Buying stock long term

It's a great idea. give me a second and I'll give you a good list.

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I'm not really into researching companies

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I am. haha

ignore my errors in categorizing companies. This sheet is mainly for me so I can simplify and understand things. I know, for example, that Johnson and Johnson isn't really healthcare.

I disagree with your general philosophy towards investing for a person under 30. I'm not saying its wrong or bad necessarily, but just that I don't subscribe to that. And one thing in particular...

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Many will tell you to invest in a dividend distributing ETF...but I'd rather get 8-10 solid dividends every quarter instead of 1 or 2. Thats just me.

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Do you understand this concept? Have you done the math on this? I'm just curious, because 8-10 dividends of 2% is the same as 1 dividend of 2% assuming the balance of your whole portfolio is the same.

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As for the OP, put it in an index fund of some sort. I personally like VTSMX as a "set it and forget it fund" because its just a total stock market fund, but there are many other funds that I own in my various accounts:

BFOCX
INPIX
FDGRX
NBGEX
PRDGX
FSEVX
NAESX
VWELX

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Also, I'm shooting for 3-4% yield, but I'm assuming thats irrelevant to your argument.

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Correct, that is irrelevant for this particular point.

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No. I don't understand it at all

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Ok, I'm going to try to keep as simple as possible. It's not a real life example but it will work for this math problem.

First, lets assume the value of your portfolio is $100k in both scenarios.

Scenario A: The portfolio is equally weighted among your choice of 8 dividend paying stocks that average to 2.89% yield.

Scenario B: All in with VHDYX (Vanguard High Dividend Yield Index Fund) at 2.89% yield.


With scenario A, your dividend income would be 100k x 2.89%. = $2,890

With scenario B, your dividend income would be 100k x 2.89%. = $2,890

The point is that the quantity of dividend payments does not change the amount of income. The income is calculated from multiplying your balance times the yield (whether its made up of 8 stocks or 1 fund).

Like I said, that's keeping it very simple to just show you that 8-10 is not necessarily better than 1. I'll post a follow-up shortly explaining the other factors that drastically complicate things.

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I understand. Plus the added hassle of trying to keep up with 10 equities come tax time.

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Well, that's just a part of it. There are lots of pros/cons.

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So everything that I stood for is destroyed? Good thing I've only wasted 3 weeks of my life

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Don't get carried away too much yet. There's lot of other levels to look at here. But the big thing is...

With a fund, you are buying little bits of lots of stocks. For example, with the fund I mentioned (VHDYX), their top 10 holdings make up only 35% of the fund and include companies like AAPL, XOM, MSFT, JNJ, GE, etc. This drastically lessens your risk by diversifying your exposure. You own dozens of stocks instead of 8-10. This is the primary principle behind mutual funds.

On the other hand, you may believe in a particular equity and you may not get the exposure you so desire with just a fund. That's a personal preference though based on your expectations for a particular equity.

Other factors to consider:
Tax implications
Dividend growth
Growth vs value
Time until you need the dividend income
Risk appetite
Expense ratios
Exposure to bonds

The list could go on and on.

If it were me in my early to mid 20's (which I am), I would invest in low expense equity funds. In particular, I like Vanguard funds because they are low expense. VTSMX and NAESX are two that I own in IRA's. As I listed, I own a number of others in my taxable account and my 401k. VTSAX is my single largest holding (the admiral shares version of VTSMX).

And if you just really want some dividend exposure, I would go with something like VDIGX.

Thanks for the advice. Honestly, what's holding me back is not having the $1,000 or $3,000 to readily invest in a Vanguard ETF.

I like the idea of being able to invest $50 or $100 if that's all I've got.

Now, this situation (having no large amount of liquid saving) should change before the end of the year, But I AM the MOST impatient person I know!

I do have a Roth with Vanguard, so that's a positive.

But due to my impatience, I own:

1,400 shares of PAL,
a whopping 2.5 shares of Intel,
and I'm in the process of starting a DRIP in General Mills and Dow Chemical (no initial investment fee/seems like a solid company with growth potential).

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Thanks for the advice. Honestly, what's holding me back is not having the $1,000 or $3,000 to readily invest in a Vanguard ETF.

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You mean mutual fund?


Because there is no lower limit to a vanguard ETF

It may be an outlier, dunno what it is historically.


But VEIPX.

Actively traded dividend fund that currently yields 2.54% dividends.

But as the investors move assets around the capital gains get forwarded to you as a distribution as well.

Yikes.

Ok, first off, slow your roll. You're still pretty young, right?. I think you're getting ahead of yourself a little bit right now. Time in the market is a great thing, but start making some money first and then start putting some of every paycheck in there.

2nd - You don't need to be looking for big dividends or really any stocks at all. You have decades before you need income from retirement assets. Save some cash and put it in a index ETF like VTI for right now.

3rd - consider re-evaluating your current positions. Buying 2.5 shares at a time is going to kill you in commissions. Now don't get me wrong, I don't have crazy buying power, but I usually try to buy at least $2000 worth of shares at a time to lesson the hit of the commissions. That number has gone up from $1k when I first bought 3 shares of AAPL at $330 in college. But regardless, buying $75 of intel with a $7 commission puts you in the hole by 10% to start. Also, PAL is a big time speculative play. I own 5k shares but thats less than 1% of my portfolio. For me, its worth the risk. For you, I doubt it. That's a big time spec play for being such a large % of your money. My advice is to stay out of the MJ/Penny thread for now.

4th - if you havent already - think about just holding the cash in a savings account for a rainy day fund. or at least put it in a fairly safe fund in your IRA if you really want it in your roth account

Possibly. My 401k is also through fidelity but I don't believe every employer has the same options.

The 4 funds that I have in my 401k are:

FDGRX
NBGEX
PRDGX
FSEVX

But I also already have significant exposure to VTSAX in my Roth IRA.

If I were you, I would look for a S&P 500 index within your 401k options and just sink your 1k in there. For example, one of the options in my 401k is FXSIX (Spartan® 500 Index Fund)