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Buyandhold 2012

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  • Retired Investors Don't Buy Bonds Until? [View article]
    "....there was a time when I completely avoided investing in stocks altogether.... That time was from 1979 through all of 1985....."

    Chuck, 1982 was the beginning of one of the greatest bull markets in stock market history. That bull market lasted from 1982 to 2000.

    I realize that no investor bats 1000, but in hindsight wouldn't it have been a better financial decision to have bought stocks in 1979 through 1985?

    A $10,000 investment in stocks such as Philip Morris or McDonald's or Abbott Labs in 1979 would have performed better over the long term than a $10,000 investment in bonds in 1979.

    I suppose for high net worth individuals who do not want to pay taxes bonds may have their place, but I have always found bonds to be an inferior investment compared to stocks over the long term.
    Jul 29, 2015. 10:32 AM | 9 Likes Like |Link to Comment
  • A Dividend Growth Stock Portfolio For July 27, 2015 [View article]
    Eric,

    I like your list of stocks.

    I have made so many comments on SA that you probably know what I am going to say, but here goes anyway.

    1) Make an effort not to buy stocks when they are overpriced. Two rules help me to avoid buying overpriced stocks. I avoid buying stocks with PE ratios higher than 20. I avoid buying stocks unless the S&P 500 is at least 20% lower than its last all time high.

    2) Do not rotate or rebalance.

    3) Do not sell.

    That about sums it up.
    Jul 29, 2015. 08:14 AM | 4 Likes Like |Link to Comment
  • Does Diversifying Damage Performance? [View article]
    "In retrospect, investors who have overstuffed their portfolios on stocks like Amazon, Netflix, and other high-flyers have done well."

    For now, Ronald. For now.

    But the truth of the matter is that successful investing in the stock market is not a sprint, it is a marathon. High flyers have a tendency to eventually crash and burn. I know that from experience.

    Investors who make the most money in the stock market over the long term buy high quality stocks with long term competitive advantages whenever these stocks are relatively cheap and then they never sell them.

    How many stocks should an investor own? Certainly not only one or two. That is investment suicide if one of the stocks should suddenly go bankrupt.

    In my view, the ideal number of stocks in a portfolio is somewhere between 20 and 50.
    Jul 28, 2015. 06:06 PM | 3 Likes Like |Link to Comment
  • Investors Should Buy LinkedIn Going Into Earnings [View article]
    Investors should buy LinkedIn going into earnings?

    According to Yahoo Finance, the consensus analyst earnings estimate for LinkedIn in 2015 is 1.93. Since I do not buy stocks with PE ratios higher than 20, the most I would be willing to pay for LinkedIn is 38.

    Last time I checked LinkedIn was at 227.80. So it would have to fall by 189 points this year before I wold consider investing in it.

    I don't invest in overpriced stocks, Ace. LinkedIn is quite overpriced.
    Jul 28, 2015. 03:44 PM | 4 Likes Like |Link to Comment
  • Retirement Strategy: The Oil Crash Could Be A Dividend Growth Investor's Best Friend Of The Decade [View article]
    RS,

    Kids today have it so easy. They have no idea what it was like to grow up as I did with a Spartan mother.

    I see kids today being chauffered to and from school. I used to walk to school during New England blizzards without a jacket. Good for the circulation, my mother used to say.

    At the beach, my mother used to tell me to run off and play in the riptide. It'll make you a good swimmer, she would tell me.

    Too much pointing and clicking, RS. That's the problem with youngsters nowadays.
    Jul 28, 2015. 03:22 PM | 7 Likes Like |Link to Comment
  • Retirement Strategy: The Oil Crash Could Be A Dividend Growth Investor's Best Friend Of The Decade [View article]
    travelguru81,

    Leave the Senior Citizens Center to trade?

    RS, this site is beginning to get overrun with young whippersnappers.

    The only time that I visit the Senior Citizens Center is to buy my tickets for the senior citizens bus trips to Tanglewood or Newport or Hyde Park.

    However, my 94-year-old mother spends a lot of time at the Senior Citizens Center as a volunteer. "A lot of those old folks need a lot of help," she tells me. "Some of them have poor circulation so I try to keep them moving."

    Mom and I will both keep on driving down to Scottrade to buy our stocks.
    Jul 28, 2015. 02:09 PM | 14 Likes Like |Link to Comment
  • Retirement Strategy: The Oil Crash Could Be A Dividend Growth Investor's Best Friend Of The Decade [View article]
    boilingfrog,

    It is too late for me to invest in a phone first, then stocks. I have been a stock market investor for 45 years.

    It was traumatic enough for me when they took away my rotary telephone. Then back in 2000 I was badgered into buying a cell phone. I still keep that cell phone in the glove compartment of my car in case my car breaks down and I need to phone TripleA.

    But I have kept up with the times and now buy all of my stocks at the discount broker Scottrade. Fortunately, Scottrade is not far from my house. I get in the car, drive to Scottrade, and place my order. I am only charged $27. I have Scottrade send me the Direct Registration statement. Then I contact the transfer agent and have them send me the physical stock certificate if there is one(some companies no longer issue stock certificates). I then place the stock certificate or the Direct Registration statement in my safe deposit box at the bank.

    Isn't that the way you invest, sir or madam?
    Jul 28, 2015. 10:21 AM | 5 Likes Like |Link to Comment
  • When Will We Ever Learn? [View article]
    Human behavior is very strange, Lance.

    Investors seem to pile in on investments when they are rapidly rising and overpriced. And then investors head for the exits like people fleeing from a burning movie theater when prices start to collapse.

    It's just plain nuts.

    One of the first things that should be learned in Econ 101 is: BUY LOW.

    I like to buy stocks when no one else wants them and there is blood in the streets. I avoid buying any stocks at all unless the S&P 500 is in the range of 20% to 50% lower than its last all time high.

    As you know, Lance, price matters.

    When will investors ever learn?
    Jul 28, 2015. 08:13 AM | 1 Like Like |Link to Comment
  • How Much Kinder Morgan Is Too Much For A Dividend Growth Investor? [View article]
    Mike, if you are really thinking of selling some of your shares of Kinder Morgan, it is time for an intervention to prevent you from making a financial mistake.

    KMI has recently fallen from 44 to 35. The low for the past 52 weeks was 33.

    If I were a KMI shareholder, I would never sell any KMI shares. Instead I would buy more shares during substantial stock market corrections to lower my average cost.

    The idea that no single stock should be too large a position in your portfolio is baloney. XOM is 18% of my portfolio. Abbott Labs and Abbvie are 20% of my portfolio. Philip Morris and Altria are 12% of my portfolio. I would be making a mistake if I were to sell any shares of those five stocks just to conform to some preconceived notion regarding asset allocation.

    Keep all of your shares of Kinder Morgan, Mike.
    Jul 28, 2015. 07:56 AM | 30 Likes Like |Link to Comment
  • Retirement Strategy: The Oil Crash Could Be A Dividend Growth Investor's Best Friend Of The Decade [View article]
    RS,

    I just checked out the price of Exxon Mobil on Yahoo Finance. It is 79.30.

    That means that the price of Exxon Mobil has fallen from 104.76 to 79.30 in the past 52 weeks.

    Holy cow! XOM is getting to be an extremely tempting buy. The price of the stock has fallen by about 25%.

    I would be driving to Scottrade today and placing my order for shares of XOM except for one thing. The S&P 500 is still close to an all time high. That is really not the best time to buy any stocks. If we have a major stock market correction in the next few years, the price of XOM could go even lower.

    Two strategies regarding XOM make sense to me.

    1) Buy XOM at a price of less than 80. If the price of XOM falls below 70, buy more shares to lower your average cost.

    2) Wait for XOM to go even lower before buying it.

    The yield on XOM is now 3.7%. Not bad when you are lucky to get 1.25% with a certificate of deposit.
    Jul 28, 2015. 07:41 AM | 9 Likes Like |Link to Comment
  • Apple: Does Size Matter? [View article]
    Does size matter?

    Absolutely, Jonathan.

    I like my dividend checks to be as large as possible and my capital gains taxes to be as small as possible.

    There is a myth on Wall Street that small cap stocks perform better over the long term than large cap stocks. Restrict your investments to small cap rather than large cap stocks, some people advise. That is just plain baloney.

    In 1970 I was looking through Standard and Poor's and I found a stock called Abbott Labs which had been performing extremely well for more than 40 years and which would have been considered a large cap stock at the time. At first I hesitated about buying it, thinking that Abbott Labs' best days were in the past and that only investors who has bought it back in 1930 would be able to make a lot of money with it.

    My stock market mentor gave me some good advice. "It's not 1930 now," she said. "It's 1970. The present is the only thing that we have. So buy Abbott Labs."

    Long story short, that large cap stock continued to perform extremely well over the next 45 years.

    Just because Apple is a large cap stock does not mean that it will not perform extremely well over the next 45 years.
    Jul 27, 2015. 10:34 PM | 3 Likes Like |Link to Comment
  • Retired Dividend Growth Investors Are Lulled Into A False Sense Of Security [View article]
    George,

    "Let your winners run and cut your losses short in order to live to fight another day."

    Well, at least you got the first part of it right. Letting your winners run is the way that investors get rich in the stock market over the long term.

    But cutting your losses in order to live to fight another day? Bad idea, George.

    The problem with many investors is that they cringe in terror every single time that their portfolio loses somewhere in the range of 20% to 60% of its value. Even worse, they sell after their stocks have begun to fall substantially in price.

    My portfolio consists mostly of high quality dividend growth stocks. During the periods of 2000-2002 and 2007-2009 my portfolio lost approximately 50% of its value on paper. Sitting there calmly and watching your portfolio suffer a seven figure loss twice in one decade is not easy for most people to do.

    But did I panic as my stock portfolio went up in smoke? No. Instead of selling, I just bought more shares of high quality dividend growth stocks at substantially reduced prices.

    Selling my stocks during the two stock market crashes in the first decade of this century would have been a big mistake. I would have been subjected to substantial capital gains taxes. I would have lost all future dividends which are taxed at a favorable tax rate. Although my portfolio lost approximately half of its value twice in one decade, my dividends continued to increase.

    If you own the right stocks, George, Dividend Aristocrats and other stocks that tend to increase in value over the long term, there is really no good reason to ever sell them.
    Jul 27, 2015. 05:32 PM | 5 Likes Like |Link to Comment
  • Biogen Falls Hard: Is It Undervalued Now? [View article]
    Biogen has fallen from 480 to 300 in the past 52 weeks. The PE ratio is now 20.32.

    Biogen used to be extremely overpriced. Now it is starting to look attractively priced.

    I generally avoid stocks that do not pay a dividend, but Biogen is extremely interesting to me as an investment.

    The only negative as far as buying Biogen at this time is that the S&P 500 is still close to an all time high. This is really not the best time to buy any stocks.

    I am keeping my eye on Biogen. It looks a bit tempting at the moment.
    Jul 27, 2015. 08:32 AM | 3 Likes Like |Link to Comment
  • Coca-Cola Set For Growth Going Forward As Investors Continue To Be Rewarded By The Stock [View article]
    Uncle Pie,

    There is something wrong with your logic that since Novo Nordisk has outperformed KO and PEP for the past 1, 5 and 10 year periods that it would be better to be invested in NVO in the future rather than KO and PEP.

    Apple has outperformed Novo Nordisk in the past 1, 5 and 10 year periods. Does that mean that it would be better to be invested in Apple in the future rather than Novo Nordisk?

    The PE ratio of Novo Nordisk is now 34.58. The stock is quite overpriced.

    The PE ratio of KO is 23.68. The stock is slightly overpriced.

    The PE ratio of PEP is 22.24. The stock is slightly overpriced.

    NVO, KO, and PEP are all holds. It is best to wait for a more attractive entry point before investing new money in any of those three stocks.
    Jul 26, 2015. 06:41 PM | 9 Likes Like |Link to Comment
  • Starbucks: Building Its Own Payment Ecosystem [View article]
    Not even the best stock is worth buying when it is overpriced.

    Starbucks is overpriced. The PE ratio is 32.28.

    Buying any stock at the right price versus the wrong price can make a huge difference in terms of long term total return.

    There is no question that Starbucks is an outstanding stock with a great future. But in order to maximize their long term total return, investors should make an effort to buy Starbucks at an attractive price. The price of Starbucks is not attractive at the moment.
    Jul 26, 2015. 08:39 AM | 3 Likes Like |Link to Comment
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