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Talk to me about stocks

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Regular Contributor

Talk to me about stocks

First off, I have read a ton of books about stock investing, I've read a lot of the boglehead wikis and forums, I've absorbed a lot of info about this. Still, I'm a newbie to actually doing it so forgive me if I ask some obvlivious questions.

 

In another thread @iced mentioned an approach that's yielding way more than high interest checking/savings accounts/CDs/SUBs that caught my attention:

 

@iced wrote:

 

As an example, I've got one stock I'm about $30,000 into. It doesn't experience a ton of growth on the share price, but it's yielding about $2,500 a year in dividends, and has consistently paid a high dividend for years that increases annually at a rate higher than inflation. By comparison, that same $30,000 in a 2.2% savings (which is now heading back down, unfortunately) would yield $660. I'd have to move that money 4 times to get the bonus 4x before I match what I get leaving it parked in stocks and forgetting it. Reinvesting the dividends into the same stock will yield double the shares in about 7 years, parlaying that dividend into more than $5,000 annually given the annual increases in dividend payout. The icing on the cake is that $2500 is taxed at 15% while the ~$1000 I get each year in interest is taxed at full income (28%ish).


So, help me understand. When I looked at dividends from stocks, they all seemed to be less than 4%, which is why I initially dismissed them. I'm primarily looking at Vanguard because my retirement account is there. Ar eyou able to name specific accounts you've had sucess with?

For example, I'm looking at Vanguard High Dividend Yield ETF. Is this the sort of fund you're referring to?

Message 1 of 33
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Super Contributor

Re: Talk to me about stocks

You can get additional dividends at any time if the company decides it would be good for them. So, while an average rate is good to go by, if the company is making some moves, you can receive a special dividend out of the blue or an increased return at the quarter. This just happened to me a few months ago. Got an alert I received dividends off-cycle. There's a good chance he invested in something with steady, excellent growth.







Message 2 of 33
Regular Contributor

Re: Talk to me about stocks


@Brian_Earl_Spilner wrote:

You can get additional dividends at any time if the company decides it would be good for them. So, while an average rate is good to go by, if the company is making some moves, you can receive a special dividend out of the blue or an increased return at the quarter. This just happened to me a few months ago. Got an alert I received dividends off-cycle. There's a good chance he invested in something with steady, excellent growth.


I was assuming that it wasn't one company but some sort of index or mutual fund. Invseting in individual companies seems a lot more risky to me based on my research, but perhaps it's just because I've been reading a lot of boglehead and vanguard stuff lol.

Message 3 of 33
Established Contributor

Re: Talk to me about stocks

Be wary of any mutual or etf funds with very high costs. Some have front-side-back loading where it can cost you in the longer run. You may make money, but most times you making some else more money. Tred slowly and if you get a ticker symbol, ask the bogleheads or search the forum. Lots of very smart financial folks share good advice there.

Message 4 of 33
Super Contributor

Re: Talk to me about stocks


@Batsy wrote:

@Brian_Earl_Spilner wrote:

You can get additional dividends at any time if the company decides it would be good for them. So, while an average rate is good to go by, if the company is making some moves, you can receive a special dividend out of the blue or an increased return at the quarter. This just happened to me a few months ago. Got an alert I received dividends off-cycle. There's a good chance he invested in something with steady, excellent growth.


I was assuming that it wasn't one company but some sort of index or mutual fund. Invseting in individual companies seems a lot more risky to me based on my research, but perhaps it's just because I've been reading a lot of boglehead and vanguard stuff lol.


Yeah, which is why I changed up the wording part way through. Lol. There are pros and cons. If one company takes a hit, the rest in the fund can help offset, but they're usually grouped similarly so if it's a hit to the sector, they all suffer.







Message 5 of 33
Community Leader
Super Contributor

Re: Talk to me about stocks

I like to wear black ones since they dont get as dirty as white ones. Oh my bad, you ssid STOCKS, I'll let myself outSmiley Wink
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Message 6 of 33
Regular Contributor

Re: Talk to me about stocks

@Batsy,  

 

I am not a sophisticated investor. I buy things I understand and use. My exposure was not much as first but with share appreciation and splits over the years the unrealized gain is impressive. Unrealized is the important word. It could all go poof.  The equities are dividend payers so that's nice, too. Long term gains are taxed more favorably than regular income another plus. 

 

I'm the turtle investor not the hare. It's worked for me so far. Again, I am not the most sophisticated investor. Maybe just lucky. 

 

I have a small dollar traditional IRA. CPA told me to do a Roth conversion a few years ago. I should have listened. Oh, well. No biggie. 

 

My suggestion is to just dip your toe in the water. Invest a small amount in a stock. Watch how it performs. You can always sell and buy something else is you want to. I'm not a shopper. Money some may blow off casually walking in a store or online I put into stocks. It was not a big portion of my world at that time. Now it's sort of nice to have. 

 

Good luck whatever you decide to do!

 

 

Message 7 of 33
Regular Contributor

Re: Talk to me about stocks

The small dollar traditional IRA I mentioned in my previous post is invested in an agressive growth fund. Sorry I neglected to mention that.

Message 8 of 33
Contributor

Re: Talk to me about stocks


@Batsy wrote:

@Brian_Earl_Spilner wrote:

You can get additional dividends at any time if the company decides it would be good for them. So, while an average rate is good to go by, if the company is making some moves, you can receive a special dividend out of the blue or an increased return at the quarter. This just happened to me a few months ago. Got an alert I received dividends off-cycle. There's a good chance he invested in something with steady, excellent growth.


I was assuming that it wasn't one company but some sort of index or mutual fund. Invseting in individual companies seems a lot more risky to me based on my research, but perhaps it's just because I've been reading a lot of boglehead and vanguard stuff lol.


The risk is minimum if you take the time to look at individual companies.  Berkshire Hathway has beaten the S&P so badly it's actually hilarious if you look at how much a return they have gotten vs the S&P over the years and Berkshire invests in stock of companies either getting shares if not flat out ownership.  Also there are problems with ETFs and funds https://seekingalpha.com/article/4292299-explaining-dr-burrys-index-fund-bubble-meltdown-prediction 

Neither ETFs, individual dividend stocks or rental properties are without risk.  I personally perfer picking individual dividend stocks but that is me.  For me it really boils down to control with me wanting to keep track of what my investments are doing personally.  That and some companies I really would rather not invest in anyway, shape or form.  If you just buy the index you are investing in companies in that index regardless of how you personal feel about that company or companies.  

 

As far as high yielding stock goes yeah it's available but it's not without risk for example Ford's dividend is 6.54% right now and when a recession does happen the dividend will probably be cut.  You also have mortgage reits like AGNC with it's 11.81% yield with it's dividend being paid out monthly which is nice but the company has had to cut it's dividend a few times and is affected by interest rates and has a good chance of having to have it's dividend cut a few more times.  

 

Now let's take a stock like Leggett & Platt with it's 3.92% dividend yield that has been paying a dividend for 47 years making it just shy of being a dividend king.  That stock is going to be more stable then Ford or AGNC but it's going to pay out less in the short term but you would make more off it in the long term.  

 

OP I would really focus more on quality and less on getting the biggest dividend yield.  Also I would look at purchasing stock more as ownership of the company i.e. try to view the stock of the company instead of just being an investment think of it as being more of a legitimate partnership vs just looking to get the highest yield from the investment. 

 

I see people with 70 something stocks and only a few shares (less than 10) in a particular stock (if not the majority of them) and I just think to myself why?  If you are going to invest in a company at least have some skin in the game and put in few hundred bucks if that's all you can afford.  If you can afford more put in a thousand, tens of thousands, millions, etc.  I'm not saying having all your wealth in stocks but if your going to buy them then at least take it seriously.      

Message 9 of 33
Moderator Emeritus

Re: Talk to me about stocks


@AverageJoesCredit wrote:
I like to wear black ones since they dont get as dirty as white ones. Oh my bad, you ssid STOCKS, I'll let myself outSmiley Wink

Interesting Joe, thought the same thing and so did another one of our close posters Smiley Happy

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