This is the second monthly update for my Green Dot Portfolio. I introduced my approach to this mixed-asset, dynamic portfolio with a swing trading twist in my Part 1 article and provided a detailed list of the 78 holdings and their full names (as of November 10) in my Part 2 article. As well, I have provided weekly updates for followers of my Green Dot Portfolio via SA Instablogs, including detailed charts, technical notes, and trade logs for swing trades.
Overall, I'm pleased with the progress to date for my portfolio. Swing trades have been very good, I'm collecting increasing income from dividends, and I've increased my total investment in the portfolio. By the end of December, the current unrealized market value of my 69 holdings is down by -1.98%, but about 43% of that loss is due to only 1 stock, General Electric (NYSE:GE). Overall portfolio yield is increasing to 6.54%. Realized income from swing trades and dividends has exceeded 1% for each month in November and December, a rate at which will comfortably exceed my annual portfolio goal of 8%+.
I remain convinced that having multiple asset classes and lowering the average unit costs of holdings through incremental purchasing is the right prescription for the success of my growth and income portfolio.
What Lies Ahead for 2018?
Looking at a monthly chart of the SPY, this bull market has had a great run-up. While the uptrend began in Spring 2009, it's always good to remember that it took over 5 years for the markets to regain the levels in late 2007 before the recession. 2013 and 2014 were solid years, and 2015 and 2016 were relatively flat. 2017 continued the clearly steeper uptrend that began in the early part of 2016. The markets are in uncharted territory now as 2018 begins. The last two weeks of 2017 were fairly flat. I think that we will see more volatility and perhaps a moderate pullback sometime in 2018.
(Source: Screenshot created by author from Scottrade.com Elite platform)
Given the steepened price curve in 2017, it's easy to think that the markets will continue to run on assumptions of an improving economy, "synchronized global recovery," and other such bullish sentiment. It's just as easy to think that the markets are extended, valuations are unsustainable, and greed and bubbles are once again among us.
My challenge going forward is to continue to find profitable investments at a reasonable price, continuing to use a long-only approach. While I am still trying to build the Green Dot Portfolio for the long run, it is difficult for me to buy stocks at the high prices that I see for many of them. So I will continue to be cautious, to buy where I see a "sale," and to take profits along the way to lock in gains. I will continue to leverage into positions that are not as low in price as I would like to pay, buying smaller positions and adding on larger dips. In the long run, the small additional trading costs (I get a relatively low price as an active trader) are more than covered through the lower average unit costs of my holdings.
Changes to Asset Classes of the Green Dot Portfolio
As a dynamic portfolio, Green Dot holdings change due to both new additions to the mix of securities as well as positions that I sell. Sells are mostly opportunistic swing trades wherein I take decent, short-term profits due to accelerated price action of a stock.
The sections below describe in detail the changes made to the portfolio in December, starting here first with an overview of changes in asset allocation. Highlights of portfolio changes in December are as follows:
- The overall cost of current investments increased slightly (0.55%) to $79,586.85.
- The total number of current shares increased by 9.7% to 4,530, but despite that the number of holdings decreased from 75 to 69 (-8%).
- The overall unweighted average yield of current investments increased slightly, from 6.35% to 6.54%.
- CEFs increased again, to 38.6% of the portfolio, continuing as the dominant asset class. REITs also increased since November to 28.5%, continuing as the second-largest asset class in the portfolio.
- Preferred stocks and preferred ETFs remained relatively constant at 17.2% of the portfolio, and stock holdings declined from 26.5% to 15.7% of portfolio investment due to the 8 swing trades in December.
|Asset Type||Date||# Holdings||# Shares||$ Cost||% of Portfolio||Div. Yield|
|Pref. ETFs||Oct 17||4||274||4,485.40||6.02%||5.74%|
Positions Sold - Swing Trades
Since August, I have been most fortunate to close 22 consecutive profitable swing trades, with a total purchase cost of $18,205.11 and total proceeds of $19,552.50. The $1,443.12 in profits included $95.73 from dividends. The profits on these investments averaged +7.93% for an average of 35 trading days, which translates to an annualized return of +56.85%.
In my November portfolio update, I provided a summary of the 9 stocks that I sold that month. As followers of my Green Dot Portfolio know, I have been including additional details about those trades - charts and some technical notes - in my weekly SA Instablogs that followers receive.
In December I completed 8 swing trades, including Williams-Sonoma (NYSE:WSM), Apple Hospitality REIT (NYSE:APLE), Molson Coors Brewing (NYSE:TAP), AT&T (NYSE:T), Archer Daniels Midland (NYSE:ADM), Proctor & Gamble (NYSE:PG), VelocityShares 3x Long Silver ETN (NASDAQ:USLV), and CenturyLink (NYSE:CTL).
The table below summarizes the 8 stocks I sold in December. Profits totaled $492.79 (including dividends), a +6.37% gain for an average of 31 trading days (+51.58% annualized). As all positions were entered before December, readers can refer to the November portfolio update for the buy dates if that is of interest. Commissions are included in the trade costs, and gains include a total of $47.74 in dividends ($18.00 for APLE, $5.44 for ADM, and $24.30 for CTL). The dividends are included in the profit percentage calculations below.
|Symbol||Qty.||Sell Date||$ Buy Price||$ Sell Price||$ Tot Cost||$ Tot Sell||$ Gain /Loss||% G/L||Days in Trade|
As I have emphasized before, investors might want to consider the boost that some well-placed swing trades can add to a portfolio. The profits help me grow my portfolio faster than from dividends alone over these short periods of time. I will continue to use swing trade profits to add to other existing positions and to buy new stocks at a larger position size. For all of these trades, although I sold them, I may consider buying them again if I think the conditions are right for making profits, while collecting dividends along the way.
I bought 2 new positions - a CEF and a REIT - in my Green Dot Portfolio in December:
- AllianceBernstein Global High Income Fund (NYSE:AWF), +6.57% distribution rate and a -8.47% discount to NAV (data as of 12/29). I bought 100 shares on 12/1 at $12.59/share.
- PowerShares KBW Premium Yield Equity REIT Portfolio ETF (NASDAQ:KBWY), +7.07% yield (data as of 11/30). I bought 25 shares on 12/12 at $35.695/share.
Additions to Existing Holdings
In December, I added shares to my existing positions in 2 REITs and 5 CEFs:
- Colony NorthStar, Inc. (CLNS)
- DoubleLine Income Solutions Fund (NYSE:DSL)
- Aberdeen Asia-Pacific Income Fund (NYSEMKT:FAX)
- Prudential Short Duration High Yield Fund (NYSE:ISD)
- LTC Properties Inc. (NYSE:LTC)
- MFS Intermediate Income Trust (NYSE:MIN)
- Morgan Stanley Emerging Markets Debt Fund (NYSE:MSD)
These positions were mostly added to take advantage of lower share prices and to increase the size of these previously underweighted portfolio holdings. The table below provides details on the dates, unit costs, quantities purchased, and the new total number of shares for these holdings.
|Symbol||Type||Qty.||New Total Qty.||Buy Date||Price|
My Green Dot Portfolio, as a growth and income retirement investment, is designed in large part to provide income via payout of dividends. As expected, payouts from the portfolio are growing as the number of shares and positions grows, as well as due to any increase in the distribution rate from holdings.
As the table below shows, the total income from dividends continues to increase, with $401.01 collected in December and a total of $954.37 since positions for the portfolio began to be purchased in August. All dividends are included for the month for which the payment is received in my account, not when the dividends are declared.
|Month/Yr.||# Payments||$ Total Dividends|
|Aug 2017||2||$ 24.39|
|Sep 2017||9||$ 75.28|
|Oct 2017||19||$ 148.94|
|Nov 2017||37||$ 305.75|
|Dec 2017 ||48||$ 401.01|
I'm also interested in following the relative contribution of dividends from the mix of asset classes in my portfolio. Given that REITs and CEFs generally pay the highest yields and represent the largest percentage of my portfolio, the majority of payments come from these two asset classes, as expected. CEFs were the largest contribution to December's dividends, at 50.6%, and they have contributed about 35% of all dividends to date in the portfolio. CEFs are more likely to pay monthly dividends than other asset classes. REITs have contributed 30.3% of all dividends to date.
|Asset Type||Preferreds||Pref ETFs||REITs||CEFs||Stocks||Total|
|Aug||$ -||$ 0.41||$ 23.98||$ -||$ -||$ 24.39|
|Sep||$ 10.47||$ 15.92||$ 37.56||$ -||$ 11.33||$ 75.28|
|Oct||$ 12.42||$ 21.51||$ 72.16||$ 19.18||$ 23.67||$ 148.94|
|Nov||$ -||$ 24.00||$ 100.52||$ 111.61||$ 69.62||$ 305.75|
|Dec||$ 64.10||$ 26.07||$ 54.88||$ 202.64||$ 52.32||$ 400.01|
|Total||$ 86.99||$ 87.91||$ 289.10||$ 333.43||$ 156.94||$ 954.37|
|% of Total||9.1%||9.2%||30.3%||34.9%||16.4%|
In December, 13 holdings paid >$10 in dividends, for a total of $207.88, or 52% of total dividends for the month. Most of these were CEFs ($88.52) and preferred stocks ($55.51), which typically pay on a quarterly basis.
|Symbol ||Dividend ||Type|
My current dividend reinvestment occurs generally on the 22nd of the month, so it is not aligned perfectly with calendar months. In December, dividends from all holdings in the portfolio were used to purchase 22 shares of CLNS at $11.775/share. I continue my strategy each month to use accumulated dividends to purchase shares in holdings that are under-represented in the portfolio (number of shares) or trading at that time at relatively low price per share. My online broker does not charge a trade commission for purchases through dividend reinvestment.
As a growth and income portfolio, Green Dot generates income each month through dividends and profits from swing trades. These are realized gains, or money that is available for additional investment. I want to start tracking this so that I can gauge progress toward my goal of an 8%+ annualized gain for the portfolio. Although I started buying holdings for the portfolio in August, Green Dot became more fully established by mid-November, so I'll use the month as a beginning.
The table below shows the total investment in the Green Dot Portfolio for each month, the total dividends collected, and the total profits from swing trades. In order to avoid double counting, I subtract dividends from swing trades collected each month. There may be a case or two along the way where a dividend is received in a month but the underlying equity was sold late in the previous month. While this may introduce a bit of a month-to-month inaccuracy, it should be small and will be treated the same each month.
|Month||$ Cost||$ Swing Profits||$ Dividends Received||$ Total Income||% on Investment|
As presented in the table, total return on investment grew slightly from November (+1.03%) to December (+1.06%). Swing trades provided a greater share of profits overall (57.4%), but more income was received from dividends in December than in November. While this is a small beginning, at a monthly average of 1.045%, my Green Dot Portfolio will yield +12.54% annualized if I can maintain the recent level of return on investment.
The net market value of my overall portfolio declined an additional -0.2% since November, to -1.95% as of the market close on December 29. The absolute dollar decline was an additional $176.57. On a relative basis since November, REITs and CEFs improved in performance, while stocks declined the most. The table below compares the unrealized gain/loss of the Green Dot Portfolio by asset class for November and December. Note that this does not include dividends and profits from swing trades, and that the investment is not the same between the two months for all asset classes (except preferred stocks and preferred ETFs).
|Asset Type||$ Cost||$ Value 12/29||$ Gain/Loss||% G/L|
|Pref. ETFs||Nov 17||5,232.95||5,168.52||(64.43)||-1.23%|
While my unrealized gain/loss is currently negative, I've added profits from swing trades (+$445.05 without dividends) and dividends (+$401.01). And I've also used part of my cash reserve to expand holdings. The overall portfolio is currently yielding >6.5%. So while any loss is undesirable, I am actually not overly concerned.
Here are the "Good News, Bad News" highlights of the market value only (no dividends) of my portfolio at the end of December:
- The leading 32 of my 69 holdings (46.4%) were profitable for a total gain of +632.03, an average of +2.13%, or $19.75, per holding. This is not much changed from November, for which the leading 35 of 75 holdings (46.7%) were profitable for a total gain of +$638.96, an average of +2.17%, or $18.26, per holding.
- The next 17 holdings (24.6%) were down a total of -$206.46, an average loss of -0.94%, or -$12.14, per holding.
- Only 2 holdings are down at my typical comfort level of -8%, where I would consider moving out of a position. Another (CLNS) is down a bit more at -8.05%.
- GE remains the mega-loser of the portfolio, at a current unrealized loss of -$666.61 (-27%), and it accounts for a full 43% of total portfolio unrealized losses. MHLA, a preferred stock, is down 11.3%, but it's a small position with an $88 loss to date, and it's paying dividends at 7.2%. At this time, I plan to continue to hold all of these positions.
Below is a summary table of the 69 holdings in my Green Dot Portfolio as of December 29. Again, full names of holdings as of mid-November were included in my Part 2 article introducing the portfolio, and new additions were described in my weekly position update blogs.
The portfolio remains fairly diversified regarding asset types and number of holdings. This was by design, as I consider that diversification is a simple tool to reduce risk.
|Symbol||Qty.||$ Avg Unit Cost||$ Unit Value||% Gain /Loss||% Div Yield||% Portfolio|
I have received some good comments from readers about my portfolio. The biggest concern is that some think that I have over-diversified and that my small positions are a disadvantage. As I am not doing options trading at this stage of my portfolio's development, as I have stated from the start, having small positions and "odd lots" is irrelevant. A second concern is that I am paying extra commissions for adding to shares. As I have also said, I am only adding a few dollars for each additional purchase due to my commission discount as an active trader (and there is only one sell commission regardless of share size), and that cost is more than covered by the continuing reduction in the average unit cost of my holdings. I have added to 25 positions currently in the portfolio.
That said, my Green Dot Portfolio continues to increase in terms that some would consider a preferable way to invest. (My comment still stands that I will gladly increase the size of my holdings 10-fold if someone sends me a check for $750,000!). Changes to date include:
- 26 holdings (37.7%) now represent >$1,000 investment, and the average investment holding across all 69 is >$1,150.
- 34 holdings include at least 50 shares, and 17 holdings now include 100 or more shares. The average number of shares across all 69 holdings is 65 shares.
- The average percentage of the overall portfolio size of my holdings has increased from 1.33% to 1.45%.
As I said last month, establishing a new growth and income portfolio in the second half of 2017 was certainly a challenge given the continuing uptrend in equity markets. I am constantly researching and searching for quality investments that are in the lower portion of their recent multi-year trading ranges. My strategy is to collect real income through swing trades and dividend stocks, as well as to capture the potential for above-average price appreciation for longer-term holdings.
I will see if my strategy and trading tactics continue to serve me well in the coming months. Until then, I'm wishing everyone a profitable 2018!
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I have appreciated the comments from readers in the Seeking Alpha community, and I look forward to continuing to share my investing experience and to learn from others. Best to your investing!
Disclosure: I am/we are long AES, ALLPD, AWF, BGX, BKH, BRX, BXMT, CLNS, COFPD, CPJ, CTAA, CXE, D, DFP, DOC, DSL, EDD, EMD, EPR, ETP, EVV, FAX, FEO, FLC, FRCPG, GDVPG, GE, GOV, HASI, HPS, HPT, ISD, JPS, K, KBWY, KHC, KIO, LADR, LTC, MDT, MHLA, MIC, MIN, MPW, MRCC, MRK, MSD, MSPE, NHI, NVG, O, OHI, PCI, PFXF, PGF, PGX, RA, RFI, ROIC, RQI, SKT, SPFF, SPGPJ, UNIT, UTF, UTG, VGM, WFCPW, WFCPX.
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.