Trading

[KenBob]

I think some amount of trading skill is required, even for a dividend growth investing. Whether or not a stock should be bought or sold should be based on the fundamentals; however, how a stock is bought or sold should use some trading skills.

For example, I use limit orders for my buy and sells. Looking at the price momentum can be used to set the limit price.

[Kerim]

I think you hit on an important point, KenBob.

I think a lot of people who are not very familiar with dividend growth investing assume that all we do is buy stocks off the champions list willy-nilly. In fact, I get the impression that dividend growth investors are more careful than many other types of investors to understand the valuations of the companies that they are considering and to work hard to select entry points that represent good value and that provide as much of the fabled "margin of safety" as possible. That involves a lot of trading skill, I think.

That said, I do not personally use limit orders when making buys for my dividend growth portfolio. I watch the market carefully and only place orders when the stock I want has reached a price that I am comfortable with. When I actually pull the trigger, it is with a market order, but I only do so when the market is open, so I know within a few pennies what my price will be. My intended holding period is years if not decades, so I do not feel that I need to worry about nickels and dimes on the actual purchase price. If I really really wanted to buy a stock that I thought might hit my price on a day I couldn't be near a computer, I might consider a limit order, but since I only buy once or twice a month, on average, this is not really an issue.

With respect to price momentum, what I generally do is wait until the stock I want is trading at or near the price range I want, then I wait for a nice down day to pull the trigger.

Good topic!

[cannew]

(10-27-2013, 08:13 AM)KenBob Wrote: For example, I use limit orders for my buy and sells. Looking at the price momentum can be used to set the limit price.

Agree with Kerim that DG investors seriously look at stocks before jumping into a buy, however, once the decision has been made I would never set a "limit price" to sell.

After deciding to buy, it should not matter if the price drops, in fact if any of the stocks I own drop significantly I'd be jumping with joy for having the opportunity to buy even more of the shares at considerably higher yield.

Sell decisions for DG investors should not be based on price, but the safety of the dividend.

[Kerim]

(10-27-2013, 03:47 PM)cannew Wrote: After deciding to buy, it should not matter if the price drops, in fact if any of the stocks I own drop significantly I'd be jumping with joy for having the opportunity to buy even more of the shares at considerably higher yield.

Sell decisions for DG investors should not be based on price, but the safety of the dividend.

Great points, cannew.

[Dan Mac @DGSInvesting]

I think dividend growth investors definately need to do a thorough current financial analysis before making a decision of buying a company. We can't just buy companies off some list at random. We need to make sure current valuation makes sense.

But once the decision has been made that this is a company you want to own and trading at a fair value that you're willing to pay, then I don't think the dividend growth investor needs to waste time worrying about technical trading trends or setting limit orders.

Over the long term (and dividend growth investors should definately be long term investors) it's not going to matter if you were able to purchase your shares a little cheaper. The long term returns will dwarf any gains you achieve by using technical analysis or limit orders to make your trade.

Just my opinion anyways.