Investing Thread

[NorthSideSox72]

Anybody have advice for someone who is looking for growth stocks or funds? Im looking to invest long term about $8000 in the next month or so and want to start looking into possibilities. I currently have a bit under $1000 combined in BP and VZ stock.

Unless you have a lot of time to trade and track actively, I'd suggest staying away from single names, and use more ETF's. You can target all manner of industries, sectors, div vs non-div, big and small div, big and small cap, etc., spread your risk more effectively, and not have to worry as much about constantly tracking company news. Just my .02.

 

[Balta1701]

As usual, I'm going to be the one who chimes in negatively on the current state of the economy. Worth noting; I'd never, ever have predicted the 2009-2010 stock price runup.

 

To me, right now, I anticipate headwinds in a lot of sectors, in no small part because of the fact that things have run up so much. Banking has recovered some but not entirely from 2008...but there's a strong risk of another implosion since nothing was ever fixed there. Consumer goods or manufacturing...some inflation can help companies by giving advantages to companies with domestic production, but another oil shock would also threaten their sales.

 

If I were looking for long-term growth, I'd either target sectors that I think might be able to show substantial growth in the next decade (Defense/aerospace, technology, pharmaceuticals, clean energy), or I'd simply go for short-term stability and let some of the overseas instability shake itself out while I sat contently holding US T-Bills. I can always move funds back into stocks from Treasuries at a later date.

[NorthSideSox72]

As usual, I'm going to be the one who chimes in negatively on the current state of the economy. Worth noting; I'd never, ever have predicted the 2009-2010 stock price runup.

 

To me, right now, I anticipate headwinds in a lot of sectors, in no small part because of the fact that things have run up so much. Banking has recovered some but not entirely from 2008...but there's a strong risk of another implosion since nothing was ever fixed there. Consumer goods or manufacturing...some inflation can help companies by giving advantages to companies with domestic production, but another oil shock would also threaten their sales.

 

If I were looking for long-term growth, I'd either target sectors that I think might be able to show substantial growth in the next decade (Defense/aerospace, technology, pharmaceuticals, clean energy), or I'd simply go for short-term stability and let some of the overseas instability shake itself out while I sat contently holding US T-Bills. I can always move funds back into stocks from Treasuries at a later date.

If your investment horizon is like a year, then yeah, I'd think a safe harbor investment would be smart. But I'm assuming that Russ is looking for something longer term. That being the case, with the eventual recovery and inflation snap back that are both inevitable, long term, I'd still strongly favor equities.

 

[Balta1701]

If your investment horizon is like a year, then yeah, I'd think a safe harbor investment would be smart. But I'm assuming that Russ is looking for something longer term. That being the case, with the eventual recovery and inflation snap back that are both inevitable, long term, I'd still strongly favor equities.

Depends on whether we're using the same definition of "Long term" and how much downside risk in you're willing to absorb in the next few years.

 

If you're talking about a 20 year long term horizon, then hopefully that's long enough that everything will shake out and the long term trends win out.

 

If we're talking about a 5 year horizon as long term, then I'd give a different answer. We're still in the range where there has been only a small "equity premium" for more than the last decade, and P/E ratios are still in a range that is historically elevated.

[bigruss]

Unless you have a lot of time to trade and track actively, I'd suggest staying away from single names, and use more ETF's. You can target all manner of industries, sectors, div vs non-div, big and small div, big and small cap, etc., spread your risk more effectively, and not have to worry as much about constantly tracking company news. Just my .02.

I was thinking of doing a Vanguard ETF, but this is unfamiliar ground for me so I was looking for advice on it.

 

I started investing last summer and that's why I have the BP and VZ stocks (I had a few others that I made profits on and sold), and have done pretty well with them, but Im not looking to continue trying to find more stocks like that and would prefer going into and ETF/mutual fund.

 

And Im only 21 so these investments would most definitely be long term.

[southsider2k5]

Anybody have advice for someone who is looking for growth stocks or funds? Im looking to invest long term about $8000 in the next month or so and want to start looking into possibilities. I currently have a bit under $1000 combined in BP and VZ stock.

 

I would be leary of stocks in the short term. I'm not sure how you are looking at the length of time you are buying this stuff for, but i get the feeling we are looking at a short term sell off soon, at least.

[southsider2k5]

I was thinking of doing a Vanguard ETF, but this is unfamiliar ground for me so I was looking for advice on it.

 

I started investing last summer and that's why I have the BP and VZ stocks (I had a few others that I made profits on and sold), and have done pretty well with them, but Im not looking to continue trying to find more stocks like that and would prefer going into and ETF/mutual fund.

 

And Im only 21 so these investments would most definitely be long term.

 

I missed this post. If I can add to it, you can never go wrong with a dow jones or SP 500 ETF for the long term. If you want to look more at risk and volatility, I would look at the energies.

[StrangeSox]

My Vanguard Total Market ETF has been doing pretty well for the last several years and pays out some dividends as well.

[southsider2k5]

My Vanguard Total Market ETF has been doing pretty well for the last several years and pays out some dividends as well.

 

Be sure to reinvest those at your age. (I'm sure you do, but more as general advice to people) You shouldn't accept a dividend check until after retirement.

[StrangeSox]

Yeah I'm pretty sure it's set up to automatically reinvest the dividends.

[Y2HH]

Yeah I'm pretty sure it's set up to automatically reinvest the dividends.

 

Automatically reinvesting dividends massively complicates taxes when you do eventually sell.

 

I never auto-reinvest dividends...I take the cash payments and leave them in the Brokerage account (cash savings), and when enough dividend money amasses, I diversify that money into a new company...and it's what I suggest everyone do with dividend payments.

 

Never reinvest into company you are already invested in...you MUST diversify.

[Y2HH]

As usual, I'm going to be the one who chimes in negatively on the current state of the economy. Worth noting; I'd never, ever have predicted the 2009-2010 stock price runup.

 

To me, right now, I anticipate headwinds in a lot of sectors, in no small part because of the fact that things have run up so much. Banking has recovered some but not entirely from 2008...but there's a strong risk of another implosion since nothing was ever fixed there. Consumer goods or manufacturing...some inflation can help companies by giving advantages to companies with domestic production, but another oil shock would also threaten their sales.

 

If I were looking for long-term growth, I'd either target sectors that I think might be able to show substantial growth in the next decade (Defense/aerospace, technology, pharmaceuticals, clean energy), or I'd simply go for short-term stability and let some of the overseas instability shake itself out while I sat contently holding US T-Bills. I can always move funds back into stocks from Treasuries at a later date.

 

Why would you not have predicted it or expected it as it was occurring? While I see not "predicting" it in 2008, you should have come to expect it as already profitable companies cut fat and CONTINUED to post huge profits quarter after quarter. Scratch that, since they all trimmed fat, they posted even BIGGER profits quarter after quarter.

 

The run up was absolutely expected, as the sell off caused by panic (not by intelligence) was easy to spot. When companies posting billions in profits have P/E ratios of under 7...it's pretty easy to put 2 and 2 together there.

[bigruss]

Would it be smarter for me to invest this money in about a month (I should receive it sometime this month) or would it be best to wait until I am working fulltime after college and putting it into a 401k plan. I am going into a second internship with a company that I really enjoyed working for and I am almost positive that I will leave this summer with a competitive offer so Im wondering if it would be best to wait on investing about a year, and put it into CDs or some stable stock with good dividends. Or is it best to have both accounts to be diverse?

 

I am pretty lost when it comes to investing in mutual funds, ETFs, 401ks, etc, and Im not sure on the tax implications which is why I am asking. So if anybody has some good articles or resources on this matter that would be awesome to have a look at. Im looking to have about 10-11k total to invest after this income and my summer internship (planning on investing atleast 15% of my wages) and I really want to be prepared for when I do so.

[southsider2k5]

You wouldn't be able to put your money into a 401k. That is a retirement account that comes through your work place. If you wanted to set up a retirement account on our own, you can contribute a total amount annually to an IRA tax free. Other than that, you will be paying taxes on anything you sell during a calendar year in any other type of account.

[NorthSideSox72]

Would it be smarter for me to invest this money in about a month (I should receive it sometime this month) or would it be best to wait until I am working fulltime after college and putting it into a 401k plan. I am going into a second internship with a company that I really enjoyed working for and I am almost positive that I will leave this summer with a competitive offer so Im wondering if it would be best to wait on investing about a year, and put it into CDs or some stable stock with good dividends. Or is it best to have both accounts to be diverse?

 

I am pretty lost when it comes to investing in mutual funds, ETFs, 401ks, etc, and Im not sure on the tax implications which is why I am asking. So if anybody has some good articles or resources on this matter that would be awesome to have a look at. Im looking to have about 10-11k total to invest after this income and my summer internship (planning on investing atleast 15% of my wages) and I really want to be prepared for when I do so.

 

 

You wouldn't be able to put your money into a 401k. That is a retirement account that comes through your work place. If you wanted to set up a retirement account on our own, you can contribute a total amount annually to an IRA tax free. Other than that, you will be paying taxes on anything you sell during a calendar year in any other type of account.

 

As SS says, your 401k doesn't work that way. You can't make large bulk contributions to it like that, in fact there is a limit to how much you can put in a year pre-tax. There are catch-up exceptions for being older than a certain age close to retirement.

 

Believe it or not, there are some great free tools on the web for deciding on what funds to invest in. They show risk level, typical term, returns in various time periods, large/small or other biases, etc., sometimes with fun graphics. Heck, Yahoo Finance even has some of that.

 

If you buy a mutual fund in any regular brokerage account, you are taxed on realized gains - that is, closing of positions, or dividends on same-instrument reinvested. If you buy them in an IRA, the gains are protected from taxation until withdrawal, and there are complex rules for withdrawal.

 

[bigruss]

Thanks for the input!!

[Y2HH]

Thanks for the input!!

 

Personal 401k's are basically called IRA's, be it Roth-IRA, Rollover-IRA, etc...I personally dislike them. I have one, but only due to prior employment and rolling it over into a self directed IRA. I feel the give and take on them is too much give, not enough take...and while they serve as a tax deferred shelter...all the other tax shelter advantages of the market are lost in them.

 

The problem with IRA's is that when you do come of age and being width drawling from them, they are taxed at ordinary income...this sucks. If you held these same assets in a ordinary brokerage account, anything you sell that you've held for more than 1 year would be taxed as long term capital gains...which is HALF of what ordinary income taxes are. Also, you cannot write off losses in them, and this also sucks, which means you cannot wash sale stocks in them.

 

Then, as time goes on, tax laws change, taxes change etc...this also sucks because you are essentially locked into them, as the new laws would take effect over your IRA, which you can't touch touch due to the penalties incurred if you do. In emergency situations, you also take penalties and have to "borrow" from yourself in order to get to the money...

 

Basically, I hate everything about them...so if you ask me, I say STAY away from IRA's. Use your companies 401k and just use a regular old brokerage account for investing purposes, you get more control over your own assets.

[kapkomet]

As usual, I'm going to be the one who chimes in negatively on the current state of the economy. Worth noting; I'd never, ever have predicted the 2009-2010 stock price runup.

 

To me, right now, I anticipate headwinds in a lot of sectors, in no small part because of the fact that things have run up so much. Banking has recovered some but not entirely from 2008...but there's a strong risk of another implosion since nothing was ever fixed there. Consumer goods or manufacturing...some inflation can help companies by giving advantages to companies with domestic production, but another oil shock would also threaten their sales.

 

If I were looking for long-term growth, I'd either target sectors that I think might be able to show substantial growth in the next decade (Defense/aerospace, technology, pharmaceuticals, clean energy), or I'd simply go for short-term stability and let some of the overseas instability shake itself out while I sat contently holding US T-Bills. I can always move funds back into stocks from Treasuries at a later date.

Why? I mean, that fed /ustreas money had to go somewhere.

[Balta1701]

Why? I mean, that fed /ustreas money had to go somewhere.

Satiating the demand for a stable investment that won't risk losing 50% of its value overnight, like all the crap Wall Street was selling for 20 years.

[lostfan]

How does reinvesting dividends make taxes tricky? Is it the cost basis?

[Y2HH]

How does reinvesting dividends make taxes tricky? Is it the cost basis?

 

Yes, the new shares have a new cost basis because 1) the stock is being bought at a new price, and 2) because the dividend was sent to you and used to purchase new shares but also taxed...so you do not owe taxes on that dividend money if/when you sell the shares...so it makes selling properly complicated. Of course, you can do what 90% of the people that re-invest dividends do and simply pay full taxes twice, once on the dividend itself (which you never actually collected) and again when you sell the shares, bought with money that's already been taxed...

 

Get it?

[lostfan]

Yes, the new shares have a new cost basis because 1) the stock is being bought at a new price, and 2) because the dividend was sent to you and used to purchase new shares but also taxed...so you do not owe taxes on that dividend money if/when you sell the shares...so it makes selling properly complicated. Of course, you can do what 90% of the people that re-invest dividends do and simply pay full taxes twice, once on the dividend itself (which you never actually collected) and again when you sell the shares, bought with money that's already been taxed...

 

Get it?

and then the corporation that paid taxes on the profits. lol

 

What's easier than re-investing dividends? Just letting it sit and collect, and then buying whole chunks of shares? (Not too thrilled with the idea of paying a transaction fee)

[Balta1701]

and then the corporation that paid taxes on the profits. lol

Really?

[lostfan]

Really?

I only wrote that because I knew you were reading.

[Y2HH]

and then the corporation that paid taxes on the profits. lol

 

What's easier than re-investing dividends? Just letting it sit and collect, and then buying whole chunks of shares? (Not too thrilled with the idea of paying a transaction fee)

 

What I do is let the dividends collect in a cash account and wait, when I find a bargin stock or an opportunity arises where a good company is hammered for no reason or bad reasons, I'll diversify the collected dividend money into that new company/opportunity. It allows you to take money paid by other companies and diversify it. To me, I already have shares of the companies paying dividends, so I'd rather have something else, possibly at a better price, and even if I do decide to buy more shares of the same company, I get to decide when to do so, usually at a better price. With dividend reinvestment, your stuck buying shares at whatever price the stock happens to be at, which isn't always the best time to buy.