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I'm a long-time arm-chair market-watcher that decided to get into the game. As an observer with a heart and knack for analysis, my investment philosophy is that of outrunning the lion chasing the herd. Just stay ahead of the last guy in the group, and you probably won't get eaten. I'm not out... More
  • Nothing Fancy Yields Education Savings Account 40% Gain In 6 Months 0 comments
    May 20, 2013 2:56 AM

    I don't afford wasting money on things, especially if I have something that works already. I pay attention to tax-free opportunities for managing finances. I don't play the lottery. Like the bulk of people I know, I'm a retail banking customer.

    I like my bank because I have an ESA wrapped around a brokerage account. It's a real brokerage account, but tax free, with no fees for trading. Everything else my bank has is probably about the same as any other bank.

    When I first had the account set up, I figured that I would be trading the ING see-saw, the spectacle of the solar industry and the TZA/FAZ/TECS Neapolitan of Bear-dom.

    The ING see-saw

    I could have traded more, but it didn't work out that way. Working stiffs don't have tons of extra time. I had noticed a pattern in NRF, and managed to ride the post-August pops of 2010 & 2011. The rise was about 25% in +/- 6 weeks two years in a row, in roughly the same time frame. REITs can be risky, though, and I felt uncomfortable following in my own footsteps with a college fund.

    If the tax implications aren't a consideration (ESAs are tax free), why not a mix of more attractive dividend payers? Fire and forget would be my strategy.

    For my first riskier dividend pick, I bought a dip in MSB, which promptly kept dipping. The more I read about it, the more I wanted to get away from MSB, and realized I did not understand this type of security.

    I had counterweighted with a preferred-stock spider which has paid a nice, boring 5-6%, which is still cranking out once a quarter. The other two picks in the dividend pool were MCGC and FNFG.

    Any time a company gives the slightest whiff of a dividend coming down, markets pummel the common stock. So when MCGC had it's run-up before the 2nd $.125 declaration in early March 2013, I took the opportunity to get out with a solid gain.

    That leaves FNFG.

    This was my least favorite pick. Any time there is a big acquisition (FNFG bought a bunch of HSBC branches in May 2012), I wait to see what happens. As with a whittling down of a dividend to manage cash, if there is the slightest whiff of integration problems post-merger, markets hammer common stock. This is what happened when HOOK became BREW (Widmer and Red Hook getting together) and someone figured out that the road was a little bumpy.

    FNFG steady as she goes

    I kept FNFG on a potential-upside with low-beta watchlist. The stock price hadn't imploded a few months after, so I decided to get in, even though the dividend was pretty paltry compared to other types of dividend stocks. I bought the post-distribution dip in November 2012. There was nothing fancy about my strategy. I was simply patient.

    I've thought about getting rid of it a few times. Maybe putting the money somewhere more exciting, or with greater potential. Then I look at the return of 42% with no load, and start thinking about my options. If I let my bank manage it for me, the return is about 4% net. I like my bank, but not that much.

    I'll take my nothing fancy 40%+ for now.

    Disclosure: I am long FNFG.

    Additional disclosure: Like my post says, I'm not a broker or investment adviser. I don't recommend making the same mistakes that I do by taking any of this as investing advice. But if you have children, note that the price of college is growing more than the rate bank-managed ESAs are returning.

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