DGI For The DIY

[fenders53]

(05-01-2020, 10:07 AM)EricL Wrote:

(05-01-2020, 09:49 AM)fenders53 Wrote:

(05-01-2020, 08:30 AM)EricL Wrote: Wrote up a post last night about portfolio weighting. What it means, how to calculate it, and how it can be useful for your portfolio.

I'm going to try to do a few of these types of posts for a beginner's section for investors.

Education Center: Portfolio Weighting

Please let me know if you can think of any topics that would be helpful for people or if you think something else should be added to the post.

I plan on updating and expanding on the dividend reinvestment page in the next week or two.

I have a few suggestions I know you would do very well with.  I'd be happy to give it some feedback before you publish.  Not that you need to answer to me, but we have slightly different tolerances for risk, and your balance sheet abilities are above average.  Anyway, I know these would help new investors.....

1.  Yield traps.  All but the complete novice knows that 15-20% Div from a commodity or financial is nothing but trouble at some point.  The opposite extreme is a fake income investment like Apple or Visa with their token divs.  Dividend investors want some yield NOW.  Explain how the 3% yielder might be better than the 6% after risk and Div growth is factored in.  The early signs your Div is too high.  Should a dividend investor immediately sell when a company cuts or suspends the Div?  That is going to hit most everyone with a lot of stocks in their port.   

2.  Credit ratings 101.  A new Div investor does not want to be confined to AA and better companies.  Few of us do actually.  Where's the line?  What does it mean to be junk or on the verge of junk when the economy goes south.  Things change fast and recent examples are  plentiful.               

Those are the two most important topics that come to mind.

Some good ideas there. Yield traps are a big one. I don't know how many times in the last two years I warned people not to buy airlines and car companies because the yields aren't guaranteed in a cyclical business.

Credit ratings are interesting, but I'm not sure how sophisticated a post I could give on that one. I just look at S&P ratings and debt, and stay away from the ones with lower than BBB credit ratings.

I know you can knock yields traps out of the park.  It might be the most valuable sticky here, and I know the more seasoned investors here would participate in a thread.  It would be a great service to the less experienced.  How many times have you and I tried to help a new investor on this low traffic forum?  Actually, I see members chasing sketchy yields here almost every day.  I do it as well but what I do with 3% of my port and some kid building an entire port full of junk is not the same thing at all.  

Credit rating article doesn't have to be a PHD quality thesis paper to be very valuable.  Everything doesn't have to be "worthy" of S.A. publication immediately.  You could work through the details here with some feedback then put it on your site.  BTW I got a lot of B's in high school and college.  That earned me a fine degree and an early retirement.  So why would I have any idea a BB stock is probably dangerous the next time the economy dips?  Did that sound ridiculous?  I suspect you overestimate the credit rating knowledge of the average new investor.  Being forced to pay loan shark financing rates will destroy an otherwise decent business, even with a well known brand.  That's less obvious to the novice investor than you may realize.                

I know you enjoy writing and have a desire to help new investors.  I have a lot of respect for your motives.