Comments on: My Investing Principles http://www.thedividendguyblog.com/my-investing-principles/ One Guy's Journey to Passive Income Through Dividend Investing Fri, 10 Feb 2012 13:02:29 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Viagra http://www.thedividendguyblog.com/my-investing-principles/comment-page-1/#comment-3009 Viagra Tue, 10 Oct 2006 19:03:01 +0000 http://thedividendguyblog.com/?p=26#comment-3009 <strong>alternative investments to stocks...</strong> Well said! ... alternative investments to stocks…

Well said! …

]]> By: Charles Pedley http://www.thedividendguyblog.com/my-investing-principles/comment-page-1/#comment-124 Charles Pedley Fri, 28 Oct 2005 01:25:46 +0000 http://thedividendguyblog.com/?p=26#comment-124 "MUTUAL FUNDS DON'T PERFORM AS WELL ..." That is like saying the AVERAGE MUTUAL FUND does not perform as well as .... Then you would be correct. But WHO would want AVERAGE mutual funds? I personally want only funds in the top 2 quartiles consistently over 3 - 5 years. That is where the myth about Financial writers being experts disintegrates! If they were SO GOOD, THEY WOULD BE FINANCIAL WHIZES AND MAKE MORE MONEY! Who knows most about the football game, the player or the sportscaster? Above average mutual funds can consistently beat the index. Check out Morningstar or TheFundLibrary and filter for funds that consistently outperform the index. Then, if you like to invest as a hobby....if it is a great pleasure to you, then do it! But picking out the BEST FUND MANAGERS and the BEST MUTUAL FUNDS saves HOURS of time and allows the TOP professionals to do the work of investing for you. Just had to clear up that myth about mutual funds not performing as well as the index. Hope what I have said is clear. One more example. Suppose you knew a black man who was lazy on the job, do you generalize and say black people are lazy? Of course not! Same goes with mutual funds. cpedley@gmail.com “MUTUAL FUNDS DON’T PERFORM AS WELL …” That is like saying the AVERAGE MUTUAL FUND does not perform as well as …. Then you would be correct. But WHO would want AVERAGE mutual funds? I personally want only funds in the top 2 quartiles consistently over 3 – 5 years. That is where the myth about Financial writers being experts disintegrates! If they were SO GOOD, THEY WOULD BE FINANCIAL WHIZES AND MAKE MORE MONEY! Who knows most about the football game, the player or the sportscaster?

Above average mutual funds can consistently beat the index. Check out Morningstar or TheFundLibrary and filter for funds that consistently outperform the index.

Then, if you like to invest as a hobby….if it is a great pleasure to you, then do it! But picking out the BEST FUND MANAGERS and the BEST MUTUAL FUNDS saves HOURS of time and allows the TOP professionals to do the work of investing for you.

Just had to clear up that myth about mutual funds not performing as well as the index. Hope what I have said is clear.

One more example. Suppose you knew a black man who was lazy on the job, do you generalize and say black people are lazy? Of course not! Same goes with mutual funds.
cpedley@gmail.com

]]> By: The Dividend Guy http://www.thedividendguyblog.com/my-investing-principles/comment-page-1/#comment-98 The Dividend Guy Tue, 18 Oct 2005 03:37:06 +0000 http://thedividendguyblog.com/?p=26#comment-98 I received this comment over at my old site and wanted to address it here: --Comment-- Dividend Guy--Thanks for the work you've put into your site and the link selection. However, I don't understand why you seem to ignore the benefits of diversification in reducing the risk-reward ratio. By selecting primarily individual stocks, and a rather small number of them at that, you expose your portfolio to unnecessarily high company risk, eg., as happened with Merck. If you only wish to have a portfolio of high/increasing dividend stocks, I would think you could achieve equivalent return with lower beta by buying one of the ETFs you've linked to such as PEY or DVY. If buying an ETF is not practical because of the recurring brokerage charges, then why not one of the equity income funds from Vanguard for no brokerage charge and expenses of less than 50 basis points? As a separate, broader point, I think you also ignore the benefits of diversification in your asset allocation model. Several of your asset categories appear to have a very high overlap, and I don't know why you have such an overall concentration in Canadian stocks. If you like high/increasing dividend stocks, that rationale should apply equally to US and other global developed market stocks; in theory you could just create your own private mutual fund by choosing the top 50 stocks in the world which satisfy your investment principles (assuming you reject the low cost fund alternative described in the preceding paragraph). Finally, you may want to consider another diversification issue that necessarily follows from using only a high/increasing dividend stock screen--virtually all of the stocks that get through the screen will be large-cap or mega-cap stocks, tilted towards value stocks, and concentrated in financial, utility, REIT, and consumer staple stocks. Nothing wrong with any of that, but you will find yourself in just a portion of the upper right-hand corner (i.e., large cap value) of the 9 square Morningstar grid. I hope this didn't sound too critical, since I was really only interested in probing your thought process, which is helpful for helping any investor, including me, test his assumptions. Thanks again for your work! David --Comment-- The Dividend Guy's Response: Good point on the diversification. I realize that I am at risk in terms of company-specific risk. The lower number of stocks tend to make my portfolio more volatile. However, I have a longer term plan and am willing to put up with more volatility in the short term. I ultimately want to hold approx. 20-30 individual stocks, which from the research I have done indicates that this is a good number to substantially reduce company-specific risk. My reason for a higher concentration of Canadian stocks is that I am a Canadian and I understand these companies a bit better. Keep in mind that I don't think I am too far out of whack here as ~40% of my investments are in US and foreign investments. In terms of my large-cap focus, you are absolutely correct. As I become a more sophisticated investor (i.e. more money available to spread around) I would like to start a allocating some funds to smaller-cap stocks/funds. I believe these stocks are much more difficult to choose and I need to study this more before I am more comfortable. I hope I have addressed your comments. If not, or you think I should be looking at things in a different way, please comment. I greatly appreciated the comments and did not think you were being too critical - these comments are the whole point of blogging. Thanks again. I received this comment over at my old site and wanted to address it here:

–Comment–
Dividend Guy–Thanks for the work you’ve put into your site and the link selection. However, I don’t understand why you seem to ignore the benefits of diversification in reducing the risk-reward ratio. By selecting primarily individual stocks, and a rather small number of them at that, you expose your portfolio to unnecessarily high company risk, eg., as happened with Merck. If you only wish to have a portfolio of high/increasing dividend stocks, I would think you could achieve equivalent return with lower beta by buying one of the ETFs you’ve linked to such as PEY or DVY. If buying an ETF is not practical because of the recurring brokerage charges, then why not one of the equity income funds from Vanguard for no brokerage charge and expenses of less than 50 basis points?

As a separate, broader point, I think you also ignore the benefits of diversification in your asset allocation model. Several of your asset categories appear to have a very high overlap, and I don’t know why you have such an overall concentration in Canadian stocks. If you like high/increasing dividend stocks, that rationale should apply equally to US and other global developed market stocks; in theory you could just create your own private mutual fund by choosing the top 50 stocks in the world which satisfy your investment principles (assuming you reject the low cost fund alternative described in the preceding paragraph).

Finally, you may want to consider another diversification issue that necessarily follows from using only a high/increasing dividend stock screen–virtually all of the stocks that get through the screen will be large-cap or mega-cap stocks, tilted towards value stocks, and concentrated in financial, utility, REIT, and consumer staple stocks. Nothing wrong with any of that, but you will find yourself in just a portion of the upper right-hand corner (i.e., large cap value) of the 9 square Morningstar grid.

I hope this didn’t sound too critical, since I was really only interested in probing your thought process, which is helpful for helping any investor, including me, test his assumptions. Thanks again for your work! David
–Comment–

The Dividend Guy’s Response:

Good point on the diversification. I realize that I am at risk in terms of company-specific risk. The lower number of stocks tend to make my portfolio more volatile. However, I have a longer term plan and am willing to put up with more volatility in the short term. I ultimately want to hold approx. 20-30 individual stocks, which from the research I have done indicates that this is a good number to substantially reduce company-specific risk.

My reason for a higher concentration of Canadian stocks is that I am a Canadian and I understand these companies a bit better. Keep in mind that I don’t think I am too far out of whack here as ~40% of my investments are in US and foreign investments.

In terms of my large-cap focus, you are absolutely correct. As I become a more sophisticated investor (i.e. more money available to spread around) I would like to start a allocating some funds to smaller-cap stocks/funds. I believe these stocks are much more difficult to choose and I need to study this more before I am more comfortable.

I hope I have addressed your comments. If not, or you think I should be looking at things in a different way, please comment. I greatly appreciated the comments and did not think you were being too critical – these comments are the whole point of blogging. Thanks again.

]]> By: Pagar http://www.thedividendguyblog.com/my-investing-principles/comment-page-1/#comment-75 Pagar Tue, 27 Sep 2005 16:14:36 +0000 http://thedividendguyblog.com/?p=26#comment-75 After buying the stock that is right for your dividend investing; The decision to write covered calls on that stock is much easier. Dieter-Is your Suncor stock symbol SU? Do you intend to hold that stock? I don't own it, but SU seems to have some very good covered call premiums right now. Write a call on 65 Strike Oct (with 24 days to expiration) this morning and you put an exact $100 in your account per 100 stocks owned (minus your broker fee) Go further out on your dates and put even more in your account. For the most return on a rising stock, short expiration dates seem to give the most return (In my opinion)but watch brokerage fees. PWI also has options so one can write a covered call. The Implied Volatility is lower than for SU, but if you already own the stock and intend to hold it, the Implied Volatility doesn't really matter. Some of the investors on sites I follow are saying that Ameritrade is the broker for Americans wanting to trade Canadian stocks. Mentioning that they can trade them directly over the internet without talking to a live person at the brokage. I don't use them, but I note that their Ad states that the have no IRA fees. For my purposes, I only trade in IRA accounts, in order to avoid tax events, makes life much simpler for me. Hope this provides some useful info. After buying the stock that is right for your dividend investing; The decision to write covered calls on that stock is much easier.
Dieter-Is your Suncor stock symbol SU?
Do you intend to hold that stock? I don’t own it, but SU seems to have some very good covered call premiums right now. Write a call on 65 Strike Oct (with 24 days to expiration) this morning and you put an exact $100 in your account per 100
stocks owned
(minus your broker fee) Go further out on your dates and put even more in your account.
For the most return on a rising stock, short expiration dates seem to give the most return (In my opinion)but watch brokerage fees.
PWI also has options so one can write a
covered call. The Implied Volatility is lower than for SU, but if you already own the stock and intend to hold it, the Implied Volatility doesn’t really matter.
Some of the investors on sites I follow are saying that Ameritrade is the broker for Americans wanting to trade Canadian stocks. Mentioning that they can trade them directly over the internet without talking to a live person at the brokage.
I don’t use them, but I note that their Ad states that the have no IRA fees. For
my purposes, I only trade in IRA accounts, in order to avoid tax events, makes life much simpler for me. Hope this provides some useful info.

]]> By: Dieter http://www.thedividendguyblog.com/my-investing-principles/comment-page-1/#comment-61 Dieter Wed, 30 Nov -0001 00:00:00 +0000 http://thedividendguyblog.com/?p=26#comment-61 Hi,<BR/><BR/> I'm working on the same thing, dividend investing to get a passive income flow. I wish I was Canadian, you have some good stocks to trade there. I have some Suncor stocks (up 100% since last september) and some PWI (Energy income trust). What do you think about these income trusts ?<BR/><BR/>Regards,<BR/><BR/> Dieter Hi,

I’m working on the same thing, dividend investing to get a passive income flow. I wish I was Canadian, you have some good stocks to trade there. I have some Suncor stocks (up 100% since last september) and some PWI (Energy income trust). What do you think about these income trusts ?

Regards,

Dieter

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