Week 12 Deposit and Politics

Its important to keep up with politics and current events without becoming sucked into personal bias.

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

Well I see that youtube chose another great image for the thumbnail. Why do I never see other youtubers with this problem?

A little edit. With all the math and numbers that fly around with a portfolio mistakes will happen there isn't a way to get around that. Novels have multiple drafts and multiple editing passes to try to catch the mistakes. For financial books there are entire teams and departments to check and recheck things.

For me, I had the wrong dividend typed in here for PCY though my spreadsheet was correct. Just a good example to recheck your numbers each time between what you have vs what your broker has.

Its also a good way to make sure your broker is correct because not all of your bookkeeping errors will be with you. PCY always pays on the last business day of the month. That was Thursday June 30th. I checked that day but there was no payment. I waited until the morning of Friday July 1st and still nothing. I contacted their help desk chat and they cleared it up.

The deposit goes through their clearing company, Penson. Then it gets passed on to me. So in a few more  hours (about 9:00 am eastern) it will show up. It did but being in July I looked at the July time period of activity. I received the dividend because my cash was higher but it didn't list it in the activity section. I just magically got more money. I checked June's statement and they show that I received the dividend at 11:00pm.
It may just be me but if I don't have the money in my account until July, don't show record of it until July, and do not have access to said money until July; then I did not receive it in June. Its not a big deal its only one day, but the point here is that we have to adjust our expectations to match how our broker does things.

If I hadn't found both of these bookkeeping errors it would not have impacted my actual account dollar totals. However the longer it takes to find the harder it gets to actually find it. Months down the road where there have been lots of payments it could make it hard to spot.

I'm going to go back and edit past entries to make it match but I wanted to make mention of it. I'm not trying to hide anything or trick anyone here. Things like this will happen with just about everyone and its something that needs to be accepted and dealt with. If anyone is expecting this to be flawless then you will be disappointed.


Weekly Activity
$100 deposit into Investing
$1.78 dividend from JNK

Model Portfolio Totals


Trading Account: $0

Investing Account: $893.56
Stock: $0
REITs: $0
Bonds: $551.67
     JNK: 7 shares. ($1.78 total dividends)
     PCY: 10 shares. ($1.26 total dividends)
Maneuvering: $341.89

Savings Account: $300
Emergency: $250
Portfolio Protection: $50
CDs: $0
Precious Metals: $0


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets

Dividend Investing: 4 - Consecutive Years of Dividend Raises

I continue my series on dividend investing by looking at something I have talked a lot about in other videos, the consecutive years of dividend raises...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

I want to expand and clear up something I mentioned in the video. That was how a dividend company vs a non dividend company grows and expands their business.
Now I am not saying that non dividend companies expand recklessly. But when they choose to grow they are not restricted by having to increase the dividend the next year. So their moves can be longer term or if their expansion is not as profitable as they thought then no big deal, they will work it out later.

The dividend paying company though has to be sure it will start generating income to pay for the higher dividend. It could take a few years before any growth will see increased income from any one expansion of buying another company or building a new factory. This forces the company to plan out more so they have several projects in the pipe. They also have to really be sure that they are on target because if there are delays then they will not have enough growth to increase the dividend and investors could become concerned or start to sell.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Expected Returns in the Financial Markets

Making money is the goal when you are in the financial markets for whatever you are needing it for. How much can you make is the question...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

I didn't give a direct answer to the question. I really prefer to play devil's advocate and throw out varying ideas and viewpoints for each person to make up their mind. And in all honesty as I mentioned in the video, its going to vary by a lot between each person.

On one hand that may seem obvious but the person just starting out really needs to dwell on it for a bit. The 80%-90% of the people that fail are probably not going to have many veterans that have been trading for a lot of years. The beginning time for anyone in any trade skill, including trading, should be focused on education and getting experience. The money will come as an afterthought.



Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Week 11 Deposit

This week in addition to the deposit I have some updates on brokers and various websites I have been testing.

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

Weekly Activity
$100 deposit into Investing

Model Portfolio Totals
Trading Account: $0

Investing Account: $794.36
Stock: $0
REITs: $0
Bonds: $554.25
     JNK: 7 shares.
     PCY: 10 shares. ($1.26 total dividends)
Manuevering: $240.11

Savings Account: $300
Emergency: $250
Portfolio Protection: $50
CDs: $0
Precious Metals: $0

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Earning Season

Its that time of quarter again when the new investor looks at stock options and starts seeing big (potential) profit in the Earning Season jumps in prices...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

I wish that  the Microsoft (MSFT) option trade that made me x7 my money had not been one of my first trades. Since it was it gave me a false sense of what the markets would be like. I even told myself "Oh this is easy!" It spurned me on to keep trying to duplicate it again and again.

Something I didnt go into detail about in the video but that makes a big impact to trading are the previous quarters estimates of this quarter. Companies will guess at how much they will make. Investors will then try to jump on that and beat other investors to the punch and the stock price will balance out to what that future news is going to be. This is called having the news "priced in".
Not only that but analyst "experts" will make their educated, and sometimes not so educated, guesses. If a company beats these guesses the stock will generally move up because it beat earnings. If they miss earnings then it will usually drop.

This really confused me when I started out. A company would grow their profit by 10% and the stock drops by 5%. How? Because everyone guessed they would grow by 15% so somehow this is a big terrible thing. The trader can get burned and its one more thing they have to research around earning season time.

To me the power of analysts is frustrating. Someone from Goldman Sachs or Citibank makes an announcement downgrading a company on fear of risk of potential difficulties, nothing even substantial, and a stock drops 5%-10%.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Dividend Investing: 3 - Yield and Yield on Cost

Yield and Yield on Cost are pretty similar in how they are calculated but the one difference is a big one...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

In the video I ended with saying that I don't want to pay someone $20 to get $0.66 a year back which is what happened with AOD. That's a 3.3% yield on cost but isnt that what I am doing now if I were to buy a JNJ or KO?

I am not buying today's dividend dollar payout I am buying the 15 year in the future one.
I want to stress this point because its THE #1 cornerstone of dividend investing. Its something I will be repeating over and over and over again probably to the point of beating it to death. I see too many investors missing this point that they don't even consider dividend investing. If it doesnt fit for a person's strategy that is perfectly fine but at least understand it enough to be able to make that decision.

Let's break down the math of my Coca-Cola comment in the video.
KO in June 1989 was around $4.80 with a $0.0375 quarterly payment (adjusted for splits). That's a 3.1% yield.
Today it goes for $68.48 and has a $0.47 quarterly payment, $1.88 a year. That's a 2.7% yield. A person only thinking about yield would probably have skipped it. Maybe even returned to KO and thought its still not paying much.
Yield on cost? That $4.80 spent is making $1.88 a year.... 39% yield on cost. Don't even get me started on if they had reinvested the dividends all those years.

So when I say I do not want to give someone $20 to get $0.66 back a year what I really mean is I want to give someone $20 and get $7.52 back a year (having bought 4 shares of KO).

Whose to say what will become of funds like AOD 20 years from now. All I know is that has cut its payment twice while KO and other companies have raised their payment. When I am jobless I don't want the worry of having to rebalance my bills after having took a paycut.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets

Week 10 Deposit and the first dividend

We hit some nice milestones with the model portfolio...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

On the weekly deposit and review entries I'll also be changing the format as time goes on and new activity starts to talk about. Since I have the investing tab at the top I didn't see a need really to list out each investment's dollar value.

This changing of data shows a bonus of sharing a blog with others. It makes me keep in mind that I am talking about this with others so I need to show whats important. It also makes me keep in mind to pass on the less important stuff. Otherwise this would turn into a daily blog and you guys would get drowned out with too much info.

Just like investing is a marathon, I am finding out blogging is too. Since this portfolio will take years to complete there is no need for me to stampede out a herd of videos and entries at full speed. I can see how people go too fast and get burned out and quit a blog. Then that leaves everyone hanging.
I still want to be here and share with you all the "I hit my goal and quit my job!" video.


Weekly Activity
$100 deposit into Investing
$1.26 PCY dividend received

Model Portfolio Totals

Trading Account: $0

Investing Account: $693.87
Stock: $0
REITs: $0
Bonds: $553.76
     JNK: 7 shares.
     PCY: 10 shares. ($1.26 total dividends)
Manuevering: $140.11

Savings Account: $300
Emergency: $250
Portfolio Protection: $50
CDs: $0
Precious Metals: $0



Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Investment Purchase: JNK

I made my second investment for the model portfolio this week...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

The blog entry is coming up a bit later then the video was published. It was a rather crazy week in redoing videos and learning how to edit. Plus I wanted to space out the blog entries and not do multiple ones a day.

At any rate, JNK. It has a nice high yield for a bond fund so why not put all my money there? Why waste my time with PCY that has a noticeably lower yield? Financial instruments have a high yield for a purpose. JNK trades 3.8 million shares a day so this isnt some hush hush secret investment that people don't know about. This yield is the yield because thats what the market has determined will pay enough for the risk. Or that the share price is high enough to risk because the higher that goes the more money per share is risked. If the market didn't think the yield was too high or the share price too high then it would be pushed up, plain and simple.

Here are the links to the funds discussed in this entry
JNK: Spdrs
HYG: iShares
PHB: Powershares


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Dividend Investing: 2 - Research

Starting out with investing has enough obstacles for the new investor that finding information to start the research process shouldn't be one of them...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

I was hoping to get this entry and video out on Wednesday but all that editing derailed that plan.
The duration in how long of a video it captures leaves something to be desired. At about the 8-10 minute mark it creates a file too big to handle and doesn't save. The screen capturing part of the video alone took me about an hour of redoing it trying to figure things out. The editing? Yeah for some reason 1 minute of screen capturing resulted in 100MB of file size!

In the end though I am really pleased how it turned out. The clarity turned out nice and when reformatting the data it compiles down to a very reasonable size. It's definitely something I have been meaning to do so I can share what I am looking at with you guys. Learning video editing isn't unlile learning investing and trading. You just have to roll up your sleeves and jump in to reading, learning, and testing.

As to the research process itself, I use all of these tools. Each shows different aspects of a company with some overlap but some uniqueness. The important thing is to get a real deep understanding of the company we might be investing in. This way there will be less chances of an "Oopps I didn't think of that before losing 50% of my money" moments.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Week 9 Deposit and Rule #5 comes up for the first time

I haven't talked much about the rules of my portfolio apart from rule #3 which is the weekly deposit. That changes this week...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

As the portfolio grows there will be more options open to the portfolio. As that happens I will need to keep an eye on the Rules to the Model Portfolio.


Weekly Activity
$100 deposit into Investing

Model Portfolio Totals

Trading Account: $0

Investing Account: $593.40
Stock: $0
REITs: $0
Bonds: $269.90
     PCY: $269.90
Manuevering: $323.5

Savings Account: $300
Emergency: $250
Portfolio Protection: $50
CDs: $0
Precious Metals: $0




Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Dividend Investing Weaknesses

I want to talk to you guys about some of the risks and drawbacks to dividend investing...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

As I mention in the video, I really hate when people only tell you what they want you to hear about a topic. Especially when its linked with selling a book, video, or newsletter subscription. I'm all for people wanting to sell a product or that believe their information is worth charging a price. Everyone needs to make a living. But at that point selling a product is or is in danger of becoming the primary motivator for what the person does or doesn't say.

So while I am an avid fan of dividend investing, I have to keep in mind that everyone watching and reading what I have to say is where I was many years ago. Forming their own ideas about how to build their own portfolio.

On the other hand I presume you arent watching and reading me because you want a textbook like experience. Presumably you want a living working exchange in watching the decisions a person makes and what the think about. So here are some ways to mitigate the risks.

Dividend cuts and eliminations: Keep an eye on what the company is doing. Are they saving money, growing the company, buying others? The dividend will be safer. If they are firing top management, involved in product recalls and lawsuits, and have a lot of debt then that increases the odds that a dividend will be cut.

Too much tempting capital gains: This one will have to come with experience in the markets. And to be honest? Its not a bad position to be in all in all. Sell a 100% gain position or keep a great yield on cost. I certainly am not complaining of having had to make the choice so don't get me wrong. But its something that will be encountered from time to time.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Overview of the strengths of Dividend Investing

As I have mentioned before, dividend investing takes a different mindset to use as a core pillar of a strategy. At first glance it appears to have weaknesses. To find its strengths you have to yank out the calculator...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

I threw out a lot of numbers in the video so I want to expand upon it more here.
For my March 2002 purchase I took the close price just before that dividends ex-dividend date. For each compounding of the DRIP I took the close price of the payout date.

How does the stock-split math work with the $14.47 price I mentioned?
February 1995: The actual share price back then was $57.88. However JNJ split the stock 2:1. Meaning you know own 2 shares for every 1 share pre-split. They did that twice, once in 1996 and then again in 2001. When a company splits like this where they double the number of shares the price per share is halved. This is to keep the actual total wealth per investor the same. That $57.88 for 1 share turned into $28.94 for 2 shares. If the price didn't get halved it would double the value of the company automatically. Share price is a measure of the value of the company. JNJ didn't double their sales or double their factories.

Since they had another split for 2:1 we would half the price again which is where we get the $14.47 price. Every 1 share today had the equivalent dollar value back in 1995 of $14.47. You pretty much have to do this because what if you want to compare how 3 current shares did back in 1995? Its gets messy.

Further comparison to the 10 year bond
The video was starting to get pretty long so I cut out the following part but I really want to talk about it
In 2002 we bought are 4 shares of JNJ for $289 (excluding commissions). Back in 2002 according to the Federal Reserve Historical Stats a 10 year US Treasury had a yield of 4.6%.
The following is how much money every year we will get paid by each
JNJ stock : $1.64, $3.76, $4.54, $6.28, $7.18, $8.17, $9.04, $10.21. $11.28 (2011 estimated)
Total: $62 total paid.
10y US Treasury $300 @ 4.6%: $13.8, $13.8, $13.8, $13.8, $13.8, $13.8, $13.8, $13.8, $13.8:
Total: $138

Keep in mind that in 2002 JNJ had a yield of 1.3% so though its catching up to the 10 year bond's 4.6% yield in those last couple of years it couldn't overtake it.
By the end of 2011 the bond expires. We have our money back but no more income. We have to go buy another one. As of right now the yield is 2.95% so we lost some yield there.
Now that $300 is only going to get us $8.85 per year. One could take all of bond income and buy a bigger bond. A $438 bond @ 2.95% makes $12.92/year
JNJ? We were not forced to sell so we are still making out $11.28/year which will continue to DRIP for more shares and continue to get their payout raise per share. It will quickly overtake our bond.
I didnt drip in the bond payments because you cannot. The US government doesn't allow it as far as I know. One would either have to buy into an ETF that allows it or wait and save up their bond income to buy a second one.

So when I say its hard to see the strengths of dividend investing it really can be. Keep in mind that this was from the absolute worst time to be buying JNJ. If I were to use the 1995 example? Things get real juicy but I think you can see where it ends up at.

Week 8 Deposit and Dodd-Frank Act

Its been two months already. It seems like just the other day I was kicking around the idea of starting a blog. Just goes to show you how quickly things can build up.

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

The Dodd-Frank Act is 1,600 some pages. Most will comment or joke that nobody has read it all let alone the members of Congress that passed it. Along with what I mentioned in the video that they are still writing the rules, there is the possibility that Congress won't like those rules and pass another law to change it or other parts of the Act. So all the freaking out? It may be temporary and then we will have something else to freak out about.

It can turn into a never ending cycle where all one does is whine and complain about how its not fair. What is that type even doing in the financial markets if they arent trying to make money?

Weekly Activity
$100 deposit into Investing

Model Portfolio Totals

Trading Account: $0

Investing Account: $492.80
Stock: $0
REITs: $0
Bonds: $269.30
     PCY: $269.30
Manuevering: $223.5

Savings Account: $300
Emergency: $250
Portfolio Protection: $50
CDs: $0
Precious Metals: $0

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

How to measure financial success

As soon as you make your first investment or trade you are going to start looking to see how well you are doing...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

Here is the breakdown of what I found on the census site and on sites I would consider trustworthy enough...

Average Family Bills / month.  2 adults, 2 kids
Mortgage: $1,733 ($323k @ 5% for 2009 homes) http://www.census.gov/compendia/statab/2011/tables/11s1191.pdf
House insurance: $64/90 ($778.84/year) http://www.census.gov/compendia/statab/2011/tables/11s1221.pdf
Utilities: $316 ($158.33 electricity x2 for water and gas) http://www.energysavers.gov/pdfs/energy_savers.pdf

Car payment: $386 guess ($20k @ 6%) This number I estimated.
# of cars/family 1.16   (135m cars / 116m Househoulds) http://www.census.gov/compendia/statab/2011/tables/11s1095.pdf
Car insurance: $62 ($749.88/year) http://www.census.gov/compendia/statab/2011/tables/11s1221.pdf
Gas: $162   (43 gallons/month) http://www.nacsonline.com/NACS/Resources/campaigns/GasPrices_2011/Documents/GasPriceKit2011.pdf
  Cost $3.79 http://www.eia.gov/

Credit card debt: $5050 on card
http://www.census.gov/compendia/statab/2011/tables/11s1187.pdf
# of cards: 6.37 (177m cardholders, 1128m cards)
Balance:5050,  792.55/card  (894b debt outstanding)
Rate 13.4% (2009) ($56/month just interest)
Cellphone: $100 (family plan 3 phones). http://www.wireless.att.com/
Food: $806 http://www.cnpp.usda.gov/Publications/FoodPlans/2011/CostofFoodApr2011.pdf
Health Insurance: $333 http://www.ncsl.org/?TabId=14509
Life Insurance: $42 state farm

Tv/Internet: $100 (http://www.comcast.com/Corporate/Learn/Bundles/bundles.html?)

Misc: $200/month. 
    Clothes, gifts, charity, entertainment, car repair.

Total bills / month: $4420
Average household income: $4191 / month (50,303) http://www.census.gov/compendia/statab/2011/tables/11s0700.pdf
Average family income where Husband and Wife worked   73% ( 33,954 / 46,201   http://www.census.gov/compendia/statab/2011/tables/11s0700.pdf
Income for 2 kids $76,575 (http://www.census.gov/compendia/statab/2011/tables/11s0700.pdf)
Average income: $6381/ month
So half of all the above monthly bills divided in half for the dual income family brings and including the taxes I will have to pay as a theoretical family member...
TARGET: $2,762 after taxes (25%)

Dividend Growth Investing: 1 - Why dividends over capital gains?

I begin yet another series of discussions about the financial markets. This time on dividend growth investing...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

Dividend investing is the topic I am most passionate about in the financial markets. Its the thing I can "geek" out the most on. I've tried my hand at buy low, sell high. I've read up on (better never actually have) naked short sold stock. We have penny stock investing, value investing, momentum investing. All sorts of strategies of investing but they all have one thing in common. You have to make the decision when to sell. That opens up the risk and consequences of "what happens afterwards".

For me and my investing personality style, I found I would get too frustrated when I sold and the price went higher. Even when I had a great profit I would think I was "wrong" because I didn't sell at the top. Not only is that just a silly notion but it distracts one from their next investment or trade.


Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Week 7 Deposit

Its time for another weekly deposit...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

My weekly deposit format of data will be a work in progress as new information comes in as with purchases...

Weekly Activity
$100 deposit into Investing
Purchase 10 shares of PCY @ $27.15

Model Portfolio Totals

Trading Account: $0

Investing Account: $395.40
Stock: $0
REITs: $0
Bonds: $271.90
     PCY: $271.90
Manuevering: $123.5

Savings Account: $300
Emergency: $250
Portfolio Protection: $50
CDs: $0
Precious Metals: $0



Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Investment Purchase: PCY

Here I talk about my first purchase for the model portfolio...

I've followed PCY for several years now and like it. When I bring it up in conversation and get to the part of which countries are in the fund, (Turkey, Qatar, Bulgaria, Columbia) a lot of people get turned off because that is "risky" and that U.S. bonds are so much safer. When I ask why they believe that they almost always seem to give a  "just because they are" reason.

That sort of thinking can be lethal to a trader and investor. Things change and common mentalities and theories on investing should be challenged and each investor should determine what is appropriate for themselves.

I have been talking in the past couple videos the idea of not shadowing and this brings up another reason. When shadowing someone you run the risk of falling into someone's line of thinking, without fully knowing why they think a certain way. You then start agreeing with something you don't fully understand and that spirals into other investment decisions you will make.

Here are the links to the various funds I mentioned in the video for those that want to research further...
PCY: Powershares
EMB: IShares
EBND: Spdrs
ELD: Wisdomtree

Here is a chart comparing several of the funds I talked about.

This is from finance.google.com and shows the % gains and losses of each one if they all started with the same purchase amount at the same time.

We can see that PCY (blue line) and EMB (green line) move pretty much the same way which makes sense being that they are the same asset class. However its always good to confirm it here. I use the S&P500 to represent the stock market. Here we see it has struggled to recover from its 2008 and early 2009 fall. TLT (yellow line) is a popular ETF for U.S. bonds. It rose while the others fell but it reverted back to 0% the quickest of them all.

Ok great so what does this tell us? To me at least, it says that U.S. bonds and emerging market bonds will move differently at times but then revert back to 0. Most bond investors will be focusing on the income they get and not share price appreciation. Bonds don't grow and expand like companies do.

One key thing to keep in mind... this chart only covers the past 3.5 years with 4 things. Its far from a conclusive review of how the stock and bond markets work especially in how these work over a 50 year period that I will be wanting to carry me to and through retirement. That will be another angle we can look at and will do so in the future. Its something to keep in mind and research before entering a position however that's a topic for another entry later on.

Disclaimer: The investments and trades in my videos and blog entries are not recommendations for others.
I am not a financial planner, financial advisor, accountant, or tax advisor. The financial actions I talk about are for my own portfolio and money and only suited for my own risk tolerance, strategy, and ideas. Copying another person's financial moves can lead to large losses. Each person needs to do their due diligence in researching and planning their own actions in the financial markets.

Week 6 Deposit and Shadowing

We have another deposit coming in for week 6...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

In the video I said week 5.... Yep I screwed up and now I am at work where Youtube is blocked. I'll try to edit it or replace the video in its place tonight. Either way thoug I will keep up my "slip up" out in the open. Mistakes are going to happen.

Weekly Activity
$100 deposit into Investing


Model Portfolio Totals

Trading Account: $0

Investing Account: $300
Stock: $0
REITs: $0
Bonds: $0
Manuevering: $300

Savings Account: $300
Emergency: $250
Portfolio Protection: $50
CDs: $0
Precious Metals: $0

Type of Investments: 2 - Mutual Funds, ETFs, and CEFs

In the next part of my series on the different types of things that we can invest in I talk about the various fund types...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

One more "anti" comment on mutual funds especially for dividend investors. Even though they own companies that issue dividends? They may not necessarily pass them on to the investor. To be honest I have no idea where they go. I have called several mutual fund help numbers looking for this information and never got a straight answer. The one thing I do know is that I never received any directly.

ETFs and CEFs? They pass them on to the individual investor. So seeing as this model portfolio is about sustainable income I'll be going with those.

As investors though we should be aware of how mutual funds work. I barely touched upon it here and there are other moving parts to them. Why is it important to be aware of them even if we don't plan to invest in any? They are very predominant in 401k plans. In the four company plans I have had access to the vast majority of choices were in mutual funds.

What happens when we buy stock

All too often the newcomer to the markets will take an action with their money before they know what they are doing. I'm not talking about what they are doing in the sense of picking the "right" stock. I'm talking about what happens when they turn their money over to their broker and tell them to go to the stock exchange and buy them some shares...

EDIT: At the time this blog entry was posted I had a Youtube video here. That has been removed but I want the rest of my content to be remain. Nothing hidden no past mistakes ignored. All out in the open.

In the video I say that there is risk when you initiate an order before the price moves. I touched on it with slippage and the spread a bit but I want to expand clarify that a bit. For this video and blog entry I am purposefully leaving out the words "bid" and "ask".

The spread can widen on volatility which is how fast a stock or option or whatever financial instrument's price is moving. The stock exchange knows that when something is moving fast it will attract more buyers and they want to get in on something moving fast. So they widen the spread to get more money out of those more willing to pay the higher price.

So continuing my example from the video of a stock we can buy for $10 and sell for $9.50. Let's say we have been following it and want to buy it. We place our market order. As we do it the price moves faster then we thought. Some news came out. Perhaps it's a drug company that cured cancer or is being bought out by another company or one of those "just because" fast moves. For whatever reason it's moving higher. You get filled at $10.25 because of slippage and you check the current price. The price is $10.50 to buy and the sell price only rises to $9.75. Why did the buy price go up more then the sell? The exchange knows that people are going to want to buy when stock moves up fast and buyers are more willing to pay extra for it. Sellers are less inclined to sell because maybe they can hold out a little bit longer and get a better deal so the exchange has less reason to give them more.

The stock continues to rise to $11 to buy and $10.50 to sell. The spread narrows because things are slowing down and it goes back to its normal $0.50 spread. So even though it was at $10 when you entered your order to get in and now it's valued at $11 to buy, slippage took $0.25 and the spread took an extra $0.25 then you planned on. To sell now at $10.50 when your entry point was $10.25? That $1 rise only leaves you with $0.25 actual profit.

The move ends and starts dropping, fast. Others are freaking out and selling so you decide to also. Just like before the spread widens. Though the buy price drops just $0.25 to $10.75 the reverse is happening with the spread. The stock exchange knows that people want to get out and sell. The spread widens against the seller and the price to sell your stock is $10. Slippage of $0.25 once again occurs and you sell at $9.75. The price levels off and the spread narrows back to a $0.50 range.... $10.50 to buy and $10 to sell.

So while the buy and sell price of the stock have both moved up $0.50 you ended up losing $0.50 a share! Bought at $10.25 and sold at $9.75

Oh yeah... and you also paid a commission twice, once to buy and once to sell, for the privilege of losing money even though you were right.  That's a very important thing to never forget... you can be right in guessing the move of a stock. You can be right in the timing of getting in. You can be right in the timing of getting out. With all that you can end up losing money.