Market Chasers

A change of pace, Long term investing: October 15th, 2008

October 15, 2008 – 12:08 pm

For a slight change of pace, I will talk about long term investing. This is an excellent time to be scaling into stocks for the long term. Here are a few rules that I have set out. Please follow them…

1)Buy in increments, meaning if you have 2k you are willing to invest and there are 3 companies you want to invest in, put about 350 in each now, save the other 950 for later to buy in at a cheaper price

2)If you are planning to invest in the long term, don’t check the stock market everyday. You will drive yourself crazy.

3)Start a dividend reinvestment plan with your broker. Some offer this, some don’t. This is basically where the cash dividend you receive is reinvested into company stock. As time progresses, this is the power of compound interest. This is how people who invested $10,000 in 60′s have a few million today.

4)Don’t be speculative unless you have the nuts to do so. Honestly if you don’t know what you are doing, you can wipe out your account in 6 months. You may get lucky once but what about the other 4 times you took a 20% loss?

5)Focus on high dividend, quality blue chips that are selling at steep discounts.

Remember guys, I am always here to answer questions for you because I would love to see others around me make money. I will answer them as long as they are not dumb questions like, “hey man look at this penny stock should I buy?”.I have stated this many times but this recession/depression type move we are seeing is a gift from god for you guys in your late teens and 20′s. If you have not started an IRA by now, I feel for you. I really, REALLY do….

Here are the plays:
1) AT&T (T): If you guys were lucky enough to purchase this at the trough of fridays move, you would have lock in a 7.2% dividend rate. I repeat, 7.2% dividend rate. Even now, it is offering about 6.5% so it is a bargain. The company is currently trading around 11.5x earnings and 8.75x forward earnings. Really? 8.75x forward earnings as I write this article? talk about cheap.

2) Exxon Mobile (XOM): This one I would wait about another month or so before scaling in. Oil is still in no mans land right now and there is alot of downside air to move. I currently own a small long term position due to the entry price I got it at but I may move the stock soon enough. This company currently has 40 billion in cash on its balance sheet and 41 billion in net receivables as of the June 30th balance sheet statement. This thing is trading at 7.49x forward earnings as I type this article. 2.5% dividend rate as well.

3) Altria (MO): If you buy this stock, you are basically betting on people smoking. Duh? 6.5% dividend rate? Duh again? It is currently trading at 12.9x forward earnings. If this thing drops into the 16 range on friday, which is where I bought it at, your locking in about a 7% dividend rate.