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What is the best strategy for long term investing, and how do I go about doing it?

Discussion in 'Ask any question!' started by Griff, Jul 7, 2019.

  1. Griff

    Griff New Member

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    I am 17 years old, looking to invest my money and take advantage of compound interest. I will not need my money now, as I am joining the military as an officer in four years if all goes well, and I can easily live off of that money, and will continue reinvesting then.

    I know there are many different strategies to investing, and I don't know which one to take. I ruled out day trading and swing trading, because I'll be much too busy to attempt that. I don't really know what value investing is, so my main focus has been between dividend stocks and growth stocks. I am leaning towards growth stocks, but have not made a decision yet.

    I really don't see how you could make much money from dividend investing. I ran the numbers on AT&T, which seems like a very good dividend stock with a 5.95 yield. I even cut it some slack and said I would buy it at $30 a share, but that only averaged out to one share equaling $1.77 a year. Yes, you would need much more money to make anything, but even with $100,000 invested, that is only 5,950 a year. It would take 40+ years to break even on that, and after you do break even, I wouldn't say 5950 a year is a goal I would strive for, even if I got my hands on $100,000.

    I have been reading and taking notes on the "Learn from Investopedia" OneNote that I found on these forums, and it has helped a lot. But I am afraid I do not know enough about the market in general. I can learn all about the company, but I don't know how to learn about the market itself.
    What is the best way to profit off of the stock market? For the long haul. I plan to retire in my late 40's, and will not touch my stock money until then if all goes well.
     
    superfast502 and Jrich like this.
  2. Stoch

    Stoch Active Member

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    I think the best strategy for a young investor is to go with a S&P index fund. Deposit something every month and don't worry if its up or down. When its down you can buy cheaper shares and when its up, you can just smile and buy more. It only matters what its worth in 20-30 years anyway. Trying to time the market over a few decades is difficult if not impossible, but the long term track record of the market is impressive. Just make sure to add something to the account every month, up or down.
     
  3. Jrich

    Jrich Well-Known Member

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    That IS the question... a question in which every investor will have their own answer, the only one of which will will be correct is the one that works best for you

    Cheesy and uninformative, i know.. but true.. no one else will have the same goals, risk tolerance and level of involvement that you might

    Best strategy as far as i can see is to feel around for a bit... start small, expect to lose money at first, the less money lost the better... the difficult part about learning a long term investment strategy is the lack of feedback.. meaning, if youre plan is to hold a portfolio of individual stocks for, say, 5 years or more, then you won't know if youre succeeding or failing until 5 years down the road

    But there is hope... simply being engaged in the markets comes along with the benifit of gaining experience... don't try or expect to figure it all out at once, just dip a toe in for a year, the next year sink yourself ankle deep, then before you know it you'll have answered your own question
     
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  4. Three Eyes

    Three Eyes 2018 Stockaholics Contest Winner

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    Griff, welcome to Stockaholics and welcome to the boards!

    Assuming T continues paying .51 dividend per quarter per share, then the current total year dividend would be $2.04.

    By "break even" do you perhaps mean "double your investment" of 100k to 200k? If so, at Friday's closing price for T (34.3), on dividends alone you would double in 16.76 years, assuming, of course, T's price would stay static, which of course it would not. And also assuming T maintained it's dividend of at least 2.04 per year. The time to double could also change if T cut or raised its dividend.

    To get an idea of T's track record, you might note they raised their dividend at least once per year for the past 34 years. Back in 1984 (when I was an undergraduate sophomore), T paid a dividend of about .47 per year. A $100k investment in T back then with the ever-growing dividends reinvested into T, would be worth $14,487,874 today for an annual return of about %15. Even if the dividends were not reinvested, that 100k investment in T on price alone (adjusted at .90/share in 1984) would be worth over $3.8 million.

    You're clearly a motivated, self-starter. No worries about you, young person. Keep reading and looking at different resources. Use these forums to ask questions or bounce ideas off of others. As @Jrich said above, it takes some time to get a feel for the markets. Given the dynamic nature of the markets, it's a also a life-long learning process (at least for us mere mortals).
     
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  5. Griff

    Griff New Member

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    Thank you all for the replies! I will continue to do research, I believe I may invest a percentage into an index fund, a small percentage into growth stocks, but then dividends is what I'm considering now. Although knowing me, that may change fast. I keep learning new things everyday that sway my leanings. I feel dumb @Three Eyes, I never considered the dividend GROWTH potential. When I ran the numbers I assumed the dividend stayed the same. I used an online calculator on what would happen if a stock like T or ABBV stayed on its present course for 30 years, and the results were astounding! Sounded too good to be true honestly, which normally means it is.

    I put in that if I invest $5000 into a stock like T and invested $400 a month along with reinvesting my dividends for the next 30 years, then at age 47 I would get $50,274 annually from my dividend. Age 48 would be $56,805. Age 52 would be $93,479. This sounds way too good to be true. I'd like some opinions of where I went wrong, or what it is truly like. Of course, I would not invest 100% into one company like T, I would diversify.

    But it sounds unreal to get $93,000 a year just from 35 years of compounding. Is it realistic?
     
    #5 Griff, Jul 7, 2019
    Last edited: Jul 7, 2019
  6. Three Eyes

    Three Eyes 2018 Stockaholics Contest Winner

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    So, the answer is "yes" and "no". The numbers are real. It really is possible. But mostly what we're looking at when we see the fantastic numbers I put up in the previous post is almost pie-in-the-sky. Why? Because of the benefit of hindsight. Consider that the investor in 1984 had to have the guts to invest in AT&T when the Federal government just broke up that company for monopolist practices. The amount of uncertainty attached to AT&T at that time was more than palpable.

    So going forward today, there is very little one might suggest is a certainty for the next 35 years. Which of today's companies (dividend-paying or not) will still be around? Which dividend payers will hike their payouts over the coming 35 years and which will cut them? One can't possibly know the answer to that. So, what to do about it?

    Well there you have it. You already had an answer to the question. Keep at the research, the absorption of material, the change of your leanings when you learn something new. These are the ingredients that will *eventually* coalesce into your own custom-made investment approach that helps secure your financial future as well as let you sleep at night.
     
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  7. T0rm3nted

    T0rm3nted Moderator
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    Being as you're only 17, I'd also suggest starting some paper trading. Treat the paper trading account as the exact same as you would treat your real account. In other words, if you have $5000 total you're looking to invest, only trade $5000 of your paper trading account. Make each trade the same size as you would in real life, don't "gamble" it, don't invest $100K just for fun, just treat it the same as you will in real life. Obviously your emotion will be different, but it will give you an idea at least and get you familiar with how trading works (buying/selling/stop/limit/etc). I'd also suggest, since you want to be a long-term holder at this time, to check out the dividend aristocrats.

    This site will give you a history of it, show you which companies are currently considered, etc.

    https://www.suredividend.com/dividend-aristocrats-list/
     
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  8. Jrich

    Jrich Well-Known Member

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    Speaking of the aristocrats, there is an ETF which holds them all... NOBL... fees are a little high, but historically the fund has outperformed the S&P, which is basically the goal of every investor anyway
     
  9. superfast502

    superfast502 New Member

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    Do you know what you are looking to achieve?
    What sort of returns are you looking for?
    How much time do you have to work at this?
     
    T0rm3nted likes this.
  10. Stan

    Stan Member

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    First, thank you for your future service to our country. Second, congratulations on having the foresight and taking action to look into and deal with your financial future. I feel most have their head in the sand.

    At this point I am a firm believer that you have to have solid values and goals to succeed in this world. Particularly trading and investing. You can make an extraordinary amount of money and live the life of dreams, but it can also rob you of everything (just look at most of the trading boards on reddit, suckerville).

    Do you know how to define your values and goals when it comes to money? It isn't easy nor is it taught in school. This is the best instructions I've seen with exercises to do you own: https://thetraderswire.com/successful-trading-plan

    Steps two and three deal specifically with how to discover your values and goals.

    I don't know much about dividend investing but I have been to several blogs written by young people that seem to have made it work. It takes a while but that monthly check is sure nice to have. I'm starting to look into it myself.

    Learn learn learn. Have patience with yourself. I think once you define your goals and values you will answer a lot of questions about how.

    Report back here when you have more info. There are enough people with experience here that we can surely point you in the right direction. Could also help you find a mentor. That would be huge.

    Good luck,
     

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