Becoming Rich!

[Salandriagado]

At the end of the day, it comes down to saving money and investing it well.

Should the government be investing a portion of all taxes it collects such as say 1 or 10% of revenues into a portfolio of blue chip stocks? I think that in this way, a lot of different programs could perhaps be funded more profitably.

It basically does. Whenever a department runs a surplus, it spends that on buying government bonds (because they are the safest investment going).

[Saiwania]

I don't know about you but I'm glad I wasn't investing in United Airlines the night they lost a billion dollars. Sure, you could say they recovered, but those are a billion dollars they're not getting back.

I could use Bank of America as one example. If I bought 1,000 shares of it on 3/6/2009, and did nothing but sit on it and sold it now, I'd get over $23,000 from just that one stock. That is a bit over $20,000 in profit. That is nothing to sneeze at. Stock investing is not a thing to be ruled by emotion, you have to focus on the long term.

[Salandriagado]

I don't know about you but I'm glad I wasn't investing in United Airlines the night they lost a billion dollars. Sure, you could say they recovered, but those are a billion dollars they're not getting back.

I could use Bank of America has one example. If I bought 1,000 shares of it on 3/6/2009, and did nothing but sit on it and sold it now, I'd get over $23,000 from just that one stock. That is a bit over $20,000 in profit. That is nothing to sneeze at. Stock investing is not a thing to be ruled by emotion, you have to focus on the long term.

Stock investing is largely socially respectable gambling, though.

[Soldati Senza Confini]

I mean, it is still nothing but pure luck. Because tomorrow the company you invested on can take a hit and lose a billion dollars overnight.

I don't know about you but I'm glad I wasn't investing in United Airlines the night they lost a billion dollars. Sure, you could say they recovered, but those are a billion dollars they're not getting back.

is that from that stupid incident with the passenger? It cost them that much?

Oh dear...

Yep. That's how much it cost them.

Now, I am not saying you shouldn't take on the stock market, just to be aware that if you do so, go with the mindset as if you're out gambling, because you can lose your money, but you can make big bucks in the stock market.

My dad and I have stuck to real estate, metals, and entrepreneurship, business ideas we come up at a whim.

Do all our ideas work? No, but to us they're safer than the stock market.

[Sanctissima]

It isn't like gambling in the sense that a stock price is a real reflection of the overall health of a company. If a business knows what it is doing, it won't go bankrupt barring some major unexpected event such as a certain industry becoming obsolete and they fail to adapt or innovate, getting a bad CEO, over expanding, and so on. If you own many companies across many profitable industries, chances are you won't lose in the long run.

With gambling, the house has the advantage and it is nothing but pure luck. At least with investing, your money is being used to generate more business capital or whatever to do useful things with.

I mean, it is still nothing but pure luck. Because tomorrow the company you invested on can take a hit and lose a billion dollars overnight.

I don't know about you but I'm glad I wasn't investing in United Airlines the night they lost a billion dollars. Sure, you could say they recovered, but those are a billion dollars they're not getting back.

Eh, it's more like strategy, much of which is fairly straightforward and low-risk provided you know what you're doing. True, every now and then there's a disaster, but blue-chip stocks tend to be quite safe (and to be frank, even when there are disasters, it's rare that they're so severe the proper response isn't simply waiting it out). It's unwise to invest all of your savings in stocks, but having a savings account plus a bit of money stored away for a rainy day and the rest put into blue-chip stocks tends to be a recipe for an early and comfortable retirement.

[Saiwania]

Stock investing is largely socially respectable gambling, though.

It isn't though, haven't I explained that the money you invest is used to raise capital for business activity?

If a company does well, you get a tiny share of all of their profits commensurate to how much of it you own. You also share in their losses, but you only lose money on paper if you decide to sell below the amount you purchased it at. You wait for the market to rebound, and you'll be in the black again provided your stock doesn't go bankrupt or cease business operations.

[Soldati Senza Confini]

Stock investing is largely socially respectable gambling, though.

It isn't though, haven't I explained that the money you invest is used to raise capital for business activity? If a company does well, you get a tiny share of all of their profits commensurate to how much of it you own.

But what if the company doesn't do as well as you expect?

The reason why I compare it to gambling is because you don't have control of what's happening. The less direct control you have in regards of making money, the more you have to treat something as gambling, in my opinion..

[Infected Mushroom]

I mean, it is still nothing but pure luck. Because tomorrow the company you invested on can take a hit and lose a billion dollars overnight.

I don't know about you but I'm glad I wasn't investing in United Airlines the night they lost a billion dollars. Sure, you could say they recovered, but those are a billion dollars they're not getting back.

Eh, it's more like strategy, much of which is fairly straightforward and low-risk provided you know what you're doing. True, every now and then there's a disaster, but blue-chip stocks tend to be quite safe (and to be frank, even when there are disasters, it's rare that they're so severe the proper response isn't simply waiting it out). It's unwise to invest all of your savings in stocks, but having a savings account plus a bit of money stored away for a rainy day and the rest put into blue-chip stocks tends to be a recipe for an early and comfortable retirement.

so its basically an adult version of Monopoly with more variables?

[Sanctissima]

Eh, it's more like strategy, much of which is fairly straightforward and low-risk provided you know what you're doing. True, every now and then there's a disaster, but blue-chip stocks tend to be quite safe (and to be frank, even when there are disasters, it's rare that they're so severe the proper response isn't simply waiting it out). It's unwise to invest all of your savings in stocks, but having a savings account plus a bit of money stored away for a rainy day and the rest put into blue-chip stocks tends to be a recipe for an early and comfortable retirement.

so its basically an adult version of Monopoly with more variables?

Pretty much, except you can choose easy or hard mode, and while there are other players nobody's outright competing with you.

Easy mode comes with small but practically guaranteed gains, since pretty much every tile is a "Pass Go" tile.

Hard mode comes with large but risky gains, since half the board is full of bad tiles, but there are a few "Parking Space" tiles filled with rich bounties.

Realistically though, so long as you do things properly and don't take any unnecessary risks, you tend to make a nice little profit from it.

[Saiwania]

But what if the company doesn't do as well as you expect?

The reason why I compare it to gambling is because you don't have control of what's happening. The less direct control you have in regards of making money, the more you have to treat something as gambling, in my opinion..

If a certain stock tanks, you want to buy even more of it if you're certain that it won't go bankrupt. A lower price means that you can buy even more shares. Whenever the stock is way back up again at a later date, you can sell for a huge profit, or hold onto it if it gets you dividend payments that you want to keep or reinvest.

It is much less risk to own a diversified portfolio of blue chip stocks. It is fairly normal for one or two of your stocks to go bankrupt over the course of a decade, but what are the odds that all or even most of them will? A business that has been in existence for a long time, is usually still around for a reason- it is because they know how to make a profit and don't make stupid decisions very often.

[Frank Zipper]

If a certain stock tanks, you want to buy even more of it if you're certain that it won't go bankrupt.

Sounds a lot like the gambler's fallacy to me.

[Risottia]

What is the best means of becoming wealthy in your opinion, statistically speaking?

Right now for me: investing in my skills as teacher by starting with a small private school for afternoon and evening courses, which I can manage out of my regular lesson hours, and eventually expanding it step by step.

If you got money to waste: invest on climate change and buy forests in Siberia. Eventually they're going to become good arable land.

[Saiwania]

Sounds a lot like the gambler's fallacy to me.

A stock isn't guaranteed to ever go back up, but if it still pays you dividends, it isn't worthless to have in your portfolio. More passive income means more money with which to reinvest or help you meet expenses so that you can live your life just a tiny bit better. I know that just that one stock, Bank of America, might've netted me $20k. That would've been enough to outright buy a nice car.

Instead of kicking myself and thinking about what might've been, instead I want to somehow get a job so I can actually do investing, every chance I get. No selling, only buying, holding, and increasing the amount of dividends coming in. Sell when you've amassed enough wealth to live off of. It must be a solid plan. Who doesn't want to retire early or live the easy life eventually?

[Olivaero]

I would suggest learning how to develop websites. It's really easy and you can work as a contractor and get all the money you earned from the work you've done, a lot of companies need professional looking websites and there are still a lot of shitty ones out there also you can learn how to do it for basically free at websites like free code camp. with regards to stocks, I'd suggest looking at a company like wealth front to manage your stocks for you as they're very much at the cutting edge with regards to automating managing your portfolio and they will do it for very cheap.

And for anyone who thinks buying stocks is remotely equivalent to gambling, you really don't understand what a stock is. You are buying a part of a company with your money not placing a bet that it will go up in value in a single day. Investing over the long term is very sensible financially.

[Chestaan]

Investing money in the stock market, to me, seems very much like gambling.

It isn't like gambling in the sense that a stock price is a real reflection of the overall health of a company. If a business knows what it is doing, it won't go bankrupt barring some major unexpected event such as a certain industry becoming obsolete and they fail to adapt or innovate, getting a bad CEO, over expanding, and so on. If you own many companies across many profitable industries, chances are you won't lose in the long run.

With gambling, the house has the advantage and it is nothing but pure luck. At least with investing, your money is being used to generate more business capital or whatever to do useful things with.

Very, very debatable. There's a lot of evidence against the efficient market hypothesis.

The money you invest with goes into the pocket of whoever you bought the stocks off, unless you buy from an IPO. In all likelihood it will just be sent back into buying stocks in the secondary market rather than anything like productive investment.

Anyway, I think the average stock market return is something like 7%. For every $1000 you invest you will get an annual average return of about $70. In order to make enough to make living you would have to have a huge amount of capital to invest.

[Chestaan]

Sounds a lot like the gambler's fallacy to me.

A stock isn't guaranteed to ever go back up, but if it still pays you dividends, it isn't worthless to have in your portfolio. More passive income means more money with which to reinvest or help you meet expenses so that you can live your life just a tiny bit better. I know that just that one stock, Bank of America, might've netted me $20k. That would've been enough to outright buy a nice car.

Instead of kicking myself and thinking about what might've been, instead I want to somehow get a job so I can actually do investing, every chance I get. No selling, only buying, holding, and increasing the amount of dividends coming in. Sell when you've amassed enough wealth to live off of. It must be a solid plan. Who doesn't want to retire early or live the easy life eventually?

Dividends aren't that important at all. In fact, financial theory suggests that dividends may actually reduce firm value in that dividends are tax disadvantaged. Have a look at the dividend irrelevance theory forumlated by Modigliani and Miller.

[Frank Zipper]

A stock isn't guaranteed to ever go back up, but if it still pays you dividends, it isn't worthless to have in your portfolio. More passive income means more money with which to reinvest or help you meet expenses so that you can live your life just a tiny bit better. I know that just that one stock, Bank of America, might've netted me $20k. That would've been enough to outright buy a nice car.

Instead of kicking myself and thinking about what might've been, instead I want to somehow get a job so I can actually do investing, every chance I get. No selling, only buying, holding, and increasing the amount of dividends coming in. Sell when you've amassed enough wealth to live off of. It must be a solid plan. Who doesn't want to retire early or live the easy life eventually?

Dividends aren't that important at all. In fact, financial theory suggests that dividends may actually reduce firm value in that dividends are tax disadvantaged. Have a look at the dividend irrelevance theory forumlated by Modigliani and Miller.

I seem to remember reading that the trend is for companies to not pay dividends?

[Saiwania]

I seem to remember reading that the trend is for companies to not pay dividends?

It is nonetheless, still money which is passive income- that you don't have to work hard for. If there are still companies out there which pay dividends, why not take advantage of that?

[Osnil Returns]

1. Don't spend money you don't have.
2. Don't go into debt.
3. Stop getting McDonald's every other day.
4. Get a job instead of sitting around in Mommy and Daddy's basement drinking booze and playing Call of Duty.
5. Vote for Republicans.

[Great Minarchistan]

The reason why I compare it to gambling is because you don't have control of what's happening.

You do. Every company is required to post stats of their financial health quarterly. Moreover, there are always the financial news you can watch out for.

[Olivaero]

A stock isn't guaranteed to ever go back up, but if it still pays you dividends, it isn't worthless to have in your portfolio. More passive income means more money with which to reinvest or help you meet expenses so that you can live your life just a tiny bit better. I know that just that one stock, Bank of America, might've netted me $20k. That would've been enough to outright buy a nice car.

Instead of kicking myself and thinking about what might've been, instead I want to somehow get a job so I can actually do investing, every chance I get. No selling, only buying, holding, and increasing the amount of dividends coming in. Sell when you've amassed enough wealth to live off of. It must be a solid plan. Who doesn't want to retire early or live the easy life eventually?

Dividends aren't that important at all. In fact, financial theory suggests that dividends may actually reduce firm value in that dividends are tax disadvantaged. Have a look at the dividend irrelevance theory forumlated by Modigliani and Miller.

Your looking at this from the wrong perspective I feel, saiwana is looking to increase his personal wealth not look at whether providing a dividend is good or bad for the company. Should the companies value drop too far he or his investor will sell the stocks he has dividend or no. but he will have still ogt the dividends that it has provided before then. And seeing as the companies that provide dividends are usually quite large they will probably have a modest up tick in value over time as they grow sort of as the market grows. So when he sells them to reinvest after their value starts to drop significantly he will still have improved on the initial amount he invested.

[Chestaan]

Dividends aren't that important at all. In fact, financial theory suggests that dividends may actually reduce firm value in that dividends are tax disadvantaged. Have a look at the dividend irrelevance theory forumlated by Modigliani and Miller.

I seem to remember reading that the trend is for companies to not pay dividends?

If I can recall my undergrad finance courses right, I think there is something called the "Life-Cycle Model of Dividends". Firms tend to not pay dividends when they are young because they have a large amount of profitable opportunities and need all the cash they have to exploit these opportunities. As a firm grows older it has larger amounts of cash and less profitable opportunities. As the pile of cash gets bigger, and the number of profitable opportunities gets smaller, firms are more likely to pay dividends because they have all this cash lying around with nothing to do with it.

Another important thing to notice is that once firms begin to pay dividends they don't stop and the amount of the dividend doesn't decrease. The reason for that is that if a firm does stop the dividend or reduces it, it sends out negative signals to the market.

I seem to remember reading that the trend is for companies to not pay dividends?

It is nonetheless, still money which is passive income, that you don't have to work hard for. If there are still companies out there which pay dividends, why not take advantage of that?

Because if the dividend was not paid out the firm's value would increase instead. Dividends aren't extra income, they simply make the stocks return lower. Or, in other words, your payoff is not being increased, you are just receiving it in a different form.

[Olivaero]

1. Don't spend money you don't have.
2. Don't go into debt.
3. Stop getting McDonald's every other day.
4. Get a job instead of sitting around in Mommy and Daddy's basement drinking booze and playing Call of Duty.
5. Vote for Republicans.

Lol. So many assumptions. Do people over the age of 18 even play call of duty any more?

[Chestaan]

Dividends aren't that important at all. In fact, financial theory suggests that dividends may actually reduce firm value in that dividends are tax disadvantaged. Have a look at the dividend irrelevance theory forumlated by Modigliani and Miller.

Your looking at this from the wrong perspective I feel, saiwana is looking to increase his personal wealth not look at whether providing a dividend is good or bad for the company. Should the companies value drop too far he or his investor will sell the stocks he has dividend or no. but he will have still ogt the dividends that it has provided before then. And seeing as the companies that provide dividends are usually quite large they will probably have a modest up tick in value over time as they grow sort of as the market grows. So when he sells them to reinvest after their value starts to drop significantly he will still have improved on the initial amount he invested.

But dividends do not make the payoff to investors larger, they simply deliver the payoff by a different method. And if you like that payoff method that's fine, but dividends aren't a bonus to investors.

If the company had not paid out a dividend ever, they would either invest it in projects that would increase their value (and, hence, the stock price) or they would hold onto it and investors would value the fact that they have a large pile of cash and this would also make the price of the stock increase.

[Frank Zipper]

If I can recall my undergrad finance courses right, I think there is something called the "Life-Cycle Model of Dividends". Firms tend to not pay dividends when they are young because they have a large amount of profitable opportunities and need all the cash they have to exploit these opportunities. As a firm grows older it has larger amounts of cash and less profitable opportunities. As the pile of cash gets bigger, and the number of profitable opportunities gets smaller, firms are more likely to pay dividends because they have all this cash lying around with nothing to do with it.?

What I think I remember is that young firms reinvest, old firms used to pay dividends, but that the new blue chip companies like Apple, Google, and Microsoft are reinvesting rather than paying dividends.