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The Drake
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Didn't want to derail the "advice" thread, but I'm kind of curious how many other Ornerians have investments.

I stay far away from real estate, because it is nowhere near liquid enough. I don't even own a home, because I want the flexibility to pick up and move with a few weeks notice.

I do invest in the stock market, and I have invested in individual stocks that lost 98% of their value. I've also picked up stocks that have doubled or tripled value. I view it a lot like horse racing.

You can learn a lot about the individual horses, talk to the trainers, know the track conditions, know the jockeys and read every statistic on the racing form. You can make a living as a professional handicapper, but you have to tolerate a lot of short-term losses and be able to take them in stride.

For me, it is a pleasure to be able to do that sort of thing - because I can remember not so long ago when investing for me was deciding which bills to pay, and which to ignore for a month.

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Digger
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The only real investing I do is in my retirement accounts. In those, I keep everything in index funds (S&P 500 and Small Cap are my biggest holdings) as well as a few individual stocks. Derivatives aren't allowed in these accounts, nor would I want them - too risky for me and I don't understand enough about them to feel comfortable investing in these types of products. I've avoided bonds so far, not because I don't like them, but more because I'm young enough to feel that a more aggressive approach is appropriate. I'll probably diversify into bond holdings in about 5 or 10 years.

As for everything else, it all centers around my business, which is real estate development. That isn't really investing, though it does involve staking a lot of my personal assets into a project on occassion. I also manage a substantial amount of bank-financed debt as part of that business. Again, not investing, but a big part of my daily financial life.

[ September 06, 2005, 04:50 PM: Message edited by: Digger ]

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The Drake
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quote:
Originally posted by Digger:
The only real investing I do is in my retirement accounts. In those, I keep everything in index funds (S&P 500 and Small Cap are my biggest holdings) as well as a few individual stocks. Derivatives aren't allowed in these accounts, nor would I want them - too risky for me and I don't understand enough about them to feel comfortable investing in these types of products.

I was actually shocked to find that I could do some very exotic trading (by my standards) in my IRA account - including margin buying and short selling.

Put options are the only thing I'm getting involved in right now. You can easily lose 100% of your investment in a hurry. But you can make a lot more also.

quote:
As for everything else, it all centers around my business, which is real estate development. That isn't really investing, though it does involve staking a lot of my personal assets into a project on occassion. I also manage a substantial amount of bank-financed debt as part of that business. Again, not investing, but a big part of my daily financial life.
I've heard a lot about real estate as an investment - particularly revenue generating properties rather than speculation. Not to my taste, though. It seems you can really wind up holding the bag. At least I know that securities can be traded the minute they go downhill - it's just up to me to give up on them in time.

I view debt as a part of the picture of investment, it is all opportunity cost for my available cash on hand. I can pay off a loan and be guaranteed an 8% rate of return. It is like a really good CD. Plus, paying off a loan helps your cash flow picture.

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IrishTD
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I've got a mix of mutual funds in an IRA. Plus I futz around some with an ETrade account, where futz == 2 trades/year. Don't have the time to do as much research and such as I would like. I'll probably shift from a few odds and ends here and there and start trying to do more long term holding...little safer that way.
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Digger
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quote:
I was actually shocked to find that I could do some very exotic trading (by my standards) in my IRA account - including margin buying and short selling.

Put options are the only thing I'm getting involved in right now.

I can't recall if margin or shorting is allowed in my IRA or other retirement accounts. And honestly, I don't want to know. [Smile]

I had a buddy who did a good bit of option trading. That is definitely NOT an option (pardon the pun) for me. Even the geek that I am, when he started droning on about butterfly spreads and the like, my eyes glazed over.

quote:
I've heard a lot about real estate as an investment - particularly revenue generating properties rather than speculation.
I think we're reaching a point in real estate investment where a lot of people are about to get hurt (see thread on Bubble, What Bubble?), but that isn't what I do. What I do is buy a piece of raw land and install streets and other infrastructure to support building houses. Then, I subdivide the property and sell finished building lots to homebuilders who in turn build houses. That's residential development in the old-school sense of the term. It can still be risky, but the Atlanta housing market is still consistently demanding 50,000 units a year. As long as that doesn't change, I feel like there will always be buyers. Whether they'll pay what I need them to pay is another story...
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Zyne
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I need to get better about handling my things. Right now, I have a primary residence, a 401(k), an IRA and a bit of cash that I've been keeping in short term CDs. I don't manage the 401(k) and IRA personally, I picked some funds and spread out the investment among them. I want to get more involved and am planning to roll them into accounts I can manage myself on e-trade. Which will be put primarily into index funds. Until I have enough cash to buy a second residence with my retirement cash. [Smile] Has anyone done that?

These accounts have been entirely flat since I've had them (all of three years!), but I'm scared that I'll do worse than the current administrator. That's why I've been hesitating.

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EDanaII
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@ The Drake:
quote:
I stay far away from real estate, because it is nowhere near liquid enough. I don't even own a home, because I want the flexibility to pick up and move with a few weeks notice.
I wouldn't poo poo real estate too much, if I were you. True, it's not as liquid as others, but that doesn't mean it doesn't have potential. On a personal note, I own a large acreage of land that I paid 24k for that is now worth -- if its full (non liquid) potential is ever realized -- millions.

As me pappy is fond of saying, "buy land, that ain't makin' any more of it, so it ain't gonna get no cheaper!"

As to other investments, I have stock, as well as, an IRA and my home. All of which I recommend highly. [Smile]

Ed.

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Dagonee
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Rolling asset allocation funds are good. I use Vanguard Target Retirement funds: basically a fund of funds that gradually shifts asset allocation based on a target retirement date. I'm using one level later right now because I think they're a little conservative for my timeframe, but it's very convenient and I don't have to rebalance myself. Basically I've got all my old 401Ks rolled into an IRA in the target fund.

Non-retirement accounts have some stock index funds, and the proceeds from our house sale are in short term (I think savings account, need to check) so we can buy a house in 2 years.

What's a good place to park that for 2 years? CD ladders?

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Dagonee
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quote:
I wouldn't poo poo real estate too much, if I were you. True, it's not as liquid as others, but that doesn't mean it doesn't have potential.
Real estate is the only highly leveraged investment most people can get access to. But it takes time and effort to do right - there's a thread here somewhere about landlord headaches.

In many markets it's not a good time because rents lag the 80% 30 year fixed mortgage monthly payment by quite a bit. But there's always something to be found.

It's better not to do it at all, though, if you can't or don't want to put the effort in.

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The Drake
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Lots of E*trade people, that's my brokerage also. The most apalling to me is the investments I've passed on --- that have doubled in value in a couple of years. My five mutual funds in my IRA (index/sector) have done very well. My single stock funds including IBM - not so good, but I think it is temporary.

I'll be happy to disclose particulars to people who are interested, but don't want to post it on the board.

Also, I have earned a 20%+ return on my fantasy football investment [Smile]

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Digger
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quote:
Until I have enough cash to buy a second residence with my retirement cash. Has anyone done that?

These accounts have been entirely flat since I've had them (all of three years!), but I'm scared that I'll do worse than the current administrator. That's why I've been hesitating.

I've never considered buying a second residence, although, if I found myself with a bunch of money laying around, I might look into a nice little spread around Asheville, NC. It's gorgeous up there.

As for your retirement accounts, you sound like you know a good bit about handling money, it may just be the uncertainty of not fully understanding the financial products available to you that's making you hesitant. I'd recommend Everyone's Money Book (the same one I recommended on the financial advice thread). It's a wealth of information and may point you to other sources which will help your comfort level with investment decisions. Focus on understanding Stocks, Bonds, and Mutual Funds. Those are the most common securities investments in retirement accounts like IRA's and 401(k)'s.

Then, at some point, you'll decide, "Well, it's only money, after all" and start buying things willy nilly. [Smile]

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Adjudicator
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It sounds like my investment style is pretty close to Digger's- I invest in index funds like the S&P 500 both in my retirement accounts and in my direct investments. A nice Vanguard account charges next to nothing in fees for index funds. By buying a set dollar amount of the fund each month I do "dollar cost averaging"- which is the basic strategy for retirement accounts etc. as well. I figure that this is about the best way to make a reasonable return while minimizing risk.

I have played around with gapping and less risky individual stock investing, but I never made any money that way. However, my little brother asked me for a suggestion once and I told him to buy dow corning. This was shortly after the crash and corning was at about $2 a share. It is now right around $20. He only invested a few hundred dollars, but still, I wish I could pick stocks like that for myself!

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David Ricardo
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All of my investments (IRA/Roth IRA/Standard Margin Account) are currently locked in just a few stocks. My portfolio (from oldest purchase to newest) consists of Intel (INTC) starting in 1997, Dell (DELL) starting in 1998, Dow Corning (GLW) starting in 2002, and American International Group (AIG) starting in 2005. I started accumulating Intel at $18.91/share, Dell at $24.75/share, Dow Corning at $4.61/share, and AIG recently at $50.19/share. Outside my IRA and Roth IRA accounts, I am somewhat leveraged in my Margin Account at a level of 28% Margin (72% equity).

I buck the conventional wisdom regarding diversification because I have so much confidence and faith in the Benjamin Graham/Warren Buffett/Charles Munger value investment strategy. It takes me so long (and so much research) to find those few great companies and good bargain prices that I would like to buy and hold forever -- that I do not bother diversifying at all. Why bother diversifing the few great companies that I know intimately with some other worse companies that I know much less intimately? For example, among the four companies which I own now, over 50% of my assets are composed of Dow Corning (GLW) shares because that's my most confident investment.

My best recommendation to someone who wants to micromanage their own investments to consistent 15%-30% returns is to read all the books available on Benjamin Graham's and Warren Buffett's value investment strategy (Benjamin Graham being Warren Buffett's mentor). It's not a very sexy strategy because it actually is very simple -- First, find great companies; Second, buy them at good bargain prices; Third, hold them forever (or as long as they continue to be great companies).

The reason why it works is also very simple. It is real investment. You are fulfilling the valuable capitalistic function of diverting scarce financial capital to the most outstanding businesses that are most deserving of aforementioned capital. The vast majority of the people are not investors at all. They are short-term speculators. They are obsessed with the simpled-minded "buy low and sell high" mentality. They are happy to buy AIG at $51/share and then selling it off at $52/share after AIG's accounting scandal. I, on the other hand, saw AIG as a great insurance and financial services company and that $50/share was a great bargain price because Eliot Spitzer was scaring everyone by breathing down AIG's collective necks. At $52/share, when all the speculator started taking their "profits," I still thought AIG was a wonderful bargain, and I bought even more AIG.

The 99% of the "investors" are actually lemming speculators so focused on the short-term returns that they always keep chasing their own tail by following short-term shifts and short-term news and by predicting short-term market downturns/upturns. They are so fixated on prices, prices, prices -- that they forget that the most important thing of all is the VALUE of the company, not its price. Once, you have identified a company with true VALUE, then you can consider the price and whether or not that is a good bargain in return for owning a piece of that business FOREVER.

Buffett completely rejects all of that nonsense. That's why whenever people ask him about "when should you sell a stock?" -- he always says: "Never. I would love to hold onto these stocks forever." You cannot realistically expect to make that much money consistently by twisting and turning with the short-term whims of the market. Buffett observes correctly that the only thing you can be sure of is the strength of your company's fundamentals and the fact that the market will correctly evaluate the company on its fundamentals in the LONG RUN.

And if you can follow Buffett's investment style diligently and faithfully, I can guarantee you AT LEAST 15% average per annum returns.

[ September 07, 2005, 10:56 AM: Message edited by: David Ricardo ]

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Adjudicator
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I agree with David that trying to time the market is a bad way to invest.
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The Drake
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Unless you have illegal information, timing the market is not a good idea [Smile]
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Adjudicator
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Drake- are you hinting that you have a hot tip?

That reminds me. The all-around BEST way to invest is off of anonymous stock tips one receives via e-mail. Those guys know what they are talking about, or else why send an e-mail, right?

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The Drake
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no way. Everyone knows the best tips are found on Yahoo Finance message boards.

The advice is particularly actionable when in all caps.

Like this advice on NVDA:

SOME PERSONS ALREADY SHORTED 10,000 SHARES AT 31.95. I THINK WE CAN START SHORT NOW AND SHORT HARDER WHEN NUMBER OF BUEYRS EQUAL OR LESS THAN SELLERS.

I just sold some shares of NVDA at 30.93, I feel a little angry because it has gone up since then by over $1 in one day. Luckily, I held more than I sold. Selling part of your holding to lock in some profit is always a nice way to avoid hating yourself.

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Funean
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Or, as my google ad says, you could just Buy Stocks Online for $7.00! No inactivity or maintenance fees!
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The Drake
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Hah, there's another one right next to it that says "Invest Online" Buy Stocks for just $4.

I looked at the site, and it is very, very shady.

You can buy for $4 only if your purchase is aggregated with a bunch of other ones. Which means you have no idea what price you will pay. But the brokerage promises that they are committed to getting you the "best price possible"

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The Drake
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Oops, right after I posted that, it changed to

Playing the Stock Market Generate quick & easy profits. 100% Guaranteed. Online Trading Tips.

100% Guaranteed?

Hm. Guaranteed to rip you off.

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Richard Dey
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Zyne: That's a very wise strategy. Don't forget foreign stock.
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EDanaII
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@ Dagonee:
quote:
In many markets it's not a good time because rents lag the 80% 30 year fixed mortgage monthly payment by quite a bit. But there's always something to be found.
I'm not sure you and are talking about the same things, Dagonee. I'm talkin about land. Even if the Real Estate bubble bursts, land will still be a good investment.

Ed.

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