Financial tips for the bums

[dawei]

5 hours ago, Aetherous said:

I'm interested to hear more about how you do before market and after market earnings reports - I'm not sure where to find those?

 

I'm using Robinhood.com, no fees to trade, but to day trade you need $25,000 in the account.  It is not a good analytic tool, so investing.com is better to review the stock, or Bloomberg, etc. 

 

If one is doing day trading, you have to consider when an earnings report is before or after market, and when to jump in.   I can't yet say whether it is more art or science but I'm studying the data.   I will say my wife has a better instinct so far but on chinese stocks in the US markets.   she know chinese stocks in chinese markets but seems to have transferred the idea to US markets.   So far, she likes to invest in chinese stocks in US market and does well.  

 

I have found many useful stocks, day by day but hesitation is my enemy. So trying to learn from it.  But I review that earnings calendar and pick a few to watch each day.   I am kicking myself in the ass on a few, both positive and negative results.... Learn and learn...

 

Next week is black friday.... retail... 

[Aetherous]

On 11/15/2018 at 9:55 PM, Aetherous said:

I recently got interested in this.

 

I took the advice of a passive income investor, and did research looking for high yield funds which had dividend yields that either consistently increased or didn't drop down for over 5 years, whose stock price tended to rise over time more or less...in sectors like real estate where it's more reliable than stocks, and perhaps real estate indexes. I put together a group which (when I last checked) when combined brought home over an 8% dividend yield.

For those who don't know about this...that wouldn't be the total return for the year, it would just be the dividend payouts. If the prices went up, the returns would be higher than that.

 

When I actually jump into this, I'll want to check how these are doing each month and listen to any news about them...definitely more hands on than long term index investing. I plan on using this high dividend strategy in a Roth IRA, so that when the time comes that I'm no longer reinvesting dividends, I'll simply be able to withdraw the money/receive the dividends as a cash flow without paying taxes.

Here were ones I picked, which more or less fit the requirements (if not, for other reasons they seemed good):

25% HEP

20% KBWY

15% GLAD

25% ARI

5% APTS
5% DEA
5% O

On dividend investing, please anyone feel free to correct me or share any tips.

 

I am very slowly learning about dividend investing, due to having a busy life. The post of mine above wasn't necessarily something good to follow.

I've learned recently that with dividend yields, the percentage they pay out as the dividend comes out of the value of the stock...it's not something extra added on to the stock. So when they disperse the dividends, the stock price falls by that same amount, and due to other fluctuations this is just not so noticeable.

 

But the key takeaway is that the yield isn't extra money. You could have a non-dividend paying stock, sell a fraction of it in order to pocket that money, and have the same effect.

Finding dividend stocks with a high yield seems smart if you don't know what you're doing, like me...it seems like you get a higher percentage of extra money which you can do with as you please...but in reality, you have to look at the return on investment altogether. You have to know that it's a good stock, and not just a good yield.

Example: let's say you invest $100 in a 9% dividend yield stock; you think you're going to make 9% a year, on top of whatever the stock makes...sounds nice! But let's say the stock price plummets by 10%. Even though it will most likely pay out the dividend (that's not guaranteed, but is likely if you've chosen one that has a history of consistently paying out), you still lost 10% of your money even after the dividends were dispersed to you.

Learning how to do this is much more challenging than simply investing in the total stock market, or something along the lines of the S&P 500.

This book, so far, has been educational in regard to dividend investing.

Oh also, a good way to keep track of your investments is the website Seeking Alpha. You can put your stocks in the Portfolio on their site, and it'll send emails regarding all news of your investments.

[thelerner]

Owning a good dividend stock can be amazing, especially if you can re-invest the dividends.  It takes awhile to get going but when it does there's a double compounding affect when dividends grow. 

 

Like any other kind of investment, perhaps more so its important to try to keep dividend portfolios diversified.  Which can be hard, often a REIT, Oil or pipeline dividends shine and its easy to purchase many of the same sector and when the shine is off they'll move down in unison.  So, diversify, its the free lunch of investing.

 

The biggest disaster in dividend investing is going for a high dividend and seeing it chopped and the price sunk.  Keep an eye on the firm.  The movement of quarterly profits and liabilities.  The realities of its business and sector.  In a good firm, you can ignore a bad quarter or two, and a down price means you'll get more shares when dividends roll around, but consistently bad quarters,  fundamental changes to the business.. then don't be afraid to walk away. 

 

You can sell 1/4 of the shares, just to be safe, buy'em back later if the business is doing better.  Having cash on the side is not a dirty word.  Investing isn't a binary game of all in or all out.  You can build positions and trim them.  You want to be able to sleep at night.

 

Some of the best dividend stocks are the stealth ones.  They don't seem like it, because of low payout, but they're brilliant because they've been raising the dividend rapidly, but its hidden because the price has gone up.  Looking at a stock in say the Yahoo finance, I'll put on the screen, switch to 5 year length, then under {events} hit dividends, which will show each dividend payment.

 

Scroll along the bottom and see how the dividend has grown.  In five years is up 25, 50% or doubled?  Take for example Home Depot.  Not a big dividend (forward 2.95% not bad) but on 3/11/14 it paid 47 cents for the quarter by 3/13/19 it was up to $1.36, 3 1/2 times more.  A comforting metric for dividend investors is Return on original money.

 

With a stock like HD you're earning over 7% on your original money 5 years later, but wait, its much more then that because you have many more shares if you've been able to reinvest, you're earning over 10%.  Fantastic and that's not mentioning that the stock has over doubled in price.  Even if it hadn't that 10+% is fantastic.   If the stock price and dividend never change in 7 years you'll be earning 20% on your original investment.  Money coming in every quarter.

 

The danger is we fall in love with a stock and when the situations change we keep it too long, against logic.  Dividend stocks I have, which may or may not be great today because I chose them years ago are- HD, OKE, GLOP, DNP, MPW, O, ABBV, OHI..

 

Index funds are a smart part of any portfolio, or should be considered a separate portfolio.. things like DIA, SPY, QQQ.. nice thing about them is A, they tend to beat the market most of the time, B you can write covered calls against them but these days when I play that game, its only go against a 1/3 of them.. just for pocket change and no worries if they get called away. 

 

 

addon> Dividend Sensei is a a solid writer imo.  https://seekingalpha.com/author/dividend-sensei#regular_articles

Best overall financial writer for explaining the market, its movement and behavioral forces is Michael Batnick  https://theirrelevantinvestor.com/

 

 

Edited March 21, 2019 by thelerner

[thelerner]

I thought this article explaining Why index funds are such a good investment was impressive-

https://www.mymoneyblog.com/buying-the-haystack-sleeping-well.html

"..

The whitepaper has a lot of math and investment jargon that you can read for yourself. Let’s skip to the conclusion here:

Historical cumulative returns of individual stocks are skewed whereby overall market returns are determined by a small minority of stocks. Therefore, all else being equal, a more diversified portfolio is more likely to hold these outperforming stocks while displaying a lower dispersion of portfolio returns. We conducted simulations of various portfolio sizes and showed that those portfolios with fewer holdings underperformed those with more holdings, leading to a higher return hurdle to overcome.

As the late Jack Bogle told us: “Don’t look for the needle in the haystack. Just buy the haystack.”

I don’t know which will be the most successful US companies in the future, but I know that I will own them via the total US index fund in my portfolio. I will own the next Amazon, Google, Facebook, Apple, or Visa. I’ll also own whoever disrupts them after that. Since I own a big chunk of global stocks inside the Vanguard Total International Stock Index fund, I’ll be covered if they come from the other side of the world.

Now, when you own the entire haystack, you will get the losers as well as the winners. Also, I won’t be as rich as if I invested in them when operated out of a dorm room. It just turns out that in this capitalist structure, owning them all still works out pretty darn well..."

 

 

 

To sum it up, these needles are the super star stocks that will go up over 10 or 100 fold.  In that time some companies will be shooting stars, some will fail, others plod along.. most will do average.  People who own the super stars will do fabulously, but its near impossible to tell a shooting star from a super star.  But buy the haystack and you'll get a couple. 

 

The article has a good graphic that reveals a good perspective. I notice its based on Michael Batnick's work, one of my favorite financial writers.  For more indepth look at the study look to the Agony & Ecstacy stock pdf- https://www.chase.com/content/dam/privatebanking/en/mobile/documents/eotm/eotm_2014_09_02_agonyescstasy.pdf

I love the line

In 90 AD, Pliny the Younger wrote of medical problems associated with asbestos mining; 2,000 years later, nearly 100 asbestos producers filed Chapter 11

 

Course imo having some higher dividend stocks (1/4?) and a few stocks (1/4) with good prospects makes for good balance. 

Edited April 17, 2019 by thelerner

[thelerner]

I'm not sure if anyone mentioned this yet, Goodrx the app is an excellent resource to find the lowest drug cost.  In many cases its dramatic.  Strangely enough there are cases when its dramatically lower then the Insurance Rate.  You literally have to remind the pharmacy not to go through your health insurance company.

 

There's a new service that might be even better.  Costplusdrugsrx.com  by Mark Cuban allegedly makes 15% profit on each prescription, often wildly less than big box pharmacies.  I haven't used it yet, but it looks promising.