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Hey guys,
I write for a site called Infobarrel, and I've been writing a series on dividend growth investing. I'm hoping to teach people who stumble upon it the importance of investing, the dangers of not doing so, and how to get started. I'm not a professional or anything, but I do consider myself relatively knowledgeable, or at least knowledgeable enough to speak to people who know nothing about this as to why they should start dividend investing. I know I'm preaching to the choir showing it to you guys, but here it is and I hope you enjoy it and share it if you know anyone who would benefit from reading it.
As I said, this is the first of a series on the subject. Let me know what you think of it. I'm hoping to add the articles here, if everyone enjoys them and finds them useful or knows someone who would find them useful.
Full disclosure: Infobarrel is a revenue sharing site, meaning that they share 75% of their ad revenue with their writers, so I am earning money if you click on the ads. Also, the Amazon links are affiliate links, so I earn a small commission for any products you buy after clicking the link, even if you buy a completely different product (all at no cost to you, of course).
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Good writing, Joey.
The sentence that stood out to me was
Quote:Alright, you are investing in businesses (don't say “stocks”, say “businesses”. It will put you in the right mindset).
Post here when you have subsequent articles published.
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“While the dividend itself is merely a rearrangement of equity, over time it's more like owning an apple tree. The tree grows the apples back again and again and again, and the theoretical value of the tree doesn't change just because of when the apples are about to fall.” - earthtodan
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(11-06-2014, 11:32 PM)Joey Batz Wrote: Hey guys,
I write for a site called Infobarrel, and I've been writing a series on dividend growth investing. I'm hoping to teach people who stumble upon it the importance of investing, the dangers of not doing so, and how to get started. I'm not a professional or anything, but I do consider myself relatively knowledgeable, or at least knowledgeable enough to speak to people who know nothing about this as to why they should start dividend investing. I know I'm preaching to the choir showing it to you guys, but here it is and I hope you enjoy it and share it if you know anyone who would benefit from reading it.
As I said, this is the first of a series on the subject. Let me know what you think of it. I'm hoping to add the articles here, if everyone enjoys them and finds them useful or knows someone who would find them useful.
Full disclosure: Infobarrel is a revenue sharing site, meaning that they share 75% of their ad revenue with their writers, so I am earning money if you click on the ads. Also, the Amazon links are affiliate links, so I earn a small commission for any products you buy after clicking the link, even if you buy a completely different product (all at no cost to you, of course).
I love your articles, keep it up.
You mentioned in the latest article that the guy on the video (Meir Barak) commented that he made 30k.
I think you misunderstood his comment.
He was asked if he's using margin and he said he have 30k in cash and with 20:1 margin he can trade like he has 600k.
Basically for every cent he makes he earns 20 and for every cent he loses he lose 20 as well.
This is VERY risky!
He doesn't mention how much he earns nor if he is even net-profitable.
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(11-09-2014, 05:58 AM)daat99 Wrote: (11-06-2014, 11:32 PM)Joey Batz Wrote: Hey guys,
I write for a site called Infobarrel, and I've been writing a series on dividend growth investing. I'm hoping to teach people who stumble upon it the importance of investing, the dangers of not doing so, and how to get started. I'm not a professional or anything, but I do consider myself relatively knowledgeable, or at least knowledgeable enough to speak to people who know nothing about this as to why they should start dividend investing. I know I'm preaching to the choir showing it to you guys, but here it is and I hope you enjoy it and share it if you know anyone who would benefit from reading it.
As I said, this is the first of a series on the subject. Let me know what you think of it. I'm hoping to add the articles here, if everyone enjoys them and finds them useful or knows someone who would find them useful.
Full disclosure: Infobarrel is a revenue sharing site, meaning that they share 75% of their ad revenue with their writers, so I am earning money if you click on the ads. Also, the Amazon links are affiliate links, so I earn a small commission for any products you buy after clicking the link, even if you buy a completely different product (all at no cost to you, of course).
I love your articles, keep it up.
You mentioned in the latest article that the guy on the video (Meir Barak) commented that he made 30k.
I think you misunderstood his comment.
He was asked if he's using margin and he said he have 30k in cash and with 20:1 margin he can trade like he has 600k.
Basically for every cent he makes he earns 20 and for every cent he loses he lose 20 as well.
This is VERY risky!
He doesn't mention how much he earns nor if he is even net-profitable.
Oh really? I didn't even realize that. I skimmed the comments to see what people were saying and I saw those numbers. I don't even know what it means to be 20:1 margin (or more aptly, I don't know how someone just becomes that), but it furthers my point in showing how complicated and risky day trading is. Me personally, I'd rather just own shares of high quality businesses and reap their profits in dividends. I think I'd be hard pressed to find someone here who disagrees with me.
Thanks for the read and for the information!
(11-09-2014, 09:48 AM)Joey Batz Wrote: Oh really? I didn't even realize that. I skimmed the comments to see what people were saying and I saw those numbers. I don't even know what it means to be 20:1 margin (or more aptly, I don't know how someone just becomes that), but it furthers my point in showing how complicated and risky day trading is. Me personally, I'd rather just own shares of high quality businesses and reap their profits in dividends. I think I'd be hard pressed to find someone here who disagrees with me.
Thanks for the read and for the information!
I totally agree with you that day-trading is risky and I prefer owning the stocks for eternity (eternity = until they reduce dividends) myself.
Having X:1 margin means that for every $1 you have in your trading account your broker allows you to buy with $X.
In order to be allowed margin you need to prove your broker that you can back i up in case you lose the margin itself
Standard brokers will allow 4:1 margin for day-traders and 2:1 margin for over-night traders.
The fact that he is allowed 20:1 margin suggest that he's either trading in futures (not stocks) or that he is using a "prop account".
Having a "prop account" means he's basically trading for a company where he placed a down-payment for the initial amount and they are "lending" him the margin from their own capital.
Either scenarios is too risky for my blood.
When you are using X:1 margin than loosing $1 means you are loosing $X real money amount so trading with 20:1 and loosing 5% (100%/X=100%/20=5%) in a single trade means you wiped yourself out 100% of your capital...
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(11-10-2014, 12:37 AM)daat99 Wrote: (11-09-2014, 09:48 AM)Joey Batz Wrote: Oh really? I didn't even realize that. I skimmed the comments to see what people were saying and I saw those numbers. I don't even know what it means to be 20:1 margin (or more aptly, I don't know how someone just becomes that), but it furthers my point in showing how complicated and risky day trading is. Me personally, I'd rather just own shares of high quality businesses and reap their profits in dividends. I think I'd be hard pressed to find someone here who disagrees with me.
Thanks for the read and for the information!
I totally agree with you that day-trading is risky and I prefer owning the stocks for eternity (eternity = until they reduce dividends) myself.
Having X:1 margin means that for every $1 you have in your trading account your broker allows you to buy with $X.
In order to be allowed margin you need to prove your broker that you can back i up in case you lose the margin itself
Standard brokers will allow 4:1 margin for day-traders and 2:1 margin for over-night traders.
The fact that he is allowed 20:1 margin suggest that he's either trading in futures (not stocks) or that he is using a "prop account".
Having a "prop account" means he's basically trading for a company where he placed a down-payment for the initial amount and they are "lending" him the margin from their own capital.
Either scenarios is too risky for my blood.
When you are using X:1 margin than loosing $1 means you are loosing $X real money amount so trading with 20:1 and loosing 5% (100%/X=100%/20=5%) in a single trade means you wiped yourself out 100% of your capital...
I've never been too familiar with advanced-style trading (says guy who just wrote article on investing in stocks). All this margin stuff sounds so bizarre. I'm trying to figure out how all parties come and make that a thing.
So your broker will just loan you money to trade? I grasp the concept that for every dollar he is trading, they are lending him $19 for those trades. But what if he picks winners? If he makes a dollar, where are they getting the $19 extra to pay him.
This, again, is why I just stick to dividend growth investing. As a matter of fact, it's a point that I didn't write in my article (because I didn't know about margins then): Investing is easier, safer, and simpler when you understand what a trade actually means and how all parties involved make money. I understand what a dividend is, where a dividend comes from, and why it comes to me. These margins, well, if I were ever a stock broker then I'd better hope that all my clients are dividend investors!
(11-10-2014, 09:51 PM)Joey Batz Wrote: So your broker will just loan you money to trade? I grasp the concept that for every dollar he is trading, they are lending him $19 for those trades. But what if he picks winners? If he makes a dollar, where are they getting the $19 extra to pay him.
When trading equities (stocks) the 20:1 margin is usually from a firm and not from your broker.
The brokers gives you 4:1 margin for day-trading and 2:1 margin for over-night positions (when trading equities).
This is how it works:
You have $100 and you want to buy a stock that cost $100 per share.
You use the margin of 20:1 and you buy 20 shares which costs $2000 using $100 of your money and $1900 from the broker/firm money.
If the share stock price goes up to $101 than you can sell the 20 shares you just bought for $2020 getting back your initial $100 and the $20 profit (you have to pay margin fees for your firm/broker but those are negligible and amount to a few cents at most in this example).
Essentially you made 20% on your capital when the stock you picked went up only 1%.
Now lets go the other way and assume the stock price went down to $99.
You sell the 20 shares and get $1980.
You need to give the $1900 margin back to the firm/broker and you get to keep the $80.
Essentially you lost 20% of your capital because the stock you picked went down 1%...
(11-10-2014, 09:51 PM)Joey Batz Wrote: This, again, is why I just stick to dividend growth investing. As a matter of fact, it's a point that I didn't write in my article (because I didn't know about margins then): Investing is easier, safer, and simpler when you understand what a trade actually means and how all parties involved make money. I understand what a dividend is, where a dividend comes from, and why it comes to me. These margins, well, if I were ever a stock broker then I'd better hope that all my clients are dividend investors!
I also agree that dividend investing is much safer and better long-term strategy than "margin gambling".
I do believe however that a person that invest in the stock market (dividend investor or not) should know how the stock market works and how other people are using it in order to (try to) make money.
These kind of margin trades causes price fluctuations and this in return give us the dividend investors the up/down price swings which allows us to buy awesome companies at discounts (just look at fast graphs during the recessions).
As for the firms/brokers they are perfectly happy with all their customers using 1000:1 margin.
Their customers can wipe their own accounts out when a stock goes against them 0.1% and then the firm/broker gets to keep the customer houses, cars, sofas, TVs etc...
They only give margin to customers that proved they can back it up in the first place.
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