Fashionably Early?

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Update: January 6, 2015

Well,  I guess being Fashionably Late has some benefits once and a while. Since I trade shares in multiple IRA accounts, I tend to get better results (percentage wise) in the smaller accounts. In order to buy more shares in the smaller accounts, the spread needs to be a bit bigger for each trade. So, I tend to put my limit orders for the buy side a bit lower than in my IRA trading account. So, by default, I tend to profit more on the round trip because I tend to sell all my shares bought at the same time.

Today, I noticed that I actually had 2 of my orders filled well below the shares in my trading account. In addition, I will be getting the dividend because they were purchased before the xdividend date. A win-win scenario no matter what.

Although trazing like this does not lead to immense growth on each trade, it does tend to allow for more shares being purchased and held on each round trip. The major downside, if you can consider it a downside, is that the size of the trade just keeps getting bigger. Once the dollar value of the trade grts large enough, each trade increases the number of shares held, thereby increasing the potential income through dividends if the shares are held xdividend. The exposure is increasing all the time.

However, let’s say that I started a DGI account with exactly 100 shares ofa $10.00 (5% div) stock. After the first dividend payout, I would collect $12.50 which could buy me 1 more share resulting in 101 shares and some cash left over. That is great, and over time, it will result in a very tidy sum of money as the dividend continues to grow as well. However, I tend to feel that a stock like T tends to meander around which leads to lots of up and down days.

Given those same 100 shares and the same divided potential as the example above, I ask what if I just decided to try to sell into strength in my IRA each and every time?  For instance, I really want the 100 shares to be a part of my portfolio and I want it to be in there until I retire. How many shares would it be if I just let it churn and reinvest. After each reinvestment, I am inherently increasing my position. I posit that it is basically no different trading the stock between those payouts and increasing the total shares since the IRA so tax friendly.

One argument is that I might miss the dividend. That argument is potentially not even valid. If I sell my shares, there is a potential for me to pick even more shares up at a level minus the dividend once the stock goes xdiv. Plus, that scenario only plays out 4 times per year. In the IRA, it is possible to do a buy, sell, buy or sell, buy, sell each and every week. Things may not (I say probably won’t) happen as put forth here, but the potential is there- This is but just one strategy that I can attempt to utilize. I can sell covered calls and also, buy cash secured puts. Each strategy could lead to increased income and overall return on investment.

We shall see how it goes. Good luck to all.

Keep cranking,

Robert the DividendDreamer

AKA — Seeking Dividends

 

Follow me on Twitter– Seeking Dividends@DividendDreamer

———————————

The end of last year’s trading sessions seemed to have given some investors the jitters. Dec. 31 saw a sell off that, at the time looked like a buying opportunity. Fast forward to today, and that buying opprtunity just allowed some of us to arrive Fashionably Early to the party. In hindsight, waiting a while and procrastinating on the buy side could have led to a much better entrance price into the stock purchase.

I hear many times about putting money to work as soon as possible, and over time, we won’t notice the differences in the price we overpaid as opposed to what the stock will be worth in the future. I think that line of thinking is easily justified. However, my point here is that sometimes, it is just as wise to be a little late to the party as it is to be early. On days like this, that might lead to a better purchase price.

Don’t get me wrong, I am the first person to tend to jump right on in. I see the beginning of a selloff, and I just can’t wait to pull the trigger. Somehow, I just do not feel the same way when the rally begins. In the past few years, I have definitely tended to hold to long- Only to see all of my profits dwindle into obscurity. It seems that there is also a point to be made about being Fashionably Early to the sell side. I can’t tell you how many times I have been up 10-15-20% or more, and in a matter of moments, it all went away. I know that thinking like this is not how most Dividend Investors are supposed to think. However, locking in 10-20% or more and redeploying that money into another stock that is being trounsed, but is still a heavy dividend stalwart, might lead to even better returns, larger dividend payouts, and increased overall wealth.

For all practical purposes, I was Fashionably Early to the party when I bought my T shares in my trading account on Dec.31.  At the time, I wanted to be in and guarantee the dividend. However, right after the purchase, I had the opportunity to turn those shares for a handsome profit by selling the covered 34.50 calls on Jan 8, 2016 while also collecting the dividend. I mulled that decision over the entire afternoon of Dec. 31, and decided to just let it ride. As of today, that decision is proving to be wrong.  Either way, I now own more shares in my trading account than ever before. Additionally, I  am now positioned to collect more dividends in that trading account than ever before. So, that can be chalked up as a win, but don’t get me wrong, I do have second thoughts about arriving to the party Fashionably Early.

Keep cranking,

 

Robert the DividendDreamer

AKA — Seeking Dividends

 

Follow me on Twitter– Seeking Dividends@DividendDreamer

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About dividenddreamer

Doing what I can to make the best of today and the most of tomorrow.
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2 Responses to Fashionably Early?

  1. Andrew says:

    Ha ha ha I was in the same boat of trading fashionably early this year. Mind you it was only a couple of shares, but I could have gotten more if I waited. Yet I realized a long time ago we can never time the market so might as well just buy when we can. I feel your pain.

    • Seems like a lot of investors could be sailing along with us. Good luck. Thanks for stopping by.

      Keep cranking,

      Robert the DividendDreamer
      AKA — Seeking Dividends

      Follow me on Twitter– Seeking Dividends@DividendDreamer

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