Author Topic: Old cow-orker is asking for investing advice  (Read 4325 times)

Financial.Velociraptor

  • Handlebar Stache
  • *****
  • Posts: 1621
  • Age: 48
  • Location: Houston TX
  • Devour your prey raptors!
    • Financial Velociraptor
Old cow-orker is asking for investing advice
« on: November 29, 2015, 06:09:52 PM »
Advice in the vein of "what stocks have the highest dividend yield?  ...and... How do I buy stock on margin?"

Trying to warn him of the danger he is exploring but fear he is going to have to get burned to get some sense in him.  :-(

lizzzi

  • Handlebar Stache
  • *****
  • Posts: 2156
Re: Old cow-orker is asking for investing advice
« Reply #1 on: November 29, 2015, 06:23:09 PM »
You really can't talk to people...they're just gonna do what they're gonna do. I usually mutter either, "Oh, I'm such a Boglehead.", or my other one: "Oh, I'm so conservative I'm probably going backwards." Then I get away from the subject.

Faraday

  • Handlebar Stache
  • *****
  • Posts: 1191
  • Age: 58
  • Location: NC
  • Solar Powered Slice
Re: Old cow-orker is asking for investing advice
« Reply #2 on: November 29, 2015, 06:32:21 PM »
Advice in the vein of "what stocks have the highest dividend yield?  ...and... How do I buy stock on margin?"
Trying to warn him of the danger he is exploring but fear he is going to have to get burned to get some sense in him.  :-(

I would give him the Bogleheads investing link:
https://www.bogleheads.org/forum/viewtopic.php?f=1&t=6211

I say this because he's asked you for advice, so you know he's at least a little bit open to good sense. And if he still does manage to screw up, you  have a clear conscience.

Heckler

  • Handlebar Stache
  • *****
  • Posts: 1361
Re: Old cow-orker is asking for investing advice
« Reply #3 on: November 29, 2015, 08:54:00 PM »
A FIRED 41 year old I know recently started to sell me on using covered calls on high dividend stocks.  Its hard to not listen when hes the one skiing while I still go to work.

Faraday

  • Handlebar Stache
  • *****
  • Posts: 1191
  • Age: 58
  • Location: NC
  • Solar Powered Slice
Re: Old cow-orker is asking for investing advice
« Reply #4 on: November 29, 2015, 11:32:40 PM »
A FIRED 41 year old I know recently started to sell me on using covered calls on high dividend stocks.  Its hard to not listen when hes the one skiing while I still go to work.

I'm almost positive covered calls on high dividend stocks isn't the reason he's the one skiing.

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: Old cow-orker is asking for investing advice
« Reply #5 on: November 30, 2015, 08:28:40 AM »
A FIRED 41 year old I know recently started to sell me on using covered calls on high dividend stocks.  Its hard to not listen when hes the one skiing while I still go to work.

Raptor (OP) does some of that - it's good and riskless if you know what you're doing (along with cash covered puts, tho a little more risky if you are writing on a company that is going BK), but like Faraday said, that's probably not how he got wealthy enough to FIRE - it was an underlying economic engine that let him purchase those div stocks to begin with

Retire-Canada

  • Walrus Stache
  • *******
  • Posts: 7835
Re: Old cow-orker is asking for investing advice
« Reply #6 on: November 30, 2015, 09:18:40 AM »
Advice in the vein of "what stocks have the highest dividend yield?  ...and... How do I buy stock on margin?"

Trying to warn him of the danger he is exploring but fear he is going to have to get burned to get some sense in him.  :-(

If he is someone you know and don't have any reason to dislike I'd chat with him about his investment goals and give him whatever advice you are comfortable with as well as providing him a disclaimer that accurately describes your investment competence/experience.

Helping people is a good thing. You aren't responsible for the outcome. You are only responsible for how you respond to his questions to you.

Financial.Velociraptor

  • Handlebar Stache
  • *****
  • Posts: 1621
  • Age: 48
  • Location: Houston TX
  • Devour your prey raptors!
    • Financial Velociraptor
Re: Old cow-orker is asking for investing advice
« Reply #7 on: November 30, 2015, 09:39:38 AM »
...
Raptor (OP) does some of that ...

That's the problem and I run into it regularly on my blog.  People see that I have a portion of asset allocation into high yield and writing cash secured puts, see the big flashy numbers, and assume they can build an entire portfolio that returns 20% a year with no sweat and near zero risk.  I've posted equally about my investments in debt instruments such as municipal bonds, preferreds, and variable rate debt.  But that stuff that lowers my beta and provides a huge part of my returns and 90% of my FIRE budget is "boring."  Never have I gotten praise for earning 6% on munis (you can smoke the 4% rule at that rate!), but I get lots of excitable responses to a put that returns 33% annually.  [And I think people are blind to the concept of risk adjusted return].

People just don't seem to understand a portfolio needs to be (mostly) boring.  I'm struggling with how to better communicate that as I fear I'm putting razors in the hands of children.

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: Old cow-orker is asking for investing advice
« Reply #8 on: November 30, 2015, 09:56:36 AM »
Yeah, a problem is always dealing with those investors who know enough to be dangerous to themselves but not enough to distinguish between speculation and fundamental investing. An example is when dealing with cyclicals - if you're just starting out, it's hard to understand why Exxon might be the most expensive when its trailing PE is 10 and cheapest when its trailing PE is 30

Gotta learn to walk before you can run

That said, covered calls might be one of the least risky things you can do with options. Worst case scenario is that you picked an underlying that has bad business fundamentals to begin with and is going down the tubes (in which case, you shouldn't be picking stocks). Otherwise you might just end up with a bunch of cash to deploy as the market goes irrationally crazy - not the most terrible thing in the world.
« Last Edit: November 30, 2015, 09:59:33 AM by Aphalite »

Petunia 100

  • Stubble
  • **
  • Posts: 136
Re: Old cow-orker is asking for investing advice
« Reply #9 on: November 30, 2015, 02:24:27 PM »
Advice in the vein of "what stocks have the highest dividend yield?  ...and... How do I buy stock on margin?"

Trying to warn him of the danger he is exploring but fear he is going to have to get burned to get some sense in him.  :-(

I would probably state truthfully "If I were going to chase dividends, I would do it via a dividend focused mutual fund or etf, such as Vanguard Dividend Growth or Vanguard Equity Income.   I don't know how to buy stocks on margin, because I would never do such a risky thing."

Aphalite

  • Bristles
  • ***
  • Posts: 425
Re: Old cow-orker is asking for investing advice
« Reply #10 on: November 30, 2015, 02:45:11 PM »
Advice in the vein of "what stocks have the highest dividend yield?  ...and... How do I buy stock on margin?"

Trying to warn him of the danger he is exploring but fear he is going to have to get burned to get some sense in him.  :-(

Oh, forgot to mention this, but one way you can scare him off of a margin account is to tell him about MF Global's rehypothecation in 2011 - here's the first link google turned up: http://www.businessinsider.com/why-is-re-hypothecation-central-to-mf-global-2011-12

Gone Fishing

  • Magnum Stache
  • ******
  • Posts: 2814
  • So Close went fishing on April 1, 2016
    • Journal
Re: Old cow-orker is asking for investing advice
« Reply #11 on: November 30, 2015, 03:11:38 PM »
Cow-orker sounds like some genetically modified blend of a cow and pig...

JinBoston

  • 5 O'Clock Shadow
  • *
  • Posts: 23
Re: Old cow-orker is asking for investing advice
« Reply #12 on: December 09, 2015, 10:56:34 AM »

You might find it useful to send him this link as well:

http://www.joshuakennon.com/how-joe-campbell-found-himself-106445-56-in-debt-to-his-broker-in-a-matter-of-minutes-because-he-didnt-understand-the-risks-of-shorting-stock/

Me, i'm long only, no margin, and know I'm too inexperienced to play with options.