Monday, November 14, 2016

Trading the Rotation

The market reaction to the election has been interesting.  Previously high flying stocks such as utilities, telecom, gold miners and REITs have been knocked down, with some getting close to 52 week lows.  Similarly, bonds have taken a big hit.   Previously beat up stocks such as financials, biotechs, and materials are rising, some by as much as 50% versus a couple weeks ago.  Energy stocks have been mixed, some have bounced and some are still down.

In the weeksleading up to the election, I was taking the opportunity to buy some beaten up stocks, that I already own.  Some of these have now rallied over 40%.   Since I don't think the Trump rally is sustainable, I plan, as a hedge,  to sell off some of the recent purchases for a profit, while keeping my core holdings.  That way if the market sells off, I will have locked in profits.  If the market continues to rise, my core holdings will benefit.

In addition, I will be looking to purchse stocks in higher dividend paying stocks that have been beaten down (and are now on sale :-) since the election:  REITs, utilities, telecoms, and consumer staples.  Despite the concern about rising interest rates, I still believe locking in 3-5% dividends is still a good strategy at this time.

For more on Strategies and Plans, check back Mondays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Wednesday, October 05, 2016

My Solution for Running in Place Frustration

Lately,the market seems to be having a lot of activity, but little movement in total value of our accounts.   When one sector goes up, another sector goes down, resulting a wash.  Lately, material, gold and utility stocks have been falling, while oil stock are rising.  This is just the opposite of what was occurring a few months ago.

Based on this activity, I will start taking trading positions in some of our core equity holdings.  That way when the stock rotates upward, I can take some profits and repurchase the trading position when the stock falls.   However, I will only trade shares in excess of the core position amount.  That way when the market resumes an upward trend, the core positions will all benefit from the market advancing.

For more on  The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Tuesday, September 13, 2016

The Fed Conspiracy

"People love conspiracy theories." ~ Neil Armstrong

Here's my Fed conspiracy theory:   Despite guidance to the contrary, the Fed won't be raising interest rates for the next few years.   The Fed will continue to keep jawboning about raising rates to keep exuberant asset bubbles from forming, but will continually find a reason not to do so when the time comes.

If the Fed really intended to raise rates, it could have done it by now, several times given the relative strength of the economy.  So I don't believe the Fed really wants to raise rates.

In the meantime, I will use the volatility caused by the Fed jawboning to purchase good dividend paying stocks as they decline and to lock in higher interest rate on long term CDs.

For more on Ideas You Can Use , check back  Tuesdays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Wednesday, September 07, 2016

On Staying Invested in this Bull Market

"The reports of my death are greatly exaggerated." ~ Mark Twain

Despite the constant negativity from pundits, this bull market, which is the second longest at 7 -1/2 years, keeps grinding upwards.  This has been the most unloved bull market ever.   However, since March 2009, the best strategy has been to be invested in a diversified equity portfolio or a total market index and to add funds during any pullback or correction.

I, unfortunately, haven't been that brilliant.   Only about 25% of our funds are invested in equities,   However, I have been good about keeping that portion mostly invested, with only occasional instances of small profit taking.  Keeping the percentage of funds invested low had been worth the lost opportunity cost.  I have low anxiety about the funds that are invested, and therefore can sleep well at nights.

Despite warnings about the imminent end of the bull market, I will continue to keep about about 25% invested.   When the bull market does end, and it will, I will be able to bear the loss and be prepared to invest in the inevitable recovery.

For more on The Practice of Personal Finance, check back Wednesdays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Monday, September 05, 2016

One Way to Time the Market

The Holy Grail of investing is to get in just before the market rallies and to get out just as the market tops.  Although I have had occasional flashes of success (such as selling before the 2011 correction), I have not been able to consistently make the right call.   The toughest part is deciding when to get back in the market after getting out.

So now I use a different approach to time the market.  Whenever the a stock I own rises significantly, I may sell off part of the position.   If it rises further, I sell off another part.     This continues until I until I sell out of the position.   Similarly if a stock in which I am interested in buy falls, I may buy a small position. If it fall further, I add another small portion.  I do this until I have reached my target position.

An astute investor might note that the commission costs of each trade may make this approach prohibitively expensive.  My solution is to do this trade in commission free ETFs offered by the major discount brokers.   I can trade as little as one share with $0 commission cost.  The only caution is that some brokerages have a minimum holding period of 30 days, which is not that difficult to meet.   Some brokerages have no minimum holding period, which offers even more flexibility.

I have been doing this timing trade with a total market index ETF.   Right now I am selling off small positions, because I expect to be buying back at a lower price soon.

For more on Strategies and Plans, check back Mondays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Saturday, August 13, 2016

What Would George Costanza Do In This Market?

"...if every instinct you have is wrong, then the opposite would have to be right." ~ Jerry Seinfeld to George Costanza in episode 86.

This market is unbelievable. All three major indices closed at new highs on the same day this week. The last time this happened was in 1999, just before the dotcom crash which was followed by the 01/02 bear market.

Every investing instinct I have is telling me the market is too high, that this is too good to be true, and that a market top is near. A correction has to be coming soon.

My instincts are screaming, "TAKE PROFITS NOW!"

However, every sell instinct, except for one, since the 08/09 crash has been wrong. The only one that I acted on correctly was in August 2011, but then I stayed out of the market too long.

So I am going to do the George Costanza opposite. I'm going to stay in the market, for the most part. However, I will use the opportunity to reduce my holdings in company stock, sell some losing stocks, and take some profit in stocks that have advanced significantly.

Otherwise, I'm going to brace myself and hold tight. I may even hold my nose and invest more fund in equities should the market pull back.
For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Sunday, July 31, 2016

Make or Break Tuesday

My company announces earnings on Tuesday before the market open.   I have a vested interest since I hold employee stock options that expire 1-1/2 months.   If the earnings report exceeds expectations, I may get a nice bonus.  If the earnings disappoint, I'll have to settle for less, maybe much less.

I fully expect my company to disappoint.  It would take a small miracle for the company results to beat expectations. Therefore,  I should sell on Monday prior to the earnings announcement.

However, I plan to take the George Costanza approach of doing the opposite.  So I am going keep my stock options until after earnings.

For more on  New Beginnings, check back Sundays for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Sunday, July 17, 2016

Dividends Higher Than Interest Again

1959 all over again? Why this could be another historic moment for the market reports that for the first time since 1959 the S&P dividend yield is higher than the 10 year bond yield.  Prior to 1959, the S&P dividend yield was almost always above the 10 year bond yield.    However, since 1959, the 10 year bond yield has always been higher than the S&P dividend yield.

I found this article interesting, since all I have ever experienced is the 10 year bond yield  being above the S&P dividend yield.   So I assumed that was the norm.  I guess I accepted the explanation that dividend stocks had earnings growth, which led to a higher total return than bonds.

So what does the flip mean?  To note, both the S&P dividend yield and the 10 year bond yield are  about half of what they were in 1959. Are bonds now considered ultra safe investments again and yields will fall further?   Are stocks about to rise or fall significantly shortly to revert to the mean?  Is inflation unlikely and deflation more likely in the future?

All great questions to ponder.  My answers and yes, yes, and yes.

For more on New Beginnings, check back every  Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Tuesday, July 12, 2016

Irrational But Not Exuberant

The best thing I can say about this bull market is that there is no exuberance.   In fact, this is the most unloved bull market ever as there is very little investor confidence in the strength of every rally.   On the other hand, just about everyone agrees that this market is irrational, i.e. there are very few fundamental reasons that support the current market value.

Markets can be irrational for quite a long time.   However, market exuberance can only be sustained for short periods, and often end with a bear market or crash.

For now, I'm staying long with this irrational market since no exuberance in sight.   I'll be looking for signs of exuberance, such as relatives and friends telling me about their killings in the stock market.  At that point, I'll protect our gains by reducing our exposure to equities, and hopefully protect some of our gains.

For more on  Ideas You Can Use, check back every Tuesday  for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC

Monday, July 11, 2016

Building a Cash Cushion

While I have enjoyed the recent stock market rally, I have no confidence in the market's ability to continue advancing.  So as the market advances, I have been taking profits in accounts that have been hitting new highs, and maintaining the original account balance.  That way I stay invested and take profits.  So if the market goes up, our investments will participate. If the market goes down, I have protected some profits.

 At first, I would wait for a 5% gain before taking out funds.  Now I am taking out funds with as little as a 1% gain.   Since the accounts are like a mutual fund with a 1.25% expense fee,  there is no commission charge when I sell a small portion to raise cash.  I have been doing this since 2012 and have taken as much as 40% out, while maintaining the original amount invested.   However,  I do have one account that is losing about 10% net after accounting for the funds taken out.

I plan to do this until I have withdrawn about 50% of the original investment to create a cash cushion.   After that I may let the investments ride until they gain 25-50% before taking additional funds out.

For more on Strategies and Plans, check back every Monday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2016 Achievement Catalyst, LLC