It sounds like you have the right temperment and intelligence to follow the investing path that you're following. A little more experience will hone your skills.
My experience that seems most applicable to you is that stop losses work well when used. They are the safety valve for what may be your own lack of understanding or when Mr. Market is irrational for longer than you expect.
In my leveraged income experiment, I didn't make use of them as much as I normally do and it hurt the capital. I did that on purpose to find out what the leveraged ride was like and help me decide on thresholds... the result is that I'm sticking with the thresholds that have worked for me in my regular portfolio.
ExpatERE 21 Day Makeover
-
George the original one
- Posts: 5406
- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
George-- Thank you for the comment. I'm always open to suggestions from others who have more experience than myself. I just finished Fisher's book last night. I'm faced with the question of determing what kind of investor I am. Graham and Fisher approached the same subject (investing) from different perspectives, yet both were equally successful. My initial approach was towards divi investing. I'm now wondering if that is the best approach for my current circumstances and goals. Not discounting it, just wondering if there is a better approach? I'm likely to have some kind of mix. What I do know is that I'm not a speculator. I've never bought a lottery ticket, played cards or gone to a casino. Speculation is not in my nature. All of my investments have been made with long term approaches.
I think considering stop losses will certainly be something I spend sometime on. Thank you for the suggestion. I've enjoyed reading about your leveraged income experiment. If you don't mind me asking how old are you and how long have you been investing? You have any other investing books you would suggest reading?
I think considering stop losses will certainly be something I spend sometime on. Thank you for the suggestion. I've enjoyed reading about your leveraged income experiment. If you don't mind me asking how old are you and how long have you been investing? You have any other investing books you would suggest reading?
Day Fifteen: The first two weeks of the makeover.
The biggest thing I've learned from the first two weeks of the makeover is the importance of keeping my spending under control and developing myself as an investor. The first will require discipline and just following through on the spending plan I've made for the year: keep spending under 15% of gross pay. The second will require time and experience. I can read till I'm blue in the face, but without execution of my decisions I will never know the outcome of such action. A close friend who knowes my interest in investing asked how I did last year. I told him I did great, way better than what my 401k returned. However I followed it up with this, it could have just been luck. Just as I don't give significant attention to the downs in my portfolio neither can I count the ups as being a reflection of my skill. What the companies are doing behind the stocks is where my interest lies and the reason I bought to begin with. A year is not a significant amount of time to judge whether a business is doing the right thing or the wrong thing. It takes time for these actions to be appreciated on a balance sheet.
So, I wait and evaluate and continue to develop my understanding of the investment world.
The biggest thing I've learned from the first two weeks of the makeover is the importance of keeping my spending under control and developing myself as an investor. The first will require discipline and just following through on the spending plan I've made for the year: keep spending under 15% of gross pay. The second will require time and experience. I can read till I'm blue in the face, but without execution of my decisions I will never know the outcome of such action. A close friend who knowes my interest in investing asked how I did last year. I told him I did great, way better than what my 401k returned. However I followed it up with this, it could have just been luck. Just as I don't give significant attention to the downs in my portfolio neither can I count the ups as being a reflection of my skill. What the companies are doing behind the stocks is where my interest lies and the reason I bought to begin with. A year is not a significant amount of time to judge whether a business is doing the right thing or the wrong thing. It takes time for these actions to be appreciated on a balance sheet.
So, I wait and evaluate and continue to develop my understanding of the investment world.
-
George the original one
- Posts: 5406
- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
@ExpatERE - Age 49, began investing beyond a savings account at age 30. Didn't have a full-time job until age 28, so there wasn't enough money to invest before then.
First go-around with investing was the typical "buy stock in a company you know" at a low price and sell them high using a local discount broker. Calculate a valuation, handicap it to provide a margin of error, and then follow the price action. My performance was slightly better than the S&P500 through the '90s, but that was also a period when a monkey throwing darts could have done that well.
After wiping out my taxable portfolio twice to buy homes (fixer starter home on 1/3 acre in 1997, then upgraded to a larger repo home with an acre in 2004), I've come to appreciate the benefits of liquidity.
The Great Recession, running out of job promotions, and my approaching retirement age moved my investing towards capital stability and income generation. I had begun seeking dividends in 1997 when I started an IRA using a "set and forget" philosophy, but the returns when I trade are better, so by then I was certain my style would be a mixture of trading and dividends. Somewhere around the Great Recession, I also discovered the power of dividend growth investing as an answer to the problem of inflation. Dividends (and dividend growth) make handicapping a stock easier, providing an income while you wait for capital gains.
You've probably read my mention of paramutual betting and it's applicability to investing in the stock market. Two books that cover the topic pretty thoroughly are:
http://www.amazon.com/Commonsense-Handi ... 625&sr=1-2
http://www.amazon.com/Commonsense-Betti ... pd_sim_b_2
You may not be a speculator by nature, but the stock market is a voting machine and so is paramutual betting. Buying undervalued securities is not too different from betting on horses that have longer odds; in both cases, you've analysed the situation and found an inefficiency. In both cases, if people start buying/betting, then the inefficiency will disappear. In both cases you also have a bankroll to manage and grow, so evaluating the risks and not betting too much on a single horse/stock is important. In both cases, it's possible to move the price/odds by placing a large order/bet.
First go-around with investing was the typical "buy stock in a company you know" at a low price and sell them high using a local discount broker. Calculate a valuation, handicap it to provide a margin of error, and then follow the price action. My performance was slightly better than the S&P500 through the '90s, but that was also a period when a monkey throwing darts could have done that well.
After wiping out my taxable portfolio twice to buy homes (fixer starter home on 1/3 acre in 1997, then upgraded to a larger repo home with an acre in 2004), I've come to appreciate the benefits of liquidity.
The Great Recession, running out of job promotions, and my approaching retirement age moved my investing towards capital stability and income generation. I had begun seeking dividends in 1997 when I started an IRA using a "set and forget" philosophy, but the returns when I trade are better, so by then I was certain my style would be a mixture of trading and dividends. Somewhere around the Great Recession, I also discovered the power of dividend growth investing as an answer to the problem of inflation. Dividends (and dividend growth) make handicapping a stock easier, providing an income while you wait for capital gains.
You've probably read my mention of paramutual betting and it's applicability to investing in the stock market. Two books that cover the topic pretty thoroughly are:
http://www.amazon.com/Commonsense-Handi ... 625&sr=1-2
http://www.amazon.com/Commonsense-Betti ... pd_sim_b_2
You may not be a speculator by nature, but the stock market is a voting machine and so is paramutual betting. Buying undervalued securities is not too different from betting on horses that have longer odds; in both cases, you've analysed the situation and found an inefficiency. In both cases, if people start buying/betting, then the inefficiency will disappear. In both cases you also have a bankroll to manage and grow, so evaluating the risks and not betting too much on a single horse/stock is important. In both cases, it's possible to move the price/odds by placing a large order/bet.
George-- Thank you for taking the time to give me some background information. I find other peoples actual experience very interesting.
Dividend and divi growth investing is what I was initially exposed to and is what made the most sense to me. I think finding the seeking alpha website and several other dividend investing blogs as well as reading Dividends Still Don't Lie and The Dividend Playbook all helped forumulate my approach. As I go forward I think I will end up being some type of hybrid investor mixing a bit of dividend and growth stocks. I'm concerned about the tax drag on divis esp. with the favorable tax laws up for expiration (end of the year?).
Thanks for the book recommendation as well, wish they were available on Kindle.
Dividend and divi growth investing is what I was initially exposed to and is what made the most sense to me. I think finding the seeking alpha website and several other dividend investing blogs as well as reading Dividends Still Don't Lie and The Dividend Playbook all helped forumulate my approach. As I go forward I think I will end up being some type of hybrid investor mixing a bit of dividend and growth stocks. I'm concerned about the tax drag on divis esp. with the favorable tax laws up for expiration (end of the year?).
Thanks for the book recommendation as well, wish they were available on Kindle.
-
George the original one
- Posts: 5406
- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
Starting to drift far off topic from your 21-day makeover...
I think potential tax rate changes is one of the three(*) reasons there is more interest in MLPs these days. Especially for buy-and-monitor investors.
(*) The other two reasons being high yields (not so much today) and the fact that mutual funds can now include MLPs in their portfolio. MLPs, as a group, are overbought in my opinion.
I think potential tax rate changes is one of the three(*) reasons there is more interest in MLPs these days. Especially for buy-and-monitor investors.
(*) The other two reasons being high yields (not so much today) and the fact that mutual funds can now include MLPs in their portfolio. MLPs, as a group, are overbought in my opinion.
George-- No worries, it's my thread I get to direct it however I choose:-) and right now I'm interested in all things investing.
I spent a lot of time thinking and writing (writing helps me collect my thoughts) about the issue of taxation. If the tax laws change that will have an impact on real return. It seems a small amount but when compounded over decades you're talking about some real money. Still working on this one.
I spent a lot of time thinking and writing (writing helps me collect my thoughts) about the issue of taxation. If the tax laws change that will have an impact on real return. It seems a small amount but when compounded over decades you're talking about some real money. Still working on this one.
I think I also need to work on this. I think I first need to determine which items are used so often that I should buy a more durable/higher quality item. I am not easily irritated, so it is hard to recognize the moments where I would get annoyed because "the thing" "isn't working/is broken" "again".
Day Seventeen: Maintaining and Repairing Stuff.
Blah. Another day about stuff. I think that if a person does not have a lot of stuff they are going to be better off. Had I come to ERE with a house full of stuff then I probably would put more importance on these subjects. Since I have 2-3 suitcases of stuff It really is not applicable. That being said in the future if I buy quality stuff and take care of it I should be set.
Blah. Another day about stuff. I think that if a person does not have a lot of stuff they are going to be better off. Had I come to ERE with a house full of stuff then I probably would put more importance on these subjects. Since I have 2-3 suitcases of stuff It really is not applicable. That being said in the future if I buy quality stuff and take care of it I should be set.
Day Nineteen: Gettin rid of your tv
Another one that doesn't apply. I have not owned a tv since my divorce. I thought about getting one last year but I started reading Thoreau and just decide what is the point? There were so many other things that I wanted to do and learn. As a result of staying away from the tv and radio I think that it has reduced my cravings for stuff. I don't think that you see something or hear something and then boom, your out buying it. I think it's a little more subtle than that. But what affect does it have over time? For me I've noticed a better ability to focus and I do a lot more reading than I've done in the past. Giving up the TV has been a positive.
Speaking of Thoreau, one of my dreams has always been to have a cabin at in the woods. I'm thinking of around five acres, build an a-frame style cabin. Incorporate as much ERE principles into the design for things like electricity, heating and cooling needs. I would like to have solar panels to provide my electricity needs. Not sure about plumbing but I would like to have a well that I could also have my own water source. These are just thoughts for now and I have a lot of studying to do to figure out to make it work. May look at buying the land this year and gradually building it over the next few years. Oh, how is it related to Thoreau? I want to name it Walden II. I can do that even if it doesn't have a pond right? Spending my days reading, working in the garden, brewing wine/beer, studying astronomy and just enjoying the time I have to live. Sounds great to me...
Another one that doesn't apply. I have not owned a tv since my divorce. I thought about getting one last year but I started reading Thoreau and just decide what is the point? There were so many other things that I wanted to do and learn. As a result of staying away from the tv and radio I think that it has reduced my cravings for stuff. I don't think that you see something or hear something and then boom, your out buying it. I think it's a little more subtle than that. But what affect does it have over time? For me I've noticed a better ability to focus and I do a lot more reading than I've done in the past. Giving up the TV has been a positive.
Speaking of Thoreau, one of my dreams has always been to have a cabin at in the woods. I'm thinking of around five acres, build an a-frame style cabin. Incorporate as much ERE principles into the design for things like electricity, heating and cooling needs. I would like to have solar panels to provide my electricity needs. Not sure about plumbing but I would like to have a well that I could also have my own water source. These are just thoughts for now and I have a lot of studying to do to figure out to make it work. May look at buying the land this year and gradually building it over the next few years. Oh, how is it related to Thoreau? I want to name it Walden II. I can do that even if it doesn't have a pond right? Spending my days reading, working in the garden, brewing wine/beer, studying astronomy and just enjoying the time I have to live. Sounds great to me...
. You'll need to study it some more, indeed, but you'll get there, if you want it.DutchGirl-- I actually did a little reading last night on energy efficiency in homes. 20% of electricity comes from appliances. 56% comes from heating and cooling. As much as I like the idea of solar power in principle, I'm not sure how practical it would be. I don't plan on having many high consumption appliances, tv, dryer, dishwasher etc. I don't plan on having a large enough place to feel that I would need a traditional HVAC units that are so common in the US. Using other design principles migh possibly make the structure so energy efficient that I would not even need ac in the summer and fireplace (wood or gas)would be plenty for the winter.
Certainly lots more research to be done. Anyone have any experience with designing an energy efficient residence?
Certainly lots more research to be done. Anyone have any experience with designing an energy efficient residence?
Day Twenty One: Investing for Early Retirment Part Two
The last day, *sigh*. It's been good to go over these and have a benchmark to be able to look back at next year. It's enabled me to see where I'm doing well and what I can do to improve on areas of weakness.
I think part two of this comes down to finding "your" way. There are many different methods of investing as well as financial instruments in which to invest. What is best for you righ now may not always be the best. Economic environments change, personal circumstances change as well necessitating a change in investment stragtegy.
The key is to find your own path and that is what I'm working on now. Things will change as my understanding changes. I fully acknowledge that I may make mistakes and that is ok. A person can spend year on the sidlines waiting until they know everything before they put into action their own commitments based on a current level of knowledge. Now this doesn't mean one should run off half cocked and jump into the deep end of the investment pool. It means have faith in your own abilities.
My investment understanding has grown by leaps and bounds from this time last year when I wasn't even sure how to make my first trade or open a brokerage account. I hope that next year I will be writing the same about this year.
For anyone interested, I came across a really good website dealing with value investing. It's dense, each sentence contains a lot of useful information. I'm still digging into it. Check it out and let me know what you think:
http://www.numeraire.com/
The last day, *sigh*. It's been good to go over these and have a benchmark to be able to look back at next year. It's enabled me to see where I'm doing well and what I can do to improve on areas of weakness.
I think part two of this comes down to finding "your" way. There are many different methods of investing as well as financial instruments in which to invest. What is best for you righ now may not always be the best. Economic environments change, personal circumstances change as well necessitating a change in investment stragtegy.
The key is to find your own path and that is what I'm working on now. Things will change as my understanding changes. I fully acknowledge that I may make mistakes and that is ok. A person can spend year on the sidlines waiting until they know everything before they put into action their own commitments based on a current level of knowledge. Now this doesn't mean one should run off half cocked and jump into the deep end of the investment pool. It means have faith in your own abilities.
My investment understanding has grown by leaps and bounds from this time last year when I wasn't even sure how to make my first trade or open a brokerage account. I hope that next year I will be writing the same about this year.
For anyone interested, I came across a really good website dealing with value investing. It's dense, each sentence contains a lot of useful information. I'm still digging into it. Check it out and let me know what you think:
http://www.numeraire.com/