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Equities: Unlimited Upside With Limited Downside

May 26, 2013 | About:

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Dividend Mantra
Trying to retire by 40 by investing in dividend growth stocks and living frugally, valuing time over money.

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Rating: 3.1/5 (15 votes)

Comments

Seanickson
Seanickson - 10 months ago
I agree for the most part. Although i dont think a large equity percentage is for everyone. Be prepared to lose 50% of your portfolio from time to time to time as it will happen but long term the overall results for equities are very good.

I think your take on real estate is a little lacking. Yes the price of the real estate likely wont do much better than inflation but thats because all the earnings are distributed to the owner(about 30% in stocks). Lets say after costs you can collect rents of 5% of the value of the property and this amount and home value keeps up with inflation, youve earned a real return of 5%, add a little leverage and you will do a little better.
AlbertaSunwapta
AlbertaSunwapta - 10 months ago
I have next to nothing in bonds now as I see them as very risky instruments. However, my ability to see the future is non existent. I have built up cash levels quite high having moved from mostly equities for the last few years. I am making some short term assumptions and "bets" on the near future as I see the probabilities - not as the probabilities really are.

Say, we go into a deep deflationary global decade or multi-decade long depression, earnings collapse, dividends start getting cut across the board, you lose your job, your spouse loses his/her job, you have kids to support, after a few years social programs start getting axed like never before, war looks ready to break out... You start selling off your equities to survive... (If we're like that once massive capital market, Japan, your equities have declined 60-80%, when you sell.) Those with safer bonds look like geniuses. People like me literally look like bums on the street.
BEL-AIR
BEL-AIR - 10 months ago
Actually you are all wrong...

The best way to make and grow wealth from the average person is to own your own business.

Ask yourself this question...

How many wealthy people do you know in your community?

How many of those people made it all in the stock market?

Pretty sure it is none....

In fact most people who you know probably lost more money then they made in the last decade if they dabbled in stocks. Almost all of the wealthy people in your community that you could replicate became millionaires by owning a business of some type, yes a lawyer or doctor would also qualify as a business person since they have their own practice.

Even Gates and Buffett made most of their wealth by owning their own business. They just got bigger and more successful business then most.

The fact is the average person in business I have known over the years including myself can make 20% to 15,000% returns per year on invested capital in their own business, yes they might have to work with their hands or do manual labor in some instances but they are doing it and it is possible. And it is safer and alot more easy for the average person to do than the stock market.

Yes that is not a typo, 15,000% returns per year... (That I know of, in fact I subcontract to dozens that fit into this category and personally know dozens more) All this from a small simple business that any one of you could do.

Now ask yourself another question...

Look at your parents, grand parents and that of your spouses, were did the actually wealth come from that they currently own (Net worth) Most of it would have come from real estate they bought 40 years ago for $30,000 that is now worth $400,000...


Just the facts folks...

sww
Sww - 10 months ago
@BEL-AIR Before you recommend others to start your own business, probably you should first find out what is the failure rate of small business.

This is one of the first link I clicked on a google search for that,

"... Did you know that recent studies have shown that 50 percent of small businesses will fail within the first year? How about the fact that a staggering 95 percent will close their doors before they hit their fifth year of operation?..."

smallbiztrends.com/2013/03/infographic-failed-small-businesses.html

Stock investing is probably the best investment vehicle for most individuals, given you need to learn how to recognize good company and how to value a business and try to invest in great companies that you would like to own for long time for a good price.

When you put your money into Coca Cola stock say $18/share in 2009 or 50+/share WMT in 2011, or BRK-B when it's below 70 last year or MCD when it's 25 in 2004/5. You do not need to do much (ever) for the every dollar you put in that day (forever). No employees need to hire, no bills need to pay and your business grows 24 hours a day.

Compare to a small business chances that these great companies will lose money is slim to none.

People lose money in stock market simply because they do not know (or want to learn) how to value a business. If you can't value a business then how can you know the price you pay for is good value?

But as Munger said, we tend to be fall into the "To a man that has a hammer, every thing looks like a nail" syndrome, people who make their first pot of gold in small business will swear by it but capital or stock market should be the best bet of the masses.
thomas.castagna1
Thomas.castagna1 - 10 months ago
I think that the best way to invest is to buy those stocks that are the strongest in a certain moment and ride them until the end of their trend. So, in this way, you have not to be invested for life in poor performing stocks. What stock to buy is always a difficult question to give a correct answer to, but it is not a difficult one if you are well equipped.

The problem is either to understand the overall trend of the market and to understand what are the strongest stocks to buy evry moment. For instance, a Nasdaq index forecast may be helpfull to those traders that are passionate with tech stocks.

I mean that to be a trend follower trader is much more usefull and enjoyable than to be a long term investor. The real problem is that everyone has to find out his own style of trading and investing. This is a life long process, but it is worth it. Kind regards, Fredrick
AlbertaSunwapta
AlbertaSunwapta - 10 months ago
Investing in great businesses whether its one you create or one you buy into is hard to beat under most imaginable scenarios. However figuring out what makes a great business is a hard thing for most to figure out.

Then to invest in it at a price where your final return will be satisfactory is another. Plus determining your own cash flow needs from those businesses in the future (due to retirement, job loss, medical crisis, hyperinflation, depression, lifestyle needs, etc) to avoid any risk of your having to sell at inappropriate prices is also a major consideration. Dividends, the ability to sell fractional interests(ie shares) or finance may prove critical to avoiding a forced sale below intrinsic value. You might have a "hold to maturity" price and value in your mind, if not calculated to the penny, but that doesn't mean you will be able to realize that value if near term circumstances work against you.

There are businesses that will survive quite well in all manner of circumstances (well all need to eat and seek medical care and heat our homes, etc. and we need positive influences / entertainment and will always be willing to pay for it) so the share price might collapse by 50-80% but the business will survive and if it pays dividends even if the "market closes for five years", you may do ok in otherwise disastrous circumstances.
BEL-AIR
BEL-AIR - 10 months ago
All I am saying is this, I know plenty of wealthy people, most of them made it in their own business.

I do not know, nor have I ever personally met anyone who was able to obtain a great deal of wealth in the stock market alone. But I have met hundreds who have done it on their own in some simple little busines they started themselves small and built up over the years until they were millionaires.

This is how I did it...

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