Tuesday, January 10, 2012
Dividend Investing Vs Day Trading...
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?