10-21-2013, 08:20 AM
Active investing and trading is much more entertaining and interesting. YTD my very interesting, actively managed account is up approximately 6%. My very boring long term dividend account is +29%. So much for excitement!
To be fair, I am using about 25% margin in the long term dividend account, so gains have been magnified to that extent. These results have convinced me of the folly of indiscriminately selling large numbers of calls in a rising market. In the managed account, all gains were capped at around 10%-12% because of call writing. When various losing plays were factored in, the YTG of 6% results. On the other hand, positions in the long term dividend account have been allowed to run, with many positions running up 30% or more, plus the steady stream from the average 5%-6% dividend yield.
I'm not sure that dividend investing will generate a better total return than a mixed growth and income portfolio, but am pretty confident that selling calls for income is mostly a counter productive strategy. Also, I doubt that all markets would provide such disparate results as above. But for a rising market, making one's best selection and then giving the positions time to run, IMO is a better trading strategy than selling calls for income or than prematurely trying to capture profits. To build a long term portfolio, I continue to lean toward dividend value investing, where positions are held long term, but where entry points are selected based upon relative value at the time of purchase.
To be fair, I am using about 25% margin in the long term dividend account, so gains have been magnified to that extent. These results have convinced me of the folly of indiscriminately selling large numbers of calls in a rising market. In the managed account, all gains were capped at around 10%-12% because of call writing. When various losing plays were factored in, the YTG of 6% results. On the other hand, positions in the long term dividend account have been allowed to run, with many positions running up 30% or more, plus the steady stream from the average 5%-6% dividend yield.
I'm not sure that dividend investing will generate a better total return than a mixed growth and income portfolio, but am pretty confident that selling calls for income is mostly a counter productive strategy. Also, I doubt that all markets would provide such disparate results as above. But for a rising market, making one's best selection and then giving the positions time to run, IMO is a better trading strategy than selling calls for income or than prematurely trying to capture profits. To build a long term portfolio, I continue to lean toward dividend value investing, where positions are held long term, but where entry points are selected based upon relative value at the time of purchase.
Alex