What's Your Plan ?

[Dividend Watcher]

Some of the newer people who've shown up here lately have heard me repeat the need for a business plan for your portfolio. Martin Rice, over on SA, wrote an excellent article today about his journey developing his portfolio and plan. I, for one, thought it was a very interesting article.

In case you missed it, read it here.

[Jimbo]

Great read and great article.

I am trying like crazy to wrap my brain around all of this stuff.

I also get confused on a bunch of the terminology and technicals.

I dont subscribe to anything, but do really enjoy this forum and the SA articles.

Anybody on here that knows whats going on live near the San Fran Bay Area, would love to pick someones brain about a bunch of stuff.

I will admit, I do not have a plan and after I read enough of these articles like this I will try my best to formulate a plan. Without the proper knowledge it will be spinning tires in mud though.

Thanks for the article, leads and info.

Jimbo

[Jason]

  Jasons Dividend Business Plan - Google Drive.pdf (Size: 71.64 KB / Downloads: 26)

I took a few ideas I liked from a couple of Seeking Alpha contributors that I follow. I believe Bob was one of them.

[Dividend Watcher]

Jimbo, my brain is slim pickings but there are a lot of people here that could answer your questions. Fire away.

You also may want to check out Investopedia. If you use their search box at the top and type in a term, you can get definitions or brief explanations about it. Then you can ask about it further here if you're confused.

Start with a goal. What do you want to accomplish by investing? No, getting lots o' money is not a goal, it's a wish. Down payment on a house, retire with xxx in income, pay cash for the new 'Vette?

Oh, by the way, dumb questions are not dumb. Not asking them is dumb.

(For you semantic purists, 'dumb' means 'stupid' in this vernacular case. Just sounded too harsh a word to use.)

[hendi_alex]

My goal is to generate maximum current income while being exposed to minimum risk, also to include the potential for at least modest growth. The risk part is the real kicker. It is hard to generate a 5%-6% yield without taking on much greater risk than would be presented by other options, a DG type of portfolio for example. Problem with the DG portfolio is the paltry average current yield which is a good bit under 3%. To mitigate risk, the majority of my portfolio is actively managed using a covered call strategy currently targeting a +10% annual cash flow return. The non covered call longer term positions are diversified across quite a few sectors including property REITs, ENERGY (which is further diversified into energy transportation, production, and midstream infrastructure, and oil services), insurance, materials. When the timing is right I'll further diversify to include some muni funds and some corporate debt. I'll also include some defensive tickers such PG, JNJ, TGT, etc. but only at strong discount to today's prices.

Here are a few of my maxims:

When to sell, when a position no longer satisfies the original criteria for purchase, or in a stable market, when paper losses exceed 10% by much of a margin. IMO holding losses to a manageable level is key to success. The market often is not rational when punishing a stock, problem is, the investor can never really know for sure whether the market is on target or not. Better to cut loose early, than to only find out the market was right, and after losses have exceeded 20% or more.

Add to winners, and gradually cull losers and under performers.

Hold to a particular strategy only so long as such seems to be working. In other words play the game that the market is willing to give at a particular time, and when the gifts from the market shifts to another direction, modify the strategy to adapt.

I blatantly steal strategies from others, but only so much as those strategies match my own objectives and comfort level.

Cash is an asset, and as such should generally have a weighting range from minimum to maximum. My cash weighting generally floats between 10% and 20%, depending upon opportunities and comfort with the market.

Long term portfolio will generally include no more than 20-30 equally weighted positions. Currently includes 15 tickers.

[rnsmth]

My plan is to hold 30-40 dividend growth positions. I probably include some positions under that umbrella that Alex may not classify as dividend growth, such as utilities and REITs that regularly increase their dividends while having relatively high yields. Overall current yield is about 3.9%.

I am reinvesting all dividends into the companies that earn them. SDRL is then only current holding that I consider speculative, and it is a half weight position. There are several others that I do not consider core positions at this point in time, such as ARCP and NGG.

My plan is to continue to hold and monitor, replacing when I perceive a threat to the dividend or the dividend growth rate. KMB is currently on probation due to its disappointing recent increase. A couple of others are on a shorter leash.

I have done a little rebalancing, the most recent example is trimming WAG, up 90% at the time and using the proceeds to bring SO up to a full position.

I am in the fortunate circumstance of not needing the income at this time, which I am sure influences the way I run our little investment business.

[Jimbo]

Dw. Thanks will look into that and some other sites.

No I am not lookin to get rich quick. The majority o# stocks I have I have had for some time and will hopefully hold another 20 years.

Jason, I like your plan, I dont have one but when I do it will be real close to what you have.

Jimbo

[cannew]

(04-10-2014, 06:40 AM)Jason Wrote: I took a few ideas I liked from a couple of Seeking Alpha contributors that I follow. I believe Bob was one of them.

Overall a great plan and one you should do well with. My only comment is that don't be too quick to sell any of your good stocks. If you've taken the time to evaluate and select good stocks (as you've described) I'd hesitate to sell if they froze their dividend for good reason (ie: canadian banks froze their dividend during the financial crisis). Even if they plan to spin off, you'd end up with two shares of a good company.

I also agree with the 100% invested in dg stocks, but often I will keep cash if I cannot buy any of my stocks at a value price. Believe your long term returns will to some degree be determined by the price you pay for the stock.

[Jason]

(04-10-2014, 04:17 PM)cannew Wrote:

(04-10-2014, 06:40 AM)Jason Wrote: I took a few ideas I liked from a couple of Seeking Alpha contributors that I follow. I believe Bob was one of them.

Overall a great plan and one you should do well with. My only comment is that don't be too quick to sell any of your good stocks. If you've taken the time to evaluate and select good stocks (as you've described) I'd hesitate to sell if they froze their dividend for good reason (ie: canadian banks froze their dividend during the financial crisis). Even if they plan to spin off, you'd end up with two shares of a good company.

I also agree with the 100% invested in dg stocks, but often I will keep cash if I cannot buy any of my stocks at a value price. Believe your long term returns will to some degree be determined by the price you pay for the stock.

Cannew, Thanks for your feed back. I just recently cut and pasted this together so it is still subject to change. I agree that you shouldn't shed good stocks just because of a dividend freeze or a planed spin off. I probably picked that up from Chowder. Maybe best to look at it on a case by case basis. I am still learning and I really do appreciate any feed back or comments. Jason

[KenBob]

I have a two page investment plan. It tends to be qualitative in the early stages of stock selection and very quantitative for buy and sell decisions.

This means that stock splits are a hole in the plan, since by definition they mess up the dividend growth data. I am thinking of a moratorium of a year or two on split stocks to let the data catch up.

[Kerim]

(04-12-2014, 12:59 PM)KenBob Wrote: This means that stock splits are a hole in the plan, since by definition they mess up the dividend growth data. I am thinking of a moratorium of a year or two on split stocks to let the data catch up.

They are a pain, but I just go back and adjust the previous years' earnings and dividends in my spreadsheets for the split.

[Robandcindy2]

Alex,

Can you recommend a good guide to using Covered Calls?

Thanks,

Rob

(04-10-2014, 09:17 AM)hendi_alex Wrote: My goal is to generate maximum current income while being exposed to minimum risk, also to include the potential for at least modest growth. The risk part is the real kicker. It is hard to generate a 5%-6% yield without taking on much greater risk than would be presented by other options, a DG type of portfolio for example. Problem with the DG portfolio is the paltry average current yield which is a good bit under 3%. To mitigate risk, the majority of my portfolio is actively managed using a covered call strategy currently targeting a +10% annual cash flow return. The non covered call longer term positions are diversified across quite a few sectors including property REITs, ENERGY (which is further diversified into energy transportation, production, and midstream infrastructure, and oil services), insurance, materials. When the timing is right I'll further diversify to include some muni funds and some corporate debt. I'll also include some defensive tickers such PG, JNJ, TGT, etc. but only at strong discount to today's prices.

Here are a few of my maxims:

When to sell, when a position no longer satisfies the original criteria for purchase, or in a stable market, when paper losses exceed 10% by much of a margin. IMO holding losses to a manageable level is key to success. The market often is not rational when punishing a stock, problem is, the investor can never really know for sure whether the market is on target or not. Better to cut loose early, than to only find out the market was right, and after losses have exceeded 20% or more.

Add to winners, and gradually cull losers and under performers.

Hold to a particular strategy only so long as such seems to be working. In other words play the game that the market is willing to give at a particular time, and when the gifts from the market shifts to another direction, modify the strategy to adapt.

I blatantly steal strategies from others, but only so much as those strategies match my own objectives and comfort level.

Cash is an asset, and as such should generally have a weighting range from minimum to maximum. My cash weighting generally floats between 10% and 20%, depending upon opportunities and comfort with the market.

Long term portfolio will generally include no more than 20-30 equally weighted positions. Currently includes 15 tickers.