To hold a stock or to sell a stock, that is the question! I recently received a question from a subscriber. The question went like this: "Ian, I have a stock that I bought for dividends and it's up 10% in a short amount of time. Should I hold and risk losing my gains, or sell and redeploy the profits in another stock?" While I do not offer investment advice, today's video covers this very question in a hypothetical way, as if I were faced with the same situation.
In particular, I cover:
* My strategy around not penalizing winners. In fact, when stocks are up in my dividend portfolio, I will often add more money to those stocks. I have stocks in my portfolio that are up several hundred percent. If I sold after 10% gains, I would have foregone so much.
* It's typically a good thing when a stock has increased in price. Often, it means that the fundamentals are good. Revenue is up. Earnings are up. News is good. It confirms that one made a great selection. Rather than penalizing a winner, I like to double down on winners.
* An increased stock price (due to strong fundamentals) is often a leading indicator of a forthcoming dividend increase. If a company has a history of increasing dividends, it surely is a good sign to see revenue, earnings, and stock price increasing.
* I invest for dividends and cash flow so I almost never sell. In fact, I try not to look at day-to-day stock price fluctuations. Rather, I stay laser focused on my stream of dividend income.
* With an increased stock price, current yield goes down. This makes it less fun to buy more shares. That said, current yield does not really matter. It's all about yield on cost, as covered in this video:
* However, please keep in mind that I like to look at depressed stocks, those driven to low prices irrationally. (These are sometimes referred to as the "Dogs of the Dow".) When opening net new positions or selectively reinvesting dividends, I will often focus on those undervalued shares. That said, I don't sell winners to fund such undervalued opportunities, since it's just not consistent with my strategy (and not tax/record keeping efficient either).
* Dividend growth investing is all about passive income and cash flow. Holding forever and not selling has so many advantages in my personal stock portfolio.
Disclaimer: I'm not a licensed investment advisor, and today's video is just for entertainment and fun. This video is NOT investment advice. Please talk to your licensed investment advisor before making any financial decisions. Today's video does not offer tax advice either.
I’m only a new investor and it’s great that you hold I also use holding strategy one reason is “time” buying and selling irrationally takes huge amounts of time too many headaches , the other thing is the quick sellers day traders are doing huge harm for stock markets, I am in Australia 🇦🇺 invested in the ASX looking at American investing I have filled out what’s called here the W8-Ben form for less tax to pay that’s a deal worked out between Aussie and USA, I have 10 companies Australian ones in my portfolio at the moment. Very very unstable markets right now however I am riding out the storm , although Aussie is a very wealthy country the growth is more or less better in the USA, however buying more stocks when your stocks are doing well that is paying top dollar for stocks that may not increase much apart from inflation growth , the other thing you say you use dividends to pay bills , WHY ? I re-invest dividends through re-investment schemes to give me an increase in shares and that is a better way to increase shares rather than buying more shares if things are going well , still good to see another point of view we call stocks /shares in australia
One thing you didnt mention is what you do with this buy and hold theory when the stock is down 20% or so. Do you still hold forever? These days (december 2018) the market is very anxious. would you not reccomend I wait until a crash come before starting to invest?
Yes, I would like to know what happened to your stocks from the peak (~2000) prior to the Internet bust( ~50% drop in value) all the way through (assuming you kept the stocks) and probably finally even-out 7 years later (2007) and then yet another crash in the Financial crisis of 2008 (another ~50% in stock value)? My guess is that it took 13 years for those stocks to even out in 2013. However, if you kept them...it should have done very well to 2018. Were they still paying out dividends during those 2 downturns?
I bought some stock when I heard the Supreme Court passed sport gambling. That was back in May I've been losing money ever since.I told myself I'll wait till the nba season kicks off .What do you think I should do.
Haha! I honestly don't remember which jeans I was wearing here... In general my favorite jeans are 7 For All Mankind (the Slimmy or Paxton fits) or Joe's Jeans (the Legend fit). Hope this helps! I'm able to buy these jeans at the outlets which is always better than paying full retail price!
Thanks so much for subscribing, I truly appreciate it! For me, I like to track everything in Excel. I create a separate row for each incremental purchase (or reinvested dividend). My spreadsheets get really long, but they do the job.
I've made a few mistakes already as a new investor and the biggest one was diving in with a lump sum of money and buying 20 or so stocks without acknowledging my end goal of dividend investing over the long term. Unfortunately I will have to sell some stocks maybe even take a loss to re position my portfolio with my end goal in mind. Im hoping they bounce back after this recent 2018 correction so I could at least break even when I sell them. Some are gambles that dont pay dividends and some are paying dividends of less than 2%, but im okay with it because its a small price to pay for a lesson that really cant be taught I guess. A lesson that wont be repeated because that wouldn't be a lesson learned lol.
Thanks for stopping by and sharing your real world experience. In my early days, I made a ton of mistakes. I even traded penny stocks for a while! In hindsight, I cannot even believe it. Thank you for your honesty and for sharing with the community here. I also wish you incredible success going forward! Really glad to have you here.
Hey Ian! I love your videos. I just have a question about how much of your portoflio you should hold in Cash ( not in emergency fund). I am currently invested 50% of my portfolio in good dividend stocks and 25% in ETFs, and 5% in Cryptos. My question is would you keep 20% of your portfolio in cash to perhaps buy a stock at a good price if it falls, or simply invest 100% as long as you have your emergency fund invested. Thanks Ian! Love the channel.
Many thanks for the kind words, Jaxter! In my situation, I'm typically "all in". I buy through the ups and downs of the market cycles since reaching my goal requires many years of averaging in. Hope this helps!
That's right! Slow and boring for sure. Certainly difficult to stick with it at times and requires huge willpower. However, the strategy works and snowballs over time. It's the best strategy I know of for sure.
Good stuff, Ian! There really are a lot of variables, which is why I posed the question with the time period of which decade and not which year, LOL!
One of my issues is that most of my current investments are inside a self-directed 401k and Roth IRA, so those wouldn't be accessible for 30 years for me (I'm 28 currently). I'm sure over the next 15 years i'll build up taxable accounts that I could use to pay for my living expenses before the retirement accounts could be accessed.
Are you familiar with Jason Fieber's investment journey over at MrFreeat33? His story is worth a look. He's built his investments in taxable accounts only with an aggressive savings rate coupled with dividend growth investing.
BTW, I bet your channel will have 10,000 subscribers within a year.
Man, that is a good question! It's really difficult to say at this time. Tons of variables. I've got to think about that one (and do a little modeling) and get back to you with a true response. Lots going on here, and will queue it up for a video response. I'm glad you asked because I look forward to putting some good modeling into my answer.
Keep up the good work! I’m surprised your channel hasn’t reached to 1 million subs. Maybe you need to market your channel better . When it comes to dividend investing, you have the best channel. I watch your video daily. So informative and insightful.
Thanks a lot, Ian for addressing the questions. Can you suggest any of your favorite books on the topic, like review of top 5 maybe. Also, it would be great if you could do sort of a video tutorial on your stock selection process, where you pick a stock and go through your process as if you were actually considering buying it, of course stating educational purpose only. For a novice investor it is rather difficult to work out an actionable system / framework for analyzing an individual stock to base you purchase decision on. Also how often do you need to re-assess the stock and what are the re-assessment criteria? Maybe follow up on any of your really long- time holdings to handhold us through your process. Unfortunately many investment books are too generic and describe DGI in general terms, but once you accept that DGI is a way to go, you need actionable procedures for analyzing companies and their stocks and that is where very little information is actually provided. So hope you can address this issue as well in you later videos.
Andrey, you are very welcome! I have a long-form video on the way (probably about 3 weeks out) that will go through my stock selection process step-by-step. This is going to be a really long video, probably about 45 minutes - 1 hour long. Great ready - it's going to be amazing. I agree that this would be incredibly valuable for the community, and will showcase specifics for those who invest in dividend stocks (dividend growth investors).
Andrey Maksakov while you wait for Ian feel free to watch this video for some basic guidelines. Now I believe Ian and I disagree on index funds but I certainly respect his advice. Hopefully you can get some good info from this and then Ian can supplement. https://youtu.be/9HeTsNnjhlQ
Another valuable video, thank you for sharing your experience with us. I share your videos with all of my friends that are into investing stocks. I hope you can reach out to a lot of people, I totally agree that dividend growth investing is the superior way of investin and it is one of the most low-stress ways of investing too (I traded forex in the past....such a stressfull thing). What do you think btw about Reits and ETF`s? Could they be a part of your portfolio too?
Jonathan, thank you so much for the support and for sharing my videos. It truly means the world to me. Thank you! Regarding REITs, I like them, and I own one in my portfolio. There are some pros/cons specific to REITs, and I will be doing a video in the future about this very topic. I know a few community members have been asking about this topic. Regarding ETFs, I'm not a huge fan, and I only purchase individual stocks (except in cases where that is not an option such as retirement accounts). I also will be doing a video on that very topic in upcoming weeks. Thanks again for your support. That forex trading sounds very stressful, for sure!
Great content Ian. Thanks for sharing your 20 years of DGI experience. I have seen all your videos on Dividend Growth Investing and honestly it has influenced me on how to invest for the long run especially through my retirement years. I know your end game is to live off the dividends in the future but do you plan to have other investment type of assets the could bring you passive income besides dividends to be even more diversified? In other words will you diversify into bonds for fixed income or real estate for rental income?
Mel, thank you so much for the continued support, comments, and questions. it means a lot to me! I am totally about multiple streams of income. In addition to dividend growth investing, my career involves investing in real estate for passive income (for the long term). And, I actively build online businesses as well that drive income. I don't like calling it passive because it's earned income, but I love the work. As I approach financial freedom / retirement, I will certainly count on my multiple streams of income, in addition to dividends. That being said, dividends are always going to be my primary focus, and I actively funnel cash flow from my other streams into dividend stocks.
Hi Ian Its Joe from Miami , I got a question... Do you have a rule or a guideline of how many share to buy before it becomes to many shares of one company - or do you have a cap of shares per company ? Just curious .. Once again Great video-Keep it up
Joseph, great question! Thank you so much for the support. I personally have no share cap (or dollar cap for that matter). For me, it's more of a percentage of portfolio cap, depending on the overall size of the portfolio. I'm going to queue up a video response to your question, as it gets a little involved. Great question and thanks again!
In a time of increasing change and uncertainty, we must be clear on what will not change to not get distracted.
Strategic Portfolio Management.
1. Periodic evaluation and prioritization of the entire innovation portfolio.
2. Strategic and priority-based resource allocation.
On a strategic level, portfolio and resource management must be fully aligned.
3. Release and exit of innovation initiatives.
About the authors.
Dr. Ralph-Christian Ohr has been working in several innovation, division and product management functions for international, technology-based companies. His interest is aimed at organizational and personal capabilities for high innovation performance. He authors the Integrative Innovation Blog.
The Biggest Mistakes in Managing a Portfolio.
The Biggest Mistakes in Financial Planning Series.
by Harvey Jacobson, CHFC, MBA, CLU.
Investors who have remained consistent with their risk profiles through volatile markets have seen a substantial recovery in their portfolios since March 2009. Those who are truly behind are those who panicked and are now left with the decision of how to recover their losses. They can, but it is a much slower recovery.
This article published originally April 13, 2010, Los Angeles Daily News.
Managing an agile portfolio.
When the right people on the right teams have the right context, they naturally do the right thing.
Set the right context.