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Originally Posted by As1an1nvas1on
or just buy spy?
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Originally Posted by TeflonDawg
I'm trying to beat SPY.
I'm sorry, this is inaccurate. See OP. While this is a long-term strategy, it's not exactly a retirement account. It is an account interested solely in generating income.
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Originally Posted by bware
Seems like a great way to get raped by transaction fees
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Originally Posted by TeflonDawg
It is and this will change. I have not done any research on taxation and fees.
Obvious to me is wait to buy in larger chunks so $9.99 is a smaller % hit to each investment, but not so obvious to me is the cost of DRIPs over time, tax implications, etc.
When a stock price drops and I can DCA, I wonder if that yields a better result per $9.99 rather than a DRIP being forced to buy a stock that goes up in price + its perpetual commissions.
When I'm not DCA, I'm diversifying.
I'm currently investing in $1k blocks through TD Ameritrade, so $9.99 per pick. That's 1%. This number drops on average per year I hold each pick if we look at it like an expense ratio. I have just started, and I don't have much available to invest, but I'm OK with the cost for now (just want to generate an impetus). It will go down over time, and I will hopefully invest in larger chunks in the future to reduce cost further.
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Originally Posted by adios
Man I traded some of these in yesteryear. I will tell you that some people that I consider experts were very actively trading some of these names using anything but a buy, accumulate, and hold strategy. Some of what I consider very savvy traders would sell just before they went x-dividend and buy in again after,like just about never taking a dividend. NLY is just a leveraged bond fund more or less but is probably the highest quality mortgage REIT. They hold agency MBS and use interest rate swaps to hedge downside risk. I made a lot of money trading mortgage REITs (MREITS) between 2005-2006. Then you know what happened. It became more than obvious the stuff was toxic in 2006. I was in cash pretty much until 2009.
With MREITs you need to know how their business model works, the nature of their assets, and how they are financed. Look up Thornburg Mortgage sometime and see how they crashed with seemingly excellent assets.
I notice that is at least one symbol is for a Business Development Company(BDC) which gets similar tax treatment to a REIT. Remember their dividends are non qualifying. I have posted before that investing in high quality property REITs in a Roth IRA had appeal since the REIT profits will never be taxed.
I could write a lot more about how a portfolio like this probably is not compensated enough for the risk you are taking. Buying SPY if you have a long term time horizon can never be a bad idea. Dividends increase over time with that too. Summary, I don't like your idea.
I would be looking for blue chips that get really beat up that pay a dividend and buy in. Something like PG. It happens but not often.
Finance theory indicates that your total expected return is no better with dividend paying stocks. Really I think you would be better served with bonds over high dividend paying stocks FWIW. Do your due diligence and maybe a bond fund would suit your needs.
In 2009 when I started this thread I had 0% understanding of anything. In 2012 when I bumped it I was still clueless. I'm beginning to understand some concepts and ideas, but I'm still just a noob.
If I were building a retirement portfolio, I suppose the first thing I'd do is open a Roth IRA, max contributions, and it would consist of something like VNQ and BND only, or something. Distributions from those are taxed at a higher rate so it wouldn't make sense to take that hit in a taxable acct. Either that or I'd do the Vanguard Target Fund for whatever year I'm eligible to cash out the Roth.
Really dunno, and won't think about it b/c I just want to build an income-generating vehicle I can supplement my investments with and eventually live off of. I'd like my income to eventually only consist of capital gains, as that minimizes tax cost. So my current strategy is to go after blue chips. The 25-year dividend champions top the list, with a requirement of 3% current yield minimum. I originally started by picking companies owned by BRK, but discovered the champ list and realized my strategy works better with companies that didn't even cut their dividend during the '08 collapse.
I understand ROI is better over time if I were to, say, just pound VT for life, but like BRK, I just want to buy and hold everything. The yield will be directed by me to invest in whatever I choose, and it won't be blue chips forever.
My strategy is to only buy more of a holding if it drops below the original price I bought it at. It's not just DCA, it's adding a position at a lower cost for higher yield, that in theory will not be cut. Over time, that 3% yield grows every time I DCA, or if the company grows on its own.
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Originally Posted by nyc999
FYI this guy has tracked the most consistent dividend payers over time - there are spreadsheets by category (with "Dividend Champions" the best - they've constantly increased dividends for 25+ years).
Dividend Stocks
Thanks for this. I learned quite a bit as a result of your post.
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Originally Posted by SJCX
I have a similar plan.
You can get dividend paying ETFs that diversify over several companies. Vanguard has one(VIG) that only holds companies that has raised their dividend at least 10+ years straight. They also have a high dividend paying ETF(VYM) that holds the higher(yet safer) paying dividends. I like their REIT(VNQ) as well. They don't pay real high yields but they are safer than the higher paying single stocks.
I put these in my and my wife's ROTH IRAs and re-invest the dividends. Dividends from a ROTH IRA are tax free when you start withdrawing them at 59.5.
I also get the total stock market ETF(VTI) in a taxable account that also pays a dividend.
We have 401ks we plan on rolling into IRAs with Vanguard that will also pay dividends.
When we retire with our federal pensions, social security and the dividends we'll be making more monthly income than we get while working, including overtime. This will be without touching any of our principal.
****ing awesome. I have a similar goal, different approach. Thanks, I am aware of the various Vanguard funds now after re-visiting this thread.