Category Archives: Investments

REITs as Investments

by

Okay, I decided to take the money from my Lunch Budget (Experiment) and put it into a REIT (Real Estate Investment Trust).  Now, I don’t expect the stock price of the REIT to rise much higher than the levels that they are currently at.  So you might be wondering why am I doing this?  …The dividend!

REITs historically pay a dividend percentage payout of about 6% to 7% for their dividend.

Why? Because they get special tax treatment if they do so.

To qualify as a REIT tax structure, a company has to:

  • invest at least 75% of total assets in Real Estate
  • deriving at least 75 percent of gross income as rents from real property or interest from mortgages on real property
  • distributing annually at least 90% of taxable income to shareholders in the form of dividends

So why would a company decided to be classified as a REIT?  Because they are able to pass the taxes to the shareholder instead of paying it themselves.  So these investment would be great in a Roth IRA, or in a child’s UTMA account where they don’t earn much money or the tax consequence is minimal.

I’m hoping that the addition of a REIT company while the fed interest rates are low will benefit me by the REIT stock appreciating and by receiving the juicy stock dividend that is higher than normal at this time!!!

Bests,

Don

A Stock Market "What If" from My Youth

by

From the time I was 5 years old to about age 18, I had an uncle that would buy me shares of stocks every year for birthdays and Christmas.

DuPont Stock Certificate

 

He was pretty good at it.  By the time of the start of my junior year, the portfolio was worth about $15,000. Unfortunately, I was short on cash for my final college years, so I cashed in most the stocks so that I could paid for my remaining years of college. I still had some money left over, so I put the remaining cash in a savings account that I would mostly use up for rent.

Lately, I’ve been wondering how much that money would be worth if I just left it alone.  By my calculations, it should have worth more than $30,000, and maybe even close to $40,000.

Even though the money went to good use, it was nice know that I had that money.  Some days, I play devil’s advocate and regret using it, always asking “what if”…

I think it was great of my uncle to be so generous and wise.  I’ve taken my uncle’s lead and investing small amounts of money in the stock market for my kids and a 529 program. Hopefully, they will be more wise with their money than I was.

– D

Investment Losses

by

Well, we are finally in the 4th quarter of 2009!  Time to start looking at any losses in our brokerage accounts (this past year was bad for me, too many high beta stock).  Beta is the risk factor the stock is rated at, 1 being average risk, and anything higher than 1 being more risky.

If your losses are greater than you gains, you can take the losses as a deduction against your earned income but only up to $3,000 worth.  The amount over $3,000 will have to be taken against future years gains (or it’s also possible to take it against past years gains, but that’s a bit more tricky).

Hopefully, you don’t have any wash sales (I’ll explain this in a future post)…

As for me, I won’t be taking any losses, at least not this October or November.  Depending on how the market does in December, I might cash some stocks in.  Most likely, I won’t even cash out then either.  I’ll wait until next year to consider losses.  I don’t like to sell low and buy high…

Hopefully, the market and labor market will be back fully back on track sometime in 2010.

-D