Tuesday, January 10, 2012

Dividend Investing Vs Day Trading...

Hello all,

As many have seen, recently I drastically altered my investment strategy to include day trading.  This shift in strategy left my portfolio with just five dividend stocks: Abbott Laboratories (ABT), Johnson and Johnson (JNJ), Proctor and Gamble (PG), Realty Income (O) and Anworth Mortgage (ANH)... and not to mention many fellow readers baffled in disbelief as well.

Although there are several who frequent DividendPartisan that feel I have completely abandoned my dividend growth investment strategy and should potentially change the website's name, a closer look at my holdings and their overall percentages will reveal otherwise.  In fact, four of my holdings (ABT, JNJ, PG, and O) made up over half of my original portfolio before I started selling my smaller holdings in order to fund my day trading - a fact that should not go overlooked when defining my investment persona... :)

Nevertheless, I have indeed been actively Day Trading for almost 30 days now, and as a result,  I thought I would share some things I have learned in regards to.... what are somewhat polar opposites of Day Trading vs Dividend Investing.

Naturally, I'll use my personal journey and my own real-world portfolio in this process.  My decisions and my trades are actual earnings, or losses, that others can hopefully glean some wisdom from.  I hope you enjoy this review...

The Dividend Journey

In this section, I'll briefly highlight two things: my thoughts on dividend investing; and where my portfolio would have been should I have continued the course with 15 or so safe, dividend companies.

FACT #1: If I would have not sold any of my holdings, AND not made any additional contributions this year, I would have earned an estimated $2,200 of dividends in 2012.

FACT #2: My original portfolio closely followed the S&P500 (within a percentage point or two depending on when you took your data.  I've slightly beaten the S&P over the last two years but not by a large margin).  Therefore, from December 12th (the day I began day trading) to January 10th, my portfolio would be up around 2% or so.

Fact #3: In December and January, my original portfolio would have returned right about $320 in dividends.

Observation: Dividend Investing is the way to go for slow, steady, safe growth..no doubt about it in my mind.  I love the "relaxed, guaranteed income" feel it brings and I cannot say enough about the wisdom in this investment strategy.

The Day Trading Journey

In this section, I'll highlight two things: my thoughts on day trading; and where my results have been thus far.  Please keep in mind that I have only actively traded now for about 20 available trading days total.

Fact #1: In about a three week span I have made over $1,400 in active trading gains.  Deposited into my account, real cold hard cash. These earnings have been a blessing I definitely am grateful for and only share in order to be open about this process, nothing further.  $1,400 would have taken me about 7 months to earn in dividends; about 210 days of the year vs 20.

Fact #2: I have only made 9 trades thus far and have not spend too much time doing it (though my wife may slightly disagree).   Nevertheless, my trades are as follows (not in any order or magnitude): several of Sirius (SIRI), several of Ford (F), one of AMR (American Airlines...delisted), one of a mutual fund, and one of Chipotle (CMG).  I have averaged over $150 on almost every trade.

Fact #3: I have not been very aggressive in my day trading (truly I haven't).  More importantly, I have sold too early on EVERY SINGLE TRADE, missing out on many, many larger gains.  I am notorious thus far for selling too early. 

Observation: Day trading is not for everyone, and definitely is not for money that you cannot psychologically "afford" to lose.  Risky.  I believe in Dividend Investing and continue to plan for it to be the core of my portfolio.

I believe that sums up this post.  As always, I would love your feedback; whether you are a dividend investor and have a blog of your own, or are simply trying to get the highest possible return with your money.  What are your thoughts?

Take care,

Dividend Partisan

8 comments:

  1. Sounds like you have a good plan as long as you don't get overly aggressive. Good luck and keep us up-to-date with your progress. I have dabbled in day trading myself, with less success than you. For me it seemed like I always would win a couple small trades, and then loss a big one. I would like to hear more about your methods. thanks

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  2. Anonymous,

    Thanks for the comment. I have been "stuck" as I like to call it several times as well; essentially being in the red on one of your trades and therefore you can only sell for a loss. My strategy with those is simply to wait them out until it turns positive again or to dollar cost average to a lower cost basis. With how much things fluctuate lately it is crazy not to day trade. For example, the market was pretty even today (down .10%), but with the swings I was able to earn right under 2%.. Keep in touch,

    DivPartisan

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  3. I applaud you to take day trading on, but personally, I couldn't do it.

    I'm a) not that smart and b) don't have enough guts to keep it going, even if I started.

    I am glad to read that you're keeping some of your heavy-hitters. I think selling those would be a bad idea. Those guys might just pay dividends for another 100 years. :)

    Cheers,
    Mark

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  4. Sounds like you have a good plan and starting to make a profit, would like to know more about the selection process for these stocks.

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  5. Anonymous,

    I have thought about how much I am going to share on the site with regards to the selection process...For now, I think I'll just report on my choices. Feel free to send me an email and we can discuss further. Happy investing!

    DivPartisan

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  6. I have tried many strategies and lost a lot of hard earned money, if day trade works for your be carefull with big loses, I found dividend investing the way to go and as author Jeremy Siegel phrase on dividend strategy: "Why the Tried and the True Triumph over the Bold and the NEW". Any ways good luck,wish you the best.

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  7. Anonymous,

    Funny you say that...My recent move was a costly one and I think unfortunately I will be "stuck" as I like to call it for awhile.. Thanks for the advice!

    DivPartisan

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  8. I know very little about day trading...but I had a family member who gave me some good advice...all traders make money when the market is moving up, as it has been the last few months...so make sure you have a good plan when the market is moving down, that will decide your fate...this is why i like dividends, because its a good strategy in almost any environment...day trading is a good strategy when the market is good, and bad when the market is bad...according to my uncle anyway...so beware of that...also, congrats at swinging for the fences, nothing wrong with that at all...also, another good bit of wisdom from the poker tables, is never bet more than 5% of your stake...so if you lose it wont cripple the rest of your game

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