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======================== THE MOTLEY FOOL ======================== INVESTING BASICS Tuesday, October 23, 2001 benjamin.rogers@enron.com ================================================================= IN THIS ISSUE --------------------- - Q&A: Should I Invest in High-Yield REITS? - Q&A: How Much Do I Need to Invest? - LESSON: Warren Buffett on Investing ================================================================= SPONSORED BY: Kaplan Become a Financial Planner! Kaplan College's online Cert. in Financial Planning program prepares you for success in the #1 ranked profession. Invest in your future career today! http://www.lnksrv.com/m.asp?i=524550 ================================================================= YOUR QUESTIONS ANSWERED Q. WHY DO SOME REAL ESTATE INVESTMENT TRUSTS (REITS) HAVE TERRIFIC DIVIDEND YIELDS WHILE OTHERS DON'T? IS THERE ANY REASON NOT TO INVEST IN HIGH-YIELD REITS? A. If a yield looks too good to be true, it probably is. Remember that it's the market that sets the price of the stock. And as a stock's price drops, its yield rises. For perspective, consider that a 30-year U.S. Treasury is priced to yield around 6 percent, because investors are pretty sure the dividend will be paid. But Russian government bond yields can hover around 30 percent -- because investors are not so sure. The same goes with REITs. As an example, consider Kranzco, the highest yielding shopping center REIT with a yield of around 15 percent at the time of this writing (in 2000). Because of weak earnings, it has been forced to cut its dividend. This development caused many investors to sell, sending the stock price south and the yield up. Management's dividend cut may be enough, but investors are understandably nervous about what the future holds. If you invest in a REIT yielding 10 percent, things may well turn out hunky-dory. But if you go for one kicking out 18 percent to 30 percent, you're buying into income streams that other folks find pretty doubtful. You'll want to do enough research to be pretty sure you're right. Q. WHAT IS THE LEAST AMOUNT OF MONEY THAT YOU CAN INVEST? WHAT IF YOU DON'T HAVE ENOUGH MONEY TO BUY 100 SHARES? A. It's tragic that many people put off investing for years, thinking they're not rich enough to benefit from the stock market. You definitely don't need to have $1,000 or more before you start investing. You don't have to buy 100 shares at a time. You can buy 17 shares or nine shares -- or even fractions of shares, using some services. For instance, at buyandhold.com, you can invest as little as $20 at a time and buy fractional shares of stock, paying $2.99 per trade. http://www.lnksrv.com/m.asp?i=524551 If you're really interested in learning more about the basics, check out our Beginning Investing Online Seminar that also includes a copy of our Money Guide. http://www.lnksrv.com/m.asp?i=524552 ----------------------------------------------------------------- THIS WEEK'S LESSON WARREN BUFFETT ON INVESTING A great way to learn about investing is to glean insights from experienced, successful investors. One of the savviest is Warren Buffett. Here are some comments he made at his Berkshire Hathaway shareholder meeting in 2000: "The first investment primer was written by Aesop in 600 B.C. He said, 'A bird in the hand is worth two in the bush.' Aesop forgot to include when you get the two in the bush and what interest rates are. Investing is simply figuring out your cash outlay (the bird in the hand) and comparing it to how many birds are in the bush and when you get them." "It's no religious thing why we don't invest in technology. It's just that we've never found a company where we think we know what the bush will look like in 10 years and how many birds will be in it. We understand technology and its impact on society. It's the predictability of the economics of the situation 10 years out that we don't understand. ... The only way we know how to make money is to buy businesses we understand." "I own 100 shares of companies such as Microsoft and Intel, so I get the annual reports. I don't think it's a dumb thing if you want to learn about businesses to invest tiny amounts in various companies -- especially for young people -- to get exposed to various managements, to go to shareholder meetings, get reports, etc." "It pays to have the right role models/heroes. ... You'll want to be a little or a lot more. I tell students to pick out the qualities they admire in people they admire and ask why they can't develop those qualities themselves. It's very simple. The person you'd really like to admire is yourself." Berkshire's Vice Chairman Charlie Munger added, "You can't avoid making wrong decisions in life, but if you recognize them and do something about them, you can wring some lemonade out of them. We've scrambled our way out of many mistakes." For more Buffett wisdom, head to berkshirehathaway.com, where there are several decades' worth of his extremely educational letters to shareholders. Or visit our Berkshire Hathaway discussion board online. http://www.lnksrv.com/m.asp?i=524553 ================================================================= SPONSORED BY: Kaplan Become a Financial Planner! Kaplan College's online Cert. in Financial Planning program prepares you for success in the #1 ranked profession. Invest in your future career today! http://www.lnksrv.com/m.asp?i=524554 ================================================================= My Portfolio: http://www.fool.com/m.asp?i=524555 My Discussion Boards: http://www.fool.com/m.asp?i=524556 WANNA TAKE THE SHORTCUT? Check out our new Crash Courses, the fastest way to get your finances in order. Get results in less than an hour, for just $10. Try one today! http://www.fool.com/m.asp?i=524557 PERKS FOR FOOLS ONLY Get free stuff and special offers, just for you! http://www.fool.com/m.asp?i=524558 CUSTOMER SERVICE Ask our staff for help with email delivery problems. http://www.fool.com/m.asp?i=524559 UNSUBSCRIBE Here's how to unsubscribe or change your settings. http://www.fool.com/community/freemail/freemaillogin.asp?email=benjamin.rogers@enron.com _________________________________________________________________ Copyright © 1995-2001 The Motley Fool. All rights reserved. Legal Information: http://www.fool.com/m.asp?i=524560 MsgId: msg-17673-2001-10-23_14-03-36-5061645_5_Plain_MessageAddress.msg-14:05:10(10-23-2001) X-Version: mailer-sender-master,v 1.84 X-Version: mailer-sender-daemon,v 1.84 Message-Recipient: benjamin.rogers@enron.com
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