Mulzar.com

When it comes to investing, starting early as possible is the best way to go. Let me show you the importance of investing early. Let’s say person A is a dividend investor that starts putting away $100 a month in the stock market when he is 20 years old.

If we use the average market return roughly 10% he would have:

Start: $0

After 10 years: $20 484.

After 20 years:  $75 937

After 45 years, when he is retiring he would have:  $1 048 250.

Let’s say person B is a person that wants to invest later. He thinks he has plenty of time to do that later.

He starts when he is 30 years old putting away the same amount, $100 a month.

After 35 years when is ready to retire he would have: 379 664 $. See the significant difference?

There’s an easy answer to this. Wealth grows exponentially in the stock market. Start as soon as possible.

Even if he would put away twice the amount as person A he would still have less.

After 35 years, $200/month, 10% average return: $759 328

Shocking huh? There’s a lesson to be learned from this, start investing early. I would recommend DRIP investing, let the investments go on autopilot. There are several good reliable blue chip companies that will most likely continue raising their dividends. Coca cola, pepsico, mcdonalds etc are good choices for the long term investor. I strongly recommend to reinvest all dividends in the beginning so you get a snowball effect.

I hope the numbers from this article taught you I-will-do-it-later-people a valuable lesson.

Pepsi one of my most important DRIP stocks I have in my portfolio. One of the reasons I choose PepsiCo is because if its strong brand and yearly dividend raise. I assume there will be a dividend raise this year also, something in the $0.47-$0.50 range.

Good luck fellow DRIP investors :=) !

Why do people keep posting beautiful graphs of performance when you reinvest dividend stocks versus no reinvestments and then point out the huge difference in return. People almost never mention the fact that when you get dividend and don’t it reinvest in the same stock you still actually have the money you received. Yes, it doesn’t disappear did you know that?

For example, if you have a stock A that pays 5% dividend and you chose to get the dividend in cash and invest the money in another stock. Than you have to calculate the return on the other stock you invested in to get the total return. Keep that in mind the next you read about dividend reinvesting. Getting dividend in cash and waiting for a market correction is not a bad idea either if you think there is a high chance that the market is heading south.

I finally decided to open a drip account. My goal is to put away some money in to Kraft Foods, Coca Cola, Pepsi and Mcdonalds every month and reinvest all dividends. I chose those 4 dividend stocks because I can’t really think of any other companies that I can trust for the next 50 years. I am going to hold these sweet dividend stocks for a very very long time.  Long term investing in reliable dividend stocks is a safe way to become millionaire, it’s slow way to become a millionaire though.

I’ve managed to save up an extra $15000 to invest in stocks. I am going to place some of that extra money in the DRIP stocks I mentioned. It will be a lot more fun updating my million dollar goal when I see dividends come in every third month!

I am also updating the market value on my apartment because prices here has rebounded a bit according to the media. The apartment is valued 5% higher than what I bought it for. I was a bit lucky that I was able to buy when the real estate market hit its lowest point here.

My net worth has increased dramitically since I started my million dollar goal. It feels good because I was actually going downhill in the beginning of my million dollar goal.

Status:

Net Worth: $51000

Holdings,

Cash:

$15000 - I will invest it soon.

Stocks/Funds:

$4200 in emerging markets funds.

Real estate:

One apartment, market price = $105000

Loans:

$71583 real estate loan.

$800 cash loan.

Is tehran real estate a paradoxal market, how can city located in a third world country have square meter prices up to $3000 in middle class neighbourhoods?

It’s actually not that surprising that prices are so high when you think about the key factors that have driven up the real estate prices in tehran so much. Tehran real estate prices has grown very rapidly, especially during 2003 to 2007. 

It not wize for the foreign investor to come to tehran and invest in real estate. Some economists strongly believe there is a real estate bubble going on in tehran. It was clever to invest 10 years ago before the real estae prices in tehran skyrocketed. But now is too late to the party. Tehran real estate prices are far from a bargain.

Whenever you apply for a mortgage loan, your lender calculates your debt-to-income ratio in order to check your affordability to repay. Debt-to-income ratio is the percentage of your monthly gross income that you pay towards your debts. It is also referred as debt income ratio or simply DTI.

How to calculate DTI

Debt income calculation is very easy and you can do it yourself. You need to divide your total monthly debt by the total gross income you earn every month.

Types of DTI calculation

You can calculate debt-to-income ratio in 2 ways, which are described below.

1. Front end ratio ? The percent of your income that you utilize in paying your housing costs. It comprises of loan principal, private mortgage insurance, mortgage interest rates, property taxes, hazard insurance, etc.

2. Back end ratio ? The percentage of your monthly income that goes towards paying your recurring debts (such as, credit card payments, car loan payments, etc.). It also includes your monthly housing expenses.

Meaning of 28/36 debt income ratio

There is a 28/36 rule with the help of which, the lenders assess your affordability to pay off a mortgage. The numbers 28 and 36 are considered to be the ideal front end ratio and back end ratio respectively. If your front end ratio is less than 28% and your back end ratio is less than 36%, then it?ll be easier for you to take out a home loan.

How debt income ratio influences mortgage payments

You can take out mortgage loan with low interest rates if your debt income ratio is low. On the other hand, taking out home loans will be difficult for you if your debt-to-income ratio is high.

Do not worry if your debt income ratio is high. You can lower your debt-to-income ratio by preparing a budget and cutting down your monthly expenses.

So much talk about real estate finally stabilizing. How is that possible?

I’ve pointed out in earlier blog posts that this recession most be the most overrated recession in history if real estate is finally stabilizing. My theory is that real estate is not stabilizing yet but falling slower. Home prices have historically crashed slowly during recessions unlike stock market crashes.

Two billionaires on the opposite sides of eachother regarding USG. Neither Buffett or Icahn are known for making bad investments. Of course one of them is wrong in this case. Buffett as we all know has the undoubtley the best track record but Icahn also belongs to the investor elite. He’s one of the most successful corporate raiders.

Berkshire owns 17 million USG shares, the average buy price is over $40. Icahn went short on the stock long before it plummeted down to the current $13.46. Icahn is way ahead so far. But they could both be right. If Icahn were to cover his short position now he would end up with a nice profit and if Buffett chose to hold the stock for another 5-10 years he might aswell also end up with a nice profit. It’s fully possible that they are both right. Icahn has clearly outperformed Buffett. But overall I consider Buffett to be a better investor than Icahn, but Icahn is definately right behind him.

I just noticed that I started the blog post by writing “Of course one of them is wrong in this case” and then I say they could both be right. I confuse myself sometimes. I want to apologise to all my readers for that.

The market and the media has certainely calmed down. The high volative movements are gone and the confidence for the economy seems to be recovering. I think it’s quite odd that the market “only” declined about 50% from all time high and then headed slowly up again.

The dow jones is at 9210 right now. I thought it would be at most 5000 by now. This was nothing like the great depression. Almost all the mainstream economists kept comparing this financial crisis to the great depression, where is the starvation? the 30% unemployment ? 86% dow jones decline?

Investing in REITs is a common way for the income investor to get hands on juicy dividends.  REITs in my opinion aren’t bad or good. There are so many REITS, so many bad ones and good ones. It’s hard to say if investing in REITs is good in general. A REIT usually fits in on these two criterias:

- High dividend

- Stable and reliable. If you forget the financial crisis, REITs and real estate companies have historically proven to be safe.

 Real Estate Investment Trusts are required to pay 90% of its profit to the shareholders, that’s why the dividend yield on most REITs are high compared to average stocks.  Since real estate slumps has a tendency to be long and slow I would avoid investing in real estate trusts in general for now.