The Thrift Meister isn't
going to trade in hot stock tips, but just as in other areas being frugal
can make a big difference in your investment results in the stock market.
Investment Philosophy
Different investment approaches work
best for different people. The real trick to finding investment success
is to find the technique you are good at and stick to it. Not many people
are good day traders, but a few can make money at it, some people prefer
technical analysis and like to trade on a fairly active basis. Some
people prefer traditional fundamental analysis and some don't like to
pick stocks at all--they buy mutual funds and let a fund manager do
it for them. The Thrift Meister likes to pick his own stocks
and buy and hold for the long-term. This allows the TM to be
frugal in the short-term and let time work for him in the long-term.
Short-term this means doing most
of the buying through dividend reinvestment plans or DRIPS as they are
commonly known which costs less than paying brokerage commissions when
buying stocks since the dividends are usually invested free of commission
charges and additional cash purchases, depending on the particular DRIP,
or either free of commission charges or very cheap relative to brokerage
commissions. Long-term the TM is buying stocks which raise
the dividend every year.
Time works for you two ways when
the company raises the dividend every year. First the yield on your
initial investment goes up every year so if you buy a stock for $25
which yields 3% ($.75) in 5 years if it increases its dividend by 8%
a year it is yielding 4.4% ($1.10) in 10 years the yield on the initial
investment is 6.48% ($1.62) in 20 years the yield on the initial investment
is 14% ($3.50) and so on. Second a rising dividend will pull the stock
price up with it so if the stock continues to yield 3% then its price
will be $36.67 in 5 years, $54.00 in 10 years, and $116.67 in 20 years.
Stocks which raise the dividend every
year tend to be consumer non-durables, financials, and services so this
technique keeps you out of trouble if you stick to it when the market
experiences a tech bubble or internet bubble. In the not too distance
future the TM will create an ebook on "Growing Annuities"
which will explain this investment philosophy in detail so check back
soon.
Stocks the Thrift Meister
likes because of their yearly dividend increases.
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Stock .........................Ticker
Symbol
Pepsico ..........................PEP
Hershey...........................HSY
Johnson & Johnson..........JNJ
Branch Banking & Trust...BBT
Jefferson Pilot...................JP
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It's hard to give timeless investment
tips, but there are a few tips that you can always bank on and they
fit nicely in to the frugal philosophy.
Stock Market Tips
* If you are buying stocks from a
broker--minimize commissions--that means shop around for the best rates
for the amount of help from a broker you feel comfortable with so if
you need a full service broker to feel comfortable check with different
firms to see who has the best commission structure and don't be afraid
to ask if they will adjust their fees to get your business. If you feel
comfortable making your own investment decisions and are using a discount
broker then you already know to check around for the lowest commissions
on fees, but also check what their other fees are which might be relevant
to your activity. They can vary a great deal on such fees as registering
a security out in your name, transferring securities to another broker,
account maintenance fees if there is no trading activity, or IRA related
fees, etc.
* If you are investing through mutual
funds use the no load fund families such as Vanguard, T. Rowe Price,
Fidelity. ALSO--in addition to the up front mutual fund fees check to
see what other fees are such as 12b-1 fees and if there are any selling
related fees.Selling fees may be reduced or eliminated if you hold the
fund long enough.
* Check into investing through an
IRA where your money is tax sheltered.
* If you have a 401k plan at work
that has a matching component to it then take full advantage of the
match--you are turning down free money if you don't.
* If you are holding the stock for
a long time and don't need the dividend to live on the consider signing
up for the dividend reinvestment plan. You will have to have the stock
registered out in your name to do this which is typically a fee of $25
to $50 or so depending on the broker's fee schedule. You will also need
to keep the stock certificate in a safe place--although in most cases
you can send it back to the firm's transfer agent who runs the DRIP
for safe keeping. Most of them will keep it for you in book entry form
so you don't have to keep up with the certificate.
* Don't worry about paying 1/8 too
much on a stock. If you are a long-term investor does it really make
any difference 10 or 20 years from now if you paid a dollar more or
a dollar less for the stock. If it is a good long-term investment then
buy it and don't lose any sleep over whether you got the lowest price
of the year for it or not. This isn't the way to be frugal.
* Don't let a broker's commission
stop you from buying a good stock. You can shop around for lower commissions
and compare of course, but don't be afraid to buy a good long-term investment
because you have to pay a broker's commission. This isn't the way to
be frugal either. Join the dividend reinvestment plan after you make
the original purchase and then your future investments can be free or
very cheap--the important think is to get started in the stock.
* Some stocks have direct purchase
plans which let you make your initial purchase directly in the stock
usually through their transfer agent into the dividend reinvestment
plan. This will save you broker's commission (there is often a small
set up fee) and the cost of getting the shares registered out in your
name. If you are buying for the long-term this is a great way to invest,
but if you like the firm don't let paying a brokerage commission one
time (till you can get into the DRIP) stop you from getting into a good
investment.
* Never invest on tips--do your own
research!
* Check out the Thrift Meister's bi-weekly mortgage payment calculator to see how much you can save on your mortgage by making bi-weekly mortgage payments.
Thrift Meister's Financial
Definition of the month
Record date--This
is the date by which you have to officially own the stock in
order to be entitled to receiving the dividend, stock split,
etc.
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Building Investing Knowledge
Becoming a confident investor
willing to take control of your own financial destiny takes time
and one of the best ways to nourish that growth is to read good
financial literature on a regular basis. It is something you need
to stick with because tax laws are always changing, new twists
to investment products come along, and different economic conditions
can require different investment responses. One of the best ways
to learn and stay in touch is to read financial publications on
an on going basis. Below are several publications the TM would
recommend to the new investor to develop their financial savvy
and keep current. Don't try to read them all every month, but
reading at least two of them a month is sure to develop your confidence
and ability to manage your own financial affairs over time.
Read one from the personal
finance category. Two good ones are Smart Money and Kiplinger's
Personal Finance. These two keep you abreast of how tax law
changes and changes in IRA's can affect your personal situation.
They provide info on various mutual funds and view the financial
landscape from that of the individual. (at Mags for less they are only $5.81 per year SM and $7.40 for KPF (prices subject to change) is less than you spend on two issues at the news stand)
Forbes and Fortune
have a different approach to the financial landscape. Here you
get insight into different companies, their managers, and macro
economic variables. There is some overlap of course, but there
is a different perspective to be gained by reading these. That
is why it is a good idea to choose one from each category.
Forbes only $6.00 for 26 issues right now at Magsforless (usual price $11.99, prices subject to change)
Business Week is
closer to the second category providing news on corporations,
but is published every week. There perspective is usually more
the news on the corporate front where as the the two former mags
do more analysis and in depth interviews with managers and companies.
MagzForLess.com
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Link to the TM
Tax Tips
The Thrift Meister collects old stock
certificates a hobby known as scripophily. You can view one of
them--a share in IMM which owned White Star Lines which owned
the Titanic and read a brief history of White Star Lines here. 
Thrift Meister's Personal Finance Page
Thrift
Meister Bonus
Here is a free, Microsoft Excel Spread sheet
designed to let you view your stock portfolio courtesy of the Thrift
Meister which will allow
you to view your dividends, total dividends in dollars, yield,
number of shares owned, price per share, market value of stock
and of portfolio, each stock's percent of the portfolio, and
ticker symbol. It is designed for 30 stocks so you can just
delete the rows you don't need or add more. You can start with
this basic spread sheet and if desired customize it further.
Don't be concerned that a couple of the columns appear to
have error messages in it when you first download it--just
fill in the info for dividend per share, number of shares,
and price per share and the rest of the spread sheet will fill
in the remainder of the fields by itself. Optional is a place
for each stock's ticker symbol. Totals for each column appear
at the bottom.
Just right click the spreadsheet then click
"save as" and pick a location on your PC to download it.
ThriftMeisterPortfolioView
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