New to the game and got a question.

[UGA12]

Have been reading several diff boards trying to get a feel for the vast amount of info that goes in this volatile game. Am 26 work for the gov (thus state retirement) and have decided that my money would be better spent in the market rather than paying the bookie. Now I am not crazy enough to think I cant lose my shirt in the market as well, but at least this will give me a fighting chance in the long run. I invested 2k into 5 stocks-FCN,LU,NT,NXTL,and the lesser of the 5 GADZQ. Just so you know I am not in this for a quick buck, more of a secondary retirement that allows me to shed some of my gambling spirit.

Question

1) Only have around 150 a month until may of next year (wife will graduate) where should this money go?

2) Any glaring company from the ones I chose that you see as a terrible investment long term?

3) Know I am not investing the type of money you guys are so do I have to be more aggressive.

4) Bought GADZQ @.50 and now sits at 1.33, should I sell (know that question is relative) and reinvest in a mutual or index?

5) Lastly and questions 1 and 3 may relate to this question, what are the pros and cons to selecting lower priced stocks 1-10$. I feel the obvious answer to this is that you are at more risk because these companies are not proven, but weighed against the fact that some of these have more room for growth in the long run how do you feel it all shapes up?


If I am an idiot for my previous investments please let me know, but foremost what is some advise for the future with what I have to work with.

Thanks in advance and again great board!

 

[selkirk]

welcome to the forum UGA12, here are some of my thoughts on your questions.

1) Only have around 150 a month until may of next year (wife will graduate) where should this money go?

if you intend to buy anything ie: house, car, ect just keep this in cash, also you should have a small amount of cash in case unexpected expenses arise. many people say six months however that depends on what you are comfrotable with;

if you already have enough cash look to investing in a mutual fund, or a stock through a DRIP/SPP.

make sure debt is paid off, had someone who had extra cash wanted to invest it, however he had $15,000 owing on a loan at 9%, pay off debt.


2) Any glaring company from the ones I chose that you see as a terrible investment long term?

do not ussually like the idea of long term investments. I have some companies I like and have owned and have kept (trade around the positions slightly), however if one of my companies starts coming out with bad news and the stock reacts badly usually sell.

I own NT but would not classify it as a long term investment, bought it as a trade, thought it could go on a run, would classify LU as the same thing. would watch these stocks with high PE and often unpredictable earnings.

sold 50% of NT at $8.50 at it is now over $10cdn. cannot win them all.hit one of my stops.


3) Know I am not investing the type of money you guys are so do I have to be more aggressive.

No. in 2000 set up a DRIP/SPP portfolio with $5000, it outperformed the market. buy quality stocks at good valuations.

4) Bought GADZQ @.50 and now sits at 1.33, should I sell (know that question is relative) and reinvest in a mutual or index?

would set a stop $1.10 $1 ect and if it hits the number then sell and invest your profits in a good mutual fund or index, or DRIP/SPP stock.

5) Lastly and questions 1 and 3 may relate to this question, what are the pros and cons to selecting lower priced stocks 1-10$. I feel the obvious answer to this is that you are at more risk because these companies are not proven, but weighed against the fact that some of these have more room for growth in the long run how do you feel it all shapes up?

often they have more risk, listed a group of jr. oil/gas stocks here over a year ago, all did well except one went to zero, found more water than oil, and reserves write downs, did not take long.

when this happens and the bad news hits losing 25-50% is better than losing your investment.

some small cap stocks are just forgotten by the market, and can be lower risk than many higher priced stocks. Mentioned Russel Metals RUS on Toronto in the past. Traded at $4.50-$5, had a PE of 9, yield of 4.5% and mangement had a good positon in the stock. earnings were going to slowly increase. with a stock like this you just do not know when the market will notice.


would build up your portfolio and would carefully research any small cap stocks, maybe buy a good US small cap fund and then buy some indivual stocks.

good luck with the investments, you will probably learn more from your mistakes than any advice you receive.

thanks
selkirk

 

[UGA12]

Thanks Selkirk, do you shoot for a certain % to make off of each stock or just ride until you feel a downturn. Also do you have a certain % of return each year that you try to attain and if so what. The reason I ask is that I am trying to figure what needs to be made off of each stock in order to attain X amount of growth each year. With taxes and such what is a good % to shoot for each year?

Also what do you think of as long term, I see where the tax goes from 29% down to 20% after a year, do you ever keep stocks a year or more and if not why.

Thanks again for all your help.

 

[selkirk]

UGA12 I have many stocks that I have held for years, I sometimes increase and decrease these positions however own a position for years.

such as the cdn. banks they have outperformed the TSX/SP 60 (TSE) Toronto exchange for decades. often they average 10-15% return a year over long periods of time.

here is what I look for in a long term stock; this is just an example

these trade in Cdn. and the US figures in Cdn. $

Royal Bank of Canada RY
dividends per share 1999-.94 2000-$1.14 2001- $1.38 2002- $1.52 2003- $1.72

the dividend is rising. will probably rise in 2004, this makes your yield grow in time.

Diluted earnings per share $

1999- $2.48 2000- $3.40 2001 - $3.55 2002-$4.12 2003-$4.43



another example, another cdn. bank
Scotia bank BNS dividends have more than doubled since 1999, and now stand at $1.68 a year, they have risen the dividends every year in the past twelve years.

annual return on BNS counting dividends
1999 7.1, 2000 33.3, 2001 3.7, 2002 7.8, 2003 46.8


these are examples but both companies have increased dividends and earnings for the most part go up every year, sometimes they have a bad year.

both are probably fully valued (maybe 5% more upside) but in 5 years they will be higher with a return of about 10% a year maybe greater.

on my overall portfolio it depends on how much risk you take, 10% is not bad to shoot for in a conservative portfolio since inflation is so low.

I try to make 20%+ every year. However I moniter my stocks if I have some stocks/income trusts that are making me 8-10% and they do this every year will keep them.

I find what kill returns is when you buy a stock and you let it fall to far, fall in love with a stock, that shows you nothing but losses.

Also when I buy a stock I have a target but if it is performing well, will not be in a rush to cash in my profit.

one example is a stock I posted here under the stock contest coolbrands built up a position in this stock at $4.50 cdn. sold 50% of the position at $6.50 cdn. close to its high, was having a good run, ran to over $20. the stock was going up, so why sell near a new 52 week high, just because that is your target.

I will sell the remaining position if it falls to $15

be more concerned with stocks that show a loss, as for your winners nothing wrong with taking some profits just be careful that you do not do what I did with coolbrands.

thanks
selkirk