3 Investing Questions You May Be Too Embarrassed to Ask

Facebook Stock"How do I buy a stock?"

That was the subject line of an email sent to one of our analysts recently. It turns out the questioner wanted to put her life savings into the Facebook (FB) IPO.

Fortunately, our analyst was able to dissuade her from purchasing the stock. Otherwise, here's how that could have turned out.

Facebook stock

There Are No Stupid -- or Simple -- Money Questions

While "How do I buy a stock?" may have seemed like a simple question, just beneath the surface were a bunch of very important questions, ones that all too often people are too afraid to ask. Questions like:

  • If I like a company, should I buy its stock?
  • How much money is proper to devote to a single investment?
  • I've earmarked money for one thing but have an opportunity to use it for something else. How do I decide which is the better investment?

It's important to ask questions -- any question -- no matter how basic/stupid/embarrassing you think it might be. That's the only way to learn. The alternative is learning the hard -- and very costly -- way.

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10 Stocks for the Next 50 Years
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3 Investing Questions You May Be Too Embarrassed to Ask

10 Stocks to Buy, Hold and Prosper

Betting on companies that are not only profitable but also have a long history of increasing their dividend payments to shareholders is as good a strategy as you'll find for increasing wealth without exposing yourself to outsize risk.

Each of these 10 businesses has been issuing ever-higher checks to their investors for at least half a century, according to the dividend-tracking site The Dynamic Dividend.

1. Diebold (DBD). This maker of safes and other security equipment yields 3% and pays out 50% of its profits as dividends. Management has increased the average payout by 5.4% annually over the past five years.

2. American States Water (AWR). This company pays a 3.1% yield as of this writing, with 45% of profits committed to dividends. This California water utility was founded in 1929 and has increased its average payout by 3.9% annually over the past five years.

3. Dover (DOV). Shares of this industrial machinery supplier yield 2.1% as of this writing, paying out 26% of profits as dividends. Management has increased the average payment to shareholders by 11% annually over the past five years.

4. Northwest Natural Gas (NWN). It pays a 3.9% yield as of this writing, with 73% of profits earmarked for dividends. This Pacific Northwest gas utility celebrated its centennial two years ago and has increased its average payout by 4.7% annually over the past five years.

5. Emerson Electric (EMR). Another member of the 100-plus club, this supplier of industrial electronics yields 3.2% as of this writing. Roughly 46% of earnings are committed to dividends. Management has raised the payout 9.1% annually over the past five years.

6. Genuine Parts Company (GPC). Yielding 3.1% as of this writing, this auto parts wholesaler pays 50% of profits back to shareholders as dividends. Management has increased the payout by 6% annually over the past five years.

7. Procter & Gamble (PG).You already know P&G -- it's one of the world's most popular consumer products companies, maker of such items as Tide detergent and Pampers diapers. What you might have missed is the company's 3.3% yield, paid from 60% of annual earnings. Management has increased its spending on dividends by 11.2% annually over the past five years.

8. 3M (MMM). Originally known as Minnesota Mining and Manufacturing when founded in 1902, 3M -- the creator of Post-It Notes -- yields 2.7% as of this writing. Management pays out 37% of profits as dividends, and 3M has increased the per-share cut by 3.6% annually over the past five years.

9. Vectren (VVC). Founded in 1912, this central U.S. utility funds a 4.9% yield by paying 80% of earnings back to shareholders as dividends. Management has increased the payout by 2.4% annually over the past five years.

10. Cincinnati Financial (CINF). The riskiest bet in the lot, this property casualty insurer pays out more than 150% of its annual profits as dividends. So while the history and current yield -- 4.6% as of this writing -- are no doubt enticing, management may be forced to curtail payments to shareholders in the coming years.

Should you invest in any of these stocks? That depends on whether you have an interest in learning more about the underlying businesses. And again, don't invest with money you'll need in the next five years. Stocks are wonderful at creating long-term wealth, but they're as dangerous as dynamite over the short term.

Below are three investing questions we are frequently asked. (Maybe one of them is yours!) Check them out, and then start making a list of your own burning questions and we'll tell you how you can get answers from our experts on DailyFinance this Wednesday, June 6, from 2 p.m. to 4 p.m. EDT.

Q. I only have $500. Should I be investing?

A. Yes. An emphatic yes, in fact! With any amount of money, saving regularly and putting that money to work for you in the stock market is the key to creating wealth. Building the habit of saving and investing is the first step on the road to financial independence, but so many people put it off assuming that they have to have thousands of dollars to get started. You're in luck: Even with just $500, there are many low-cost brokers at your fingertips. With the special offers online brokers give to new customers, setting up an account will cost you little to nothing.

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Q. What if I make a mistake?

A. Making mistakes is the only way to learn. If you are diversified -- meaning you've spread your money out among stocks that do not move in lockstep with each other -- mistakes won't cost you much and the education you gain will last you a lifetime.

Q. Should I sell my stock if it goes down?

A. Stocks go up and down daily as people buy and sell them. With information flying at you by the nanosecond, it's sometimes hard to sit back and do nothing. But often that's the best thing to do.

Still, sitting idle doesn't mean you should turn a blind eye to the business in which you've invested. If the dip is out-of-the-ordinary, then before you sell, you need to answer two questions:

  1. Has something fundamental changed with the business? If the company you are invested in decides to change its business from selling video games to selling knitting kits, for example, you should reconsider if this is the type of business you want to be in. Has there been a big shuffle in upper management? Has one of the company's biggest customers gone away? Fundamental changes in a business require investors to reevaluate that company. Which leads us to question No. 2.
  2. Has something changed with the valuation? If the stock price goes down and nothing else has changed, then that could mean that the valuation has improved. Investing is one of the few areas in life where something goes on sale and everyone runs away. Treat investing like you would grocery shopping -- look for deals on quality products, and when you see them, load up your shopping cart.

Get answers to your questions on Wednesday, right here!

Have an investing question you've always been too embarrassed to ask? We'll be hosting a live chat on DailyFinance.com this Wednesday, June 6, from 2-4 p.m. EDT with Motley Fool analysts live and on call to field your investing questions.

Drop any and all questions about getting started investing in the comment box below and our experts will get back to you in the chat.

The Motley Fool owns shares of Facebook.
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