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J.D. Welch's  Instablog

J.D. Welch
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I just recently caught the investing bug and started taking an active interest in my (presently meager) portfolio in October, 2011. Turns out I'm not too bad at making my own picks, and I really enjoy doing my own research. So far my picks have significantly outperformed those of my high-priced... More
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  • My 401(K): What Next To Buy, And Why? – August, 2013

    Time flies when you're having fun and accumulating funds in your 401(NYSE:K)!

    OK, it may not be "fun" to have those funds taken out every paycheck, but keep thinking about how and when you want to retire, and how much you dislike eating cat food on Saltines and living under a bridge. At least, that's my biggest fear about having to retire without enough money saved up (and invested in dividend growth stocks that are increasing their dividends at rates that beat inflation) to meet my monthly nut.

    For starters, let's recap the three ETFs and one mutual fund that I had held in my 401(K) account:

    1. iShares High Dividend Equity Fund (NYSEARCA:HDV)
    2. iShares FTSE NAREIT Mortgage Plus Capped Index Fund (NYSEARCA:REM)
    3. Utilities Select Sector SPDR (NYSEARCA:XLU)
    4. Yacktman Focused Service Class (MUTF:YAFFX)

    As a refresher, the last time I reported about my 401(K) I had decided to initiate a fourth ETF in the coming months into which new funds will be funneled until that position's percentage allocation of my 401(K)'s total value approaches the other positions, or at least the other three ETFs. Previously, I had instructed Fidelity to allocate 25% of the withholdings from each paycheck into YAFFX, and to put 75% into my cash account, where the cash would accumulate until I had enough to justify the $7.99 commission I have to pay for each transaction. In mid-June, I changed that to an 80%/20% split, so that 80% of the money withheld each paycheck went into cash, in anticipation of initiating and then continuing to grow the new, fourth ETF.

    Here's how things looked back in mid-June when I last reported on this account:

    (click to enlarge)

    Well, the time has come, and I decided to follow through with my plan and start a position in the ETF iShares Dow Jones Select Div Index Fund (NYSEARCA:DVY).

    Unfortunately, my timing wasn't great in initiating this new position. Between the time that I decided to shoot for adding DVY to my 401(K) and the time that I had enough funds accumulated to make a purchase worthwhile, DVY and the market as a whole had a bit of a run up. I recently bought a starting position in DVY, but since then there's been a bit of a drop in the value of all of my ETF positions, such that here's the way things look now in this account as I write this:

    (click to enlarge)

    We all know that mREITs have been taking a beating of late, so I'm not surprised by the drastic change of fortune of REM. Hopefully things will improve in the future, or at least not deteriorate any more than it already has for mREITs. I need to do some research in that area and see what the pundits are saying about the future of mREITs, but for now I'm content to sit tight on REM (and the mREITs in my IRA).

    So DVY is not off to a roaring start as the newest member of my 401(K), but it's made up of solid dividend payers and growers, such as Lorillard, Inc. (NYSE:LO), Lockheed Martin Corporation (NYSE:LMT), and Chevron Corporation (NYSE:CVX), to name the current top three holdings. And as I'm in this for the long haul (or at least as long as it takes me to get to retirement age), I'm confident that DVY will make up what it's lost in the short time I've held it, and then some.

    That's it for the current state of my 401(K). The plan now is to continue to add to DVY every three pay periods or so, so about every month and a half through about November. At that time DVY should have a solid percentage allocation of the overall total, and I can start looking at where amongst the four ETFs now in my 401(K) to apply the next round of funds. If something changes in that plan, I'll be sure to let you know, but in the meantime, that's how it looks like things are going to play out.

    Disclosure: I am long DVY, HDV, REM, XLU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: Disclaimer: I am not a professional investment advisor or financial analyst; I’m just a guy who likes to crunch numbers and can make an Excel spreadsheet do pretty much whatever I want it to do, and I’m doing my best to manage my own portfolio. This article is in no way an endorsement of any of the stocks discussed in it, and as always, you need to do your own research and due diligence before you decide to trade any securities or other products.

    Tags: DVY, HDV, REM, XLU, retirement
    Aug 20 2:52 PM | Link | 3 Comments
  • My Mad Method: Oil Titans Updated & Expanded

    Earlier today my article "My Mad Method: Battle of the Oil & Gas Titans" was published here on Seeking Alpha. Some of the first comments asked why I had not included Total SA (NYSE:TOT) or Eni, S.p.A (NYSE:E) in the analysis of major Western oil companies. My apologies to all; I am not an expert in oil and gas, and frankly was not aware of these companies from France and Italy, respectively.

    So, per my offer in the Comments section of the article, I've re-done the analysis to include these two companies. The result is that my watchlist is now made up of 35 companies, which will change some of the MyMM valuations. Also, I've updated all of the data for the companies on my watchlist with the most recent data as of the close of the market today, July 25th, 2012.

    Here is how these 8 Oil Titans now scored using the 17 metrics from My Mad Method:

    BP still comes in first numerically, but CVX has moved up into a tie with COP, and RDS-A has actually dropped down quite a bit in the overall ranking out of the 35 companies on the watchlist.

    Here is the pricing and 52 week high/low data, similar to what was in the original article:

    I don't know why TOT's price has taken such a hit in the past 12 months, but given that it has the highest yield and scored the best in terms of The BMW Method numbers, and is in essentially a dead heat with COP and CVX, this makes TOT a very attractive option, indeed, IMHO. One thing to consider, however, is that there would be foreign tax taken out of any dividends from TOT, as would also be the case for BP, E, RDS-A and STO.

    On the other hand, with a slight increase in its share price today, XOM has slipped into "Screaming!" territory, making it that must less attractive (at least to me) to potentially acquire. If its price slips down a bit further, I think XOM, and all of these companies, actually, are fine choices in the energy sector.

    Once again, I apologize for the omission of TOT and E from the original article, and hope that you find this additional information helpful.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: I am not a professional investment advisor or financial analyst; I’m just a guy who likes to crunch numbers and can make an Excel spreadsheet do pretty much whatever I want it to do, and I’m doing my best to manage my own portfolio. This article is in no way an endorsement of any of the stocks discussed in it, and as always, you need to do your own research and due diligence before you decide to trade any securities or other products.

    Jul 25 5:44 PM | Link | 1 Comment
  • Could It Be That I'm Smarter Than My Broker? – Introduction

    "You don't know what you're doing," my wife said. "We need to find a broker, someone who's been trained in how to invest. Someone who knows what they're doing." She'd said that before, and I let her get away with it. Until last October. That's when I decided that my high-priced broker really didn't have my best interests at heart, and if I didn't want to end up being a Wal-Mart greeter on the graveyard shift just to make ends meet in my Golden Years, that I needed to take matters into my own hands.

    Flash back to later summer, 2008, or thereabouts. Bear Sterns just went under. My wife, who is a conservative radio talk show addict, insists that we pull our meager funds out of our portfolio of predominantly USA stocks at a reputable brokerage and stash the money in a cash account. In this case, she was right. Not long after that, the market crashed and we entered The Great Recession. If we'd left our money where it had been invested, it would have lost about half of its value. Bullet dodged.

    That's the good news. Roll the clock forward to July of 2010, and our precious nest egg is still sitting in a money market account, doing pretty much nothing while the market recovered reasonably well after the low points of 2009. Now she's ready to get our funds back into investments, but she insists that we use a particular brokerage firm that specializes in foreign securities. This firm and its CEO believe wholeheartedly that the USA economy is doomed to collapse in the not-too-distant future, and their recipe for salvation is to invest exclusively in non-USA securities and/or currencies. I don't happen to agree with this doomsday philosophy about the almighty dollar, but I can't talk her out of it and I get the, "You don't know what you're doing, you're not trained to do this" speech again, so I go along with it. We ended up getting nicely diversified in non-USA equities and a few funds. These guys are supposed to know what they're doing, and for their "personalized" service we pay very high commissions if we ever want to move anything around, sell something that's not working or buy something else that might be better (or when we've accrued enough dividends). But we get sold into a "set-it-and-forget-it" kind of mentality, with the assurance that they will be in touch with us periodically to review our positions and see if anything needs to be rebalanced.

    Time marches on and we get monthly paper reports from our broker that I really don't understand, but the little graphics on the first page don't paint a very bright picture for how our money's doing. October of 2011 rolls around, and my employer embarks on a program of providing all employees with access to all sorts of tools and professional advice on saving for retirement. Stimulated by this, I wake up to the realization that I should be able to check my investments online. This was 2011, after all. Eventually I get access to my account online, and I'm greeted with a lot of red numbers. Doesn't look good, so I call up my broker to talk to him, and his first response was, "Yeah, most of what you're invested in we don't support or recommend anymore." Fabulous. What happened to keeping an eye on things periodically and advising us when we should shuffle things around? After all, that's why we were paying them those high commissions and fees, right? "Yeah, we kind of lost track of you guys, you slipped through the cracks…" Even more fabulous.

    Some of the stuff he had gotten us into had done reasonably well, but most of it was not doing well at all; net-net, we were slightly ahead of where we were when we entrusted our life savings to these guys back in July of 2010, but there's a lot of damage control that needs to be done. So we set about dumping all of the positions that were bleeding all over my statement, and he comes back with some recommendations for where I should redeploy what's left of my assets.

    This becomes the pivotal moment in my investing life.

    I decide that this guy really doesn't have my best interests at heart, and my account is probably "too small to matter" to his firm. I think I can do a better job managing my money in the approximately 17 years I've got left before I have to retire, but I've got to convince my wife that 1) I really do know what I'm doing, and 2) I can do it better than our broker has been doing it for us. I decide that I'm not going to take all of his suggestions, but that I will split the available cash into two groups, one of which I will go ahead and take his advice with, the other of which I will do some research on my own and make my own picks.

    A little over seven months later, here are the results…

    (The rest of this story can be found in the article entitled "Could It Be That I'm Smarter Than My Broker" here on Seeking Alpha. I hope you take the time to venture over and read the rest of tale…)

    Thanks,

    J.D.

    Jun 14 12:02 PM | Link | 4 Comments
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