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Investments...stocks & Bonds....

Discussion in 'The Lounge' started by RollTide, Mar 17, 2006.

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  1. RollTide Pro Bowler

    Bishop
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    Yahoo finance has a message board for every company and they are very populated so i jusy thought the general topic of investments should occupy just one board here. After all investments are manly and we are mostly men right?

    Everyone should be an investor. Everyone! And anyone with a time horizen to retirement of at least 10 years should be in stocks. If not 100% then at least 75-80%. A house should be first on the agenda but after that you should be in an IRA or 401K and that means stocks. No you don't have to be rich at all to get started some can get started for as little as $25-$50 with a monthly committment that can be that low.

    Stocks have outperformed bonds 2-1 long term and outperform cash investments like CDs 3-1. For long term capital appreciation you have to own stocks. Graham and dodd who wrote the classic tome "security analysis" proved this way back in the 1930s and peter lynch talks about this and runs over the numbers in his book "beating the street" from 1993.
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    TitanJeff Kahuna Grande

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    For 99.9% of investors out there, mutual funds are the best route to go.

    The formula is simple:

    1. Pay off debt.
    2. Create an emergency fund covering 3-6 months.
    3. Max out any opportunities such as 401Ks and IRAs.
    4. Invest in a balanced portfolio of mutual funds/bond funds.

    So many think investing is something you begin later in life. The power of investing is what time does to your money. There are a ton of sources out there on the topic but the Rule of 72 gives you a good idea of the power of time on money. If you know the yearly interest rate, dividing that percentage into 72 will give you the approximate number of years it takes an amount to double. So, because 72 divided by 6 is 12, it takes 12 years for your money to double at 6 percent. After twelve years, your $1,000 has turned into $2,000. Then your $2,000 doubles into $4,000 in the next twelve years. And so on.

    So invest early on. Some mutual funds take very little to get started. And you can have it pull out $50 a month from your checking/savings account. It's shocking how you don't miss it and how your investment grows over time.
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    Gunny Lord and Master

    Wright
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    I have an investment already - my parents put in $2000 into a bunch of stuff for my 21st and it has risen pretty steadily in the 3 months.
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    TitanJeff Kahuna Grande

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    Just for fun, look at the rate of return you are getting and do the Rule of 72 with it to see what it's value may be down the road. 8% means every 10 years (and I'd be delighted with 8%). So that investment will be worth $64,000 in 50 years.

    And if you invest growth, dividends, etc. into it, it'll be even more. Of course you have inflation hammering your value but it's still smart to "let it ride" and then maybe split it up among a number of funds at some point.
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    Gunny Lord and Master

    Wright
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    I'll look into it next time I check it out.
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    Gunny Lord and Master

    Wright
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    apparently it is 10% interest.
    so it would take me 7.2 years for it too double if i dont add in money, but every month i add in atleast $100.
  2. RollTide Pro Bowler

    Bishop
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    Realistic Returns...

    I'm looking for a 10% annual after tax return and it's not hard to get that. The s&p 500 has gained 12% annually for the last 30 years and that includes several periods of recession, bear markets or just stagnant markets.

    The s&p 500 is an index of 500 of the largest companies in america. It's the epitome of blue chip diversification. The index as many know can be bought as a low cost tax efficient fund. Vanguard offers the lowest costs so that is the way to go though i would recommend the value index more. It's lower priced stocks in relation to earnings and assets taken from those 500.

    Long term value beats growth and long term small stocks have beaten large stocks. So i own small cap value funds from royce which have consistently beaten their benchmarks and the s&p500. Royce is a great fund family because they don't try to do all things. They are simply good at one thing.

    Look at the royce microcap fund. In 14 years it has delivered an annual return of 16.2%. It was down just twice in those 14 years it's worst year it lost 13%. Right after that 13% lloss it came right back with a 52% gain. The vanguard s&p 500 fund on the other hand had three down years two of them worst than -13%. In fact from 2000-2002 the s&p500 lost 40%!

    Royce delivers because they specialize in that one thing. Highly diciplined value investing in only financially strong small companies. Royce has no large cap funds and they have no bond funds. They don't even offer a cash money market fund to park your money. As a result all their funds, every single one of them will outperform the russell 2000 index which is the benchmark index for small stocks.
  3. RollTide Pro Bowler

    Bishop
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    $2.3m!

    Initial investment of just $1000.

    $1200 a year, $100 month.

    10% annual after tax return.

    30 years later=

    $2.3M!



    It's all about discipline.
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    TitanJeff Kahuna Grande

    Hunter
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    As are most things in life.
  4. smili Starter

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    Hi all,

    this topic is close to my heart. It's all about letting time work for you - the power is in starting young, and letting time/compounding take care of the rest.

    Forced saving is probably the best way imho. Work 401k are great in this regard. If you take it out before you see it you never miss it.

    And if folks are analytically inclinded, with study and attention I think the average Joe investor can also beat the market averages over the long term. I've been testing investment strategies at marketocracy.com for the past 3 1/2 to 4 yrs and have come to think that beating the indexes is a realistic possibility for many folks
    http://www.marketocracy.com/cgi-bin...undPublicPage/source=IiBoBmMeDlBfFcBkMaKiAbOa
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