Sep 15, 2013

Stock

Buying stock is the shortest path to wealth.    

Money does not bring happiness.  But it allows more flexible use of time, additional choices and the ability to help others.  Which are three things that make me happy.

I mainly want enough saved up so I won't be stuck eating ramen and diet water when I'm old.

Some people are maybe not sure where to start when it comes to investing.  Or they don't feel like they have the knowledge and skills to get it done.  Hiring a pro to help guide our savings makes sense for many.  Just realize that route costs money, potentially tens of thousands $$ in fees over the years.

My 401K, Roth IRA and daughter's college 529 are managed by experts that (hopefully) know what they are doing. A few years ago, I had a small amount of play dough sitting, so decided to take the plunge and learn how to buy shares of stock on my own.

It was 2010 and scary times.   Banks were getting spanked and 100-year-old behemoths like General Motors were filing for bankruptcy.  Unemployment was near double digits.  

Emotionally, it was a terrible time to invest in the stock market.  

But mathematically, it was time to strike.  Companies whose stock was $50 per share in early 2008 was trading at $10 in 2009.  Even if the value would never again rise to $50, I knew it would increase significantly from $10.  

My parents taught me to save, regardless of whether or not I wanted to.  

30 years ago, Dad helped me open a savings account.  Growing up, he instilled in my sister, brother and me to save 10% of every buck we made.  Into savings went a cut of every $5 bill grandma tucked into our birthday cards.  Out of bed at 5:00 am Sunday mornings to walk a paper route when I was 13, 10% of every tiny paycheck was chucked into savings.  

As a kid, I kinda resented the savings account.  It nibbled away at my diminutive income and was the only barrier to a new pair of parachute pants and Reebok Pump high-tops.  We were poor-ish and might have worn junky skids from Payless.  And delivered to school in a 1960s Dodge Coronet we called the butterscotch bomber.  But a strong work ethic and spirit of delayed gratification would pay out in the long run.

As an adult, I wanted to build upon Dad's advice to save.  Rather than holding in a safe bank account with a puny single percent return, I was ready to invest.  Which means swallowing some risk for possibly a higher payout.  There is opportunity cost in playing things too safe.

I didn't study finance in college, but applying common sense and carefully researching potential companies to invest in has brought solid results.  The market could sag tomorrow and green turns red in a few blinks, but so far so good.

Netflix is in beast mode, pushing 300%.  Las Vegas Sands (LVS) and Chinese Internet provider Qihoo 360 Tech are trending towards 200% by year end.  Not a fan of gambling, some might say I therefore shouldn't invest in LVS.  Others mutter it's not patriotic to invest outside the border.  Still others suggest investing in the market at all is the same as gambling.  Hogwash:



Heavy on the tech companies, my opinion is that's where the risk and growth opportunities are.  

Here are some of the players in the portfolio and why I decided their stock was worth buying.

Snagged Netflix before streaming movies was popular.  I knew Blockbuster would soon die and online would become the way you do flicks.  Opposite thinking process for Outerwall/Coinstar.  They own Redbox kiosks and I figured $1 for a new release for people that can't afford a monthly Netflix streaming plan is a smoking good deal.  

Pfizer concocts the little blue pill, 'nuff said.  

Tesla builds the best electric car in the world.  Some say the best car in the world, period.  Elon Musk is a gentle genius, Iron Man's Tony Stark was modeled after him.  The Model S car is quicker then a 550 horsepower BMW M5, the battery lasts 250 miles per charge, and you can plug-in like a cell phone and juice up in the garage overnight for a few dollars.  Within three years, their next generation, more affordable electric car will be for sale.  Hundreds of thousands of cars per year will churn from their Fremont California factory.  Tesla's Model S in 2013 is to the world what Ford's Model T was in 1913.

Verizon = millions of $80 a month phone data plans.  

Cree makes household and commercial LED lights.  I bought their stock because compact florescent bulbs are terrible,  incandescents are on the brink of death, and LEDs are cheaper in the long run factoring electricity costs.

Amazon is a no duh buy, unless a new company called Nile comes along to compete.  

Ford stock was cheap after the 2008 debacle.  Same is true for JP Morgan stock, a fire sale as banks were going belly up leading into '09.

And on it goes.  Generally, my plan is to identify and buy stock of newer tech companies before they become popular.

It's not all peaches and puppies.  My Apple stock has taken a crotch kick this year, probably because Steve Jobs and innovation went away.  It'll come back a little when their smart watch and TV hit the market next year.  My worst performing account, Chinese gold seller Kingold Jewelry, is down a bloody 87%.  

Buying stock is easy.  You open an account with a trader like Scottrade, eTrade or TD Ameritrade.  Sync up your bank account, transfer in funds, set the stock buy price, pay the $7 to $10 trade fee, computer executes the sale, boom you're done.  Then jump on the bear or bull and ride her out.  Lots of articles out there to help you get stated.

We'll save the buy/hold/sell stock discussion for another time.

-Beard 

13 comments:

  1. Whohoop! And Mr Musk is a Mzansi Boy :-)

    Beard, you lost me at "Stock". But I know the The Husband follows more or less the same principle, also traded a bit himself, but not any more, and added property to the list.

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    1. Musk is the man, he builds rockets on the side via SpaceX and wants a Mars mission. Check his Grasshopper rocket test, it hovers then self lands.

      http://youtu.be/eGimzB5QM1M

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  2. I'd love to hear more about this. I don't know anything about stocks, though I know a lot of people who are into them. This post was very informative!

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    1. Maybe I should write a post on how to buy a few shares of stock?

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    2. 10-4, let's do it.

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  3. Thanks for this!! I've been wanting to buy some stock lately simply because my savings account rate of return is the pits and I mean the deep pits. I have a 401k but want to start somewhere else too. I was thinking it couldn't be as easy as it sounded - ScottTrade, etc. but I guess it is!

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    1. Pretty easy to get stated, and surprisingly fun watching the account grow and shrink with the market. Harder part is deciding which stocks are a good value and attempting to predict if a company will rise or fall in the future. Can always start conservative, buy a few shares of a staple like Target or Amazon.

      I suggest folks shore up their 401k and Roth first, then if they have some cash left, slowly buy stock.

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  4. Anonymous9/16/2013

    Darn, I got a migraine trying to follow you on this one. But hey, thanks for spelling it out for us idiots. Looking forward to more on this topic.

    I assume pigtails has a savings account?

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    1. Shove it under the mattress and be done with it.

      No savings account for daughter yet, but she has some money sitting in a piggy bank. I've started teaching her the basics if stocks, and explained shares are like buying a small slice of a company's pie. She will probably open a stock account before a savings acct.

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  5. We have some Tesla stock... genius I swear. If we had the bills I would love to have the Model X. The doors alone would make me the cool mom at preschool pick-up!

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    1. Gull-wing doors for the win, you'd be driving the Batmobile!

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Thanks for the note, check back for my response!