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educational blogs |
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Like so many things regarding the task of Investing, it really isn’t easy to do in practice but if you can find those relatively rare ‘Long Term Buy & Hold’ (LTBH) Stocks, that just have a habit of going up year after year and also paying you a decent Dividend, then you will have a very easy and very prosperous life (especially if you slam some Leverage on it as well but that’s another matter !!).
To an extent I am looking for Stocks like this but in practice I recognise that apart from the fact they are not too common, they tend to do well for a few years and then the performance drops off. The ones that have pretty much risen for 10 years or more are exceptionally rare.
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My mate Phil (@sloan_phil on the Tweets) has kindly provided this Guest Blog following the recent events regarding cuts to Dividends and his action in reviewing and rejigging his Income Portfolio. I have read it a couple of times for proofing and all that and it is really good and has some excellent insights into investing in US Stocks.
Many thanks to Phil for providing WD Readers with this and a personal thank you for saving me a load of work in writing a blog this week !! Cheers, WD.
Fairly recently I caused a bit of a stir on the Tweets when I suggested that People who have regular payment plans into Funds (normally Unit Trusts – see my ‘Funds’ page for definitions of what the different types of Funds actually are), might be wise to suspend the automatic payments prior to the Coronavirus problems when it is highly likely that we could see Stockmarkets really struggling.
I got a lot of flak for this and it is very understandable why because there are maybe some advantages of such drip-feeding over time; but for me personally, I wouldn’t do this at all. But then I am perhaps a different type of Investor to many others and there is an element of ‘Horses for Courses’.
I’ve been meaning to write this hopefully fairly short Blog for a while but I keep getting distracted onto other things and we actually discussed this on a recent TPI Podcast so I wasn’t feeling a huge need to get it written. Having said that, we didn’t go into a comprehensive coverage of the issues and there is always a sense I have that I should try to cover as many topics as I can within my Blog Archive, so that WD Readers can revisit it in the future if they want to know about something. Maybe new Readers might find it useful also as the whole WD thing should really be to help Newbies as its main Sultana d’Etre (should that be ‘Raisin’?).
The essence of the ‘problem’ with my Income Portfolio is that my original theory behind it was to generate an Income Stream from the Dividends that was at least 5% a year based on the starting position each year. Apart from other aspects such as low activity and low risk and the diversification benefits, part of my thinking was that at some point in time in the future, I might have grown the Income Portfolio enough so that it would be throwing off Dividends that might amount to maybe £6,000 a year or so and that with other Income sources I have, I could get to a position where my Yearly Spending needs on food and rent and stuff are covered without me having to sell any Shares or make any money on Spreadbets etc. It is simply easier to just take Dividend Cash out of an Account than to have to think about which Shares to sell and all the timing issues and suchlike.
I am approaching an important and significant milestone with my Investing activities where I will need to start taking Cash out of my Main ISA Share Account in order to have dosh for my day to day spending needs. In this blog I intend to go through the implications of this and to look at best ways to manage any Drawdown so I get out the Cash I need to eat but also so that I still achieve decent Investment Returns and manage to compound gains as much as I can but obviously removing Cash reduces this beneficial effect. I am pretty sure that careful management of the Drawdown process should mean the impact on Returns is not too hefty.
I have now been ‘retired’ for pretty much 10 years (by the way, today is my second birthday – 21 years since my Bike Accident !!) and up until now I have had Cash and Investments outside of my ISA Share Accounts which I was merrily spending through but that source is drying up. I still have a big chunk of my overall Wealth in a Prudential With-Profits Bond but I see this as a bit of a ‘rainy day’ kind of thing and in a way it is for ‘emergencies’ such as if we are in a horrible Bear Market when I can’t see obvious ways to get Cash out of my Share Accounts. Fortunately over those 10 years my Main ISA has grown a lot.
Earlier this afternoon I was reading a copy of Investors Chronicle from a few Weeks ago (as always I am way out of date on my reading !!) and there was a couple of pages on a Regular Feature that Chris Dillow writes regarding several different Investment Strategies and how they work over time (Editor’s note - this Blog was first written in draft form back in mid 2018).
I reckon I might have done a Blog around this before or at least I have probably referred to what Chris does in this Strategy Piece and I guess that is one of the catches of having written various Blogs for nearly 4 Years now - I totally forget what I have written about and what I haven’t !!
I am sure I mentioned that I wanted to create ‘Buy Checklists’ that I could use to help me make a final Decision whether to Buy a Stock or not and having thought about it I have come to the conclusion it is not an easy thing to do !!
I have sort of already done the opposite of this - a ‘Negative’ if you like in a photographic sense - in the form of the ‘WheelieBin’ and if you look at the Website page with the WheelieBin on it you will find a good Checklist of what constitutes a Stock that is best avoided.
THIS IS NOT A TIP OR RECOMMENDATION. I AM NOT A TIPSTER. PLEASE DO YOUR OWN RESEARCH. PLEASE READ THE DISCLAIMER ON THE HOME PAGE OF MY WEBSITE. IF YOU COPY MY TRADES, YOU WILL PROBABLY LOSE MONEY. I HAVE A LARGE PORTFOLIO AND I USE DIVERSIFICATION TO SPREAD RISK ALONG WITH TRICKS LIKE HEDGING AND OCCASIONALLY BY THE USE OF STOPLOSSES - IF YOU BUY ANY STOCK YOU REALLY SHOULD FOCUS ON HOW IT FITS IN YOUR PORTFOLIO AND KEEP RISK MANAGEMENT AT THE FOREFRONT OF EVERYTHING YOU DO. BE AWARE THAT ALL INVESTORS/TRADERS GET THINGS WRONG AND MANY STOCK SELECTIONS WILL WORK OUT BADLY.
If you have not yet had a chance to read Part 1, then you can find it here: http://wheeliedealer.weebly.com/blog/primary-health-properties-php-buy-rationale-part-1-of-2 Valuation At the time of writing this Blog the Mid Price in the Market is 114p - I will use this Number for the purposes of this Valuation Section but of course in practice the numbers change as the Price moves up and down. Normally when I write these ‘Stock Buy Rationale’ Blogs I tend to use the actual Buy Price that I paid and that is obviously logical and relevant. However, in this case I am so late in getting the Blog published that I think it might be more useful for Readers if I use a Price closer to the prevailing Price at this point in time. Having said that my Buy Price was about 112p so it is not wildly different anyway.
THIS IS NOT A TIP OR RECOMMENDATION. I AM NOT A TIPSTER. PLEASE DO YOUR OWN RESEARCH. PLEASE READ THE DISCLAIMER ON THE HOME PAGE OF MY WEBSITE. IF YOU COPY MY TRADES, YOU WILL PROBABLY LOSE MONEY. I HAVE A LARGE PORTFOLIO AND I USE DIVERSIFICATION TO SPREAD RISK ALONG WITH TRICKS LIKE HEDGING AND OCCASIONALLY BY THE USE OF STOPLOSSES - IF YOU BUY ANY STOCK YOU REALLY SHOULD FOCUS ON HOW IT FITS IN YOUR PORTFOLIO AND KEEP RISK MANAGEMENT AT THE FOREFRONT OF EVERYTHING YOU DO. BE AWARE THAT ALL INVESTORS/TRADERS GET THINGS WRONG AND MANY STOCK SELECTIONS WILL WORK OUT BADLY.
If you have been keeping on top of my rare and infrequent Trades this year, then you might have spotted that I recently sold out entirely of my Holding in Sainsburys SBRY which I had held primarily in my Income Portfolio but I also had a Long Spreadbet on it which I sold earlier (you can see all details of my Trades on the ‘Trades’ page, funnily enough). The idea behind my Income Portfolio is that it is really intended to be Low Risk, Low Activity and Low Return - but what I mean by that is by targeting a Blended Dividend Yield for the Portfolio of 5% and with a little bit of Capital Gain each Year I hope to get about 7% CAGR (Compound Annual Growth Rate). If you skip over to my ‘Portfolios’ page you will see at the top a full list of the Stocks in my Income Portfolio at the moment.
I figured that title would attract a huge Readership to this Blog - I nearly went with ‘Free Bitcoins’ as I thought that would drive devourers of Reading Material on the Web utterly insane with their frenzy to take advantage of such an appealing offer.
I nearly went with something along the lines of ‘Actresses and Bishops’ because that tends to draw a big Readership also but I didn’t think I could stretch what seems to be the dull subject of Dividends that far. I also know that a small chunk of Readers are under 18 so I need to keep it clean (ish). I have actually stolen the title from my mate Cappy (@SmallCappy on Twitter) who always comes up with this term when we mention the wonderful phenomenon of nature that is the humble Dividend Payment. He has nailed it with such a description and I am fully onboard with his use of this term and I shamelessly pinch it whenever I can (you should have copyrighted it when you had the chance, mate !!). |
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