Gyroscopic Investing

Wondering how folks go about their VP and what everyone's favorite investment or strategy is.

For me, I am partial to a Dividend Portfolio.  I just really like the idea of growing dividends.

Although I (tell myself that I) don't seek dividends anymore, my favorite part of my vp are the remnants of a dividend stock strategy. What was the quote from Rockefeller? Nothing gives me pleasure but seeing my dividends come in, or something along those lines. They've got some smart people at Bogleheads who can be pretty convincing when they argue that dividends are inefficient and offer more in the way of psychology & happiness than financial gain, compared to a dividend-lean smallcap index fund, for example.  I'll take the happiness. After all, I've also got the pp.

Speaking of psychological trickery, you're supposed to look at the yield on your holdings, not yield-on-cost. That's because you can then compare it to the yield you'd get from a new investment if you sold everything to buy it. I do look at the former, but I also like looking at the yield on cost. Imagine you put your money in Bank of America and they told you, "Your balance my fluctuate, but it should have a generally rising trend. And you know how we were paying you 3% last year? This year we're going to pay you 3.3%"

Well The Bank of Lockheed Martin is paying me 7% "interest" on my original "deposit." Same with Bank of Chevron.  The Bank of Altria, a lending institution that has always treated me well, is currently paying me 12%.

It's not the only strategy in town, and it's no longer anywhere near being 100% of my strategy as it once was, but better to get these dividend stocks going and move on to something more mature like the pp than the other way around. They need time to grow.

Finally, most all of the dividends are qualified and not being in an upper bracket I  haven't had to pay much at all in the way of taxes on them, although I'm sure that will change.

VT as a long term buy and hold.

dualstow wrote: Well The Bank of Lockheed Martin is paying me 7% "interest" on my original "deposit." Same with Bank of Chevron.  The Bank of Altria, a lending institution that has always treated me well, is currently paying me 12%.

Exactly and there are no annual expense fees with the direct ownership.  Reminds me of planting a forest, and nature takes care of the rest in time with no extra care needed.

Ad Orientem wrote: VT as a long term buy and hold.

This was my primary investment prior to discovering the PP and I still have a large chunk of my net worth in it.  I truly love the simplicity and diversity of it.

TennPaGa wrote: Favorite VP?

That would be George Clinton, VP under Thomas Jefferson and James Madison.

Favorite investment of George Clinton?

That would have to be PFNK.

Outside of a long dead Vice President, the Master of Funk and his excellent work.  What is your favorite Variable Portfolio Investment?

I also like VCIT, Vanguard's intermediate-term corporate bond fund etf.
While Bogleheads mainly prefer Total Bond Market, I have to hold a lot of treasuries for the pp. So, in my vp, I can hold these corp bonds in tax deferred.

Add the VCIT in vp to the treasuries in the pp and you don't quite have the total bond market, but you have a nice diverse mix of bonds.

It is limited on contribution amount but I like my ESPP (employee stock purchase plan) as my variable portfolio.

I sell it as soon as I can to hopefully capture ~18% gains (taxed as regular income) due to the 15% discount I get on the stock.

Gold stocks appear to have bottomed!

portart wrote: Gold stocks appear to have bottomed!

Hold on there, Paul Revere.  I mean I hope you're right b/c I'm down a lot in them. But, do you remember when you said "Here comes GDX, right on schedule."
At least I think it was GDX. In any case, it was several months ago and it didn't last. Let's see how this plays out. Again, it would be great if you turn out to be right.

portart wrote: Gold stocks appear to have bottomed!

I thought so about six months ago (when the Juniors were at a low).  I bought some long term options, and they're down 50-60%.

It's hard to figure out the Miners.  I have a feeling they can go much lower than we think. 

As MT has pointed out, they might be suffering simply b/c the quality of the gold they are able to mine is much lower than it used to be. 

dualstow wrote:Well The Bank of Lockheed Martin is paying me 7% "interest" on my original "deposit." Same with Bank of Chevron.  The Bank of Altria, a lending institution that has always treated me well, is currently paying me 12%.

Ah, the Yield On Cost illusion  

Lockheed Martin is only paying you about 3.5% on your LMT holdings right now.  Chevron, a bit less than that.  How many years of dividend payments do you have locked up in unrealized gains on those holdings?

@wildaboutharry: I don't think you were reading very carefully. Check out post #2 (reply #1), paragraph 2.

dualstow wrote:@wildaboutharry: I don't think you were reading very carefully. Check out post #2 (reply #1), paragraph 2.

Oh my.  I "read" right by that.  Attribute that to lack of caffeine early in the AM

I've followed the Boglehead's threads on this, and think they mostly miss the point of 1) what a dividend strategy actually is and 2) why someone would pursue such a strategy versus a more traditional portfolio.  And in general I think they really don't embrace the "many roads to Dublin" concept.

I do like dividend-paying stocks, but my "Bank of Lockheed Martin" is only yielding about 5.7% based on cost.  I keep track of how many years of dividends (at current rates) my unrealized capital gains represent.  My "Bank of Walgreens" has about 22 years worth.  I think that might be a sell signal!

WildAboutHarry wrote: Oh my.  I "read" right by that.  Attribute that to lack of caffeine early in the AM

I've followed the Boglehead's threads on this, and think they mostly miss the point of 1) what a dividend strategy actually is and 2) why someone would pursue such a strategy versus a more traditional portfolio.  And in general I think they really don't embrace the "many roads to Dublin" concept.
...
I keep track of how many years of dividends (at current rates) my unrealized capital gains represent. 

I hear you on the caffeine 

The boglehead threads on this topic with Larry Swedroe vs financial dave and others are very interesting. People caution against having too many strategies. However, having a broad stock fund in my pp core allows me to feel I'm doing "the right thing." Meanwhile, I can give in to the psychological allure of dividends (and bathe in the illusion of yield-of-cost once in a while) in my vp.

The pp is a smarter strategy. But, there's nothing like having dividends to reinvest or to use for expenses. Maybe I'll feel differently when they're large enough that I have to take a tax hit. I'm not yet in a high enough bracket to pay for these. (This might be the first year, depending on tax laws. I think my bracket remains the same).

And of course, even with all this money printing, the Bank of America or Wells Fargo does not suddenly show your principal as being half of what it was yesterday the way the "Bank of Altria" can, so it's a dangerous comparison. But it sure feels good when the market's down.

dualstow wrote:And of course, even with all this money printing, the Bank of America or Wells Fargo does not suddenly show your principal as being half of what it was yesterday the way the "Bank of Altria" can, so it's a dangerous comparison. But it sure feels good when the market's down.

The banks have the luxury of showing us nominal dollars and thinking we do not notice!

I agree that using dividend stocks to generate income during retirement seems better than relying on "creating a dividend" by selling things.  I do think the PP is a great approach to building a portfolio during one's working years.

Recently I've been collecting as many different silver coins as I can find. Not sure I would even call this part of a VP though, since I don't plan on ever selling them. My wife likes anything with an animal on it, especially Takus and the 10 oz Kookaburra. I'm partial to the kilo Libertad.

ZedThou wrote: Recently I've been collecting as many different silver coins as I can find. Not sure I would even call this part of a VP though, since I don't plan on ever selling them. My wife likes anything with an animal on it, especially Takus and the 10 oz Kookaburra. I'm partial to the kilo Libertad.

Wow, that Libertad is a gorgeous coin. What is that, like US$750 right now? I'm drooling over it. I hope you're not buying it on eBay or from China. ;-)

Direct from China is the only way to go, they have amazing deals!

Gainesville Coins has a 10 kilo lunar snake, but they want about 1.5 times spot. At some point I'll get one that size, but it will have to be something I really, really like.

I'm in the process of designing a quantitative trading program to swing trade various index ETFs like the Dow, Russel 2000, various country indices, etc..  it'll probably be no more than 5% of my entire portfolio.