Saturday, March 1st, 2008 |
Jesse Livermore’s 5 money management rules.
These are the tried and true money management rules for traders, given to us by the greatest trader of all time. I felt obligated to share these points as I read through them- even though I am more of a long term investor.
I have always said that there are many ways to make money in the market and that you can always learn from others. That said, please take these words of Mr. Livermore and figure out what they mean to you and your investing or trading plan.
1) Don’t lose money.
Don’t lose your stake. A speculator without cash is like a store-owner with no inventory. Cash is your inventory, your lifeline, and your best friend. Without cash, you are out of business. Don’t lose your line.
There is no place in speculating for hoping, for guessing, for fear, for greed, for emotions. The tape tells the truth.
2) Always establish a stop.
A successful speculator must set a firm stop before making a trade and must never sustain a loss of more than 10 percent of invested capital.
I have also learned that when your broker calls you and tells you he needs more money for a margin requirement on a stock that is declining, tell him to sell out the position. When you buy a stock at 50 and it goes to 45, do not buy more in order to average out your price. The stock has not done what you predicted; that is enough of an indication that your judgment was wrong. Take your losses
quickly and get out.
Remember, never meet a margin call, and never average losses.
Many times I would close out a position before suffering a 10 percent loss. I did this simply because the stock was not acting right from the start. Often my instincts would whisper to me:J.L., this stock has a malaise, it is a lagging dullard. It just does not feel right, and I would sell out of my position in the blink of an eye.
I absolutely believe that price movement patterns are repeated and appear over and over with slight variations. This is because humans drive the stocks, and human nature never changes.
Take your losses quickly. Easy to say, but hard to do.
3) Keep cash in reserve.
The successful speculator must always have cash in reserve for exactly the right moment. There is a never-ending stream of opportunities in the stock market and, if you miss a good opportunity, wait a little while, be patient, and another one will come along. Don’t reach for a trade, all the conditions for a good trade must be on your side. Remember, you do not have to be in the market all the time.
The desire to always be in the game is one of the speculator’s greatest hazards.
When playing the stock market, there are times when your money should be waiting on the sidelines in cash waiting to come into play. Time is not money “ time is time, and money is money.
Often money that is just sitting can later be moved into the right situation at the right time and make a fast fortune. Patience is the key to success, not speed. Time is a cunning speculator’s best friend if it is used wisely.
4) Let the position ride.
As long as the stock is behaving normally, do not be in a hurry to take a profit. You must know you are right in your basic judgment, or you would have no profit at all. If there is nothing basically negative, then let it ride. It may grow into a very large profit. As long as the action of the overall market and the stock do not give you cause to worry, have the courage of your convictions, and stay with it.
When I was in a profit on a trade, I was never nervous.
Of course the opposite is true as well. If I bought a stock and it went against me I would sell it immediately. You can’t stop and try to figure out why a stock is going in the wrong direction. The fact is that it is going in the wrong direction, and that is enough evidence for an experienced speculator to close the trade.
I do not and never have blindly bought and held a stock.
To buy and hold blindly on the basis that a stock is in great company or a strong industry, or that the economy is generally healthy, is, to me the equivalent of stock market suicide.
Stick with the winners. Let them ride until you have a clear reason to sell.
5) Take the profits in cash.
I recommend parking 50 percent of the profits from a successful trade, especially when the trade doubled the original capital. Set the money aside, put it in the bank, hold it in reserve, or lock it up in a safe-deposit box.
Like winning in the casino, it’s a good idea, now and then to take your winnings off the table and turn them into cash is the single largest regret I have ever had in my financial life was not paying enough attention to this rule.
More great information on Livermore can be found here.
Have an awesome day!
Posted in Uncategorized | 1 Comment »
Tuesday, January 16th, 2007 |
Greetings,
One of my readers has recently suggested that I should include more personal information on this site. He said that he would be more interested in my personal investments and that I should update everyone on how I am doing from time to time. I have no problem doing that and if more people would like me include more personal information, that would be great!
That said, one of my goals for 2007 is to make Dividend Money the best site that it can be. The best way I can think of to do that is to ask you what you would like to see on Dividend Money!
Please tell me how I can improve this site. I would love to hear all of your comments and feedback. What do you like about Dividend Money? What don’t you like? Would you like more charts? More pictures? A Forum? Let me know!
Feel free to contact me at tyler(at)dividendmoney(dot)com or leave any suggestions in the comments section at the bottom of the post.
I am open to any suggestions and I want to make Dividend Money your favorite financial site this year!Â
Posted in Uncategorized | No Comments »
Saturday, January 13th, 2007 |
It is always reassuring to me as a Dividend Growth Investor to see the strategy I use highlighted by analysts and financial planners in major news publications.
I recently found this article in the Globe and Mail and thought it would be beneficial for you to read the high points outlined below.
Dividend stocks will appeal to investors not so much for yield but for the total return they provided through a combination of cash distributions and price appreciation. Consider the bank stocks that Mr. Marshall is looking at, RBC and TD. Both yield a bit less than 3 per cent right now, but their total returns for the past 12 months are about 22 and 15 per cent, respectively, because their shares have risen.
There are hundreds of blue-chip dividend-paying stocks listed on the Toronto Stock Exchange as well as U.S. and global exchanges. How do you find the best of them? The Calgary-based investment dealer McLean & Partners Wealth Management emphasizes not the yield of a company’s dividend, but rather the company’s track record for increasing its cash payouts to shareholders.
A high dividend yield — say anything about 5 per cent or more — suggests investors have a cautious view toward a company (as the price of a stock falls, its dividend yield rises). But dividend growth sends a message that a company is strong and healthy. “It says a company will be around through thick and thin, and that it will outperform over the long term,†said Ric Palombi, a portfolio manager at McLean & Partners.
Mr. Palombi said his firm looks for companies that have increased their dividends by more than 8 per cent every year. “Owning a stock that increases its dividend by 8 per cent a year is like getting an 8-per-cent raise every year,†Mr. Palombi said.
The major banks are classic dividend growth stocks. RBC, for example, has raised its dividend 14 times this decade, from 12 cents to the current 40 cents a quarter. If you paid the going market rate of about $15.50 for RBC shares in January, 2000 (this price is adjusted for stock splits), then your current yield would be just over 10 per cent.
Three dividend growth stocks that McLean & Partners likes right now are Astral Media Inc., Manulife Financial Corp. and Power Financial Corp., all of which have posted double-digit increases in their dividends over the past few years. The firm also likes global dividend stocks, including French company Veolia Environnement.
If you prefer to buy mutual funds rather than individual stocks, there is a small but growing number of funds that focus on dividend growth stocks. This week, Investors Group introduced Canadian, U.S. and European funds in this category. Another fund in this group is Franklin Templeton U.S. Rising Dividend.
This is great advice from a respected writer and publication. I hope that you heed this advice in your long-term investment strategy as well. Have a great weekend!
Posted in Uncategorized | No Comments »
Sunday, January 7th, 2007 |
Here at Dividend Money, we have not talked a lot about Real Estate Investment Trusts and I thought it was about time to throw together a short post.
My favorite REIT is by far Washington Real Estate Investment Trust (WRE) which is a diversified trust that invests in different kinds of real estate in the Washington D.C region. Other than that I prefer commecial real estate trusts to residential trusts, simply because of the general quality of the lease terms are more favorable to the landlord versus the tenant.
There are several types of commercial REITs, including those that invest in office buildings, those that are retail oriented including shopping centers, and the industrial REITs, which can include warehouse, manufacturing, and mini-storage properties. There are also diversified REITs which invest in any or all of the above in addition to apartment buildings. Of course, one of the prime features of investing in commercial REITs is the high yield. The following is a list of commercial REITs with yields above five percent:
Pres Rlty Cp Cl B (PDL-B) 9.1% [Diversified]
Resource Cap Corp (RSO) 9.0% [Diversified]
Newkirk Realty Trust (NKT) 8.9% [Diversified]
Newcastle Inv Cp (NCT) 8.8% [Diversified]
RAIT Financial Trust (RAS) 8.7% [Diversified]
Northstar Rlty Fin (NRF) 8.2% [Diversified]
PMC Commercial SBI (PCC) 8.0% [Office]
Trustreet Prop Inc (TSY) 7.8% [Retail]
Arbor Realty Tr (ABR) 7.7% [Diversified]
Crescent Rl Est Eqty (CEI) 7.6% [Diversified]
Feldman Mall Prop (FMP) 7.4% [Retail]
Gramercy Cap Corp (GKK) 7.3% [Diversified]
Glimcher Raelty Trst (GRT) 7.2% [Retail]
Monmouth Real Inv (MNRTA) 7.1% [Industrial]
Republic Property Tr (RPB) 7.1% [Office]
Capital Lease Fnding (LSE) 6.9% [Office]
HRPT Properties (HRP) 6.8% [Office]
American Fin Rlty Tr (AFR) 6.6% [Diversified]
Lexington Cp Pty Tr (LXP) 6.5% [Diversified]
Ashford Hosp Tr Inc (AHT) 6.4% [Diversified]
First Ind Rlty Inc (FR) 6.1% [Industrial]
Capital Trust Sbi (CT) 6.0% [Diversified]
Franklin St Prop (FSP) 5.9% [Diversified]
Getty Rlty Hldg Co (GTY) 5.9% [Retail]
Colonial Property Tr (CLP) 5.8% [Diversified]
National Retail Prop (NNN) 5.8% [Retail]
Penn Real Estate Tr (PEI) 5.8% [Retail]
Cedar Shop New (CDR) 5.7% [Diversified]
One Liberty Prop (OLP) 5.7% [Diversified]
Pitts W Virginia RR (PW) 5.7% [Diversified]
Agree Realty Cp (ADC) 5.6% [Retail]
U-Store-It Trust (YSI) 5.6% [Retail]
Realty Income Cp (O) 5.5% [Retail]
Brandywine Realty Tr (BDN) 5.3% [Office]
Inland Real Estate (IRC) 5.1% [Retail]
Parkway Prop Inc. (PKY) 5.1% [Office]
Mack-Cali Realty Cp (CLI) 5.0% [Office]
Extra Space Storage (EXR) 5.0% [Industrial]
Liberty Properties (LRY) 5.0% [Office]
Posted in Uncategorized | 5 Comments »
Thursday, December 21st, 2006 |
ProLogis makes it official!
DENVER, Dec. 21 /PRNewswire-FirstCall/ — ProLogis (NYSE: PLD), the world’s largest owner, manager and developer of distribution facilities, announced today that its Board set a new annualized dividend level for 2007 of $1.84 per common share, or $0.46 per quarter. This represents a 15% increase over 2006. The company has increased its dividend every year since becoming publicly traded in 1994.
   Jeff Schwartz, ProLogis chief executive officer, commented: “The growth in our dividend reflects the continued strength of global demand for industrial space and our confidence in the company’s ability to capitalize on opportunities in the market. These factors continue to allow us to generate significant earnings and dividend growth.”
Posted in Uncategorized | No Comments »
Monday, December 4th, 2006 |
Here’s a great article from Selena Maranjian on the importance of growing dividends:
I did an interesting little calculation the other day. You see, I own shares of Motley Fool Income Investor recommendation Johnson & Johnson, which I bought for about $43 each back in 2002. The stock has recently been trading for around $66 per share. If you look up the dividend yield for the stock, it’s approximately 2.3%, a pretty respectable number. That’s the yield you’d get on your investment if you bought the shares at the current price.
Not me, though. My dividend yield for Johnson & Johnson is approximately 3.5%. Even better: I suspect it might be 13% or more in just 10 years.
Let me explain
Remember, my purchase price was roughly $43 per share. If you take the current annual dividend amount of $1.50 (which is paid out in quarterly installments, like most dividends), and divide it by my purchase price, you get a dividend yield of 3.5%. Divide it by the current price, and you get 2.3%.
My yield is bigger because I bought the stock for less. The dividend is growing, too. When I bought back in 2002, the annual dividend was just $0.82.
Here’s a quick look at J&J’s quarterly and annual dividend amounts in past years, plus the increase of each amount over the previous sum…
Read on From Motley Fool
Posted in Uncategorized | No Comments »
Wednesday, October 18th, 2006 |
Following our quest to finding high quality companies that grow thier dividends over time, we look to the Big Caps in the S&P 500 for some superior performing dividend paying companies.
We’ll use a screen from Business Week that looks for high quality companies with 4 or 5 star ratings, a dividend yield greater than 2.50%, and dividend growth of 5% or greater in each of the past five years.
The screen returned the following results:
Abbott Labs
Altria Group
Bank of America
BB&T Corp.
Citigroup
General Electric
Pfizer
Synovus Financial
Your homework is to cross reference these stocks with Mergent’s Dividend Achievers and check out each of the charts to look for support and resistance levels.Â
Let’s see what we can find out.
source: Business Week
Posted in Uncategorized | No Comments »
Tuesday, October 17th, 2006 |
Yet another update from Seeking Alpha. This article identifies 5 stocks with high yields and low beta (volatility). These stocks are definitely worth some research, maybe we can find some with good dividend growth potential.
Here are the 5 stocks:
Unitil Corp. (UTL) engage in the retail distribution of electricity in the southeastern seacoast and capital city areas of New Hampshire. It also distributes electricity and natural gas in the greater Fitchburg area of north central Massachusetts.
YIELD : 5.7%, Beta: 0.32
First Commonwealth Financial Corp. (FCF) operates as the holding company for First Commonwealth Bank (FCB), which offers various financial services and retail banking services in western and central Pennsylvania.
YIELD : 5.25%, Beta: 0.74
Bassett Furniture Industries Inc. (BSET) engages in the manufacture, marketing, and retail of branded home furnishings in the United States, Canada, and internationally.
YIELD : 5.00%, Beta: 1.39
Duquesne Light Holdings Inc. (DQE) through its subsidiary, Duquesne Light Company, engages in the supply, transmission, and distribution of electric energy.
YIELD : 5.10%, Beta: 1.21
Consolidated Edison Inc. (ED) through its subsidiaries, provides energy-related products and services to its customers in the United States.
YIELD : 4.95%, Beta: .30
As you can see, several of these stocks have very high yields. This could indicate that the stock is currently value priced or that the market perceives higher risk in the stock and its dividend.
Research into a stock’s average yield and dividend payout ratio would give us a better indication of the situation.
Do you hold any of these stocks?
Posted in Uncategorized | No Comments »
