One additional reason to consider selling (for some) would be a significant change in management approach. This is kinda-sorta a fundamental change but it is very important that the company's management hasn't decided that it has NEW goals which drive their decisions to the detriment of a DGI shareholder.
One recent example of this was CTL. Their management basically decided it was more important to buy back shares than continue paying dividends to the shareholders. In fact they cut the dividend at the same time they 'announced' the change so that was another trigger to sell.
Still, it's possible that other management teams at other companies might decide that the old ways are out and that might be reason enough to consider selling a holding.
Congrats on reshaping your portfolio into a DGI based one. I think you'll find TGH will be a keeper if you can get it at a good price. My net cost was around 31 and it's been a good little doggie yielding a bit over 5.9% for me. Their management really seems to be on top of things.
The Portfolio For Do It Yourselfers: Our Strategy Moving Forward [View article]
Great update Dave. As always I enjoy seeing each of the real-time DG portfolios updated to see how things are going. Between you, Chowder, Bob, and DVK it is rapidly becoming apparent that DGI works (and it often outperforms "the market" as represented by SPY).
My own practice DGI portfolio is nearing the 2 1/2 year mark since I started it. I'm now up to 26 stocks and doing well despite a few stumbles along the way (CTL chief among them). My income is up over 40% from the first year's pace, though some of that is adding new stocks along the way.
My experience parallels that of the publicly posted portfolioss. The time it takes to keep an eye on them is minimal. I've finally gotten to the point where my chief regret is not having enough cash available when prices drop.
A Million Dollar Portfolio: Easier Than You Might Think [View instapost]
You can lower your annual contributions to $3,325.00 and still make it to a cool $1 million under the conditions given in the article.
That's about $277.00 per month of savings.
Dave's exercise is a good way to set up a predicted set of goals to compare your actual results against along the way. Year by year you can see if you are on schedule, or even ahead if you're lucky.
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
"I ignored the stocks those cutting dividend for at least 2 quarters just because I always "hope" they will be strong again. Yeah, as Chowder "screams" to me "...hoping they will bounce back up....It's crazy thinking." I refuse to be a crazy person. So, I will take action." - Smallstep
That is the beauty of putting together a written plan. All the thinking is done at a time when you don't have a pressing decision to make. You get to take time to figure out how you want to handle a situation, then write it down in "The Rules".
Once "The Rules" are written, you simply do what they say. If you are uncomfortable with that, you can simply 'blame' The Rules (as though someone else had written them and it's not your fault).
Always follow The Rules!
If after some time passes you feel that The Rules are inadequate, you can sit down and think about changing them based on new knowledge, or different objectives, but only when you're not under the gun to decide what stock to buy or sell, or otherwise in the heat of the moment. Changes to The Rules should be considered dispassionately and rationally.
In theory, breaking The Rules should never happen (though it sometimes does).
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
"Which day is International Harp Day?" - Robert
I don't know if Harpists are as organized at Tubists, but there was an International Harp Festival which started on April 6, 2013 in Edinburgh Scottland.
Judging by your question I would guess you didn't offer to take your wife there. Maybe next year...
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
fludolph,
If you haven't already, you should real Chowder's instablogs. All of them. You will learn a great deal of useful information from a very sharp investor.
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
"What the heck, let's throw this comment stream off topic to tUbA pLaYiNg!" - Hilo
Spoken like someone who may never have witnessed the ubiquitous 'end-of-the-world' SPAM dialogues in the DG section of SA. Every now and then we like to have some fun too. :-)
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
Robert,
Regardless of the eventual outcome of the IBM / KMB trades, this has been a "good" trade.
1) You have learned that everyone can fall prey to impulsive actions at times and you have had the opportunity to learn from it without significant negative impact (other than thepain of a ruler across the wrists from Chowder).
2) You have learned a few alternate ways to structure such a trade in the future.
3) You have learned that perhaps you need to revisit your investing plan and consider making some subtle changes.
4) You are a lot less likely to make this mistake again, at a time when it might wind up costing you a great deal of money.
Nobody's perfect. We all stray from the intended investing path. Learn and move forward. That's all you can hope for.
For those reasons, even if your trade turns out to be less than optimal it has still been a "good" trade. The value of the knowledge you gained will outweigh any potential loss in economic opportunity you suffered. Next time will be a different story.
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
Nice review Robert. You raise an interesting situation that most DGI'ers will eventually encounter. What to do with an overvalued stock?
One area you didn't discuss was the potential for reducing your risk by selling and redeploying to multiple stocks. A possible alternative would be to sell your KMB (at 170% or 1.7x a 'full' position) and use the proceeds to buy three roughly half-sized positions in different stocks.
This 3-for-1 swap would further reduce the risk to your income stream by having more stocks, possibly in different segments of the market. Since the new positions would only be half-sized, you could add shares later on when they offered better valuations.
By beginning several smaller sized positions you might be willing to take a risk on less comfortable stocks like an mREIT or MLP and give your portfolio yield a little bit of a boost too, sort of with house money.
Just thinkin' out loud. There's always a different way to skin a cat if you consider the problem long enough.
Guaranteed Retirement Accounts: Good Idea Or Not? [View instapost]
"In 2007, an organization called The Economic Policy Institute issued a policy paper, ... titled: "Guaranteed Retirement Accounts: Toward Retirement Income Security. "
Title translation into layman's terms:
"How to get habitual savers to pay for the retirement of habitual squanderers."
Naturally not every so-called "poor" person is a squanderer. Some wind up there through no fault of their own and probably deserve a hand with necessary expenses (think widows, orphans, and those who suffer debilitating injuries or illnesses). Most likely this could be paid for by family members or via charitable contributions from those who have more than enough for their own needs, as it was throughout history.
However those who chose spending over savings when they had an option deserve to learn why squandering was a bad choice. Any expectation of a comfortable retirement on their part deserves little consideration on the part of savers.
Unfortunately a squanderer's vote counts every bit as much as a saver's vote and as we have seen in recent history, the people voted into office frequently cater to the squanderers at the expense of the savers, until the entire system implodes of its own weight.
There is no magic pixie-dust which pays for things we cannot afford the old-fashioned way, depite claims to the contrary by most of our elected officials. One day our country as a whole will regret the debt run up in our name by those elected to office.
Guaranteed Retirement Accounts: Good Idea Or Not? [View instapost]
"Certainly an investment council like Oregon's could do better than US Treasuries." - rnsmth
The eventual problem with any required Federal Government retirement system is that they WILL be investing most of your retirement money in special non-marketable Treasury issues, just like they do for Social Security.
Of course the "non-marketable Treasury issues" are really just IOUs. Your 'investment' money goes into the general fund and gets spent immediately, just like Social Security money does today. This is the only way the Feds can maintain the illusion of reducing the deficit, by 'investing' your retirement savings in nice, safe "bonds". Spending all the Social Security receipts isn't doing the trick any more, so they need another source of funding, and your retirement savings are now in their cross-hairs.
Guaranteed Retirement Accounts: Good Idea Or Not? [View instapost]
"It concerns me that someone who is called a "high earner", that is someone who makes $60,000 a year would get less in retirement under this plan than someone who makes $40,000 a year." - Dave Crosetti
The high earner will still have a larger total income, just a smaller percentage of pre-retirement income.
61% of $60,000 = $36,600 71% of $40,000 = $28,400 89% of $20,000 = $17,800
The truly sad part is that by saving $250 per month (5% of $60,000 pay), and investing it at a 7.5% CAGR (very do-able with DGI), the worker could accumulate more than enough money to pay dividends of $39,000 annually (at a 4% yield), without the need to also pay government "fund managers" to administer the program.
What an incredibly bad plan a government administered savings program would be.
Is Now The Time To Sell? [View article]
One additional reason to consider selling (for some) would be a significant change in management approach. This is kinda-sorta a fundamental change but it is very important that the company's management hasn't decided that it has NEW goals which drive their decisions to the detriment of a DGI shareholder.
One recent example of this was CTL. Their management basically decided it was more important to buy back shares than continue paying dividends to the shareholders. In fact they cut the dividend at the same time they 'announced' the change so that was another trigger to sell.
Still, it's possible that other management teams at other companies might decide that the old ways are out and that might be reason enough to consider selling a holding.
Congrats on reshaping your portfolio into a DGI based one. I think you'll find TGH will be a keeper if you can get it at a good price. My net cost was around 31 and it's been a good little doggie yielding a bit over 5.9% for me. Their management really seems to be on top of things.
The Portfolio For Do It Yourselfers: Our Strategy Moving Forward [View article]
My own practice DGI portfolio is nearing the 2 1/2 year mark since I started it. I'm now up to 26 stocks and doing well despite a few stumbles along the way (CTL chief among them). My income is up over 40% from the first year's pace, though some of that is adding new stocks along the way.
My experience parallels that of the publicly posted portfolioss. The time it takes to keep an eye on them is minimal. I've finally gotten to the point where my chief regret is not having enough cash available when prices drop.
That gets really annoying sometimes. Ha!
A Million Dollar Portfolio: Easier Than You Might Think [View instapost]
That's about $277.00 per month of savings.
Dave's exercise is a good way to set up a predicted set of goals to compare your actual results against along the way. Year by year you can see if you are on schedule, or even ahead if you're lucky.
It's a great planning tool.
Is Apple A Tax Dodger? What About You? [View instapost]
I honestly think that the tax code should be a single number. What percent of your net income to send in ...
Eliminate every other loophole, and dividends should be counted as an expense (since they are taxed as income of the shareholder).
That's fair to everyone and incredibly simple to administer.
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
That is the beauty of putting together a written plan. All the thinking is done at a time when you don't have a pressing decision to make. You get to take time to figure out how you want to handle a situation, then write it down in "The Rules".
Once "The Rules" are written, you simply do what they say. If you are uncomfortable with that, you can simply 'blame' The Rules (as though someone else had written them and it's not your fault).
Always follow The Rules!
If after some time passes you feel that The Rules are inadequate, you can sit down and think about changing them based on new knowledge, or different objectives, but only when you're not under the gun to decide what stock to buy or sell, or otherwise in the heat of the moment. Changes to The Rules should be considered dispassionately and rationally.
In theory, breaking The Rules should never happen (though it sometimes does).
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
I recently picked up some TCAP. Worth a look.
Here is a recent article which reviews the business:
http://seekingalpha.co...
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
I don't know if Harpists are as organized at Tubists, but there was an International Harp Festival which started on April 6, 2013 in Edinburgh Scottland.
Judging by your question I would guess you didn't offer to take your wife there. Maybe next year...
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
If you haven't already, you should real Chowder's instablogs. All of them. You will learn a great deal of useful information from a very sharp investor.
http://bit.ly/14QwcIB
One of his instablogs addresses portfolio weightings specifically:
http://seekingalpha.co...
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
Spoken like someone who may never have witnessed the ubiquitous 'end-of-the-world' SPAM dialogues in the DG section of SA. Every now and then we like to have some fun too. :-)
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
Hah!! What a timely comment...
Friday May 3rd is International Tuba Day!
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
Regardless of the eventual outcome of the IBM / KMB trades, this has been a "good" trade.
1) You have learned that everyone can fall prey to impulsive actions at times and you have had the opportunity to learn from it without significant negative impact (other than thepain of a ruler across the wrists from Chowder).
2) You have learned a few alternate ways to structure such a trade in the future.
3) You have learned that perhaps you need to revisit your investing plan and consider making some subtle changes.
4) You are a lot less likely to make this mistake again, at a time when it might wind up costing you a great deal of money.
Nobody's perfect. We all stray from the intended investing path. Learn and move forward. That's all you can hope for.
For those reasons, even if your trade turns out to be less than optimal it has still been a "good" trade. The value of the knowledge you gained will outweigh any potential loss in economic opportunity you suffered. Next time will be a different story.
How Can One Trade Be Both Good For Me And Bad For Me? [View article]
One area you didn't discuss was the potential for reducing your risk by selling and redeploying to multiple stocks. A possible alternative would be to sell your KMB (at 170% or 1.7x a 'full' position) and use the proceeds to buy three roughly half-sized positions in different stocks.
This 3-for-1 swap would further reduce the risk to your income stream by having more stocks, possibly in different segments of the market. Since the new positions would only be half-sized, you could add shares later on when they offered better valuations.
By beginning several smaller sized positions you might be willing to take a risk on less comfortable stocks like an mREIT or MLP and give your portfolio yield a little bit of a boost too, sort of with house money.
Just thinkin' out loud. There's always a different way to skin a cat if you consider the problem long enough.
Guaranteed Retirement Accounts: Good Idea Or Not? [View instapost]
Title translation into layman's terms:
"How to get habitual savers to pay for the retirement of habitual squanderers."
Naturally not every so-called "poor" person is a squanderer. Some wind up there through no fault of their own and probably deserve a hand with necessary expenses (think widows, orphans, and those who suffer debilitating injuries or illnesses). Most likely this could be paid for by family members or via charitable contributions from those who have more than enough for their own needs, as it was throughout history.
However those who chose spending over savings when they had an option deserve to learn why squandering was a bad choice. Any expectation of a comfortable retirement on their part deserves little consideration on the part of savers.
Unfortunately a squanderer's vote counts every bit as much as a saver's vote and as we have seen in recent history, the people voted into office frequently cater to the squanderers at the expense of the savers, until the entire system implodes of its own weight.
There is no magic pixie-dust which pays for things we cannot afford the old-fashioned way, depite claims to the contrary by most of our elected officials. One day our country as a whole will regret the debt run up in our name by those elected to office.
Eventually the Piper must be paid.
Guaranteed Retirement Accounts: Good Idea Or Not? [View instapost]
The eventual problem with any required Federal Government retirement system is that they WILL be investing most of your retirement money in special non-marketable Treasury issues, just like they do for Social Security.
Of course the "non-marketable Treasury issues" are really just IOUs. Your 'investment' money goes into the general fund and gets spent immediately, just like Social Security money does today. This is the only way the Feds can maintain the illusion of reducing the deficit, by 'investing' your retirement savings in nice, safe "bonds". Spending all the Social Security receipts isn't doing the trick any more, so they need another source of funding, and your retirement savings are now in their cross-hairs.
Count on it.
Guaranteed Retirement Accounts: Good Idea Or Not? [View instapost]
The high earner will still have a larger total income, just a smaller percentage of pre-retirement income.
61% of $60,000 = $36,600
71% of $40,000 = $28,400
89% of $20,000 = $17,800
The truly sad part is that by saving $250 per month (5% of $60,000 pay), and investing it at a 7.5% CAGR (very do-able with DGI), the worker could accumulate more than enough money to pay dividends of $39,000 annually (at a 4% yield), without the need to also pay government "fund managers" to administer the program.
What an incredibly bad plan a government administered savings program would be.
But we already knew that....