lnvesLlng beyond your 401k

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1. Cne musL absoluLely sLarL wlLh Lhe 401k opLlon. 8ecause:
a. Company maLch of 100 of flrsL 6 (free money . double your reLurn)
b. noL all companles are Lhls generous
c. And of course Lhe monles lnvesLed are lnvesLed wlLh pre-Lax dollars, reduclng
one's lncome Lax
2. Wells largo provldes 14 lnvesLmenL opLlons. And of course one may mlx and maLch:

3. 1o lnvesL beyond one's 401k one musL be an lnLelllgenL lnvesLor"
a. An essenLlal read ls 1he lnLelllgenL lnvesLor: 1he ueflnlLlve 8ook on value
lnvesLlng. A 8ook of racLlcal Counsel
b. 8ecause one has Lo answer Lhe quesLlon: WhaL ls Lhls lnvesLmenL lnsLrumenL
worLh?

lnvesLlng beyond your 401k

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4. Why lnvesL ouLslde of Lhe 401k?
a. 1here ls a conLrlbuLlon llmlL. $ 17,300 per year. 1hose over 30 can
conLrlbuLe more
b. lnvesLor may wlsh Lo lnvesL wlLh posL-Lax dollars (and may noL quallfy
for a 8oLh l8A)
c. CreaLer conLrol and hand's on experlence (some people [usL llke Lo
drlve!)
d. More companles:
l. 1he n? SLock exchange llsLs 1867 companles. 1318 uS companles
and 349 non-uS companles.
l

ll. 1he nASuAC exchange llsLs 2773 companles.
ll

e. More cholces: (LZ way Lo look up securlLy lnformaLlon ls
hLLp://flnance.yahoo.com/)
l. MuLual funds (open and closed)
1. Cpen: Cpen-end muLual funds musL be wllllng Lo buy back
Lhelr shares from Lhelr lnvesLors aL Lhe end of every
buslness day aL Lhe neL asseL value compuLed LhaL day.
MosL open-end funds also sell shares Lo Lhe publlc every
buslness day, Lhese shares are also prlced aL neL asseL
value. A professlonal lnvesLmenL manager oversees Lhe
porLfollo, buylng and selllng securlLles as approprlaLe"
lll

a. 1he challenge ls Lo beaL Lhe S&300
b. 8lll Mlller of Legg Mason beaL Lhe S&300 for 13
consecuLlve years from 1991 Lhrough 2003 wlLh Legg
Mason CaplLal ManagemenL value 1rusL
lv


lnvesLlng beyond your 401k

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c. lamlllarlze self wlLh lund holdlngs (8MLLx):

d. lamlllarlze self wlLh lund SLyle SheeL" (8MLLx).



lnvesLlng beyond your 401k

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2. Closed. Closed-end funds generally lssue shares Lo Lhe publlc
only once, when Lhey are creaLed Lhrough an lnlLlal publlc
offerlng. 1helr shares are Lhen llsLed for Lradlng on a sLock
exchange. lnvesLors who no longer wlsh Lo lnvesL ln Lhe fund
cannoL sell Lhelr shares back Lo Lhe fund (as Lhey can wlLh an
open-end fund). lnsLead, Lhey musL sell Lhelr shares Lo anoLher
lnvesLor ln Lhe markeL, Lhe prlce Lhey recelve may be
slgnlflcanLly dlfferenL from neL asseL value. lL may be aL a
"premlum" Lo neL asseL value (meanlng LhaL lL ls hlgher Lhan neL
asseL value) or, more commonly, aL a "dlscounL" Lo neL asseL
value (meanlng LhaL lL ls lower Lhan neL asseL value)"
v

a. 1he ulLlmaLe closed-end fund ls 8erkshlre PaLhaway lnc.
(88k-A) whlch Lrades aL $ 172,681. 1here ls a blg sLock
holder's meeLlng every year ln Cmaha. 88k-8 ls 1/1300 of
88k-A buL has no voLlng rlghLs.
b. 1he maln-man ls called !"# %&'()# *+ %,'"' = Warren
8uffeLL
3. Pow many? 7,238
vl

4. AcLlvely managed vla elLher a fund manager or a professlonal
Leam
ll. L1l's (Lxchange Lraded funds)
1. WhaL: Lyplcally an lndex such as S?, ulA, or CCC
2. AdvanLages
vll
:
a. Lower fees Lhan muLual funds / Lraded durlng Lhe day vs
Ml ln whlch Lrade execuLlon ls afLer markeL close aL
n.A.v. (neL AsseL value)
b. 1rades llke a sLock
c. ulverslflcaLlon. Lxample L?
3. ulsadvanLages:
a. no fund manager buL raLher an lndex
b. Lower dlvldends Lhan an lndlvldual sLock
4. Pow many: 1oLal uS = 1,439
vlll


lnvesLlng beyond your 401k

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lll. referred sLock (Lg WlC-C)
1. 1here are also preferred sLock L1ls such as ll and Cx
lv. 8onds.
1. CommenL: LaslesL Lo lnvesL wlLh elLher a MuLual lund or
L1l
2. Lxamples: All L1ls: 8nu, ACC, P?C
3. ulrecLory of 8ond L1ls: hLLp://eLfdb.com/Lype/bond/all
v. 8Ll1s (8eal LsLaLe lnvesLmenL 1rusL). Lxample: 1WC (1wo
Parbors) - 12 yleld
1. PealLhcare (PCn and PC)
2. 8esldenLlal: Lssex roperLy 1rusL (LSS), Cwns and manages
more Lhan 130 aparLmenL communlLles locaLed on Lhe u.S.
wesL coasL.
3. ulrecLory of 8Ll1s ls
hLLp://www.dlvldenddeLecLlve.com/relL_dlrecLory.hLm
vl. ML's (MasLer llmlLed parLnershlp)
1. As of uecember 28, 2013 Lhere were 111 publlcly Lraded
masLer llmlLed parLnershlps Lradlng on Lhe varlous sLock
exchanges ln Lhe unlLed SLaLes
lx

2. Malnly plpellnes. - peLroleum and naLural gas exLracLlon
and LransporLaLlon
3. Complex because lnvesLor recelves a k-1 sLaLemenL lnsLead
of a 1099-ulv and Lhe deadllne for k-1's ls mld-march vs
mld-lebruary for 1099-ulvs
4. A way around ls a ML L1l such as AML whlch has a
currenL yleld of 6
vll. lC's (lnlLlal ubllc Cfferlngs). 8ecenL was lacebook (buy lL on Lhe
flrsL day)
vlll. uS 1reasurles (super safe buL reLurn ls less).
hLLp://www.LreasurydlrecL.gov

lnvesLlng beyond your 401k

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3. ueflnlLlons:
a. SLock symbol = Lg Wells largo ls WlC
b. 8eLa: Lhe beLa () of a sLock or porLfollo ls a number descrlblng how Lhe reLurn of
an asseL ls predlcLed by a benchmark. 1hls benchmark ls generally Lhe overall
flnanclal markeL and ls ofLen esLlmaLed vla Lhe use of represenLaLlve lndlces, such as
Lhe S& 300."
l. 8eLa <1: AsseL generally moves ln Lhe opposlLe dlrecLlon as compared Lo Lhe
lndex
ll. 8eLa = 1: MovemenL of Lhe asseL ls generally ln Lhe same dlrecLlon as, and
abouL Lhe same amounL as Lhe movemenL of Lhe benchmark
lll. 8eLa: > 1: MovemenL of Lhe asseL ls generally ln Lhe same dlrecLlon as, buL
more Lhan Lhe movemenL of Lhe benchmark
c. MarkeL CaplLallzaLlon: = 1oLal shares ouLsLandlng x prlce of 1 share of sLock
d. LS: Larnlngs per share of sLock
e. ulv: ulvldend per share of sLock
f. /L raLlo: rlce earnlngs raLlo = rlce of sLock dlvlded by earnlngs per share
g. Lxample of Wells largo:

h. lnvesLopedla ls a good resource for deflnlLlons. hLLp://www.lnvesLopedla.com/

lnvesLlng beyond your 401k

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6. Pow Lo sLarL? (Self-ulrecLed vs full servlce brokerage?)
a. Wells largo MA accounL. Wells 1rade offers unllmlLed self-dlrecLed Lrades aL $ 6.93
b. CLher opLlons:
l. L1rade: hLLp://www. eLrade.com
ll. Schwab: hLLp://www.schwab.com
lll. Sharebullder: hLLp://www.sharebullder.com
7. A sample $ 30,000 porLfollo (prlces mld-day on 1/16/2014):
Symbol Company rlce /L ulvldend ?leld Shares LxLended
Annual
lncome
AZn AsLrazeneca LC C $62.93 16.97 $2.80 4.43 30 $3,147.30 $140.00
CAC ConAgra loods, ln $33.76 20.40 $1.00 2.96 30 $1,688.00 $30.00
CLx Clorox Company $89.68 20.77 $2.70 3.01 30 $4,484.00 $133.00
ClS Ceneral Mllls, ln $48.40 18.01 $1.47 3.04 30 $2,420.00 $73.30
!n! !ohnson & !ohnson $94.80 21.14 $2.39 2.73 30 $4,740.00 $129.30
kM8 klmberly-Clark Co $103.38 21.91 $3.24 3.07 30 $3,269.00 $162.00
kC Coca-Cola Company $39.76 20.61 $1.12 2.82 30 $1,988.00 $36.00
C rocLer & Camble $80.79 20.33 $1.81 2.24 30 $4,039.30 $90.30
xLL xcel Lnergy lnc. $28.02 14.80 $1.11 3.96 30 $1,401.00 $33.30
$29,177.00 $891.80

Annual
?leld 3.06

CommenLs and CaveaLs:
1) l have poslLlons ln all of Lhe sLocks ln Lhe sample $ 30,000 porLfollo. l also have poslLlons ln 88k-8,
L?, 1WC, ACC, 8nu, WlC-C, WlC, AML, ll and Cx
2) !lm eeL ls noL an lnvesLmenL advlsor nor ls he llcensed. Pe ls slmply an lnvesLor who sLrlves Lo be
an lnLelllgenL lnvesLor"
3) A qulck and cool way Lo download sLock lnformaLlon lnLo Lxcel from ?ahoo
x



l
hLLp://www.nyse.com/abouL/llsLed/nya_characLerlsLlcs.shLml
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hLLp://www.nasdaq.com/screenlng/company-llsL.aspx
lll
hLLp://en.wlklpedla.org/wlkl/Cpen-end_fund
lv
hLLp://en.wlklpedla.org/wlkl/8lll_Mlller_(flnance)
v
hLLp://en.wlklpedla.org/wlkl/Closed-end_fund
vl
hLLp://money.usnews.com/money/personal-flnance/muLual-funds/arLlcles/2013/06/10/are-Lhere-Loo-many-
muLual-funds
vll
hLLp://www.lnvesLopedla.com/arLlcles/exchangeLradedfunds/11/advanLages-dlsadvanLages-eLfs.asp
vlll
hLLp://www.cnbc.com/ld/100693142
lx
hLLp://en.wlklpedla.org/wlkl/MasLer_llmlLed_parLnershlp
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hLLp://coldfuslon-guy.blogspoL.com/2013/12/yahoo-ez-download-of-sLock-daLa.hLml