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Early Starter
Old 09-07-2004, 12:06 PM   #1
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Early Starter

Hello everyone. I've enjoyed reading this board for a couple weeks and I'm ready to make some posts. I'm currently 21 and a Junior Finance Major. I currently have $86k in a brokerage account that contains mostly small/micro-cap companies I invest in. I have $10k in a Roth which is also invested in ( i wouldn't say risky) but higher risk micro-growth companies. I have $4k in my 401K and about another $2k in large-cap DSP/DRIP plans. I guess I'm fairly good at picking stocks, and am looking to learn more about real-estate. I've gotta run to class now so I look forward to participating on this board!
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Re: Early Starter
Old 09-07-2004, 12:26 PM   #2
 
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Re: Early Starter

Stop! Read something like The CoffeeHouseInvestor or Mutual Funds for Dummies (really). At your age, if you just buy Vanguard's Total Stock Market Index, you could retire WAY young. Don't get caught up in the stock picker's game, it's a losing strategy.
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Re: Early Starter
Old 09-07-2004, 04:25 PM   #3
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Re: Early Starter

Quote:
*I'm currently 21 and a Junior Finance Major. *I guess I'm fairly good at picking stocks, and am looking to learn more about real-estate. *I've gotta run to class now so I look forward to participating on this board!
I knew a lot of people who thought they were good at picking stocks, and most of them are broke now. Maybe you really are good at it and if you continue, I hope you succeed. But I wouldn't recommend using the stock-picking strategy to retire early. I would recommend dollar cost averaging into a few good mutual funds on a consistant basis including maxing your Roth IRAs and other retirement plans. Plus read this board, you'll learn a lot from the people here.
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Re: Early Starter
Old 09-07-2004, 05:45 PM   #4
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Re: Early Starter

Hey, let's not forget to congratulate this poster for saving so much, so early. How did you make all this money so young? It would be great to hear.

Congratulations on a terrific early start.

Anne
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Re: Early Starter
Old 09-07-2004, 10:05 PM   #5
 
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Re: Early Starter

jeesh you guys are nice, givin gme a chance to toot my own horn in only my second post ive always been a saver, i inherited that from my dad... sophomore year of highschool i was able to scrape together $3100 and open an ameritrade account. I bought Philip Morris and Berkshire Hathaway "B". MO at $18 and BRK.B at $15xx. Well they went quite a bit higher, In the meantime i added more money and bought ANF and CAPX. I've probably owned somewhere in the ballpark of 2 to 3 doezen different stocks over 4 1/2 years and I think i've only had to sell 4 or 5 at a loss. anyway, i' made most of my money off buying 1400 ASFI at 6 and selling 1/2 at 20, it split 2 for 1 and its at like 15ish now. This last spring i took 13k and made the biggest bet ive ever made and bought 25000 HGRD at .45 i still own them all. i have enough money where i'm starting to think about protecting some of it as opposed to simply trying to grow it. I've seen my portfolio fall from 40k to 18k in 6 months. ive also had it soar from 50k to nearly 150k in 6 months too! i'm about in the middle of that right now, but i'm confident in my stocks. im looking to add new money into more conservative investments as well as possibly rotating some out of my higher risk investments. noone on here really talks much about individulal stocks, and i think that's unfortunate. risky small-caps aside, you can't tell me that certain stocks in which you can buy DSP/DRIP plans for next to nothing, wont out-perform the S&P over the coming years. I own DSP/DRIP plans in WMT (my employer, i get 15% off) HRB, PFE, JNJ. A Pfizer DSP account can be opened for only $500 and no fee, i would encourage some of you to look into that, drugs haven't been this cheap since 1994 which Warren Buffett has refered to as one of the great folly's in his career by not buying them then. I own no mutual funds outside my 401K, but i think a diversified DSP/DRIP portfolio of 8 or so issues for the taxable portion of your portfolio offers advantages over strictly mutual funds, and will actually compliment a mutual fund rich 401K nicelly.
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Old 09-08-2004, 01:26 AM   #6
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Welcome, Berkshire_Bull! I hope you're not a Wal-Mart greeter. Many of us see that position as a last-ditch solution to a busted retirement portfolio, and we'd hate to have to compete with finance majors for it.

"Reader"s point may be that, while you can certainly win by picking winning stocks, you can also win by not losing-- IOW by DCA'ing into index funds.

Reader's advice is very good for 99.9% of the investing community. You're at a point in your life where, if you're interested in stock picking, you should do so. You'll either do fine (and perhaps maintain or even improve your record) or you'll blow yourself up and teach yourself a valuable lesson. Both of those are much easier to accomplish when you don't have a spouse, kids, mortgage, or other obligations. At this point in your life you probably don't sleep much at night, let alone worry about its quality.

Most of us fund our liabilities (living expenses) with our retirement portfolios/pensions. Those of us interested in picking stocks tend to do so with money that we (and especially our spouses) won't mind losing. Very few (if any) of us retired due to superior stock picking. Most of us did it with superior savings, frugal living, govt pensions, or business-owner/stock-option windfalls.

I believe that the credibility of your self-assessment depends on the number of bear markets you've been through. Bull-market trading records are irrelevant since any chimpanzee can make money then (and several have). After 1973-4, 1987, and 2000-? I feel much more comfortable with a govt pension and a bunch of index ETFs to pay the bills while I re-learn how to make money while the rest of the market isn't. While it's great that you're making money, you'll learn even more by reading up on market psychology during the 1970s. Business Week's 1979 article "Are Stocks Dead?" is a classic.

Gary Smith's "How I Trade For A Living" is a great peek at a trader's life-- even if you only read the first chapter. I think his biggest lessons are (1) Indicators don't tell you when they stop working or when they start working again and (2) If you're picking the right investment then you shouldn't hesitate to put a large percentage of your portfolio into it. With Gary that turned out to be junk bond funds. Gary's pretty much retired in his late 50s but you have to consider if you're willing to model your life after his.

I guess anyone investing in Health Grades also should be familiar with Manuel Asensio. He tends to greet messengers with flamethowers but his research & reporting is no less valid for his ranting & raving. http://www.asensio.com/Index.aspx

I can't say that concentration is a good thing when you're buying your employer's stock, even for Bill Gates. But again you're young enough to have an earnings potential big enough to recover from any catastrophe. You just have to consider the impact of Wal-Mart having a bad quarter, watching their stock getting whacked 25%, and then "retaliating" by laying you off. No, it probably won't happen. But could you survive if it did?

Berkshire Hathaway has been very, very, good to us and our kid's college fund too. Outside the retirement fund, I'm long Nortel (NT) & Costco (COST), short K-Mart & Greenfield Online (SRVY), and looking for a shorting entry point on Google. I don't know if I'll ever get into microcaps on fundamentals. While I could analyze the books of a company like Health Grades, I'm afraid that I'd take Asensio's approach by researching the felony records of their executives & directors...
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Re: Early Starter
Old 09-08-2004, 05:44 AM   #7
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Re: Early Starter

"Assume you have 10,000 people who flip a coin once a year. After five years, you will have 313 people who have come up with heads five times in a row. If you put suits on them and sit them in glass offices, call them a mutual or a hedge fund, they will be managing a billion dollars. They will absolutely believe they have figured out the secret to investing that all the other losers haven't discerned."


From an article I read somewhere...

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Re: Early Starter
Old 09-08-2004, 05:47 AM   #8
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Re: Early Starter

Here is the link:

http://www.2000wave.com/article.asp?id=mwo032802
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Re: Early Starter
Old 09-08-2004, 05:50 AM   #9
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Re: Early Starter

At 22, I spent a lot of my stock market profits on penthouse living, dirty blonds and a new sports car. Hopefully you are smarter than that. I was also a new Boeing engineer and 'a legend in my own mind' when it came to stock picking.

Today at 61 - one modest suggestion - benchmark a Vanguard Balanced index fund - DCA into it - and try to beat it over the next 15- 20 years.

Yes - individual stock picking may be incurable - I have 40 DRIP dividend stocks currently. But in my case, the bulk of ER came from DCA into index funds.

But you gotta try what you gotta try while you are young.

85% index funds, 15% dividend type DRIPs.
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Re: Early Starter
Old 09-09-2004, 01:17 PM   #10
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Re: Early Starter

Since you're a finance major, you may enjoy these in the area of Behavioral Finance:

Boys will be Boys: Gender, Overconfidence, and Common Stock Investment, by Terreance Odean. Young, single, males tend to be the worst investors!

Why Smart People make big money mistakes, by Belsky and Gilovich.

- Alec
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Re: Early Starter
Old 09-09-2004, 01:46 PM   #11
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Re: Early Starter

Alec

I rest my case. BTY - when my 40 DRIP stocks beat my balanced index - I plan to write a book.
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Re: Early Starter
Old 09-09-2004, 07:35 PM   #12
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Re: Early Starter

Berkshire,

You're welcome! And you are welcome here; I think you'll fit in fine despite your heretical ideas about stock picking. This is largely an index-worshiping crowd, myself included. But I think Nords has a good point about your age and your investment strategies.

I was converted to index worship by the academic research; you might want to read Bernstein's Four Pillars and see if it affects your thinking. But don't rush. You do have many years ahead for more conservative investment strategies.

Anne
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Re: Early Starter
Old 09-10-2004, 06:13 AM   #13
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Re: Early Starter

Bershire

It's male and biological - probably incurable. At age 61, I'm down to 15% individual stocks, 85% index funds.

Like the Monty Python movie, the holy grail - er ah the one great stock - may be unatainable for most - but a reasonable minority hit it often enough to make it a horse race.
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Re: Early Starter
Old 09-10-2004, 06:47 AM   #14
 
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Re: Early Starter

Yeah and I'm male and 60 (today - kudos to me).

My allocation is still 0% stocks. I'm a Monty Python fan
and understand the "Search for the Holy Grail" stock-wise, but
don't want to take a chance on my ER being squeezed,
especially since the road here was so serpentine.

John Galt
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Re: Early Starter
Old 09-10-2004, 08:52 AM   #15
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Re: Early Starter

Its true that most very wealthy people got there on the back of one stock. Usually the one belonging to the company they created or are on the executive team of. I certainly did.

Its also true that many people who used to be wealthy got to their reduced status on the back of one or two stocks.

Diversity is the great peanut butter spreader. You wont hit one out of the park but you wont strike out as easily either. Theres a lot to be said for the guy who bangs out a base hit every time they go to bat. They wont talk about you on sportscenter and you wont get any "da da da...da da da" music. So what?

I'll also once again assert this...and bear in mind I do love Berkshire and Warren and have owned both "A" and "B" shares. You have to seriously consider the risks of ownership in a company with a 70-something money manager who likes to eat dairy queen cheeseburgers, whose primary backup is a guy pushing 90...with the knowledge that if Buffett suddenly pushes up the daisies you can kiss most of your money goodbye overnight.
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Re: Early Starter
Old 09-10-2004, 09:21 AM   #16
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Re: Early Starter

Hey TH,

I think you may be overstating the value of Buffett
to the stock. It is true that the stock would take a
hit, but the underlying value of the companies he
holds won't disappear just because he is pushing
up daisies. I suspect it would be a good time to
buy on the dip when he goes.

Cheers,

Charlie
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Re: Early Starter
Old 09-10-2004, 09:28 AM   #17
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Re: Early Starter

Hey charlie...you never know whats going to happen!

Your last name isnt Munger now is it?

My original post said I would probably look into buying it on the dip after he passes on but I took that out. It felt a little vulturish.
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Re: Early Starter
Old 09-10-2004, 09:43 AM   #18
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Re: Early Starter

Don't I wish!!

For those who don1t know Charlie Munger, here is
a link:

http://www.fool.com/news/commentary/...ry040507wt.htm

Cheers,

Charlie
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Re: Early Starter
Old 09-10-2004, 10:07 PM   #19
 
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Re: Early Starter

comeon guys, im not a greeter... i work in pets :
but anyway, id work here again a couple days a week when i retire and i'm old ( ie. 30< ) gotta have a reason to get up in the morning and some sense of achievement even if the money is minimal.
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Waddya saying, Berkshire Bull?
Old 09-11-2004, 10:27 AM   #20
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Waddya saying, Berkshire Bull?

Do you need work to give you a reason to get up in the morning?

Do you need work to give you a sense of accomplishment?!?

Keep socking the savings away while you ponder those life-defining questions...
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