The benefits of Long Term Investing

[JSOP]

How’s that 1989 investment doing in Lehman, General Motors, WaMu, Conseco, IndyMac, PacificG&E, Calpine, Lyondell etc etc, plus the rotting carcasses that are still being dragged through the desert like AIG, Fannie, Freddie, etc etc

You only read stories about the wealth creating stocks like AAPL, AMZN but never the wealth destruction stocks.
30 years from now someone might be saying “why didn’t I sell AAPL before it tanked 95%”.
Just like the GE bagholders

And don't forget Enron!

 

[JSOP]

"I-just-woke-up-from-a-30-year-coma-Before-that-I-bought-100-000-in-Sears-stock-You-re-my-accountant-What-s-the-good-news-and-bad-news
"


Good news #2: You’re a millionaire!!!! (REALLY!)

Good news #3: You still have a functioning brain after 30 years in a coma.

Good news #4: Check out the Internet!

Other news: 1989 was a heck of a year. Poland had elections, Hungary opened its border, the Berlin wall fell, leading to the reunification of Germany a year later. Lots of political stuff has happened, and now Donald Trump is President (it’s a long story).

OK, so Sears went bankrupt, but you got money. Suppose you bought your shares in Sears at the beginning of 1989. Back then, Sears Stock (“S”) was trading at about $16 per share. So you would have had about 6,200 shares of stock.

But Sears stock paid dividends. From 1989 through 1992, it paid $0.50 in dividends per quarter. That’s $12,400 in dividends per year. That’s $49,600 in dividends through the end of 1992.

During 1993, 1994 and the first half of 1995, Sears paid $0.40 in dividends per quarter. So you got another $24,800 in dividends.

From the second half of 1995 through 2005, Sears paid $0.23 in dividends per quarter. So this would have netted you another $57,040 in dividends.

So you would have over $125,000 in your investment in dividends, plus whatever interest those funds earned until 2019, assuming they were not taken because your account was inactive.

But wait, there’s more!

In 1994, Sears spun off Allstate. Each Sears shareholder received 0.93 shares of Allstate for each share of Sears. So you got about 5,766 shares of Allstate. In July 1998, Allstate shares split 2:1. So now you would have had 11,532 shares in Allstate.

Allstate is currently trading at $94 per share. That’s $1,084,008!

This doesn’t even count the dividends you would have gotten on Allstate!

We’re not done yet!

In 1993, Sears spun off Dean Witter. Each shareholder of Sears got 0.39031 shares of Dean Witter for each share of Sears. You got about 2,400 shares of Dean Witter.

Dean Witter then acquired Morgan Stanley, with the new company taking the Morgan Stanley name. In 2000, it split 2:1, so you now have 4,800 shares of Morgan Stanley. Morgan Stanley is now trading at $41.19. So you have $197,712 in Morgan Stanley. Plus whatever dividends you would have earned on this!

MORE MORE MORE!

Sears was acquired by KMart, and the resulting company was Sears Holding. Sears shareholders got one half of a share, or $50, in the new company called Sears Holding. Who knows what your broker chose while you were asleep. Had they chosen $50, you would have wound up with $310,000 more. Had you taken Sears Holdings you would have wound up with, well, let’s not talk about that.

Still, all in all, you did ok!

Sources:

Sears Dividends Reference Page - Historical Stock Info

SEARS FORMALLY SPINS OFF ALLSTATE (Chicago Tribune)
.

Bad News #1: Your "loved ones" have decided to pull the plug in your 2nd year of being in the coma thinking you wouldn't want to live like this with no quality of life and all. Your mother tried to stop them but your "loved ones" went to court and the court ruled in favour of your "loved ones" to pull the plug.

You have been dead for 28 years and your "loved ones" have already split your money and stocks and everything and have put your now 96 years old mother, healthy and kicking, in a nursing home. Your second wife is suing the children of your third wife for bigger share of your estate believing to be hers and your brother has since taken your third wife and is suing everybody for all of your estate.

Good news #1: There is no good news.

That's the most likely scenario.

 

[ajacobson]

Oh yeah Discover and Dean Witter were also spin-offs from Sears,

 

[tsznecki]

Everytime this debate comes up it's binary. Daytrading or buy and hold XYZ stock. What about everything else in the middle?

How about just buy and hold SPY. No company specific issues there.

 

[Nobert]

And don't forget Enron!

And the noble prize for economics that they had.

 

[ironchef]

zdreg,

It is hard to convince us ET'er, especially day traders that buy and hold can win big if you give it a long time to compound. Ours are the instant internet, instant gratification time period.

 

[Handle123]

IF all one does is buy and hold and do nothing in between, going to difficult to keep up with inflation and possible of stock ending bankrupt like Sears one day will. It in not 1970s or before where you had a pocket protector on your shirt and pencil sharper on your desk. This is electronic age and investing has become less fundamentals cause you can't trust what the CEO's bonus is relying. There is good profits by keeping long term stocks if you bought low and dividends much higher than 2009, plus you have to learn how to sell options and buy them to hedge when topping or buying more stock. You have to be able to read charting well and know your stats.

Ge is a favorite stock, great option plays, but if you can't read H&S on monthly tops 12/16, either hedge with Puts, sell short or stand aside. 12/18, WOW triple bottom going back 20 years Buy/hedge, Put credit spreads, stock can triple or more, but sitting on it forever...unless GE is going to develop new products, people will maintain or buy elsewhere for better product. Longer term, have to be working your funds. IMO.

My largest risks is scalping and day trading actually, too costly to do hedging. Just better to get in, and quickly get out.