Tag: t_windfallProfit

DYOC ^ 中长线 #K.hu

Posted on by tiger40490

— This is a Jan 2021 self-description of my trading style to a respected fellow investor.
I’m relatively new to stocks, growing my own portfolio and my own system. In my “system”, dividend takes center stage. I think your view is quite common and mainstream. It’s not wrong (though it may not meet my objective).

My objective is dividend as a (relatively) dependable income source, not capital appreciation. (What’s your objective?) If a stock has stable dividends then usually the business is resilient. As I said previously, if I buy at $100 and the price goes $30 to $150 over 3Y, I can afford to ignore the fluctuation to the extent that the dividend amount stays steady. If the actual dividend amount is steady (like $4/Yr, or 4% div yield on cost), then I intend to wait for 25 years to recover my capital. Patience and holding power are keywords in my “system”.

In your comments , I notice a recurring view represented by 正道 . I think many investors think their own “system” is the mainstream (probably yes) and is safe/prudent (??). Following these mainstream “systems”, I am also investing a small amount in ETFs based on sp500 stocks. I also look at each company’s long-term prospect, but not as the centerpiece, because I don’t have time or expertise to evaluate that.

Is dividend investing  正道? I believe it is fairly popular, proven, relatively safe, but less mainstream within my cohort. If you say a focus on dividend is not  正道 then I think thousands, possibly millions, of investors would disagree, esp. in the U.S. There are many articles about using dividend as a major retirement income.

Actually all “systems” I have come across are imperfect and risky. (For low-risk, we would consider government bonds and the money market.)  Within the universe of stock markets, I consider U.S. stocks safer than other regions, blue chips safer than unknown names, long-living companies safer than young stocks, proven profitable companies safer than growth stocks with low P/E.

If I were to use my objective and my safety criteria to judge another person’s system (possibly mainstream system), I might conclude it’s not 正道  not sustainable, perhaps because the realized dividend yield on cost is too low, making it tough to hold the stocks through a downturn. Overall, I feel my own new and evolving “system”, with my focus on dividend, is not mainstream but safer than many mainstream systems. I seldom buy tech stocks or financial stocks (I can name some exceptions). I do agree with the caution that fixation on current div yield can be unwise and regrettable, because some stocks stop paying high dividends after a few quarters, so an initial $100 become $50 in NAV (for many years) + $10 in cumulative dividend. Again, buy-n-hold would become a challenge.

You are right about dividend fluctuations. It’s rare (and precious) to find stocks with steady rising dividends + current dividend yield above 4% . I will name some examples in the future (Perhaps AT&T ? )

Note my 3Y holding period is not applicable to some ETFs.

On Thu, 21 Jan 2021 at 17:11, Bin TAN (Victor) wrote:

You said “big trends are usually only in mid to long-term, where short-term tradings, are usually noises compared to long-term. 抓大放小才是正道”.

I prefer buy-n-hold, hopefully for 3Y or longer, rather than short-term trading. However, I mostly buy for dividend rather than windfall profit. There’s nothing 大 in my approach. I estimate that 90% of my Robinhood assets have a published current dividend yield of 4% – 7% (actually dividend yield on cost is what I care about.)

While you (like other investors) monitor the stocks in your portfolio, I tend to monitor the dividend amounts. If I buy at $100 and the price goes $30 to $150 over 3Y, I can afford to ignore the fluctuation to the extent that the dividend amount stays steady.

Actually, I don’t monitor dividends. Dividend amount fluctuates less than stock price which is determined by supply-n-demand on the market. Dividend amount is decided by management, regardless of stock price.

 

[18]incremental buy-n-hold hero stocks 4div

Posted on by tiger40490

See https://finance.yahoo.com/news/rich-dividends-time-loves-hero-140657693.html

Consistent div usually comes from a defensive stock, but I have no insight into this popular ValueInvesting wisdom.

— Q: what’s the most valuable “gain” from buy-n-hold on a hero stock?
A: dividend, not windfall appreciation. At my age, I need current income (with principal protected) more than a windfall. I feel holding out for a windfall is easier said than done. Receiving dividends is easier.

To my family, reliable div is more important than index-beating appreciation. See stable div^ fractional@growth_stock

Q: Have I experienced holding a dividend stock long term?
A: GS. No distraction 🙂 However, not really a hero stock.

— why keep holding and avoid selling
I told a few friends that I prefer to buy-n-forget (or buy-n-buy) to collect dividends, rather than selling within 3Y… See DYOC ^ 中长线: babysit #Kun.h

The costs of buying include

  • mental energy of analysis
  • pre-clear .. inapplicable to ETF
  • order entry
  • transaction fees .. inapplicable on robinhood

If I sell, then all of these sunk tcosts are wiped out.

I want to build up dividend income .. Obviously selling is questionable.

— Incremental strategy with dividend stocks
slowly growing the portfolio at a managed tcost. Tcost is a bigger cost than $cost in many cases .. stock: top3concerns#XR: diversify

  1. Step 1: brief due diligence including restrictions. Minimize to 3 min if dollar amount < $20
  2. buy one share each of the dividend stocks, so I get used to living with them, regulating the periodic check.
  3. in a correction, more due diligence then buy more. “Be greedy when others are fearful” — i.e. pick up bargains
  4. if price sinks further, just hold for 5Y. For illustration, see T:US #AT&T # ^Energy12
  5. .. ! .. keep distraction in-check

See also steps: buy@Robinhood

— compare mufu — inferior due to the erosive management fees. The longer you hold, the more annual fee you pay. Therefore, I disagree with Rebecca (UOB). I would use mufu only for non-US stocks.
— compare bonds
nowadays bond yields are low. When they are high, you can buy a bond with 5Y maturity but may not get good yield after that the 5Y. Dividend income can be more long-term if you pick a good stock.
— compare rental properties — see other blog posts like REIT/dividend stock^shop unit

[20]div stocks widely seen as low-growth #laughing stock

Posted on by tiger40490

utility stocks including T:US need to pay high CDY as they are seen as low growth, which dampens investor demand

VZ is seen as higher growth

—-

For two stocks each generating $5/share in annual dividends, BB is trading at $100, AA at $500. (BB could be O:US or T:US..)

In all cases, dividend per share is decided by management, in each dividend season, even if PnL is negative. In contrast stock price is decided by the market i.e. buyers and sellers, supply^demand.

I feel the market views BB (a blue chip utility such as T:US or IBM) as low-growth, past-the-peak, boring/uninspiring. Therefore, investors demand a 5% dividend yield as compensation to forgo the growth opportunities elsewhere. Consequently, relative to growth stocks, BB is under-priced — good for dividend investors like me.

The fact that 4% div yield is widely considered high-yield implies that bulk of the market prefer high-growth stocks, to the extent that 1% or zero dividend yield is widely accepted. I think most of the market don’t care much about current income (rent or div..) and much prefer windfall profit.

Not sure about other stock exchanges, but I guess U.S. stock market is mostly about growth. A small fraction of the investors care about current income. When I show my 5% current income to friends, they probably walk away laughing that it’s nothing compared to the 100% return they made or heard about, possibly in BTC.

Very loosely, Most of the popular (hot) stocks in U.S. are high-growth, low-dividend. A lot of growth stocks have high P/E, unable to support a dividend.

— value investing? I get the impression that many value investors (following Buffett’s principle or not) would find the high-growth stocks poor value.
Many high-growth stocks have zero or negligible free cash flow.

current_payout^windfall_far_out

Posted on by tiger40490

https://www.richdad.com/resources/rich-dad-financial-education-blog/january-2010/wealth-is-measured-in-time says

Most people are only familiar with capital gains investing (including windfalls). In other words they are focused on trying to get rich. When you focus on investing for cash flow, you are focused on building your wealth, creating passive income that earns you money without depleting or selling the original asset.

I used to prefer a high annualized return, despite a long wait, such as Chinese properties, land banking products, forestry,,, but in my 40’s I feel I need current income to provide for education, better commute, better home, recreation, self-growth, interest, hobbies, … I have experienced a few show-down cases of current income vs far-out windfall , that shaped my perceptions and preferences.

  • eg 🙁 land-oriented investment is advocated by Alan Shi, but such a remote location has low rental demand. Low current income. In fact, automobile burn rate could be higher. I probably won’t like it.
  • eg 🙁 life insurance — zero income for an extremely long “wait”
  • eg 🙁 endowment plans such as Manulife Universal Life — zero current income + paltry return
  • eg 🙁 land banking promising a windfall? I don’t think there’s any current income.
  • eg 🙁 Allianz IncomeProtector — zero current income + delayed high income. I don’t like it because I need income now, not later.
  • xp: monthly payout — funds on FSM. Overall not impressive since most of the current income seems to come from the NAV
  • xp: Energy 12 — good guaranteed current income + some appreciation potential
  • xp (long): #4-116 — huge appreciation (Realized!) + current income (in terms of realized rental since 2005 + my rental savings). So this is the #1 biggest success story in my entire life.
  • xp (long): Beijing property — huge appreciation + zero current income for me but indirectly my parents are enjoying the rent-free benefits. This is the 2nd biggest successful story.
  • xp: BridgeRetail — high current income (Realized!) + long-term appreciation potential.
  • xp: PeakRetail — lower current income, bigger potential for windfall
  • xp: BGC — promising current income + long-term appreciation potential.
  • xp: Goldman Sachs dividends
  • xp: My 2009 Roth401k voluntary contribution was a regrettable decision. The money is now locked-up when I need it (now). When the money someday gets unlocked, I won’t need it as much as now.

I have concerns over the long wait for a “windfall” (I have never been convinced to buy any):

  1. With such a long horizon, things may not work out as planned. The more “guaranteed”, the smaller the windfall, like the /paltry returns/ of insurance products. On the other extreme, the big windfall of land banking often disappoints investors
  2. our health? Wife or I might get a condition too early and can’t really enjoy the windfall. Even if we can enjoy it at that advanced age, I don’t want to wait for that time, in poor health.
  3. my lifespan? If the windfall comes at 67, I have a few decades to enjoy it, but I would rather get the windfall 40 years before end of life.
  4. inflation? Singapore is OK so far. U.S. is less stable.

%%cohort r more keen@windfall !!income

Posted on by tiger40490

I’m clearly more proud of my high-income investments. My peers generally feel “6% a year passive income over 10 years … only 60% profit over 10 years… Too low too slow.”

I asked only a few peer investors. I can only assume that most of my friends in my cohort are not debt-free. I feel most of them are not only dreaming but aiming at a 200k->$500k-1M windfall, over 5-10Y. My wife might be one of them.

Q: So how much risk capital are they committing for that target windfall? 100k? 200k?

Q: is that level of return realistic? I guess only tech stocks and BTC can deliver 30%/Y compound return, usually low growth, low growth … short bursts of high growth.

I don’t want to overthink this question, since it affects only them, not me.

Q: Did I ever aim at that target and how did I decide to stop?
A: perhaps I was never so ambitious so hungry for windfall, after I become an investor.