The Motley Fool: Buy to Keep


Ask a Fool: Buy to Keep

Q. Is the best way to invest simply “buy and hold”? — P.Y., Morgantown, West Virginia

R. It is certainly difficult to overcome that approach. Even better, buy TO hold: Instead of just blindly buying and holding, buy while planning to hold as long as the business remains healthy with great growth prospects. This new wording reflects the fact that, ideally, you should be keeping up with your holdings by reading their quarterly and annual reports and following them in the news.

An exception would be if you only invest in a low-cost broad market index fund, like one that tracks the S&P 500. If so, there’s no need to read financial reports or news; just try to keep adding money over time and stick with it, for many years if possible.

Q. Do small companies have low share prices and large companies have high share prices? —IC, Gilbert, Arizona

A. Not at all. The price of a share alone does not say much. Consider, for example, that Comcast recently had a market value of close to $133 billion and a stock price of close to $30, while defense firm Northrop Grumman’s market value was much lower, at $75 thousand. million, but his shares were at $485. (Market value, or market capitalization, is simply the current stock price multiplied by the number of shares.)

To get an idea of ​​how valued a stock might be, you need to relate its price to other numbers, such as earnings. A price-earnings (P/E) ratio divides the current stock price by earnings per share (EPS) for a full year. Northrop Grumman’s P/E was recently around 13.5, while Comcast’s was close to 10. In general, lower P/E’s reflect stocks that are less valued by the market.

Fool’s School: Health Care Costs in Retirement

Many people make a big mistake when planning for retirement: They don’t plan for substantial health care costs.

Fidelity has estimated that a 65-year-old couple retiring in 2022 will spend, on average, about $315,000 on health care expenses in retirement. Oh! And that doesn’t even include over-the-counter drugs, most dental services, or long-term care.

Speaking of long-term care: That can be another major retirement cost. You may not need long-term care (LTC) insurance if you’re wealthy and can afford care if you need it. And you may not be able to afford insurance if you only manage to make ends meet. But if you’re somewhere in between, consider LTC coverage.

So how can you prepare for high health care costs? Here are some ideas:

  • Get and stay healthy. By eating nutritious foods, exercising regularly, seeing your health care providers routinely, and getting preventive exams, you may end up spending less on health care.
  • Be smart about Medicare. Enrolling late (more than three months after your 65th birthday) can cost you big penalties, for the rest of your life. (Don’t be late!) Consider purchasing an add-on plan to limit out-of-pocket costs. Also consider a Medicare Advantage plan; offers as much coverage as traditional Medicare (which includes Part A and Part B), and often includes more, such as dental, vision, and/or hearing benefits. Medicare Advantage plans also limit your out-of-pocket costs each year.
  • Consider using a health savings account (HSA) or flexible spending account (FSA) to pay for qualified expenses on a pre-tax basis. An HSA is preferable as it allows money to accumulate in the account; you can invest that money and you can withdraw it when you retire.
    It’s hard to avoid paying for health care in our later years, but if you take the time to read and learn more about it, taking some smart steps can lower your costs.

My Dumbest Investment: Zoom Bombing Problem

I bought Zoom Video Communications stock in early 2020 for less than $100 per share. Stocks topped $120, and at that point, the term “Zoom bombing” was in the news: people who weren’t invited to video calls were getting on, often sharing graphic and/or disturbing images. There were potential lawsuits, some institutions started banning the use of Zoom, and stocks came under some pressure. I sold at $115, thinking I got out just in time. You know what has happened since then. — UK, online

The Fool Responds: Zoom stock soared in 2020, topping $580, as millions of people were suddenly working from home and often participating in Zoom-hosted video conferences. You missed out on some big wins. But once vaccines became available and many people thought life might soon return to normal, stocks began to slide; in fact, they were recently trading around $78.

You were right to take note of that Zoom blitz phenomenon. The question for Zoom investors at the time was whether the Zoom blitz was likely to be a major, intractable problem or a temporary one that the company could curb. Zoom ended up paying $85 million in a class action lawsuit related to the Zoom bombing and agreed to improve its security measures. Today, the company continues to grow and many think that it has a promising future.

Silly trivia: name of that company

My roots go back to the discovery of oil in Pennsylvania in 1859. In 1870, John D. Rockefeller and others incorporated Standard Oil, one of the first major companies in my lineage. By 1911, it was so large that it was forced to break up into 34 different companies, including Jersey Standard, Socony, and Vacuum Oil. Today, headquartered in Irving, Texas, and with a recent market value in excess of $425 billion, I am one of the world’s largest integrated fuels, lubricants and chemicals companies. My current name reflects a great merger from 1999. Who am I?

Answer to last week’s trivia

My roots go back to 1903, when some young people founded me and dedicated themselves to producing motorized bicycles. The machines grew more powerful over the years, and I supplied them for use in World War I and World War II. You may have seen some of my products in the movie “Easy Rider”, and under the direction of Evel Knievel. I offer insurance and financing along with my vehicles. Many clients wear tattoos of my logo. I live in Milwaukee and have a recent market value of around $5.1 billion; it could be said that sometimes it “hogs” the road. Who I am? (Answer: Harley-Davidson)

The Motley Fool’s Opinion: Growing Token Engagement

Advanced Micro Devices (Nasdaq: AMD) is an up-and-coming player in the semiconductor industry, with its price recently lowered amid the general market downturn. The company also warned that next quarter’s results will be disappointing. If you can withstand the turbulence and plan to stick with it for a few years, this is a tech stock you should consider buying.

Long considered second fiddle to Intel, AMD and its semiconductor suite have been gaining momentum for more than a decade, after it abandoned its manufacturing business to focus on chip design. That has given AMD the resources to steadily consume Intel’s leadership in processors, not just those used in consumer electronics like PCs and laptops, but also in the fast-growing and highly lucrative infrastructure for computing on the Internet. cloud.

AMD’s mega-merger with Xilinx (the leader in field-programmable gate arrays) in early 2022 opened up a new front against Intel. Meanwhile, AMD gaming GPU cards are competitively priced against offerings from industry leader Nvidia.

The semiconductor industry is experiencing rapid change and expansion right now. Estimates point to global chip demand reaching $1 trillion a year by 2030, more than 60% more than current global sales. There is volatility ahead, but in the long term, AMD could do well. (The Motley Fool owns stock and has recommended Advanced Micro Devices.)

— distributed by Andrews McMeel Syndication


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