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Wednesday, January 1, 2014

Analysis of Investing results in 2013

I started to invest in dividend growth stocks in October 2013. After reading comments of clever investors on Twitter for a while, plus reading websites/blogs dedicated to investing in dividend stocks with a history of growing those dividends, I decided it made sense to put some of my money in solid companies with strong track records of paying cash to their share holders.

I was also inspired by the relative under performance of my options trading activity this year in respect with the S&P 500. When you start trading options, as a rookie you dream of 50% or higher yearly returns. And you think if I can do that, why the hell would I invest passively in stable, boring companies that on average grow my capital 7% per year and pay me an additional 3% on top of that? Why would I change a fun strategy that multiplies my money faster, by one that is boring and gives me so little in return? "I wanna be wealthy, and I wanna be now!!" Oh you rookie!!! Only time and skin in the game let you realize that no trading vehicle will give you 50% returns a year without facing superior risks. And the truth is that in very strong markets, like what we had in this 2013, selling options is a tough challenge, dealing with low premiums to sell, and facing greater risks as a byproduct of selling options whose strike prices are closer to the current market.

One more thing that made pull the trigger and start aggressively investing for the long term was the fact that over time all the trading blogs I followed started to disappear. Or simply stopped sharing their trades. Some of them did not shut down their sites but just stopped blogging entirely. In contrast, I must say the community of investing blogs is pretty solid. There are plenty of retail investors that have been sharing their trades, track records and ideas for years, and are still there. This inevitably led me to believe that probably the main reason is that in the community of bloggers, those that are oriented towards investing have been obtaining better results than the traders, and therefore they have felt more motivated to continue blogging.

In just 3 months, from October 1 to January 1, I got to invest 10,466.28 Canadian Dollars in 7 Canadian companies and 5,968.02 US Dollars in 5 American Companies. The Canadian companies portfolio is up +6.67% and the US companies portfolio is up +3.08%. On top of that, $49.40 Canadian dollars and $26.35 US dollars were received as dividends during this period for holding the shares.

My first purchase was Bank of Nova Scotia. BNS declared its initial dividend at the rate of 3% per annum on July 1, 1833. Since then, it's been 180 consecutive years rewarding shareholders with cash. Think about it for a second: 180 consecutive years. Wars, recessions, catastrophes. That's the kind of company where I want to put my money for the long term so I receive passive/reliable income without having to sell any shares.

Bellow are the details of all my investments in 2013
Canadian Portfolio

American Portfolio

I will receive at least 471.32 CAD and 225.20 USD in the form of dividends in 2014 just for holding these stocks. And I say at least because all these companies have a history of raising their dividends every year, so in all likelihood I will receive more than the aforementioned amounts. That's the main goal of my investments. I want to create a stream of passive income via dividends. Dividends are pretty cool because you don't have to sell your stocks to materialize gains, and yet you get to receive periodical little rewards for being a shareholder. They are also taxed favorably in respect with ordinary income or short term gains. My plan is to invest $15000 to $20000 every year. Right now it is hard to find good undervalued companies with the markets at these levels so, I will stop purchasing new symbols for the time being until I see better opportunities. My entries will hopefully be close to the 52 week lows in solid names with a good history of paying and growing dividends. I won't write an article on the blog every time I make a new purchase or receive a dividend payment. It would mean too much blogging for me. But I will update the portfolio in the Results page the last day of each month and on top of that I will probably write an article about long term investments on the site whenever I feel there is something fresh or useful to say. Hopefully this new section of the blog inspires/helps someone out there.

Related Articles:
Analysis of Options Trading results in 2013
Analysis of Forex trading results in 2013
Invest and Retire before you die
ETF Rotation Systems to beat the Market

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