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too conservative? any suggestions?
Old 08-08-2006, 01:37 PM   #1
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too conservative? any suggestions?

After i sell the last of my non-primary properties, I should have approx 200k in cash.* I don't know what to do with it other than to put them in online savings accounts with HSBC or Citibank.* I also thought about putting some of it in 6 month CDs, with Citibank offering 5.5% yield.* However, I would like to take on a bit more risk and perhaps get a better return.* Any suggestions?

29, single, no dependents.
current situation.

135k split 5% citibank e-savings, 5.05% HSBC online savings, misc checking/saving accts
14k in 401k currently, just started late last year and hoping to max out every year going forward.* holdings:
GROWTH FD OF AMERICA* RGAFX 10%* * *
COLUMBIA LGCAP VALUE* NVLUX 20%* * *
DODGE & COX STK FD* DODGX 10%* * *
FIDELITY DIVERS INTL* FDIVX 20%* * *
FIDELITY REAL ESTATE* FRESX 10%* *
COMPANY STOCK FUND 30%
2.4k trad ira - 5.5% 6 month cd
3.8k roth ira - (idle - would like it to do something with this)
24K in brokerage - (PFE MRT GE EWJ EWS EWA EWM EWC) - (ADCT, CSCO, COM, SUNW)
6k in brokerage - cash reserve (4.5%)

yeah.. i've been pretty stupid w/ stocks and definitely trying to learn at this point.
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Re: too conservative? any suggestions?
Old 08-08-2006, 01:41 PM   #2
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Re: too conservative? any suggestions?

What is your risk tolerance? Would a 10% drop in your portfolio have you cowering? How about a 20% drop?
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Re: too conservative? any suggestions?
Old 08-08-2006, 01:47 PM   #3
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Re: too conservative? any suggestions?

my stock portfolio is down 8% right now. i'm only upset b/c i feel like i'm not educated enough to make the "right" call. 10% is okay. 20% drop would cause me to think that i should just stick to what i know.
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Re: too conservative? any suggestions?
Old 08-08-2006, 02:42 PM   #4
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Re: too conservative? any suggestions?

Do you like owning individual stocks? They can be volitale, but I enjoy the 0% management fees .

I think the following are solid long term investments:

BRKb
TGT
LOW
FAST
O (best owned in a tax-advantaged account)

A little about these.

Berkshire is Warren Buffet's company. It is a financial fortress. I also thing it is a good time to buy it, as he has been making some large purchases lately. The day he dies will probably be a bad one for the stock, but the business will do fine without him too. I own this stock.

Target currently is very reasonably priced, IMHO. It is a nice dependable growing company with a strong competitive advantage. It has avoided most of the bad press Walmart has gotten, although it runs its business in a very similiar fashion. The only real potential problem I see is that they may be getting too aggressive with their credit card business. I own this stock.

Lowe's is very reasonable priced because people think the home improvement business may get crushed as the housing market slows down. I think the worries are exagerated. People need to maintain their homes even if they are aren't able to sell them. There may very well be a downturn, but I can't see it doing much long-term harm to Lowe's. I do not own this stock (yet :>)

Fastenal has been growing like a rocket since the late 80s. Their growth has slowed somewhat lately, but they are still growing at a decent clip (10-15%/year).
They are a little pricey, but they've always been worth it. I own this stock.

Realty Income Corp. is a REIT with about a 6% dividend yield. They run the business in a very conservative fashion and have slowly increased the dividend over time. They own mostly retail properties that are leased to longterm tenants. They pay their dividend on a monthly basis. I own this stock.

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Re: too conservative? any suggestions?
Old 08-08-2006, 02:49 PM   #5
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Re: too conservative? any suggestions?

Quote:
Originally Posted by James L
However, I would like to take on a bit more risk and perhaps get a better return.* Any suggestions?
yeah.. i've been pretty stupid w/ stocks and definitely trying to learn at this point.
Yes, as you can imagine we've seen this type of thread on the board one or two thousand times, and we've tried various ways of answering that question.

You've made the best suggestion-- go learn more.

Read a library copy of Bernstein's "Four Pillars" and take a look at the sample portfolios at the end of the book. Go read his articles at efficientfrontier.com. If you're really interested in the big picture, try Siegel's "The Future for Investors" or Dimson's "Triumph of the Optimists".

Everyone wants to take risk when their investments are going up, but very few know how they feel about risk when their portfolios are tanking. By the time you've read Bernstein then you'll know where individual stocks and all the other investments belong in your portfolio.
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Re: too conservative? any suggestions?
Old 08-08-2006, 03:07 PM   #6
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Re: too conservative? any suggestions?

My suggestion would be to educate yourself with those books mentioned. In the meantime stay cash its paying well.
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Re: too conservative? any suggestions?
Old 08-08-2006, 03:52 PM   #7
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Re: too conservative? any suggestions?

At this point, i'm not that interested in individual stocks as i am not too confident in it. I was just wondering if there is a better place to park cash in while i go about slowly learning more. Or do you all think that under my current situation, cash/cd is really the best option.

Thanks!
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Re: too conservative? any suggestions?
Old 08-08-2006, 04:22 PM   #8
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Re: too conservative? any suggestions?

Quote:
Originally Posted by James L
At this point, i'm not that interested in individual stocks as i am not too confident in it.* I was just wondering if there is a better place to park cash in while i go about slowly learning more.* Or do you all think that under my current situation, cash/cd is really the best option.

Thanks!
Start reading up. In the meantime, a high yield savings account, low cost money market fund, or T bills would be a great parking place.
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Re: too conservative? any suggestions?
Old 08-08-2006, 04:57 PM   #9
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Re: too conservative? any suggestions?

Quote:
Target currently is very reasonably priced, IMHO. It is a nice dependable growing company with a strong competitive advantage. It has avoided most of the bad press Walmart has gotten, although it runs its business in a very similiar fashion. The only real potential problem I see is that they may be getting too aggressive with their credit card business. I own this stock.
interesting..an individual stock discussion popping up I thought IntotheMystic/DanTien was big on target...I was looking at a little bit...
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Re: too conservative? any suggestions?
Old 08-08-2006, 05:00 PM   #10
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Re: too conservative? any suggestions?

I would think retail wouldn't be attractive in a rising rate, inflation/stagflation environ...

But then, I don't own individual stocks...
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Re: too conservative? any suggestions?
Old 08-08-2006, 05:05 PM   #11
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Re: too conservative? any suggestions?

I have trouble researching mutual funds let alone ind stocks. Cripes..
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Re: too conservative? any suggestions?
Old 08-08-2006, 05:44 PM   #12
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Re: too conservative? any suggestions?

Darts anyone?

I don't waste time researching stocks - I just buy them.

Tear out the stock list pages from Mergent's Handbook of Dividend Achiever's - put em on a corkboard.

A hand full of good quality darts and you are in business - has worked fairly well for 15 years. Actually too well - I peaked at 44 stocks and two file cabinets of DRIP plans.

heh heh heh heh heh - need a 12 step plan to cut back - slow enough to not get hosed on taxes.
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Re: too conservative? any suggestions?
Old 08-08-2006, 06:11 PM   #13
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Re: too conservative? any suggestions?

James L -

The only comment I have is that I would significantly limit exposure to company stock. Too much risk to have both your paycheck and retirement dependent on the same company.

Just my .02
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Re: too conservative? any suggestions?
Old 08-08-2006, 07:09 PM   #14
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Re: too conservative? any suggestions?

0% management fee, but you pay lots for the trade?!
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Re: too conservative? any suggestions?
Old 08-09-2006, 09:04 AM   #15
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Re: too conservative? any suggestions?

virginia: just don't trade a lot.. $9.95 over 10 or 20 years is pretty cheap vs. even the lowest of mgmt fees. Trading fees are for fidgety people. You have to try not to be fidgety.
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Re: too conservative? any suggestions?
Old 08-09-2006, 10:05 AM   #16
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Re: too conservative? any suggestions?

If it gets to the point that people stop going to Target, I don't think it will matter what stock you buy*

A very bad economy will certainly hurt retail for a while, but over the long term I can't see the Target or Lowe's story ending badly.

I definately agree with the board that the original poster is sitting well in cash while he reads up.

Quote:
Originally Posted by HFWR
I would think retail wouldn't be attractive in a rising rate, inflation/stagflation environ...

But then, I don't own individual stocks...
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Re: too conservative? any suggestions?
Old 08-09-2006, 11:29 AM   #17
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Re: too conservative? any suggestions?

Quote:
Originally Posted by Hamlet
A very bad economy will certainly hurt retail for a while, but over the long term I can't see the Target or Lowe's story ending badly.
Well, that may be true if you invest in the retail sector in general, but there can be significant fluctuations within the sector. For example, I haven't bought anything at the Lowe's across the road in years because a Home Depot 5 miles down the pike has better selection and prices.
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Re: too conservative? any suggestions?
Old 08-09-2006, 02:24 PM   #18
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Re: too conservative? any suggestions?

Lowe's same store sales continue to be positive, so they appear to be holding their own against Home Depot.* I think both companies are likely to be long-term winners (like Target and WalMart).* They will both gain share against the smaller players.

I would prefer Lowe's over Home Depot because Home Depot's management seems to hold their shareholders in contempt.* Having none of the directors show up to the annual meeting and refusing to answer shareholder questions is a giant red flag for me.* I've also been hearing alot of anecdotal evidence that the quality of their employees has been dropping off dramatically due to poor treatment by the management.* So far that hasn't shown up in Home Depot's numbers, though, so it may just be some ex-employees complaining.

Quote:
Originally Posted by Scrooge
Well, that may be true if you invest in the retail sector in general, but there can be significant fluctuations within the sector. For example, I haven't bought anything at the Lowe's across the road in years because a Home Depot 5 miles down the pike has better selection and prices.
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Re: too conservative? any suggestions?
Old 08-09-2006, 04:50 PM   #19
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Re: too conservative? any suggestions?

Quote:
Originally Posted by Hamlet
I would prefer Lowe's over Home Depot because Home Depot's management seems to hold their shareholders in contempt.* Having none of the directors show up to the annual meeting and refusing to answer shareholder questions is a giant red flag for me.* I've also been hearing alot of anecdotal evidence that the quality of their employees has been dropping off dramatically due to poor treatment by the management.* So far that hasn't shown up in Home Depot's numbers, though, so it may just be some ex-employees complaining.
I prefer to sit on the sidelines (at 5%/year) until Nardelli implodes. Then I'll think about jumping back in when the board brings in fresh talent. This tactic worked well with Disney.

Our local Lowes is a harbinger of what's happening to the chain when they get too big to sustain their growth. They start cutting expenses, hollowing out their employee skills & customer service, and suddenly their stock price languishes for years... like Wal-Mart.
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Re: too conservative? any suggestions?
Old 08-10-2006, 09:32 AM   #20
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Re: too conservative? any suggestions?

Fair enough.* Although I would disagree about why Wal-Mart has languished for years.* Wal-Mart's business has been growing fairly well over the last five years, but they got so overpriced during the stock market boom that they are only now back to a reasonable price.* You just can't run a large retailer up to over 50 times earnings and expect it to have good returns going forward.

Frankly, I think all four are going to be solid investments going forward (although I could never invest in Home Depot with Nardelli at the helm).* If I had to pick one it would be Target.* As long as they don't let their credit card business get out of control, they should do well for a number of years to come.

Quote:
Originally Posted by Nords
I prefer to sit on the sidelines (at 5%/year) until Nardelli implodes.* Then I'll think about jumping back in when the board brings in fresh talent.* This tactic worked well with Disney.

Our local Lowes is a harbinger of what's happening to the chain when they get too big to sustain their growth.* They start cutting expenses, hollowing out their employee skills & customer service, and suddenly their stock price languishes for years... like Wal-Mart.
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