[kbell]

I have some extra cash in my checking account. I heard somewhere that if you get to 10k you start getting taxed. I was wondering what should I invest in. My goal eventually is to have a steady stream of passive income for travel and food.

Should I be putting money into a Roth IRA? Stocks, mutual funds? Intellectual properties if you can invest in them? Anything else?

I'm not the smartest in math, I only made it to Ap Calc in high school which I flunked than took ceramics instead. I think more in terms of art and shape.

[bacan]

Roth IRA is tax free earnings, but you can't withdraw it until requirement age obviously.

[Flavius Aetius]

Cant give you financial advice, but tobacco stocks (MO, LO, PM) are my favorite long-term investments. Their dividend yields average 5% (and are increased 6-7% every year on average). Earnings grow about 7-8% per year. Very steady recession proof industry. Make sure to reinvest the dividends.

Tobacco is an addictive product and the US market is controlled by 3 companies (oligopoly), which gives them pricing power. Twice a year all of the tobacco companies raise their prices per pack. I love smokers--loyal until the end.

[Veloce]

(12-30-2013 10:13 PM)kbell Wrote:  

I have some extra cash in my checking account. I heard somewhere that if you get to 10k you start getting taxed. I was wondering what should I invest in. My goal eventually is to have a steady stream of passive income for travel and food.

Should I be putting money into a Roth IRA? Stocks, mutual funds? Intellectual properties if you can invest in them? Anything else?

I'm not the smartest in math, I only made it to Ap Calc in high school which I flunked than took ceramics instead. I think more in terms of art and shape.

Depends what you want to get out of it. Roth IRA is tax deferred but you can't touch it til 65. Not a bad idea to stash away for retirement but you probably want to reap some benefits before then.

If you're new to investing I would suggest you open a brokerage account with Vanguard. It's $3000 minimum. Open a money market account and that's where you cash sits plus any dividend payouts if you choose to take cash instead of shares.

Vanguard offers ETFs with zero brokerage fees. It's an excellent resource for defensive or passive investors. You can diversify your cash into any number of funds. You can stash everything into their S+P 500 fund and you'd do just fine. I personally recommend getting into a REIT, an International Value Fund, a Health Care fund, and a mid-cap fund. That would be a very solid start.

While your assets start to appreciate, pick up The Intelligent Investor by Benjamin Graham or any of Peter Lynch's books. Ignore investment books that specialize in anything and ignore the Motley Fool. Ignore any investment advice anyone gives you when it comes to stocks. You have to learn this shit on your own. Buying stocks is a matter of effectively valuating a company and decided whether to buy, sell, or hold. It gets slightly more complicated with buying on margin, short selling stocks, etc, but that's for guys who are serious about dedicating serious time to playing the market, and the vast majority of them fail. The more active investors are, the more likely they are to lose money in hasty decision-making, high brokerage fees, and cap gains tax.

[Neo]

Good thread.

TheDude or anybody else invest in stocks using the CANSLIM approach popularized by William O'Neill?

At first glance the strategy sounds feasible...only invest when the market is in an uptrend, only buy stocks that are being heavily bought by institutional investors, in addition to the CANSLIM criteria which pretty much finds company's that are leaders and have accelerating earnings growth.

What I find dubious however is their 'market timing.' What constitutes an uptrend or a downtrend? Moving into and out of the market according to their analysis will probably eat up some profits because of fees.

They have an ETF strategy that stays 100% invested during an uptrend, then a 50% position when the uptrend is under pressure, and 0% when the market is in a correction. I haven't done a complete analysis using historical data, but in my mind I'm not sure this is better than a simple buy and hold through the swings. Of course it depends on your time horizon but even after the market bottoming out in 2009, it's recovered nicely in just a few years.

Thoughts?

[WestIndianArchie]

Are there programs that let you run strategies using old data?

[Jaydublin]

I didn't see where anyone filled u in on this yet so I will. You don't get taxed on the size of your bank account. 10k, 100k. It doesn't matter. The money was taxed when u earned it.

[Neo]

(12-31-2013 04:20 PM)WestIndianArchie Wrote:  

Are there programs that let you run strategies using old data?

I'm not sure about programs, but the market trends are published every market day in their paper. It would be tedious to be sure, but I would have to historically find when the they changed the trend and do a calculation using a hypothetical portfolio.

EDIT:

Actually I just did a quick Google search and others have done this. Not sure about the accuracy of the data however. Here are some links:

http://community.investors.com/viewtopic...2&p=751653 scroll down to post 7.

There's also this post which is somewhat critical as well.

http://www.crystalbull.com/IBD-market-pu...w/%3C/p%3E

I'm going to have to do more research on their system, which is why I was curious as to whether anybody on RVF used it.

[DoctaWho]

Think about when/if you'll need the money any time soon. Unless you have a checking account that gives you interest then you should not see any taxes on what' in it. See if you can find a credit union or something in your area that will give you a money market account. The interest rate will be shit and you will be taxed but there's no point in letting a bank have your money for free.

With 10k you could start looking for mutual funds or ETFs, just make sure that the fees are not too high (remember that a lot of the barely beat the market so you don't want fees to eat away at whatever gains have been made). Another option is to start a drip portfolio with companies you like (google drip + motley fool).

One thing to keep in mind is that most of the time when you sell something there will be a capital gains tax so again weigh that against the desire to keep the money liquid. For example, I'm saving to travel more now and I don't want to sell of equities/funds while I'm traveling and accumulate a tax bill that I might not be able to pay.

Also, if you're working and your long term goal is stability then see if your company does 401k matching and if so max out your contribution if you can. If your company matches and you don't max out then you're leaving money on the table (again you need to weigh the opportunity costs of having you money liquid vs tied up). If you're interested in investing check out charles schwabb (I don't work for them but this feels like a shameless plug). They have people that can talk you through investment decisions and most of the fees are reasonable.

[kbell]

Do mutual funds pay dividends? I believe that's what's needed for passive income?

[WestCoast]

^ you dont have an interest in actively managing your money. With that said:

1. Have no more than 2 months in a savings/checking account (If shit hits the fan you can click sell on all your securities)
2. Put the rest into an ETF/mutual fund if you want stocks something as simple as SPY will work.
3. For the love of god do not look at it, close your eyes and just throw whatever extra cash you have back into the etf

(extremely basic example of why you close your eyes and dollar cost average is right here:
http://wallstreetplayboys.com/sp-500-sur...ot-ending/ )

4. If you want to be incredibly safe buy a basket of bonds at 4-6%.

DO NOT pay more than 0.20% for any and all transasction fees. Net expense ratio was 0.1% last time I dug through the numbers on SPY before.
http://financials.morningstar.com/etfund...html?t=SPY

Finally, if you're looking for more specific riskier stuff you can PM me but it is NOT financial advice and I will not be held accountable. There is also a long and old thread I started that covers some other options.

For full disclosure yes I own some spy and I also own a shit load of other stuff that most ppl shouldn't touch with a 20ft pole.

*yes some mutual funds pay divys

[LeBeau]

(12-31-2013 04:20 PM)WestIndianArchie Wrote:  

Are there programs that let you run strategies using old data?

There's certainly some expensive ones out there, but the main problem is you end up finding patterns/strategies that would seem to be big winners but won't necessarily apply in today's environment.

The goal posts in terms of what years you start and stop the time period measurements can also hugely skew the "returns".

Finally, I'm not assuming you think this way, but in general, a lot of people get too caught up in correlations rather than trying to understand the underlying drivers of prices in the first place.

[WestIndianArchie]

@lebeau

I'm actually interested how or whether news affects share prices.

When I used to do patents, I'd read interesting things that should have tipped off tech stock buyers. Don't know if they did. Prices seem to be only loosely correlated with science

[kbell]

What's ETF and SPY?

[WestCoast]

An ETF is "an exchange traded fund".

In laymans terms. If you have a brokerage account and buy "shares" of SPY it is equal to owning the S&P 500 index with little to no fees (0.1%) as mentioned above.

[svenski7]

kbell Wrote:

I have some extra cash in my checking account. I heard somewhere that if you get to 10k you start getting taxed.

What? Are you in the USA? You don't get taxed on the amount of money in either your checking nor savings accounts. That's the kind of shit they do in Ukraine!

kbell Wrote:

Should I be putting money into a Roth IRA?

Yes.

bacan Wrote:

Roth IRA is tax free earnings, but you can't withdraw it until requirement age obviously.

Not true. Roth IRA contributions can be taken out at any time -- tax free. Also, you can remove funds for emergencies such as medical expenses without penalty.

Currently, the yearly maximum contribution to a Roth IRA is $6,500. Let's say over four years you contribute $20,000 and it growth to $50,000 over the ten years after that. You can always take that original $20,000 back out without penalty. If you touch the $30,000 (read: realized gains) before proper age or emergency circumstance, you will pay a hefty tax.

Why is a Roth IRA tax free? Because you already paid tax on what you put in. The money you take from your paycheck and put in the Roth account will still be added into your annual income bracket and taxed. It makes sense not to pay tax on it when you withdrawal...you've already paid it forward. Remember the Time Value of Money...you paid $500 in tax to gov't ten years ago...if they would invest that wisely, they could realize the same gains you see in your account (but they don't).

kbell: It sounds like you are just over the 10k hump (somewhere between 10-25k). At this stage, you need to contribute the 6.5k to a Roth IRA. Also, ask HR at your work if they match contributions to your work IRA. At my previous employer, they matched up to 5%. That's free money. Increasing your contribution means you bring home less money but you can keep that nice little account long after you leave that employer.

Your not ready for real estate/time share/intellectual property investments.

Mutual funds are dead.

ETFs/Index Funds are the way to go.

Don't ever take individual stock picks from friends or especially from anyone over the internet. The worst loss on a stock (over 90%) I've experienced was from a "friend's tip." Luckily it was only a couple hundred dollars.

If you lean more toward ceramics than calc, open a Roth IRA and purchase the Wilshire 5000. It includes all of the small startups (read: Apple in the 80s) as well as the big boys to balance your risk. This isn't an individual stock tip because all I'm saying is "buy the whole market."

Warren B has said the same thing...if you aren't in finance, just buy index funds. He also recommends buying his BRK shares -- can't blame the man lol

Source: Personal experience, trial and error

[svenski7]

(01-03-2014 01:47 PM)WestIndianArchie Wrote:  

@lebeau

I'm actually interested how or whether news affects share prices.

When I used to do patents, I'd read interesting things that should have tipped off tech stock buyers. Don't know if they did. Prices seem to be only loosely correlated with science

The only news item that I've seen with a high correlation to short-term stock price is the earnings report. Everyone focuses on last quarter's earnings versus expert estimates. Sad but true.

[LeBeau]

(01-03-2014 03:00 PM)svenski7 Wrote:  

(01-03-2014 01:47 PM)WestIndianArchie Wrote:  

@lebeau

I'm actually interested how or whether news affects share prices.

When I used to do patents, I'd read interesting things that should have tipped off tech stock buyers. Don't know if they did. Prices seem to be only loosely correlated with science

The only news item that I've seen with a high correlation to short-term stock price is the earnings report. Everyone focuses on last quarter's earnings versus expert estimates. Sad but true.

I'm certain you could have an edge if you were an expert at patent analysis in a particular field.

Even without the SAC Capital style insider trading.

News absolutely affects share prices, even faster nowadays and in unexpected ways based on trading algorithms.

Even social media is a driver of price changes.

Some people aren't aware that there are complex computer programs designed to read news headlines, online trending topics, etc. far faster than any human could, then make extremely fast trades based on internal decision rules.

I've posted this video in another thread, but it's relevant here:

[600]

KBell - stop! Do not invest in anything and do not listen to any advice from anybody. Be your own guru - be your own council. You must find a method of trading which is specifically tailored to your own psychology, do not attempt to enter the market with live cash until you fully comprehend your own system. Save yourself the pain of being shafted by the markets and don't even bother with them unless you feel there's nothing else you can do. Trading is even more dangerous than it is difficult. If you are not highly trained the market will destroy you. I know it's not what you want to hear but it's the truth.

http://www.newyorker.com/online/blogs/sp...exity.html

http://www.youtube.com/watch?v=WM9wMgRPv8U

[kbell]

I put quite a bit of cash into a ROTH IRA and probably will switch that to index funds (russel 2000, and SP500 about 5 k each and some into a foreign index). Over the years I plan to put more into them and into some others. I'm slowly learning how investing works. I finished up A Random Walk Down Wallstreet understanding maybe about 50% of it. I understand the algebra pretty well, its just the terminology I'm still not to great on.

I'd like to invest in a non IRA as well. I think have a vanguard or Schwab account as well my father started when I was younger, and kind of interested in investing. Never really did much with it though. Hopefully would produce divided that I can put more into the investment and some into my checking for cushioning if I lose a job.

[Ibagemyoutagem]

In my experience which has been trading stocks since in was 13 is that stocks are a start to build some real capital. Then open/buy a business (franchise pref) and let that be a solid asset and passive income. In my long years trading. Fuck the market, it honestly doesn't help greatly unless your in the flagship of institutions or have millions for safe dividend to actually be worth something after tax.

point - self sufficient businesses or millions of dollars starting off in market = steady stream of passive income for travel and food AND The Position of Fuck You.

[ElBorrachoInfamoso]

1. Invest in low fee index funds (as others have already suggested)
2. Learn the difference between Roth IRAs/401K and traditional IRAs/401Ks

The main difference is that the Roth varieties allow you to contribute money after taxes. So you pay income tax on your earnings and then contribute to your Roth IRA or 401K account and that money grows tax free. You pay no taxes on transactions within the account (capital gains, dividends, etc.) and later can withdraw the money without paying taxes.

Traditional IRAs/401Ks let you contribute money before paying any income taxes but when you withdraw the money you have to pay taxes at whatever your marginal income tax rate is. It's key to remember that you'll pay an income tax rate, not a capital gains tax rate because income tax rates tend to be much higher.

One deciding factor on whether to choose one over the other is what you expect your tax bracket to be in the future versus now. If you decide to use both types of accounts, then a good rule to remember is that you should not have any stocks in your tax exempt account (traditional) unless you have only stocks in that account. Similarly, you should not have any corporate bonds in your taxable account (Roth) unless you have only corporate bonds in that account.

Another thing to remember about Roth IRAs is that there is an income limit beyond which you are not allowed to contribute anything. You hit it when your adjusted income gets close to $200K. At that point we have to contribute to a traditional IRA and convert that into a Roth IRA. This is known as a backdoor IRA.

[Kaebs]

After reading quite a bit on this thread, forum and the topic/career of being an investor, I've stumbled upon one question that I simply cannot wrap my mind around, how did top investors and finance guru's get to where they are???

I know one obvious answer that most here will point to is by having connections, but even with that its quite amazing how some guys make their way to the top.

For instance Peter Lim, one of Singapore's richest men, earned the nickname "Remisier King" from his clients do to his impressive ability at earning his clients impressive returns on their investments. Apart from that he's had many other successful investments such as in Palm Oil, which has garnered him quite a substantial amount of his wealth. Even guys like Jeffrey Epstein came from nowhere to advising very wealthy clients on financing and taxing strategies.

[jj90]

Connections, pedigree, and an absolute commitment to making money and loving it. Your drive to make and save money at every corner must be your calling.

If that's not on your mind every waking moment, go do something else.

[Lime]

A great book is written by the founder of the Vanguard funds: titled something like 'common sense investing' by John C. Bogle.