Ep.105: How To Invest In Stocks For Beginners With Marvin Germo

Sean

From Mark Davis, is it always a good thing to buy cheaper stocks?

Marvin

When you say good, is he talking about percentage gains? Is he talking about cashflow? Is he talking about if the stocks will go up after three months? Generally speaking, you want something cheaper because that will give you a larger amount of upside. However, to balance it also, cheaper does not mean it will increase quickly. There’s a reason why it’s cheaper.

That’s one way to look at it. You have to define what’s good for you. I’ll give you another example:

With eREITs, you get a 5% to 6% dividend yield. Some people don’t want that because it’s just 6%. For some people, 6% is already good enough. 

I think it has to be quantified. What you cannot measure, you cannot improve. You need to measure it. 

For example, you’ve measured it and you’re okay with just getting 30% a year. If you got 32% then that should be above your goal. If you don’t put that standard or measurement, you won’t know if you were able to earn or not. All you know is that you achieved a certain amount. 

Sean

Mark Davis emphasized cashflow.

Marvin

If that’s the case, then I will look at the dividend yield. For me, if it’s cash flow using dividends, what’s important is the stock’s track record of how much it consistently gives out. Was there a year when they stopped giving out dividends? Was there a year when their income was hit and the dividends decreased?

So it’s the track record of how consistent they are at giving dividends. If the dividends they give out have been increasing, that would be better and that yield at the time when I bought it attractive.

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