The Investing for Beginners Podcast - Your Path to Financial Freedom

Announcer (00:02):

I love this podcast because it crushes your dreams of getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew say there, and Dave step-by-step premium investing guidance for beginners. Your path to financial freedom starts now. All right, folks.

Dave (00:33):

All right, folks Well, welcome to the Investing for Beginners podcast tonight. We have episode 170, Andrew, and I am going to answer some great listener questions we get recently. So I will go ahead and start to read our first question. So I have Andrew; I know you have spoken about having hard rules about selling a company. And one of them is when they cut their dividend during COVID-19, some companies cut their dividend temporarily, but I’ve had a long history of dividend growth. Do you make an exception in this particular circumstance or stick to the rules?

A specific example is Disney’s great company, but they suspended their biannual dividend payout to combat the significant decrease in revenue. While this isn’t a sign, the company’s in trouble. Would you still hold on to such companies in this rare circumstance, respectfully? Matthew, what are your thoughts on that, Andrew?

Andrew (01:25):

Yeah, so I’ve had to deal with this quite personally, in the sense that, you know, you have varying degrees of how companies are dealing with their dividends during this crisis. We’re recording this now in the middle of September. And so you’ve seen a lot of initial fear that happened at the beginning. And then I’ll, it seems to me that there’s more confidence that’s been building since the crisis. You know, you have managements who are starting to provide guidance, feeling more comfortable with reinitiating dividends and things of that nature. So I tried, on the one hand, you want to take a case by case. On the other hand, you also want to understand that if you’re going to make rules hard rules like I did, where, you know, as an example, my, my hard rule is you sell on a D on a dividend cut, complete dividend cut. I also have another hard rule I sell on negative earnings. So those have been the two hard rules so far that I’ve stuck to in my investing life.

Andrew (02:31):

And I feel like it’s helped me make better-investing decisions. So now we have this gray area, right, where you have a company like Disney, or I have another retail company in my portfolio. And they also did a similar thing where they’ve even say that there’s not going to be a dividend. They said they’re going to delay their dividends. So, you know, you can trust that versus something like Southwest airlines. This was a company that I held through the pandemic. And once they announced that they were not paying the dividend, then I sold that company. So as Southwest, they had a situation where they took money from the federal government, the federal government said, okay,

Announcer (00:02):

I love this podcast because it crushes your dreams of getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew Sather and Dave Ahern. To share Step-by-step premium investing guidance for beginners. Your path to financial freedom starts now.

Dave (00:33):

All right, Folks. Welcome to Investing for Beginners podcast. Tonight is episode 169, and Andrew and I are going to answer some listener questions. We got four great ones that we’re going to answer for you guys. So we’ll go ahead and start. So I have the first question here. Andrew, do you have a pod episode that talks about stock splits, or have you guys talked about the upcoming Apple and Tesla splits on recent pods? I may have missed it. Thanks, Joe. Andrew, what are your thoughts on that?

Andrew (01:03):

So we haven’t talked about the splits; by the time this goes live, the splits will have already happened for Apple and Tesla. It’s I, that’s a good time to talk about them, basically what a stock split is when. So if you go back to the basics of why the stock is and what the stock market’s like and what that represents with businesses, you could literally go back to the basics with our series.

Andrew (01:29):

We did on episode four, the two I believe. And we did four episodes, all covering that very, very in-depth. So I highly recommend that for beginners who are just tuning in, but essentially ownership of a business is split into all of these different shares. And so, you know, you have a certain number of shares, and then you have the price per share and that price per share, what you’re going to see on CNBC or Yahoo finance. And, you know, in the case of, you know, let’s say Apple today, they’re at 120 something to share something, something like that, right? So you have that number. You have several shares. So when a company does a stock split, what they’re doing is they’re going to split they’re splitting the price. And so what that’s doing is it’s doubling the shares. So, you know, you can do different types of stock splits.

Andrew (02:29):

Tesla’s was kind of interesting because they did a weird ratio, but for something like Apple, you could, if you own the ones, one share, they’re going to split that into two shares. Let’s say you’re going to own two shares now. And then the price of Apple went from 200 something to a hundred and something. And what that does as a shareholder, if your current shareholder that doesn’t change anything. And if you look at it on a big picture, you’re not changing the ownership percentages any differently. And so one description I saw recently kind of summed it up perfectly,

Announcer (00:02):

I love this podcast because it crushes your dreams of getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew Sather and Dave Ahern. To provide step-by-step premium investing guidance for beginners. Your path to financial freedom starts now.

Andrew (00:32):

Welcome to the Investing for Beginners podcast. This is episode 168 tonight. We’re going to talk about asset allocation. We still do have Dave with us here tonight. But I’m going to be asking him some questions on asset allocation. It’s something he’s been working on behind the scenes for several months. And so it’s a very important topic. We get questions related to this all the time. I think a lot of times, investors don’t know that they need to learn about asset allocation. Embedded in their question might be thoughts about asset allocation. So, Dave, first we’ll start. Let’s say somebody is either just gone inheritance as an example, or maybe saved for many years, and you know, we’re talking about life savings, and they’re getting close to retirement. So in either situation, there might be different ways of looking at the portfolio. So when somebody is looking at a situation like that, where they have a significant sum and either, you know, the timeline’s kind of shrunk or the sum they have now needed to last them for the rest of their life.

Andrew (01:44):

Let’s say, what kind of things are, give me an example of something different from somebody else who’s maybe putting a portion away every month and what, why that’s, why that’s different in that case?

Dave (02:00):

Well, it depends on the timeline, and that’s something that you brought up. It comes down to the timeline and where you are and what your goal is. So for example, let’s say that somebody comes into an inheritance and they have quite a bit of money, but maybe they’re 10, 15 years away from retirement. They want to use that money to last until they go into the great gig in the sky, or however, you want to put that that has a big impact on what it is and how you set up your portfolio. And some of the things that I’ve been learning about the asset allocation are seemed intuitive and seem natural. But when we sit down and have to put numbers to situations, it becomes a little more difficult. And one of the things that you have to think about is, for example, let’s say that you’re ten years away from retiring

Dave (03:00):

And you got a big chunk of money, and you want to do something with it. Well, there are several things you have to think about. The first thing you have to think about is how much risk can I tolerate? So, in other words,

Announcer (00:02):

I love this podcast because it crushes your dreams and getting rich quick. They actually got me into reading stats for anything you’re tuned in to the Investing for Beginners podcast led by Andrew Sather and Dave Ahern. Step-by-step premium investing guidance for beginners. Your path to financial freedom starts now.

Dave (00:32):

Welcome to Investing for Beginners podcast. This is episode 166 tonight, Andrew and I are going to answer some list of questions. We got some great ones the other day, and we thought we would answer those for you guys on the air. So the first question I’m going to go ahead and read. This is from Corey says, hi, Andrew. I just started investing a few weeks ago and found your ebook podcast and e-letter incredibly informative and helpful. I do just have a couple of questions about when to sell. So assuming we have done our due diligence and decided company XYZ is a company we should purchase after we make the purchase. Number one, how often do we reevaluate the company? Number two, how do we decide? Is it time to sell your position? Thank you for all your help and guidance you’ve given so far. I look forward to continuing to learn from you. Sincerely Corey, Andrew, what are your thoughts on all that?

Andrew (01:25):

So I’m going to give you two answers. I’m going to give the, what should the average investor do, and then I’m going to answer, what do I do? So those are going to be two very different things because I have the newsletter that I do full time, right? And the average investor might not. So for the average investor and when I was more of a part-time investor, it was something where I would check once a year. You know, sometimes if, if a big news thing happened to come out or obviously with coronavirus, I think everybody kind of tuned in to how things were developing, because it was such a rapidly changing environment. But, you know, in normal circumstances, just waiting for the annual reports, waiting for those 10 Ks once a year and getting those audited financial statements and seeing how those change from year to year, that’s generally a good process for that.

Andrew (02:23):

If you’re buying for the long term, you’re not necessarily trying to, you know, squeeze the juice out of every percentage point that you can. I think that’s, that’s a really good way to go as an example. You know, I did my research on the value trap indicator years ago, where I looked at the top 30 biggest bankruptcies in the 21st century. And, you know, just really went through those financials and tried to see if there were any common characteristics in there. And there was, you know, there were a lot of instances of companies who were the red and a lot of instances with companies with a lot of debt. So, you know, those things sound simple, but you know, sometimes the best answers aren’t always the most complex. And with, with each of those, you know, a lot of these businesses in the years before they went bankrupt,