Ted Huntington - Investment
I am a person for complete freedom of all information, and am against the need for idiot legal disclaimers, but on all my web pages, the advice I give is only my advice, what a person chooses to do with that information is their own choice, and I should not be held resposible for any kind of loss people experience because of something they saw on my website. Investing can result in loss and I give no guarantee that following advice I give will not result in loss.
Saving money for the future is a smart idea. For most people, investing, like taxes and running a small business is ridiculously and unnecessarily complicated. I try to take alogical, science based, simple approach in my tiny life of 80 years.
There are a number of options:
401k/403k retirement plan
-This is a good idea, and I contribute nearly $100/month in this. My only worry, is that somebody is investing my money, and I do not really know where the money goes to, possibly some place I do not want my money to go to. This money lowers the amount of money that is taxed, but when you withdrawl the money, you have to pay taxes then.
The interest rate at Bank of America is .25%, unbelievably low, in particular when inflation can possibly be estimated at 2 to 3%. "Ing Bank" offers 2%, enough to cover inflation. A savings account is FDIC insured, and if the bank goes bankrupt, a person will still have their money. So a savings account is a very safe investment, but almost no return, so this is like simply saving your own money, in addition, for most accounts, the money can be withdrawn at any time and that is nice.
Bonds are also low risk (very safe). People spend $1000 (or some amount) for a 5 year (or some other length of time) government bond (US federal, state, etc...) and get interest. The money can be withdrawn, but only by paying a ridiculously high penalty, and so most people view that money as being frozen.
A CD (Certificate of Deposit) is basically the same as a bond, but is done through a bank, but I have to check this
There are 2 kinds of IRAs, the "Roth IRA" is a recent invention in the USA. I have to learn more about IRAs.
6) Common shares of stock
In looking at the performance of companies over the last 10 years (the last 10 years we had a good economy in the USA, under the peacenik Clinton and Gore), some comapnies like Intel returned 1000+% on a 10 year investment. I bought 1 share of Intel in 1994, if I had not sold that share, that I would have made 10 times my money in 10 years. If the share was $10 I would now have $1000. So far, of all the companies, Intel (INTC) has had the highest 10 year capital gain (the price of a share of stock, including stock splits after 10 years [market price in April 2004 - market price in April 1994]). Then comes Texas Instruments with a similar very high return. Many companies I looked at had average returns or 20-40%. Many of the money banks (Citigroup, JP Morgan, Bank of America) gained 20-60% in the last 10 years. So compared to the 2% of a savings account, buying shares in a company, can return much more, but of course, there more risk in losing money. Some companies had poor 10 year performances returning under 5%, and some had losses (-10%, etc...). I was surprised that the grocery stores (except perhaps Kroger), did so poorly, after all, an unending supply of food simply grows for the cost of the space and water. I am looking for 30 year (at least) investments, and so I am not looking to "play the stock market" like gambling, I am looking to invest for the future. One other important point that I learned is that a number of companies had poor 5 years gains, but do show ok or good 10 year gains, no real gain is seen in many companies for at least 10 years. Still a poor 5 year return, usually resulted in a smaller 10 year return for most companies I looked at. I think that in a company has a poor (<20% gain - an already 20% is a phenomenal return), then I will probably sell after 10 years and try a different company.
For me, in looking at companies, there are some important points:
1) company has a solid product
2) company has a solid 5 and 10 year capital gain (+dividend)
3) company has a solid future, will not lose if free info is voted in, etc...
4) I actually use the product(s) the company makes.
There are interesting things to worry about when buying and selling stocks. To buy and sell stocks, currently a person needs a broker (although some stocks can be purchased directly from companies, these are called dpp or dip, direct payment/investment plans). Some time perhaps people can electronically buy and sell stocks themselves, I think that is a good idea. One funny issue, is how salaries are determined, for example, there is a large amount of democracy in corporations, but like the US government, not enough. People do not vote on the salaries of the CEO, the CFO, etc...and perhaps they should. There is every possibility of a top level humanager human, taking millions of dollars away from the company, so that for example, the income of a company is $1 million dollars less...and so the people that own stock are getting $1 million dollars less (in the form of a dividend or captial gain that could result from using that money for more products/advertising, etc...). But, for the most part, if a company has been successful for 10 years, they will probably continue to be, and most people that are upper level humanaging want the company to be successful. For example, there are some companies were the money paid to the people employed is directly related to the amount of income the company gets...that makes sense to me (although I am grateful for my constant salary!), that would make people more interested in the success of the company. Plus, that makes more sense, because if a company has to make regular salary payments, they may go bankrupt simply from 1 or 2 bad years, because they did not plan for bad years when calculating constant salaries.
The money.msn.com quotes must be adjusted, (in the monthly price list), because they are much lower than the actual historical market prices, I updated the data in the spreadsheet to show the actual return as calculated with data from finance.yahoo.com. I updated the spreadsheet with the values I calculated from finance.yahoo.com.
I thought that the Total10 was not relative to the share price, but it is. The Total10 is:
Total10=[(price now - price 10 years ago + 10 years of dividends)*splitratio-1]/10
Therefore, if 2 stocks return 10% per year (averaged after 10 years [100% in 10 years]) but 1 stock is $100 and the other is $10, if you invested $1000 you would still see 10% of that (10x$10=$100) back each year, but you would own 10x the number of shares of the $10 stock (100x$1=$100) returning 10x compared to only 1 share of the $100 stock.
The Total10 (Total5, and Total1) is a percentage that would apply to any amount of money invested, no matter how many shares were bought.
I am looking forward to seeing how my shares fair in 10 years, was the last 10 years an indication of the next 10 years? Will this group of people alive now continue to risk destroying our economy by such religion, antisexuality, secrecy, lies, violent values and bad voting?
Already I have learned some interesting things. The market is terrible under Bush jr.
Here is my current portfolio: Stock Portfolio on 10/21/04
So far I have lost $500, some savings plan! I lost $200 on Intel, $100 on HP, $100 on Gardenburger, and those added up to $500 in losses. Although 10 years from now, those undoubtably would be huge gains.
I am looking for more short term gain, because I may sell these stocks if I need money, but also I want a dependible stock/investment. For these reasons I decided to invest more in REIT/real estate, because one thing is true, the price of earth continues to go up all the time, there are more and more humans, put not more and more earth. Humans will eventually develop the moon, mars, etc...
I think real estate appears to be the most stable, regular investment.
Look at my portfolio, the REITs have high dividend returns, and that money you can use now and depend on to be regular. I like the residential/apartment REITs because throwing money away on an apartment is how much of my life and money has been spent. People like apartments because there is no long term commitment, they can pay a few hundred/thousand and have a place for a month/year. The banks are relatively stable but do not return as much as the REITs do. I am looking more at the 5 year returns. Citibank only has an 8% 5 year return, compared to the Bedford REIT at 24% (these include cap gain, dividends, and splits).
What I have learned is that products like computers, and ICs, while topping the 10 year return are not stable, for example Dell and HP have some of the highest 10 year returns, but negative 5 year returns, they have done very poorly under Bush-jr-nomics, but the REITs have survived and moved forward. I guess a lesson is that, people may not need computers, but they definately need a place to stay. people somehow find money to pay for rent, computers are a luxury compared to shelter, and the price of land continues to go up because there is a limited supply and a growing demand with rising human population. So I lost $500, but if all my investments are like UDR, and TCR, I should get that back in a few months. They have already returned $100 (TCR) and $50 (UDR), that is a phenomenal, 20% (TCR) and 5% (UDR), most savings accounts only pay .25% to 2% interest.
So far I have lost $100 (about 5%), but in individual stocks I have gained, in particular on Banks and REITs (except 1).
Here is an update of my calculating 1,5 and 10 year gains (including dividend), and these percentages are yearly gains, they represent what interest rate a person has been getting each year. So take that number (for example 10 year gain for WM 58%) and 1.58^10=96.96. 96.96 x amount invested is how much people that bought shares of WM on 03-02-1990 would have now (if $1000 they would now have $96,955!, that is why WM currently ranks 18th for 10 year return of the 309 companies I am looking at).
Comparing to the numbers above from 10/04 you can see some interesting trends, in particular in the 5 year, because Bush jr. has been prez for 5 years. In particular ranking #13 is Lockheed (the employers of Thane Cesar, the killer of Robert Kennedy), the US military specific business, the US military must be doing big business with Lockheed buying tanks with that $200 billion the senate approved spending. Up there too, at #10 is Sunoco, they have really benfited in these 5 years. Northrup #43 has done well.
Tab delimited 10,5 and 1 year