Starting over, Part 2

HT & Thx to Nike

Resuming our review of investing steps, here are a few tips based on information gleaned from newsletters, television, and now the Internet:

a. Buy what you know – if the company makes a product you admire, or is in an industry you understand, or has another link to your outside life that gives you special insight – buy stock that fits those qualifications.

b. Get to know the CEO. We say this many times. You can get to know the CEO by going to an annual meeting, reading what financial publications have to say about the CEO, reading the company’s SEC filings and annual and quarterly reports. You will get an idea about what the CEO considers important: employees, customers, profits, values (beware of meaningless jargon here!) or other elements of running a company.

c. Read books on finance, industry, business history, business leader biographies.

d. Start a watch list. Back on Jan. 2, 2012, we posted this essay: Ta-da! Announcing our new Model Portfolio:

We’ve picked five new stocks with the monkey method; i.e., a monkey could have picked them.

We named some we had been interested in, but there were some things we didn’t like, like one is a bank! Others we’re just curious about, but haven’t done our brand of research on.  Others have been recommended by market watchers we respect. IOW, pretty random.

We pretended to buy 20 shares of each to get to our goal investment of $5,000 as of Dec. 30. In this case the five companies’ 20 shares each totalled $5,062 by Jan. 2, 2012.

Current dividend yield for the entire portfolio is 2.2%. Average P/E (price/earnings ratio) is 11.4. That is extremely conservative. Little did we know as we were picking the stocks!

Without further ado, here it is: our new 2012 Model Portfolio Index, the MPI!!

Model Portfolio

Symbol Price Change
28.60 -0.14 -0.49%
27.56 -0.20 -0.72%
40.36 -0.47 -1.15%
73.09 -0.73 -0.99%
83.49 -0.50 -0.60%
Total (USD) $5,062.00 -40.80  -0.80%
Cumulative  0.00  0.00%

Here is where they are today, Dec. 3, 2013, almost two years later. NOT including dividends, which total $157 annually at this time, or 1.89% per year, there is a total of 64% gain, or $3,265, over two years!

Model Portfolio

Symbol Price Change
41.10 +0.25 +0.61%
43.73 -0.45 -1.02%
40.20 -0.43 -1.06%
109.69 -0.62 -0.56%
181.66 -2.00 -1.09%
Total (USD) $8,327.60 -65.00  -0.77%
Cumulative  3,265.60  64.51%

This is an understandable result given how rapidly the DJIA has risen. Note that as the price of the stock goes up the yield of the dividend goes down, even though dividends may be the same or even have raised each year.

And never forget that any idiot, or in this case, monkey, can make money in a rising market.

Stay tuned tomorrow for Part 3 of Starting over.

N.B. Do you know what “stay tuned” originally meant? It’s a phrase from early radio when stations had to be “tuned” in by moving the dial until a signal came in and played the program. So, to “stay” tuned, meant to keep that station tuned in. Just a little bit of history.

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About InvestingforOne

I've been investing in various assets by myself using a discount broker for many years. Over that time, I've developed some theories that others might find useful. Plus, there is more to investing than money. Time, talent, work, friends, family all go into developing a good and satisfactory strategy.
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