Tag Archives: stocks

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

Selecting A Brokerage Account

Once a person has decided that they want to start investing in the stock market, have stabilized their finances, created a workable financial budget, and established their investment strategy it’s time to select an investment platform/brokerage through which you want to buy and sell your stocks. This would be the most efficient and economically manner in which to do this.
There are quite a few brokerages to choose from. I’m only going to tough upon a few in this post. Most brokerage companies are now commission-free for normal traditional investing activity. There are exceptions so make sure that you check out their fee schedules to find out what transactions carry a fee with them and how much.

M1 Finance : You get high yield checking, low rate borrowing for margin trading, automation, and optimization. They do support fractional shares and you can tap into a flexible portfolio line of credit at a low base rate, and use those funds for anything: major purchases, emergency funds, or portfolio leverage. Plus, you can pay back on your schedule. There are 2 downsides to this platform: they require a minimum investment of $100 and they charge a yearly fee of $125.

Public : Another commission-free investing platform that also will give you a free stock when you open and account and fund it. Also supports the purchase/ownership of fractional shares. They have Built-in safeguards for risky stocks, they explain terms when you see them, but they don’t allow day-trading or sell you margin loans to invest with, and they don’t sell you exotic, complex investment instruments.

Robinhood : Another of the non-traditional investing brokerages that offered a free stock when you open an account and funded it. This is the one where I got my start in investing. Also allows for purchasing/ownership of fractional shares, unlimited commission-free trades in stocks, ETFs, and options with Robinhood Financial, as well as buy and sell cryptocurrencies with Robinhood Crypto. Does not offers free IRA accounts or short selling.

Webull  : Webull supports full extended hours trading, which includes full pre-market and after hours sessions. One problem with Webull is it doesn’t currently support dividend reinvestment, but they may in the future. I would take this is mean that fractional shares are not supported. Offers free IRA accounts and commission free short selling in margin accounts.

TD Ameritrade : One of the main brokerage companies that has recently been bought up by Charles Schwab. After starting out on Robinhood I moved all of my positions over to here. You can manage your own portfolio or, for a fee, have your investments managed for you. They do have a DRIP (Dividend ReInvestment Program) and allow fractional shares through it but you cannot buy fractional shares outright.

There are other brokerage accounts out there so be sure to do your research before you make your final selection. If you decide to switch later on most brokerages will allow you to transfer you account to another brokerage but there will be a transfer fee associated with it. The fee with depend on the brokerage company you are transferring your account FROM.
Many of the brokerage houses, even the smaller ones, provide tools to help you manage your investments. Depending on how much detail information you want will determine which platform you’ll want to use, from least detailed like Robinhood to most detailed like TD Ameritrade.

Due Diligence

Whenever you come across a company that you’re interested in investing into it is best to make sure that you do your due diligence before you invest. The reason you want to do this is to:

  1. Minimize the risk of losing your investment. All investments have an element of risk associated with them. But a smart investor wants to minimize that risk.
  2. Know something other than the company’s name and stock price. How is the company doing? Is it a good investment? This last point is based on your pwn investment criteria.

In order to do either of the above you need to access the company’s fundamental information. From there you need to be able to calculate certain benchmark data. There are many benchmark calculations that are suggested but in this post I will highlight the ones from the Income Statement. I may not look at all of these but these are the most common ones investors suggest.

  1. Net Revenue (Revenue – COGS)
  2. Gross Profit Margin (Gross Profit – Operating Expenses)
  3. Operating Margin (Operating Income /Revenue)
  4. Post-Tax Income (Pre-Tax Income – Income Tax)
  5. Net Income Margin (Net Income/Revenue)

I may not check each and everyone but I am interested in a company’s Gross Profit and their Net Revenue. This tells me how well the company is doing in its market niche and how well they are managing/controlling their operations. The benchmark for these is up to each individual investor to establish. I usually don’t calculate these for single companies but as a comparison between multiple companies.

I have limited funds available to invest so that if the other criteria benchmarks are relatively close with each other I use these benchmark data to narrow down my selections. The reason that I use benchmarks, even though I am a dividend investor and growth in stock price is secondary, because I want to make sure that the company will be around for the long-term. I’m not looking to invest for the stock price to jump up within a relatively short time. I’m looking to capture a passive income for the long-term. Once I buy a company stock I’m reluctant to sell unless the company cuts their dividend payout 2 times.

Here are some other calculations you can use to narrow down your selections:

Importance Of Stock Price To A Dividend Investor

How important is the stock price to a dividend investor. Speaking only for myself, stock price is a little less important than the dividend payout and the number of shares owned. As long as the stock price remains within the 52 week price range, all is well for me. If it set a new low, I will definitely take another look at the company to determine if I want to remain invested with it. To me the share price is an opportunity for me to buy additional shares so that I can get more dividends.

You find a lot of stock investor stressed out because of the activity with the stock market, specifically when the market has a downturn or pullback in the prices. That’s because that is all they are banking on, the overall value of the total stock. I don’t sweat it when my stocks take a decrease in price. I look at it as an opportunity to purchase more stocks at a price less than what I originally paid. Don’t get me wrong, I still think that stock price is important but not the #1 factor. It’s in the Top 5. You could end up with a stock like Just Energy Group ($JE) that had a 1 day drop in price of 95% back in Sept-Oct.

That’s too much of a risk for me. I can’t eliminate all risk but I tend to prefer mitigating it as much as a I can.

Accumulating cash

I’ve been very quiet on my blog so far because there’s nothing happening for me in the investing world. I’m holding my current positions and I have recently received dividend payments on some of my stocks. Those payments I’ve taken and re-invested into the same stocks. At this point I am waiting for the rumored stock market crash so that I can pick up some bargains and to increase my positions on the stocks that I currently own.

In the meantime, as my funds for investments come in I’m just accumulating them into my investment cash account. My focus is to acquire additional dividend stocks, primarily, and to increase my current positions when the opportunity presents itself. This is my sub-strategy for the next 8-12 months. Then I plan on changing gears to focus more on increasing my current positions, primarily, and then to acquire additional dividend stocks when the opportunity presents itself.

But so far all I have been accumulating has been investment funds. I’m looking to find stocks or ETFs that pay dividends on a monthly basis. All of my other criteria still are in place whenever I research where I should invest.

Not All Dividend Stocks Are Created Equal

As a dividend investor, dividends are the key factor in deciding if I want to invest in a company or not. As I’ve mentioned in my previous posts there are other additional factors that go into my decision making process to invest or not to invest. But in this post I want to focus on the aspect of dividends. Many investors are growth investors. They buy the stocks of a company for the purpose of selling for a profit within a specific period of time. Others, like myself, invest for the long term to capitalize from a company’s increase in revenues and thus profits, which then translate into dividends. But again, not all dividend stocks are created equal. Some companies pay very low dividend payouts while others pay a substantially higher amount.

One of the key things I look at is the dividend payout relative to the company’s stock price. This is referred to as the Dividend Yield. This is the amount of dividend you will receive for every dollar you have invested. Some are very low, such as Dollar General ($DG), where the yield is 0.67%. Their last dividend payout was $1.44/share. To get that $1.44 you’d have to spend about $218 to buy 1 share.

Then you have McDonalds who just increased their dividends. Even with the last payout being $5/share, this is still only a little over 2% in dividend yield. You’d have to spend about $224 to buy 1 share of stock. That one share would then pay you the $5 in dividends.

There are many similarities between growth stocks and dividend stocks when it comes to deciding if the company is worth investing in or not. But with dividend stocks you’re looking for a continuous income coming in. The growth stock investor is also looking for income but they have to sell all or a portion of their holdings to generate the income. This means that they have to constantly be on the lookout for their next “Deal”. They have to replace the stocks that they sold.

This is the reason that I prefer dividend investing. Once I have researched a company and I have decided that it is worth investing in, all I have to do is hold my investment and collect the dividend payments. As long as there are no drastic or catastrophic changes to the company, there is no reason to sell the stock. Once you decide to buy the stock the only things left to do is 1) collect the dividends and 2) decide when to buy more stocks in the company. This last part is for another post in the future dealing with buy on the DIP (drop in price). After buying the stock and the dividend yield drops, you may want to just hold onto the stock shares you have. If the yield increases that may be a good time to increase the positions you hold. Again, other factors come into play here.

But back to the original premise of the initial dividend yield and how it is a factor in deciding to buy. As I stated before the dividend yield is the key factor for me. I want to get the maximum dividends for the least cost (i.e. stock price). The only time that share price is important is when I am looking to buy more shares. I’m not looking to sell my shares any time soon. As long as the stock price stays fairly stable, I am happy. As long as the dividend keep growing, I’m happy. As long as the company doesn’t reduce the dividend payout 2 periods in a row, I’ll hold on to them shares. My whole focus is to own the maximum number of shares for the least amount of money.