reit, emerging, energy) 45% stable funds/cash

After the market rebounded to around DOW 10,150 I changed my diversification/allocation goals and realized I wanted to accelerate my short term retirement plans as I no longer had/have faith in our monetary system as a method of value storage in the long term. I sold my house at this time which has now gone down another 27% since selling according to the zillow average and it is still falling. I am in an awesome position to take advantage of any situation. My next step will be trying to only work winter's on contract after exercising company policy regarding a 6 month leave of absence. This might not work as I have planned since it has to be approved, but you only live once. I imagine I would have some nice business related write offs as contract if I can pull this off.


To reduce my often book posts and sum it up, I found out that I am a conservative investor and that I should only work as I need money to help reduce the markets and monetary systems ability to leave me feeling like an Enron employee.




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PostPosted: Tue May 01, 2012 11:14 pm 

Joined: Wed Jul 28, 2010 3:28 am
Posts: 2658
Location: Orygun

Currently a dividend & dividend growth investor, but also trade those stocks according to relative valuations. My "emergency fund" is invested in I-bonds purchased from 2001-2004 (back when there was an acceptable fixed yield portion).


How I got here: Back in the '80s, I was too naive and didn't have any money to invest because finding a permanent job was difficult. In the '90s, I traded stocks of tech companies that I knew. Tech bubble was forming, but I'd already spent the money on my first house in '97, so it had little effect on me. By 2003, the first house was outgrown, so traded up using the stock proceeds from 2002-2003 (increased dividend holdings, but still primarily trading) plus realizing the equity in first house in 2004. Minimal money in investement accounts again until just before the market crash.


The most recent chapter: Withdrew home equity to invest in dividend growth companies 2010 to provide a stable income while planning early retirement. The portfolio aim is to yield 6.5%, preserve capital (if not increase it), and increase income faster than inflation.




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PostPosted: Wed May 02, 2012 3:53 am 

Joined: Tue May 31, 2011 3:00 am
Posts: 129

Spent the first 7 years after college working for far less than I make now but for enough to trigger lifestyle inflation and put me into credit card debt twice. Taught me how much I hate that. Started to save/invest at "normal" early-retirement rates, but didn't really get smart about investment strategy.


In the past 3 years, I started to make enough money that it was easy to accumulate money much more quickly. In the past year, I both discovered the ERE idea of saving a large percentage of one's income, and I also spent a lot of time learning to trade (by making a large number of trades and learning from what I did.)


But, the current strategies I follow are roughly this:

1. dividend / dividend growth / "value" stocks as a relatively safe place for most of my money, keeping in mind reasonable diversification (I don't like to have more than 5% in a single stock, even if it's something fairly safe.)

2. some stock/etf investment specifically oriented towards sector rotation (not entirely distinct from #1.)

3. trading long options positions with a small amount of my total net worth. These have usually been positions I've held for 1 - 4 weeks.


This year, I've been trying to make things a bit more tax-efficient, but without letting that get in the way of good investment decisions.




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PostPosted: Thu May 03, 2012 4:12 pm 

Joined: Fri Aug 20, 2010 10:03 pm
Posts: 55

I am extremely risk-averse but one risk is inflation outstripping your investments, so I have never had much of my long-term investments in bonds. Here’s my journey.


1. Ignore investing until student loans are paid off. Meanwhile, began career at employer with a defined-benefit pension.


2. Calculate max amount I can lose without being bothered ($60/month). Calculate how much I can invest in 403(b) and lose $60/month from my pay ($75/month). Invest $75/month in socially responsible mutual fund.


3. Roth IRAs are invented. Being raised in the 1970s (and having a pretty low income), feel that taxes have nowhere to go but up, so I love this invention. Realize that I am unlikely to lose ALL my invested money; I would probably lose no more than half. Realize that my socially responsible mutual fund is doing worse than the market at large. Realize that the only benefit of socially responsible investing is that the mutual fund has bargaining power with companies to encourage them to be nicer. Stop the 403(b) investing and begin investing the maximum amount ($166.66/month) in low-cost index fund. Keep barely maxing out my Roth IRA as limits go up.


4. I-bonds are invented. Several months later I discover them. I know that stocks tend to do better than bonds long-term, but tell myself that having 10% of my investments in bonds is perfectly reasonable and buy several hundred dollars worth at a fixed rate of 3% (plus inflation). [Now I wish I had bought a lot more.]


5. Somewhere in there I bought a house. It cost only 50% of the median price in my town, and I could afford it (barely) without a roommate but planned always to have a roommate. I got a 30-year fixed-rate loan at 8.25% (so cheap compared to what my parents paid in the 70s!!). Yet my principal payment was only $30/month (on a $600/month payment). I paid an extra $100/month (cutting 3 months off my ending date each month) for 2 years, then refinanced to 15-year loan with a slightly higher payment at 6.625%. Then I paid the minimum so I could keep maxing out my IRA. I did manage to usually have a roommate. Except for the year I bought the house and the year I re-financed, I basically broke even compared to renting (with a roommate). Now the house is paid off and is costing me less (property tax + homeowner’s insurance + maintenance) than renting.


6. Decided to split my investments into multiple low-cost index funds so that I could use rebalancing to buy low and sell high. Started working towards even amounts in: large-cap growth, large-cap value, small-cap growth, small-cap value, European, Asian, developing, REIT, bond fund, inflation bonds (TIPS/I-bonds).


7. Could afford to exceed the Roth IRA max—started putting money in to low-cost index funds in a Roth 403(b).


8. Realized I hated my job. Switched my extra money to a 457 (from which you can withdraw penalty-free whenever you leave the job even if you’re not yet old) as a sort of unemployment insurance.


9. At some point, I invested in a few specific companies in a non-retirement account. Recently, I got excited about growth dividend stocks. Started investing a small amount of extra money in those outside of retirement funds. (Of my first two, one cut dividends entirely and one cut dividends in half. So I started looking at a lot more information in picking my stocks after that, Seeking Alpha style.) Noticed that some were in my large-cap growth index fund and some were in my large-cap value index fund, so I decided to reduce the percentage of those funds proportionally.


10. Quit job. Cashed out 457 (and stockpiled vacation). Stopped investing in anything and stopped charitable contributions. Started taking on part-time jobs. I’ll decide at the end of the year whether I want to make contributions for this year (depending how things go). I’ve got 2 – 6 years before I am FI (depending how much of my work is at my former employer and how high my salary is).


11. PP sounds awesome yet scary, especially with gold being at all-time highs. I also prefer to stay in more liquid investments. Real estate also sounds like a good idea, but it’s already half my net worth with just the one house, plus I wouldn’t enjoy most landlady duties, so I’m settling for REITs.


12. Another thing—Choices change all the time. (One cool thing about “The Intelligent Investor” is how obvious this is. In the olden days, everyone invested in railroad bonds.) My safe money started in savings accounts. Then I started moving much of it into CDs—that “substantial” penalty for early withdrawal turned out to be no more than the interest you’ve earned so far, and probably less. Then I moved it to online savings accounts. Now I’m actually using I-bonds. At 0% + inflation, they are depressing for long-term needs, but for any money I can ignore for a year, the interest is a lot better than any savings account right now. I’ve decided that financial instruments are often a good place to be an early adopter (except for the crazy ones). I-bonds and online savings accounts where much more awesome when they were new than they are now. The Target debit card is still new enough to be awesome (because people are scared to give Target their checking account information).


13. I still want more diversification. Basically, I use diversification to deal with my risk aversion (instead of trying to keep my principal risk-free like all the books say that risk-averse people should do because that just seems idiotic unless you're rich enough). I’m sick to death of people saying, “oh, yes, you need stocks AND bonds.” That’s only two eggs for my basket. The same two eggs my pension is using. So I’ve also paid off my house. If property taxes go up too much, that must mean my house is worth a lot, so I could sell it and use the proceeds to live elsewhere. So, three eggs. Now I’m working on having more skills so I don’t have to rely on hiring other people so much.




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PostPosted: Thu May 03, 2012 5:26 pm 
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Gosh, I think it would take too long to give an entire history. And then I'd have to own up to all of the stupid things I have done, too. Over the past 25 years or so I've invested or speculated in everything from pork bellies to real estate tax certificates to your typical stocks, bonds and funds. I confess I have a "gambling jones", but have kept it under control by allocating only a small portion of assets to pure speculation. But I enjoy reading about investing and speculation as a hobby.


Maybe I will just summarize a few of the most important lessons I have learned:


First, the most powerful rule in long-term investing is the idea of Regression to the Mean. Markets are seldom at equilibrium and the equilibria are inherently unstable. So things are usually either underpriced or overpriced and may remain that way for months or years at a time. Bubbles form and burst -- this is actually normal market behavior, although it can be exacerbated by infusions of borrowing. You want to buy when things are underpriced and sell when they are over. This is the general principle behind Value Investing (Graham/Buffett), the Permanent Portfolio and the immense fortune accumulated by Hettie Green ("The Witch of Wall Street"). And its psychologically very hard for most human beings to do, so its usually best to set up a mechanical system for when to buy and sell.


Second, the best long-term decisions tend towards diversification so as to minimize overall risk. The answer to "should I invest in stocks/bonds/gold/commodities/MLPs/real estate/pay-down-my-debt" is usually "yes -- all of the above" PROVIDED you have some level of confidence in the proposed investments. The risk of losing a lot because you put all your eggs in one basket is just too high. And if if you think you know what will happen in the future, chances are you won't be able to pick the correct timing as to when the market will react.


Third, you do have to have personal confidence in whatever you are investing in. Otherwise you will bail right when you should be sticking with your program. This is why the decision of what to invest in is a personal one. One size does not fit all. You have to be able to sleep at night with whatever you choose. Paying down debt is almost never a bad option, though.


Fourth, if you are going to invest in stocks, unless you have inside information or are an expert in a particular industry, its usually best to stick mostly to the steady dividend and dividend-growth payers. The reasons for this go back to the 19th Century when there were no reporting requirements. The fact that a company could pay a dividend and/or the dividend was improving was concrete evidence that the business was stable and actually making money. Money talks . . . This still holds true today by-and-large, but always be careful about financial-industry stocks.


Fifth, be mindful of when you will need to use the invested money. Life insurance companies try to "match maturities" so that they will be able to pay out claims as they come due. This is a good practice -- e.g., as my eldest approaches college age in a couple years, that money is in a stable bond fund. If you need the money next year, it shouldn't be in a long-term or unstable asset.


********************************


Where I am today is with most of my freely investable assets in a "Permanent Portfolio" - style set-up, although I am trying to come up with a few "Regression to the Mean" - type rules within each sector to improve its performance. Nothing I have really acted on at this point. And my small pile of "gambling money" is currently in VIX options, but that's only to keep me from fooling around too much with the rest. Apart from the gambling money, I try to limit trading to only a few times per year.




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PostPosted: Fri May 04, 2012 1:26 am 

Joined: Thu Jul 22, 2010 12:18 pm
Posts: 549

By age:


< 24 => 100% cash, pay off all student loans (~$15k)


24 - 27 => 50% cash (travel fund), the rest in index funds in a Bogglehead style: 90% stocks, 10% bonds. This was heavily influenced by "A Random Walk Down Wall Street" and various beginner Personal Finance books. I didn't realize at the time time that the index funds that made up my stock allocation (large cap, mid cap, international, etc) were all 99% correlated with each other, and thus providing little actual diversification.


27 - 28 => 27% stocks, 3% bonds, 70% cash while I researched investing, my version of "on the sidelines"


28 - 29 => Permanent Portfolio plus 10% hand picked dividend stocks: 22.5% stocks, 22.5% gold, 22.5% cash, 22.5% 30Y bonds, 10% dividend stocks. I like the philosophy behind this allocation, and the reduced volatility, and the reduced reliance on prosperity/stocks.


When I say cash I mean checking + high interest online savings accounts, although in the past couple of years I also mean I Bonds and EE Bonds.


I've also flirted with real estate investing for years, ever since age 23. I've looked at thousands of properties online, a bunch in person, and put offers on a few, and came awful close to buying some of them, but ultimately never found a deal good enough to tie myself down. I probably will invest in real estate in my late 30s when my life is more settled, and I can imagine being in the same zip code for more than a couple of years.




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PostPosted: Tue May 08, 2012 6:32 am 

Joined: Mon Aug 02, 2010 4:45 am
Posts: 769

By age:


< 25: Satisfied avoiding debt and stockpiling cash in bank savings. Completely ignorant about investing; neither my family nor public education ever broached the subject.


25: Hired at a job with an unlimited 100% 401k match. HR orientation guy rightly says "I urge everyone to take advantage of this." I set up the account and am overwhelmed with dozens of AFAIK synonyms for making money: growth, value, appreciation, income...


25-28: This triggers extensive/obsessive self-education which leads me to index fund, modern portfolio theory, Boglehead investing. Yet I keep fiddling with my allocation as I waffle on issues like whether to value-tilt, REIT-tilt, hold corporate bonds, avoid MBSs, etc. In hindsight I was uncomfortable with some of the assumptions at the core of this approach, but rather than confront that I was nibbling around the edges.


29: Hear about the permanent portfolio. Initially I mock it and read the primary sources with the goal of refuting them. Long story short I am eventually convinced that the PP's economic world view, and conservative investing in general, are more compatible with my personality.


30+: 100% in a plain-vanilla PP.




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