Tag Archives: exchange traded funds

Which Portfolio Mix, Is Best For You?

Guest Article By Richard Brody 

When, it comes to investing, and/ or, personal financial planning, there is no such thing, as, one – size – fits – all! Depending on one’s age, needs, goals, priorities, risk tolerance, purposes, etc, the most appropriate strategy, may be determined, on a case – by – case, basis! Your total assets, liquid assets, income (from a variety of sources), job security, reserves, and personal, comfort zone/ level, are significant factors, to determine, the best path forward, for you, in terms of creating a personal, investment portfolio. With that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, which, mix, might make the most sense, for your specific combination, and set of conditions, and factors.

1. Risk tolerance: One of the first things to consider, is, your personal, risk tolerance. That means, in simple – terms, how might you balance, investing, and being able, to sleep, at night! Many people confuse terms, especially, when it comes to, mixing – up, the difference, between, growth, and income. How often have you heard, someone, declare, the growth – investments, they held, didn’t offer enough income, and/ or, income – focused investments don’t provide growth/ rising prices, etc? One must consider, how much risk, they are ready, willing, and/ or, able, to tolerate, and accept!

2. Goals/ objectives: Identify, clearly, your individual goals, and objectives, when considering your portfolio mix. Some goals, include: saving for a child’s education; creating a source, to purchase a future house; developing a retirement fund; etc. It makes sense, usually, to carefully, choose, the right mix of investments, for each objective. Achieving goals, generally, is easier/ simpler, when done, over a longer – period of time, so one might take advantage of the concept of Dollar Cost Averaging. This approach, often, minimizes overall – market risk, because, when purchases are made, at a specific point, every month, market fluctuation becomes far – less, relevant and significant!

3. Needs: We are individuals, and have our own needs! Avoid, trying to, Keep Up With The Joneses, because, what might make sense, for them, may not, for you, and what you need! Do you need, growth, present income, future income, or some combination, etc?

4. Small, versus, Large – Cap, equity: We often hear the terms, small – cap, versus, large – cap. This refers to the amount of capitalization, of the individual company, investment, or mutual fund. The value, and monetary stability, and strength of any company, may be a factor, in the safety, etc.

5. Bonds and Preferred Stock: Corporate bonds are debt, which companies use, to raise monies/ capital. Some are unsecured ones, but, generally, we consider, secured bonds (debentures), which are backed, by the finances of that company. Therefore, while, many consider, bonds, safe, that depends on, the quality of the specific company. Preferred stocks are generally, favored forms of equity, and pay a regular dividend. Most people, who invest in these two types of investments, seek consistent income. At this point – in – time, because of record – low, interest rates, existing bond prices, are high, because they were issued, when rates were higher, and the price of the bond, is adjusted, because, it determines the total yield.

The more you know, and understand, the better, you will determine the portfolio mix, which might, best serve your individual needs, goals, and priorities. Become a smarter investor!

Richard has owned businesses, been a COO, CEO, Director of Development, consultant, professionally run events, consulted to thousands, conducted personal development seminars, and was involved in financial planning, for 4 decades. Rich has written three books and thousands of articles. His company, PLAN2LEAD, LLC has an informative website http://plan2lead.net and Plan2lead can also be followed on Facebook http://facebook.com/Plan2lead

Article Source: https://EzineArticles.com/expert/Richard_Brody/492539

Article Source: http://EzineArticles.com/10348480

Modifying Your Investment Strategy

I’ve decide that it was time to modify my investment strategy. Not because it was wrong but because it wasn’t moving things along fast enough. Again, as I’ve stated before I have a timeline that is considerably shorter than the normal “rule of thumb” timeline of 30 years. My timeline is only 5 years, albeit a rolling 5 years. One cannot turn back the clock and try to redo the past so all we can do is work with what we have. My goal is still to stop working and live off of the dividends. To do so I have to have a extremely larger amount of money invested than I do presently. To this end I am putting any discretionary funds into investments.

I have outlined my strategy previous but now I’m going to be adding another point. And that is that I will be focusing on companies and funds that pay dividends on a monthly basis. Quarterly payouts are nice, but monthly is much better. If you are a believer in compound interest then you know what I am getting at. Why wait for the quarterly dividend in order to re-invest when you can re-invest the dividend on a monthly basis. All other criteria in my strategy still holds.

My focus will be Exchange Traded Funds (ETF). This will allow me to diversify and to minimize my risk. I get to own a little bit of everything instead of trying to own everything all at once. I also don’t have to keep a constant eye on the market value to determine when the stock no longer performs to meet my goals. Someone else does that. Yes, I’m willing to pay someone to do that…to a limit. I still have my criteria of not getting ETFs that charge over 0.6% in costs. There is a high yield ETF that has a dividend yield of 7.77%. Seems good. Except that the Expense Ratio is 1.25%. Morningstar rates the Risk as Above Average and rates the Returns as Low. So, I am not going to blindly invest just on a high dividend yield. I am not a great risk taker. Especially with an abbreviated timeline. I like my risks to be Average or Below. The returns should be rated Average or Above.

So, what caused me to tweak my strategy? I had viewed the video 5 Monthly HIGH Dividend ETFs (5%+) ETFs that Pay Monthly Dividends that I had posted on my blog previously. This video is put out by Learn To Invest. He does put out quite a few useful tutorial videos about investing. This one got me to thinking that his presentation of ETFs could help me accelerate my investment activity and thus increase my investment values at a higher pace.  So, I have to determine if I should liquidate all or some of my individual stocks and put the proceeds into ETFs or do I just invest my money solely into ETFs going forward from now on, leaving the individual stocks untouched.  

So, follow my blog to learn what I end up doing. Maybe you’ll get something out of this taht you can apply to your investment strategy.

When Do I Sell?

I haven’t been investing for that long of a time. I’ve acquired a few company stocks and ETF’s. But my sales have been few. Right now I’m looking for sell all of my Obalon (OBLN) stock because it is one of the first ones that I bought when I was first starting out. At that time I really didn’t have a clear idea of what I wanted to do. I didn’t have a strategy. I bought Obalon and and a couple of others because they were companies that were in the healthcare industry. That was it. None of them paid any dividends and there wasn’t any real growth with them.
After developing my own investment strategy I decided that the money I had invested in those companies could be better used with other investments. I sold the others at a bit of a profit but held Obalon because it was trading under what I paid for it. I decided to wait to see if the price would come back.

When I first started investing I opened an investment account with Robinhood. When I did that I received a free stock for Lyft. I decided to hold that one for a little while. When I was given that share of stock the price was around $42/share. It also wasn’t paying any dividends. I held that stock for a little while and the price dropped down to the low $30’s per share. The stock fluctuated in that neighborhood for a while. I finally decided to sell my share and put the money to better use.

Now I have developed my own investment strategy and I feel confident that I know more than I did when I first started. I now invest in dividend stocks. If a company doesn’t pay dividends then I don’t have a real interest in investing my money with them. Am I missing out on windfall returns? Maybe. But I’m also missing out on catastrophic losses. I’m at an age when I can ill afford to lose money because I don’t have as much time to recover from major losses. Also, if I am going to be investing in a company for the long term then I want to get paid for my time that I am waiting for the stock to grow, thus the dividend payout. The dividend payout is the company’s payment to me for being patient and sticking it out with them.

So, based on all of the above when do I sell my stock? I will only consider selling my stock when either of the two conditions below are met:
1. The company drastically cuts their dividend payout 2 times or more in a row.
2. The stock price increases 200%+.

So far I’ve been lucky in that none of my investments have had their dividend payouts cut. But I will tolerate 1 such payout cut but if they go to 2 in a row, they’re history.

My ETF Portfolio

I was glad to see that my Vanguard ETF portfolio grew in value. Even though I’m investing for the long term benefits, I just wanted to check and see what the funds were doing. I have another portfolio of individual stocks I am invested in but the ETF portfolio hold the most promise. My ETF portfolio currently holds the following ETFs:

  1. VDE – Vanguard Energy
  2. VNQ – Vanguard Real Estate
  3. VYM – Vanguard High Dividend Yield

Yes, they are all Vanguard funds. I have a preference for Vanguard. This is not to say any others one, like Fidelity, are worse but I just prefer Vanguard. Checking today’s market value and I find that the portfolio has increased by +3.07%. I won’t have a comparison with the S&P 500 or the NASDAQ Composite until the end of the day. I’ll be check back then.

I only started on my investment journey since the beginning of the year with ETFs and stocks. Last year I started my 401K with my employer. What’s in my 401K?

  1. VFIAX – Vanguard 500 Index Fund Admiral Shares

Now, I look at other factors with my funds to decide if I increase my position with any or all of them or look for another investment (except the VFIAX, which is automatically invested into).

  1. VDE is currently trading at $48.85. This toward the low end of its 52 week range. I may end up buying a couple of more shares of this fund. The expense ratio is high for my liking (0.10%) but the fund pays $2.74/share (a yield of 5.61%). VDE invests in giant-cap and large-cap U.S. energy stocks.
  2. VNQ is trading at $80.71 which is right in the mid-range of the 52 week range. This one is one that I’ll keep an eye on. I’m not overly happy with the expense ratio of 0.12% but the dividend paid is $3.11/share (a yield of 3.85%). Situations do change so this one will stay on HOLD.
  3. VYM is my pride & joy. I love this fund. Currently it’s trading at $82.47 and that puts it on the high side of its mid-range of the 52 week range. The dividend is $2.96/share (yield of 3.58%) and the expense ratio is a happy 0.06%. This is one that I may increase my position by a few shares.

I don’t have much to say about VFIAX because it is on auto-pilot within my 401K account. I am still fairly new to this investment process so I don’t have much on how I am doing on the amount of dividends I have been paid. Stay tuned for new updates as they develop.

VDE vs. QYLD

I’m always on the lookout for ETFs to add to my investment portfolio. I came across 2 that I thought were possible candidates. Because I have a limited amount of money to invest, I tend to limit myself to 1 stock investment during my investment period. Currently, my eye is on these 2. Both are consistent performers in term of dividends.

  1. VDE (Vanguard Energy ETF) – VDE tracks a market-cap-weighted index of US energy companies. The index includes those companies deemed investable by MSCI and covers 98% of the market. The fund invests in stocks of companies operating across energy sectors. It invests in growth and value stocks of companies across diversified market capitalization. This fund will allow me to diversify my portfolio to include energy stocks. As the name implied, this fund was created and managed by Vanguard (which I tend to prefer) back in 2004. Cost ratio is around .10%, which is a bit higher than I prefer. The fund is designated as an average risk (all investment entail a certain amount of risk, nothing is a sure thing). And lastly, the key factor to me is the dividend yield and dividend payout which is 5.69% and $2.74, respectively. The 5 year growth rate is a modest 4.73%. The current share price is $48.46. Which would not allow me to maximize my share ownership with my limited funds. $100 investment would only get me 2.06 shares. At the current dividend payout amount this would give me $5.65 in dividends.
  2. QYLD (Global X NASDAQ 100 Covered Call ETF) – The investment seeks to provide investment results that closely correspond, before fees and expenses, generally to the price and yield performance of the CBOE NASDAQ-100® BuyWrite V2 Index (the “underlying index”).The fund will invest at least 80% of its total assets in the securities of the underlying index. The CBOE NASDAQ-100® BuyWrite Index is a benchmark index that measures the performance of a theoretical portfolio that holds a portfolio of the stocks included in the NASDAQ-100® Index, and “writes” (or sells) a succession of one-month at-the-money NASDAQ-100® Index covered call options. It is non-diversified. The cost ratio is around 0.60% (a bit high for me) but the dividend yield and payout are 11.78% and $2.55, respectively, which is better than most % yields. There is no data for the 5 year growth rate. The investment risk is above average but the return is considered high. This fund was started in 2013. Lastly, the current share price is $21.69. This is a better price in terms of maximizing share ownership. $100 investment will get you 4.61 shares. At the current dividend payout amount this would give me $10.97 in dividends.

From the start I’m going to tell you that I like Vanguard funds and tend to gravitate toward them. I’m not saying that Vanguard funds are better than Fidelity or others, just that I like them better than the others. Another factor that goes into my decisions is that I try to avoid risks in my investments. All investments have a certain level of risk associated with them and I try to minimize those whenever I can. I tend to stay away from high risk investments and investment activities (i.e. day trading, value investing, etc.) for no other reason that I’m at an age where I may not have the luxury of recouping any losses that I incur. Again, with all investments there is always a possibility of incurring losses but those, again, I try to minimize/avoid. I don’t gamble. I live in an area where I am no more than an hour away from a casino, yet I can’t remember that last time I was in one.

Another factor that affects my decisions is that I love dividends, consistent dividends. If one of my funds cuts their dividend payout two time within the same period, they become a prime candidate for me to sell. I’m in it for the income. My goal is to replace my current wages with income from my investments so that I can stop having to get up and go to work. Additionally, if I should die the income from the investments, if left alone, would be enough to sustain my wife. So I like dividend investments with dividend that pay consistently and grow.

So, based on many factors and data, including my investment goals and preferences, I’ll probably go with VDE.

This is NOT a recommendation to buy or not buy a certain ETF stock. This post is just a collections of information and thoughts that I had when I was going through to determine which ETF stock to invest in. This post is not intended to be any kind of financial analysis for evaluating specific ETF stocks, other than for myself and to show others what kind of evaluation I go through.

Avoid the pitfalls of investing

Why I Prefer Mutual Funds & ETFs

As I mentioned previously, before you start investing you should spend some time learning the different options available to investors. One option is to invest in stocks. Another is to invest in mutual funds and ETF (exchange traded funds). Just so you have a basic understanding of those 2 options, let me recap:

ETF – “An exchange traded fund (ETF) is a type of security that involves a collection of securities—such as stocks—that often tracks an underlying index, although they can invest in any number of industry sectors or use various strategies. ETFs are in many ways similar to mutual funds; however, they are listed on exchanges and ETF shares trade throughout the day just like ordinary stock.”

Mutual Funds – “A mutual fund is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds, money market instruments, and other assets. Mutual funds are operated by professional money managers, who allocate the fund’s assets and attempt to produce capital gains or income for the fund’s investors. A mutual fund’s portfolio is structured and maintained to match the investment objectives stated in its prospectus.”

I prefer these because they include multiple stocks, not just a single stock. If you buy one stock and its share price tanks or the company ceases to exist then you have nothing. With mutual funds and ETFs there are multiple companies within the funds so if one starts to tank it can be replaced with a better performing one. You don’t lose that much value or shares.

With a single stock if the company decides to split its shares your stock price get diluted (price per share goes down). If the company does a reverse split you end up with less shares (not good if you’re looking for dividend income). With MF (mutual funds) & ETF (exchange traded funds) you never see this because these funds are managed for you. You do pay a small fee for this service but as long as the activity within the fund is low, so is the fee.

I do own a couple of individual stocks but the majority of my investment activities are with mutual funds and ETFs. I invest my 401K money with Vanguard 500 Index Fund Admiral Shares. My ETF investments are with Vanguard Real Estate ETF and Vanguard High Dividend Yield ETF. Yiu can pretty much surmise that I lean toward Vanguard funds. It’s pretty much a hands-off situation with those investments. I just invest more when I have the funds available and make sure I buy at the lowest price possible. That’s not saw that I don’t review the status of those funds but I don’t feel I have a need to be tinkering around with them.

I also have money invested in a mutual fund with my bank, FT Innovative Technology (FKUVBX). Again, I don’t concern myself as much with the share price as I am with the dividend payout. Especially with the mutual fund because the you need a minimum/increment of $1000 to add to the fund. This, to me, is the one drawback with mutual funds. At this time I can’t come up with $1000 to add to the fund. My investment fund is increased by $60-$200 at a time. Whenever I transfer any amount into the investment account, I like to have the money invested within a few days. I prefer to have my money working for me instead of just sitting and “collecting dust”.

So, to recap my basic strategy:
1. I want to add money into my investment funds in order to have funds available to increase my current holdings or to take advantage of a unique opportunity.
2. I want to invest in stocks that have a high dividend yield.
3. I prefer individual stocks to be priced below $20/share and ETFs to be priced below $100/share. The purpose here is to maximize the number of shares owned. I will trade off a higher price per share for higher dividend yield.
4. In the short term (within the next 5 years), reinvest the dividend back into the stock/fund. Grow the amount of shares owned.
5. View drops in price for shares as opportunities to increase number of shares owned because dividends are paid per share.
6. Keep a watchful eye on the declared dividend amount. If a company reduces the amount paid twice in a row, stock is a candidate for replacement. This only applies to individual stocks owned. Mutual funds and exchange traded funds are managed for you.