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Old 01-11-2013, 06:08 PM   #21
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response #1 to comments on my high-yield investing


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Defend how you can stop a pendulum from swinging because that's what you're up against. What's great today won't be that way over the long run.

Okay... we're off and running.

I'll answer the questions and/or respond to the comments one at a time, so things don't get all tangled up.

I'll assume the pendulum refers to the market swinging up and down day-to-day, as well as swinging back and forth from bull to bear. This point comes to mind on that:

My income and my 8-8.5% annual IRA withdrawal expectations are based on the dividends and interest generated from this point forward by my portfolio, and do not require cashing out any of the portfolio's holdings. So, it is irrelevant to my projected income stream what the price of any stock in the portfolio -- or the market value of the portfolio as a whole -- may be at any given time. I don't have to sell anything, and I particularly don't have to sell anything when the market pendulum is on a downstroke.

So much for the market's up-and-down pendulum?

Note: Hopefully, this also answers Animorph regarding having my principal at risk, and HLF718 regarding what happens if my portfolio "suffers" a 10% set back (presumably to the portfolio's market value.)


Alex in Virginia
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Old 01-11-2013, 06:21 PM   #22
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I'll take a swag at the pendulum. It's only a pendulum when viewed on a particular timescale. What looks like a downturn to a long term investor is completely irrelevant to a short term investor and vice versa. So one may adjust their investment horizon according to the pendulum. Now, you are free to use the pendulum to your advantage.
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Old 01-11-2013, 06:26 PM   #23
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Wow. How could I have been so wrong?

You guys have obviously figured out how to make big bucks in the market. Enjoy!
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Old 01-11-2013, 06:29 PM   #24
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Closer to a few pennies than big bucks, but it's better than working.
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Old 01-11-2013, 06:30 PM   #25
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Wow. How could I have been so wrong?

You guys have obviously figured out how to make big bucks in the market. Enjoy!
Silly successful early retiree: tricks are for kids! (and hookers)
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Old 01-11-2013, 06:33 PM   #26
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Originally Posted by Alex in Virginia View Post
My income and my 8-8.5% annual IRA withdrawal expectations are based on the dividends and interest generated from this point forward by my portfolio, and do not require cashing out any of the portfolio's holdings. So, it is irrelevant to my projected income stream what the price of any stock in the portfolio -- or the market value of the portfolio as a whole -- may be at any given time. I don't have to sell anything, and I particularly don't have to sell anything when the market pendulum is on a downstroke.

Alex in Virginia
So your portfolio investments have a given stated yield and you with draw this amount. What do you do when you have a default on a junk bond or a dividend cut due to a business imploding? How do you make up for the permanent loss of capital?

Separately, what do you do about inflation? My experience is that you can have high dividend yields or substantial dividend growth, but not both.
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Old 01-11-2013, 06:53 PM   #27
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Over the years,
...
For almost 4 years, I have invested my IRA funds only in high-yield dividend stocks. When I started, I set a minimum of 6% yield, but in practice I have been operating on a minimum 8 - 8.5% yield for the last 3+ years. Over the last 6 months, I have begun shifting some money into bonds, but again only high yield (10% or better).

This means, of course, that starting next year (at 66), I anticipate a withdrawal rate of 8% per year from my IRA -- without touching the principal (which has doubled since March of 2009).
What have other possible investments done in 4 years? You act like this is the only way to make money. Maybe there are other -- less riskier -- ways to make money? We all know that since Jan 2009 (4 years ago) that everything has been up 80% to 100%. And since the low of March 2009, small cap value has almost tripled in value. Total Stock Market Index is at 2.4 times its March 2009. It sure seems like you have underperformed simple stock market indexes.

Be sure to revisit this thread in the heart of the next bear market.
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Old 01-11-2013, 07:21 PM   #28
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It's going to work great until it doesn't. Yawn, I guess I'll go back to whatever no work boring portfolio I have.
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Old 01-11-2013, 07:39 PM   #29
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Your strategy is aggressive, and if you are comfortable with actively trading on it you may continue to do quite well. In my experience, knowing when to sell (or sell and adopt a new strategy) is much more difficult than plunking your capital into what the market, by virtue of the yield, has defined as risky. I would be much more interested in learning about when you have decided to adopt a new strategy when the market faces rising Fed rates and attempts to stave off inflation. I recommend watching aggregate fund flows out of bonds into equities. Please let us know your "yield" after eating any capital loses. I am rooting for you, but then I always root for the underdog.
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Old 01-11-2013, 07:40 PM   #30
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response #2 to comments on my high-yield investing


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Looking at your spending thread, I'd suggest you immediately cease and desist on any and all efforts to increase spending. Your investment strategy will likely result in you needing every penny you can get your hands on.
OK, REWahoo, I think I just caught you rolling your eyes at what I'm doing. You clearly are assuming some kind of disaster is going to happen. But what disaster? If you can be more specific, I'll do my best to think through your negative expectation and respond to it.

(Ditto samclem and Texas Proud?)

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Old 01-11-2013, 07:46 PM   #31
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OK, REWahoo, I think I just caught you rolling your eyes at what I'm doing. You clearly are assuming some kind of disaster is going to happen. But what disaster? If you can be more specific, I'll do my best to think through your negative expectation and respond to it.
I don't believe any additional comments from me on this subject would be productive, so I'm done here. The best of luck on your spending and investing strategies. Hope all turns out well for you.
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Old 01-11-2013, 07:55 PM   #32
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In all my readings, I have never heard of anyone advocating this route.
Does that give you a clue that maybe the rest of us are not stupid and quite possibly you're overlooking something?
Bruce
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Old 01-11-2013, 08:04 PM   #33
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Ever heard of don't follow the masses? Maybe there is some truth behind it.

I see the question of when to sell. There is no question I decide when to sell before even placing a buy order. So when the condition I've already decided upon is met, I sell. And if the sell condition is never met? I choose the condition to sell such that this is impossible. Can't really get much simpler than that.
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Old 01-11-2013, 08:06 PM   #34
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I have a question. What would motivate anyone to "attack" your investing or anything else that you do? It's purely your business. It is impolite to go around attacking things, and generally stupid also.

So like many others, I'll just say I hope it goes well. I am in favor of anything that produces a taxpayer rather than a taxtaker. Bonne chance!

Ha
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Old 01-11-2013, 08:11 PM   #35
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I don't believe any additional comments from me on this subject would be productive, so I'm done here. The best of luck on your spending and investing strategies. Hope all turns out well for you.
Or as they would say on Shark Tank (TV Show):
You're Out.

I'm out, too.


I'm just following this thread for its entertainment value.

Edit to add: Like others, I hope it works well for the OP.
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Old 01-11-2013, 08:16 PM   #36
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Ever heard of don't follow the masses? Maybe there is some truth behind it.

I see the question of when to sell. There is no question I decide when to sell before even placing a buy order. So when the condition I've already decided upon is met, I sell. And if the sell condition is never met? I choose the condition to sell such that this is impossible. Can't really get much simpler than that.
Sweetheart, I have rubbed elbows with far sharper knives than you in the investing world and I can tell you one universal truth: longevity of a portfolio and investing success can only rest upon a very solid foundation of risk management. I also think it is pretty clear that even the very sharpest manage to cut themselves from time to time, so make sure you have lots of bandaids handy.
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Old 01-11-2013, 08:18 PM   #37
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It requires adhering to a strict set of rules and never deviating.
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And when the market changes, you will adapt or end up broke.
I cannot reconcile these two. How do you know when to stop your strict adherence and adapt? Usually that happens in hindsight.
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Old 01-11-2013, 08:22 PM   #38
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My rules clearly define how to adapt and when to adapt. So there is no point at which I break the ground rules I've established for trading. I have a set of criteria to determine what sector to invest in, weeding out companies, exactly when to buy, and precisely when to sell.
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Old 01-11-2013, 08:30 PM   #39
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I was making big bucks writing options. Until 9/11 when the airlines collapsed to single digits or went bankrupt.

Then I was making big money trading futures. That is, until 2008, when margin increased dramatically overnight and my 6 figure account got squashed in a margin call.

It'll work until it doesn't. The question is...will you be around then to admit it?
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Old 01-11-2013, 08:33 PM   #40
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I don't use margin :-) But in all seriousness, I purposely separate my trading money from safer / stable money. So when things go south, and they have, I'll still have options. Will my strategy remain profitable long term? That remains to be seen, but it has served me well so far (knock on wood).
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