Dripping Works: A Real-World Example [View article]
Hi aida. Thanks for reading my article. I'll take a few swings at the questions I can answer.
1. I drip everything. I only own three stocks in taxable accounts but they are three of my largest positions. I also drip within my IRA and Roth IRA.
I was fortunate to have had a couple of substantial rollover IRAs, so that did help, but my wife and I also have six-figure Roth IRAs from years of making the max investments, dripping divvies and never selling anything within them. So it is possible to accumulate decent-sized IRAs, it just takes time, like so many things in life!
Of course, I'd rather not pay taxes at all! But it really doesn't "bother" me to pay taxes on dividends enough to make me not invest in dividend-paying companies. It's just part of the cost of investing, like commissions and aspirin! I'd love to make so doggone much in dividends that they put me in a different tax bracket ... I like to think I'd consider it a very nice problem to have.
I will tell you that my wife and I are at least considering selling some of the stock we hold in taxable accounts and using that money to buy investment real estate. We might never go through with that, but if we do, I almost surely would use some of the cash I've been harvesting in our IRAs to buy those same companies again.
2. Regarding kolpin and AgAu using terms like "fully weighted position," "equal-sized portions" and "too big positions," maybe they'll weigh in. Until they do, though, I'll give you my read on what they mean.
Say an investor has a portfolio of 20 stocks. He must decide if he wants each of the 20 to be worth the same amount of money or if he wants what he considers his "best" stocks to have more prominent values. Two of my favorite Seeking Alpha contributors, chowder and Bob Wells divide their money equally among the stocks they own. (Just as you say in your example - $8k for each of 10 stocks.) I believe AgAu does this, too. Many other investors will assign higher values to their favorite (or "core") stocks. For example, MCD, KO and JNJ might each be worth 10% of their portfolios while BP, LO and GSK make up only 5% of their portfolios and three other stocks make up only 3%.
By "fully weighted," I believe kolpin is saying that he only wants his portfolio to have a certain percentage (or dollar value) in any one holding. Once a stock reaches that value, he doesn't want to own any more of it and so he stops reinvesting his dividends back into those fully weighted stocks.
When AgAu says "too big," I believe he also is saying he owns as much of a certain company as he wants to own.
For what it's worth, I consider my positions in PG, WAG, MMM, PM, RDS.A, O, WM, GE and LNCO to be "full," and I have no intention to use any of my available cash to buy more. However, I plan to hold those companies for a long time - maybe even forever - so I don't mind acquiring a few new shares of each every quarter through dripping.
As you can see, there are a lot of ways to initiate and build portfolios, and a lot of ways to deploy dividends. The "right" way is the one each investor finds most comfortable and sticks with!
3. I need to learn how to use spreadsheets better, so I definitely am not the right person to answer this question. Anybody else?
You are always welcome to use my articles to ask questions, aida. We all are trying to learn.
Utility Investors Should Focus On ROIC, Not Dividend Yield - Part II S&P Utility Index [View article]
If you ever headline an article with the words "Forget Dividend Growth Investing." you will get lively conversation in your comment stream, that's for sure!
6 Lessons Learned From Up And Down Markets [View article]
Larry:
Great common-sense advice based on personal experiences. I love these kinds of articles because most of us can read them and say something like, "Yeah, I went through the same thing. I like how he handled it better than I did. Next time, I'll do better."
I, too, got involved in the dot-com bubble and wasn't as fortunate as you to escape WCOM with only a 65% loss! I rode it all the way to zero but years later did receive a lovely cash settlement of about 10 cents! Why do lessons learned always have to be so expensive?!?!
Anyway, I also have been squirreling away cash lately, and I don't think I'll regret it at all. I'm not bailing from the stocks I own and, in fact, am adding a little here and a little there to companies I especially value. But I am going to be ready for the next fall, doggone it!
My 5 Points For Managing My Retirement Investing Behavior [View article]
Eddie:
Three things:
1. I really like your writing style. Easy to read, well organized, filled with useful facts while avoiding important stuff. It's a lost art. Well done.
2. You and I share so many stocks it's scary ... for you!
3. I REALLY need to learn how to use Excel. I love looking at other people's charts but I've struggled to use the program to create something I like. Maybe I'll take a class at the local community college or, better yet, just wait till I get together with my kids next!
Why I Bought Linn Energy 3 Months Ago And Still Like It [View article]
Nice piece, Avi.
I sold LNCO and LINE with slight profits after the first Barron's article. After doing a lot more reading and research, I realized that it was mostly a crock, so I bought back in to LNCO and BRY after the second Barron's article gave me another chance.
I'll probably buy a little more BRY soon. After the merger, that will complete my LNCO position. I have decided against buying LINE again because I decided to pass on the tax hassles; LNCO will be fine for my purposes.
Reliable, proven, diversified, decent yielding, great earnings history and the best kind of moat (an addictive product, which also could be classified as a bad moat for those addicted and not investing).
They are trying hard to make inroads in China, too; if that happens, the earnings potential is limitless.
And at the base of it all, basically an American corporation. Beautiful.
Dripping Works: A Real-World Example [View article]
Rose:
My pleasure. The cheapskate in me chose PG because its DRIP plan had zero costs and was very easy to use. Please be aware that, although I have had a nice run with PG, I am not advocating the purchase of that or any other particular company.
There are many others with good, no-cost DRIPs, too, most of which can be found here: http://bit.ly/194mKR9
Dripping Works: A Real-World Example [View article]
Contraria:
You touched on something important: If one invests in good companies and stays the course, one will be rewarded over the long term because the many winners will be able to overcome the one or two losers.
Of course, best we pick no losers at all ... easier said than done, right?
Dripping Works: A Real-World Example [View article]
kolpin:
Definitely a legitimate question.
I'm not worried about that ... yet. My portfolio is pretty diversified and will be moreso as I continue to accumulate and get closer to being fully invested.
Maybe one day, I'll change my thinking. But I still kind of like the idea of adding a little bit through dripping even to my biggest holdings every few months. After all, I let them become my biggest because I am confident in them.
That was a long way to say: Ask me again when I'm more fully invested!
Dripping Works: A Real-World Example [View article]
Thanks for adding an interesting comment to the discussion. I like the idea of "pyramidding" - if it wasn't a word before, it is now!
Dripping takes a lot of the emotion out of stock-buying decisions, too, another reason I like it. I overthink enough crud already!
Mike
My 5 Points For Managing My Retirement Investing Behavior [View article]
This professional writer just noticed a typo in my comment above. I meant to say you avoid UNimportant stuff. Pretty big difference.
Today's writing tip: In general, "un" is a very poor two-letter combination to inadvertently omit!!! D'oh!
Keep up the good work.
Mike
Dripping Works: A Real-World Example [View article]
1. I drip everything. I only own three stocks in taxable accounts but they are three of my largest positions. I also drip within my IRA and Roth IRA.
I was fortunate to have had a couple of substantial rollover IRAs, so that did help, but my wife and I also have six-figure Roth IRAs from years of making the max investments, dripping divvies and never selling anything within them. So it is possible to accumulate decent-sized IRAs, it just takes time, like so many things in life!
Of course, I'd rather not pay taxes at all! But it really doesn't "bother" me to pay taxes on dividends enough to make me not invest in dividend-paying companies. It's just part of the cost of investing, like commissions and aspirin! I'd love to make so doggone much in dividends that they put me in a different tax bracket ... I like to think I'd consider it a very nice problem to have.
I will tell you that my wife and I are at least considering selling some of the stock we hold in taxable accounts and using that money to buy investment real estate. We might never go through with that, but if we do, I almost surely would use some of the cash I've been harvesting in our IRAs to buy those same companies again.
2. Regarding kolpin and AgAu using terms like "fully weighted position," "equal-sized portions" and "too big positions," maybe they'll weigh in. Until they do, though, I'll give you my read on what they mean.
Say an investor has a portfolio of 20 stocks. He must decide if he wants each of the 20 to be worth the same amount of money or if he wants what he considers his "best" stocks to have more prominent values. Two of my favorite Seeking Alpha contributors, chowder and Bob Wells divide their money equally among the stocks they own. (Just as you say in your example - $8k for each of 10 stocks.) I believe AgAu does this, too. Many other investors will assign higher values to their favorite (or "core") stocks. For example, MCD, KO and JNJ might each be worth 10% of their portfolios while BP, LO and GSK make up only 5% of their portfolios and three other stocks make up only 3%.
By "fully weighted," I believe kolpin is saying that he only wants his portfolio to have a certain percentage (or dollar value) in any one holding. Once a stock reaches that value, he doesn't want to own any more of it and so he stops reinvesting his dividends back into those fully weighted stocks.
When AgAu says "too big," I believe he also is saying he owns as much of a certain company as he wants to own.
For what it's worth, I consider my positions in PG, WAG, MMM, PM, RDS.A, O, WM, GE and LNCO to be "full," and I have no intention to use any of my available cash to buy more. However, I plan to hold those companies for a long time - maybe even forever - so I don't mind acquiring a few new shares of each every quarter through dripping.
As you can see, there are a lot of ways to initiate and build portfolios, and a lot of ways to deploy dividends. The "right" way is the one each investor finds most comfortable and sticks with!
3. I need to learn how to use spreadsheets better, so I definitely am not the right person to answer this question. Anybody else?
You are always welcome to use my articles to ask questions, aida. We all are trying to learn.
Mike
Utility Investors Should Focus On ROIC, Not Dividend Yield - Part II S&P Utility Index [View article]
6 Lessons Learned From Up And Down Markets [View article]
Great common-sense advice based on personal experiences. I love these kinds of articles because most of us can read them and say something like, "Yeah, I went through the same thing. I like how he handled it better than I did. Next time, I'll do better."
I, too, got involved in the dot-com bubble and wasn't as fortunate as you to escape WCOM with only a 65% loss! I rode it all the way to zero but years later did receive a lovely cash settlement of about 10 cents! Why do lessons learned always have to be so expensive?!?!
Anyway, I also have been squirreling away cash lately, and I don't think I'll regret it at all. I'm not bailing from the stocks I own and, in fact, am adding a little here and a little there to companies I especially value. But I am going to be ready for the next fall, doggone it!
Mike
My 5 Points For Managing My Retirement Investing Behavior [View article]
Three things:
1. I really like your writing style. Easy to read, well organized, filled with useful facts while avoiding important stuff. It's a lost art. Well done.
2. You and I share so many stocks it's scary ... for you!
3. I REALLY need to learn how to use Excel. I love looking at other people's charts but I've struggled to use the program to create something I like. Maybe I'll take a class at the local community college or, better yet, just wait till I get together with my kids next!
Anyhoo, great job, as always.
Mike
Why I Bought Linn Energy 3 Months Ago And Still Like It [View article]
I sold LNCO and LINE with slight profits after the first Barron's article. After doing a lot more reading and research, I realized that it was mostly a crock, so I bought back in to LNCO and BRY after the second Barron's article gave me another chance.
I'll probably buy a little more BRY soon. After the merger, that will complete my LNCO position. I have decided against buying LINE again because I decided to pass on the tax hassles; LNCO will be fine for my purposes.
Your Portfolio Can Be All American [View article]
My single favorite international stock is PM.
Reliable, proven, diversified, decent yielding, great earnings history and the best kind of moat (an addictive product, which also could be classified as a bad moat for those addicted and not investing).
They are trying hard to make inroads in China, too; if that happens, the earnings potential is limitless.
And at the base of it all, basically an American corporation. Beautiful.
Dripping Works: A Real-World Example [View article]
My pleasure. The cheapskate in me chose PG because its DRIP plan had zero costs and was very easy to use. Please be aware that, although I have had a nice run with PG, I am not advocating the purchase of that or any other particular company.
There are many others with good, no-cost DRIPs, too, most of which can be found here: http://bit.ly/194mKR9
Enjoy the ride!
Mike
Dripping Works: A Real-World Example [View article]
You touched on something important: If one invests in good companies and stays the course, one will be rewarded over the long term because the many winners will be able to overcome the one or two losers.
Of course, best we pick no losers at all ... easier said than done, right?
Mike
Dripping Works: A Real-World Example [View article]
Definitely a legitimate question.
I'm not worried about that ... yet. My portfolio is pretty diversified and will be moreso as I continue to accumulate and get closer to being fully invested.
Maybe one day, I'll change my thinking. But I still kind of like the idea of adding a little bit through dripping even to my biggest holdings every few months. After all, I let them become my biggest because I am confident in them.
That was a long way to say: Ask me again when I'm more fully invested!
Mike
Dripping Works: A Real-World Example [View article]
In after-market trading, PG gained back the 93 cents per share it lost during regular trading.
I'm rich again!
Dripping Works: A Real-World Example [View article]
You sound just like me. I'm grateful I stumbled across DGI here on Seeking Alpha and wish I had done so years earlier!
Mike
Dripping Works: A Real-World Example [View article]
Can't argue with that ... as long as one has $1,000 lying around ready to be invested.
Mike
Dripping Works: A Real-World Example [View article]
As I like to say on the golf course: Luck is better than skill.
Wait a second ... on the golf course, I have precious little of both!!!!
Mike