The numbers are in. Please grade me. Trolls welcome.

[otc]



A friend of mine was raving about AGNC a few months ago, said the dividend was great. I just don't understand it enough to justify investing in it yet.

I'm not completely marsupialed, I'm just too conservative/cautious to put money into something I don't fully understand yet. Why is AGNC such a risky asset compared to other REITs? The only reason I have such a hardon for REITs is that they seem more stable than the normal stock.

AGNC (and the other similar mortgage REITS) makes its money by throwing ton of leverage at agency mortgages. The agency mortgages themselves are relatively safe since they are guaranteed by uncle sam (though they are still residential mortgages...), but the spread between their safe-but-tiny payments and the rate that they can borrow at to create so much leverage is pretty small. Unlike a commercial office building REIT, AGNC doesn't actually own and/or operate property...they just buy mortgages for the interest payments.

Other forms of REITs can be pretty stable and there are real estate investments that don't take the REIT structure (changes the tax implications and means you can invest more in the company where as REITs have to keep diluting their shares with secondary offerings). A well diversified owner of commercial property is going to be no more or less stable than other areas of the stock market...but the yields are going to be more like 5% instead of 20% at AGNC.

 

[reidrothchild]

IMO, you're doing pretty well if for no other reason than the fact that you have a positive net worth before age 30. Most 28 year olds I know have crazy school/mortgage/car debt. You're a poster child for for the "don't sweat the small stuff" approach to personal finance. As long as one doesn't buy big stuff, like a house or expensive car, you can spend money fairly frivolously and still do pretty well. Rental property would be a good place to stick your cash if you're fairly handy and can handle the added headache.

 

[jackbrown]

AGNC (and the other similar mortgage REITS) makes its money by throwing ton of leverage at agency mortgages. The agency mortgages themselves are relatively safe since they are guaranteed by uncle sam (though they are still residential mortgages...), but the spread between their safe-but-tiny payments and the rate that they can borrow at to create so much leverage is pretty small. Unlike a commercial office building REIT, AGNC doesn't actually own and/or operate property...they just buy mortgages for the interest payments.
Other forms of REITs can be pretty stable and there are real estate investments that don't take the REIT structure (changes the tax implications and means you can invest more in the company where as REITs have to keep diluting their shares with secondary offerings). A well diversified owner of commercial property is going to be no more or less stable than other areas of the stock market...but the yields are going to be more like 5% instead of 20% at AGNC.

You sir sound like you know what the **** you're talking about. I'm just reading and studying as much as I can (including for CFA Level 1 this June). How did you get to your level of comfort and knowledge? Surely it wasn't just reading CNBC all day long.

 

[otc]



You sir sound like you know what the **** you're talking about. I'm just reading and studying as much as I can (including for CFA Level 1 this June). How did you get to your level of comfort and knowledge? Surely it wasn't just reading CNBC all day long.

Nah, I don't really know what I am talking about (and would really have no idea about it if not for the fact that I own AGNC and thus want to know what I am dealing with).

Haven't watched a day of CNBC in my life...this stuff is all somewhat related to my work though which helps.

 

[oneeightyseven]



Maybe you're just a baller.

nah, I hope to be one day though. I'm afraid for what cutbacks I'm going to have to make later in life

 

[HgaleK]



don't listen to this guy. gold is already extremely highly priced. how much higher will the trend go????

Broeightyseven, that's kind of a marsupialed way of looking at it. Don't get me wrong, I think gold is a **** buy too (and now we watch as it takes off), but it's not because it has a high price.

JB- investopedia is a great place to start learning about securities and portfolio management.

 

[tomgirl]

Lol, strippers.

 

[Rambo]



Lol, strippers.

Sup beezy?

BTW - unless you're smoking some high potency, medical grade ****, you're getting taken to the ******* cleaners on weed. You live just north of Mexico for ****'s sake!

Also, **** the Forex! Put your money in that sticky icky. That **** will pay off 10 times over.

 

[cahlersmeyer]



don't listen to this guy. gold is already extremely highly priced. how much higher will the trend go????

Gotta say I agree. A lot of ppl are going to get taken to the cleaners when the gold bubble busts. I've heard a lot of economists relating the rise in metals to the dot com bubble. Its gonna bust, and bust hard.

 

[Tangfastic]

OP, I think you are already in the top 10% of Americans income wise http://www.styleforum.net/t/281210/usa-50-bunch-of-brokes-wat-went-wrong/0_50 and have many productive years ahead of you; I'd give a straight A for your current age, income and savings regime. It could be better but not a great deal so. If you continue with your current expenditure and save sensibly your extra income next year it's an A+. If 90% of your saving is in secure and diverse products, I don't think it's a bad idea to have 3k to 'gamble' with on penny stocks or high risk stuff. If you get burned you learn a lesson you can just about afford, and you may get lucky.

You do seem to spend a lot on strippers though.

 

[Joffrey]

OP is a nerd that only has such fantastic savings because he lives in a 3rd tier city with **** rent. Move to the big leagues and we'll see how cute your savings rate is.

 

[whiteslashasian]



OP is a nerd that only has such fantastic savings because he lives in a 3rd tier city with **** rent. Move to the big leagues and we'll see how cute your savings rate is.

Excellent post! I actually laughed.

 

[reidrothchild]



OP is a nerd that only has such fantastic savings because he lives in a 3rd tier city with **** rent. Move to the big leagues and we'll see how cute your savings rate is.

I can't tell if this is a serious post. What's wrong with living in an affordable city if you can also have a decent income in that city? On the flip-side, if your income /rent situation doesn't afford you a similar savings rate in your "1st tier" city, does that mean you're not ready for the "big leagues"?

 

[gort]

I think he was just filling the trolls portion mentioned in the title

 

[jefe]

If' you're going to spend money on strippers, I'd think Dallas is a much better investment than DC. Perhaps even first tier...