If you want to have your investment strategy stimulated and inspired, you should consider becoming part of the American Association of Individual Investors (AAII) and attending your local chapter’s meetings. Of course, I can’t say what all chapter meetings are like, but the Boise group combines round table discussion with specific topic presentations. You don’t need to worry about being new to investing or unfamiliar with the lingo. I have found everyone to be friendly and eager to explain or direct to resources, as is needed.
If you have trouble making it to the meetings, you might think about finding someone who can let you attend via something like Skype. They did this once for me when I had to be home, but could watch most of the meeting online.
Last week’s meeting was set in motion by two questions:
- What do you do for income investing, meaning how is income generated to be available for spending/living.
- Where do you park your cash, meaning what is done with cash/liquid funds that are not invested at the moment.
Each attendee took a turn answering those questions and I ended up with notes to contemplate.
Here is a summary of responses to “what do you do for income investing?”:
- Invest in REITs. (Real Estate Investment Trust) This is likened to owning real estate without having to be a landlord.
- Invest in foreign companies. This requires more research, but has an international aspect that might make possible unique growth opportunities for the companies. Sometimes doing investing in foreign stocks via an ETF (Exchange-Traded Fund, a basket of stocks with a certain theme, bought and sold like stock in individual companies) is helpful.
- Own real estate outright. If there are renters, there will be income.
- Own dividend stocks. This is most reliable when the companies have a history of paying a certain percentage regularly, which many do. A number of people cautioned that companies paying extraordinarily high dividends are probably too good to be true.
- Own stock in utility companies. These are considered very low risk, but supply necessary things that everyone will be buying. Not a huge potential for growth, but safe. The stock prices and dividends don’t vary much with the general stock market.
- Invest in MLPs (Master Limited Partnership). I had never heard of these before.
- There will be taxes somewhere along the line for any investment income. Several of the attendees are dealing with “minimum required distributions” out of pre-tax savings/investment plans. It sounded complicated and like it required a fair amount of work to stay in line with “the law.”
When asked what they do with their cash, this is what people said:
- It’s not worth much. Either invest it or spend it on something fun or that will retain value better.
- Don’t have it around. Make investments using margin with the brokerage (which requires a lot of supervision in order to not run into trouble).
- Use it to pay off home equity, then use that equity as your own bank.
- Keep it in money market accounts. Like any savings account, the money is basically being loaned, however, this does not have the same availability as money in a regular bank account.
- Buy Treasury Bills. (another loan) Again, this is not as accessible as plain cash in the checking account.
- Put it in CDs (certificates of deposit). There seem to be several different methods and names for simply loaning money to a company or government, without actually investing in it. The interest rate for CDs would be known at the time of purchase, so no surprises, good or bad, unless the company (or government) goes belly up.
- Have dividends set up to be automatically reinvested with the company. This is possibly most useful in a tax sheltered (you know, until “they” tax you later) account.
- Keep it in a cash account with the brokerage firm in order to be better positioned to take advantage of investment opportunities or options activity.
The meeting wrapped up with decisions about future topics, such as preparing a surviving spouse. Barrons was suggested as a reference for finding suitable “preferred stocks,” They also listened to me present my idea for interviewing each of them and writing up profiles of them (here on the Stock Market Diaries) as non-professional, man-on-the-street investors, and they seemed agreeable to it. I first plan on interviewing the man who started the Boise chapter. I expect to learn many things from all of them!