Whither 2005's 4K?
I just transferred the piddly $4,000 the government allows me to IRA'ize each year into my retirement account. Not that four grand is chump change, but compared to the annual price of, you know, retirement, it's a drop in the bucket. But be that as it may, now I've got to figure out where to park it for the next couple of decades.
I've been watching Amazon (AMZN), Apple (APPL), Caribou Coffee (CBOU), CDW (CDWC), Deuche Telecom (DT), Dreamworks Animation (DWA), Ebay (EBAY), Google (GOOG), Krispy Kreme (KKD), Lions Gate (LGF), Netflix (NFLX), Starbucks (SBUX), and Whole Foods (WFMI). The strategy's to look at companies that I know from personal experience provide solidly for their customers.
Who's got an opinion? About those, about others, about target prices, about what else I ought to have done besides socking away money for retirement, about whatever's on your mind...
Comments
Krispy Kreme - yum! Always a good investment. I've had surprisingly good luck with Netflix over the last couple of years, but Apple and Pixar have been the all-time best performers in my meager portfolio. Of course, if you buy Pixar now, you only get to keep it for a few months and then it gets converted into Disney shares.
Buy Shrek stock at your own risk buddy. I know where you live. ;-)
Have you considered the "dogs of the dow" approach? Learn more at http://www.dogsofthedow.com/ for example.
If you don't already have a portfolio, the first place to invest is a basic index fund of some kind -- spreading your bets across the market. Especially when you're looking at retirement, 3+ decades hence, you can just leave and not think about -- without the volatility of something like NFLX or EBAY (both of which we have in our portfolio, in very modest amounts relative to the total).
If your IRA is with an online broker or similar, you'll want to look at ETFs -- exchange traded funds -- which are mutual funds that trade as stock. You pay commissions to buy and sell, just like regular stocks, but the operating fees are generally lower than regular mutual funds (especially in big ETFs). You can get broad-market ETFs (like "Spiders", which invest in the S&P 500); or more specialized funds (say, put $1000 in a precious metals or commodities ETF as a hedge against inflation and drops in the value of the dollar relative to world currencies). It's not as fun as buying individual stocks, but it gives you a lot more peace of mind to ignore your portfolio for a day, a month, or a few years.
A big advantage of IRAs is that you don't have to worry about capital gains distributions from mutual funds, which can be a pain. However, you also miss out on the lower tax rates on qualified dividends and capital gains (either you get taxed as regular income in retirement, if it's a regular IRA; or you don't get taxed at all on the earnings, in a Roth). Another kind of investment worth considering for the IRAs, thus, are REITs (Real Estate Investment Trusts), which tend to have good dividends but due to their special tax treatments their dividends are *not* subject to the lower "qualified" dividend tax rate (which is of no concern for an IRA).
Anyhow, just some thoughts. :)
I'm a big fan of S&P 500 index funds. Like John said, not very sexy, but pretty dang reliable.
This is a pre-existing IRA, with about half of what's there already in the S&P 500. That fund, however, has been sucking mighty wind, which doesn't make me want to rush out and re-up with this year's entire contribution. I'm heady on Pixar's recent performance, which I bought at an opportune time. (Actually, this whole Pixar/Disney merger, and Eisner's departure, makes me a lot more optimistic about Disney's future in general. I may just keep hold of the Disney when the shares convert.)
Stacey thinks it might be illegal in California to invest IRA money in REITs. Anyone know anything about that?
I'm going to look into the information on the Dogs of the Dow site.
On a non-financial note, I'm also very interested in putting money into companies that I personally do business with, and that I know to do good business. Not social investing, per se, but I'd think twice -- heck, I'd think three or four times -- before investing in, say, a health insurance company or in big pharma, because that whole business's practices are pretty unsavory, to paint with the giant brush.
You may want to consider other tax-favored retirement account options, if you feel the $4,000 IRA contribution is inadequate. A good summary is available at http://www.bankrate.com/brm/news/sav/20060110b1.asp?caret=24. This is under their Taxes section.
I assume you have a traditional IRA. As Mr. Nephew noted, an advantage of IRAs is that income is not taxed. Because of this, I believe that IRAs (both traditional and Roth) should be used to hold cash-generating investments. You should have some cash-generating investments and, where possible, they should be held in an IRA account where you can defer or avoid taxes on the income.
Another point to consider is that there is no advantage to losses held in an IRA. If held outside an IRA, you can claim a loss. If held inside an IRA, I do not believe that you can. Thus, an asset where you predict a 50-50 chance of big gains or big losses should be held outside an IRA, so you can claim the losses if they occur.
Almost all of the companies on your list do not pay a dividend. Only Deutsche Telecom pays a significant dividend. I regard several of the companies on your list as higher risk-reward investments due to the immaturity of the company or industry. So, I am not sure that your list of companies meshes well with an IRA investment vehicle.
I don't have any idea at all why you could not invest IRA assets in an REIT, but you live in California and I don't understand many things about California.
I also would point out the advantages of a Roth or Roth conversion IRA, if you qualify. You must pay taxes now. But, you can take the money out at any time (which I don't recommend ever, so forget that is an option) and are not required to take distributions.
If you project that you will have sufficient resources at retirement other than a Roth account, I think you must have a Roth IRA. In this case, your money can grow, tax-free, until you die. I have Roth IRAs and I plan to do just that. Your primary risk is that, at some point in the future, the government, desperate for revenue, will change the rules. At least one financial writer, Eric Tyson, I believe, holds this opinion and thus recommends against Roth IRAs.
Steve Anderson makes some really strong points, to a hearty "me too" from me.
I know the S&P500 has been pretty mediocre of late, but especially with an IRA, your concern is less the next 5 years and more the next 30-50. Over that time frame, diversification is really your friend. Heck, you might think about buying a little bit of an inflation-adjusted bond fund.
Steve's observation about the benefits of losses is one that I'd not been thinking about, but it's a good one. In a taxable account, if you have some volatile stock like NFLX you can sell it for a loss and get the consolation of at least using the loss to offset your gains, or even non-investment income (up to $3000 per year, and if you have a bigger net loss than that you can carry it over to future tax years). If you sell at a loss in an IRA account, that money's just gone.
On the topic of picking companies -- I actually like investing in corporate villains like Exxon and Pfizer. Each year I get the pleasure of voting against the board's recommendations on various socially conscious shareholder proposals. But I've also been known to waste time doing things like writing e-mail to Norm Coleman, so one might be leery of my habitual exercises in futility.
Ffej, long time, no talkie. FWIW, our S&P index fund is tearing it up right now and has been for the last year. I think someone else cheered such an investment further up on this post page. So I will second that notion. Anyway, thought I'd say hidy-ho and give you my new email address (entered into this handy-dandy little posting form you have). P.S. Alby emailed me... R.I.P Tomo. Tomo is now... brace yourself... www.adhocmobile.com. I'm sure they are looking for investors... sorry, bad joke. Ciao.
Caterpillar is a very green company. They go WAY out of there way to recycle stuff rather than just the cheapest way to get rid of it.
I have absolutely no idea how they do on performance, however.