November 4

Today’s Letter from Grandma Sylvia

Dear Reader,

How are you today?  Wherever you live, the seasons might be changing. We each have seasons in our lives.  Where are you in the season of your life?

Big Picture

Archibald McLeish, a former Librarian of Congress, wrote:

Autumn is the American season. In Europe the leaves turn yellow  or brown, and fall. Here they take fire on the trees and hang there flaming. We think this frost-fire is a portent somehow: a promise that the continent has given us. Life, too, we think, is capable of taking fire in this country; of creating beauty never seen.

 In each of our lives we can behold and create beauty.  Let’s think of our lives and what we hold dear and what we want to accomplish.  In part, what do you want to accomplish with your investing? What are your goals?

A Story

When I started investing, my primary goal was not to lose money.

That’s still uppermost in my mind when I think of buying or selling anything, but now it’s somewhat softened by my knowing that at times I will lose money.  I’ll guess that everyone who invests in the market, or elsewhere, will lose at some time.  It’s the size of the losses.  We all want our losses to stay small or only be on paper (like market fluctuations of stocks that we are holding but not selling).

Even if a person puts money under the mattress, that person loses the value of the money because inflation keeps robbing the money of its worth.  (At one time a can of Campbell tomato soup costs $.10 or less and now costs $1.00 or more.)

I’m still very cautious about how I buy or sell anything in the market, but I now know my goals. They are: to have money to live now; to help the next generation; to help others and to give to good charities.

What about you?

Today’s Topic: Goals

Goals are very important in investing.  Why do we want to invest?

Some people have few assets and want to start investing for retirement or a later big purchase, for example to buy a house.  Others might have suddenly received money, want to preserve it, and have it grow for many different reasons.

In this topic, I’ll mention a few different types of investment strategies and some possible investments, but I won’t talk about how to buy these stocks or bonds, yet. The idea here is simply to think about the different types of investment goals.

I’ll also mention specific stocks, but in later posts I’ll talk about buying baskets of these types of stocks which is my belief about the better way to invest.  The reason I’m mentioning specific stocks is that I think it’s clearer to talk about stocks from specific companies which many of us know than to talk about baskets of stocks.

Stocks: Growing Your Money

People who want to grow their money and not withdraw any money, might choose stocks that tend to increase more in value from year to year. These people might have goals related to a longer-term retirement or investing for the next generation.

These are current ‘growth stocks’ and include: Apple, Amazon, Netflix, Costco, and many more.

Stocks: Taking Dividends

Others might want to take dividends to use during the year, but have the stock retain some growth.  These people might need the money for yearly expenses or for special purchases, like travel or gifts, but not want to sell any stock.  They can use their dividends for this extra money.  I like to think of dividends as part of the profits from the company doing well and sharing that with me.

 Some current dividend stocks are:  3M (Scotch-Brite® scrubs, air filters, Scotch ®masking tape) Johnson and Johnson (consumer and health products like bandages, over-the-counter drugs like Tylenol® etc.), and Duke Energy (utility company).

While many people do buy individual stocks, on the whole, I buy baskets of stocks (called index funds or Exchange Traded Funds, ETFs) so I don’t have to make decisions on individual stocks.  I’ll talk more about those funds later.  For now, I wanted to mention some of the kinds of stocks people buy.

Bonds

Of course, stocks are not the only option.  Many people buy bonds or primarily bonds.  They can take their interest yearly or can let their interest accumulate.

These people might choose government bonds (US Treasury bonds bought from the US Treasury and not the stock market), or municipal bonds (such as city or state bonds bought through financial advisors).

Each choice also involves different levels of risk.  Some investments, like bonds, are relatively safe. Other investments carry more risk of losing some of your investment but making more money.  I’ll talk about risk in another topic and ways you can learn about your own level of comfort with risk.

Important Ideas

•  Write down your investment goals.

•   Decide how much money you want to save and then invest for each goal.

Next time, I plan to write about the marvelously great revolution that has happened in investing that helps rather ordinary people like you and me.

*****

Tomorrow I’m going to take time to do some cleaning around the house.  Dust balls and papers seem to accumulate.  It’s a joy to be in a home that is clean and bright and welcomes you and your visitors. Do you feel that way, too?

Grandma Sylvia

grandma@grandmasinvestingforbeginners

NOW…….ME                                                                                    MAYBE SOMEDAY…..A HELPER.