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A portfolio that produces dividend yield to pay off start up loan payments
I have a perfect picture painted in my head about a portfolio. I intend on taking out a loan to invest in a good diverse portfolio my initial investment will be a loan preferably the lowest interest rate humanly possible. On the back end of this investment I would like the dividend yield to be capable of paying off the loan payments. I know it's feasable but to find such a diverse set of dividend stocks to provide a payout each month, that is the nemesis. Can anyone help me? To simplify the venture I'm looking for a diverse set of dividend stocks that payout quarterly as to receive a payout once a month across the portfolio. Enough to payout to pay off the initial start up loan.
Starting an investment payout by leveraging debt isn't a good idea at all especially if you're new at this. Remember dividends normally are approximately X% of a given stock's value. There are a number of companies that normally raise their dividend each year but the future is never perfect and therefore if you are wrong (or pick the wrong companies) you could be in debt you can't pay off. You'd end up having to use the dividends to pay off the loan and it would take years before you had enough money to where the portfolio was paid off and was "yours". Remember that in bad years, the portfolio will go down but your loan payments won't and therefore you could end up in the same boat that a lot of people are with their house these days.
Portfolios and trading accounts should always be created with pocket cash (aka money that you can afford to lose) and therefore helps in shoring risk against the rest of your livelihood. The one time you can use money that isn't always affordable to lose would be for something like a matched 401k because you're guaranteed returns based on your employer's contribution contract (your employer matching your contributions is like a dividend).
Portfolios and trading accounts should always be created with pocket cash (aka money that you can afford to lose) and therefore helps in shoring risk against the rest of your livelihood. The one time you can use money that isn't always affordable to lose would be for something like a matched 401k because you're guaranteed returns based on your employer's contribution contract (your employer matching your contributions is like a dividend).
This is one time that tree and I are in total
agreement (head for the hills!!!) You are about to embark on a dangerous trip,
for the reasons tree outlines. Your idea of a dividend portfolio, is wonderful.
Thinking that you can use the dividends to pay off the loan and pocket the
capital gains is specious. Once you enter a circumstance where the dividends
for whatever reason don’t equal the loan payment, you must reach into your
savings to pay for the loan or sell stock (and thereby decrease the dividends.)
If it is no problem for you to
reach into your saving, use them now to buy the stock and use the dividends to
buy more shares. That is the safe way to go. You are not the first one to have
painted your picture…too often the dream turns out to be a nightmare.
If it was that easy, everyone would have billion dollar loans. Hell, trillion dollar loans.
The part missing from your plan is risk. No matter how well you diversify your portfolio, there will be an event that knocks out one of your stocks (if not more). This would leave you in a position where you would have to liquidate part of your portfolio to make your next payment. Now, with less dividend income, the whole thing could start to unwind, and you might eventually be left with much more debt than assets.
The part missing from your plan is risk. No matter how well you diversify your portfolio, there will be an event that knocks out one of your stocks (if not more). This would leave you in a position where you would have to liquidate part of your portfolio to make your next payment. Now, with less dividend income, the whole thing could start to unwind, and you might eventually be left with much more debt than assets.
LOL. keep us posted SPIDA. I wanna know how this turns out.
Addendum:
If your a bank, you can barrow from the government for interest rate A. Then use that money to buy Treasury Bonds with an interest payout of A + X.
Banks are people (thanks to Citizens United), but people are not banks.
If your a bank, you can barrow from the government for interest rate A. Then use that money to buy Treasury Bonds with an interest payout of A + X.
Banks are people (thanks to Citizens United), but people are not banks.
Is this more like a carry trade or arbitrage? The things people do with money is cool.doougle said: Addendum:
If your a bank, you can barrow from the government for interest rate A. Then use that money to buy Treasury Bonds with an interest payout of A + X.
Banks are people (thanks to Citizens United), but people are not banks.
I am not going to say it can't be done, but one of the real problems is building a portfolio that is diversified and will still accomplish your task. You could easily find 8-10 stocks that would pay a high enough dividend to cover the cost of the loan but they are more than likely going to be in the REIT or mortage investment sector. Some of these I have traded successfully over the past year. AGNC, AI, ARR, CYS, IVR, RSO, & TWO are some examples. (not a recommendation). ARR pays a monthly dividend, the rest are quarterly and most pay out in the same month. Stocks that are outside of the REIT / mortage investment arena that one could consider: GNI, BBET, CLMT, PBI, & WIN (again not recommending any of these and I do not own any of these)
Note: I do not like any stock in the shipping / bulk transportation industry.
Several closed end funds will do the job as well, but they are not without their pitfalls. Often the dividends are a return of invested funds and the dividends are not stable.
One idea (again not a recommendation) would be to identify a group of 20 stocks that are paying in a tight range of say 9-11% (or whatever range you determine is needed). Keep 8-10 of these in the portfolio and replace with a different stock if any get out of the range. If XYZ is $30 and pays out an $.80 quarterly dividend (10.67%) you can keep that stock as long as the dividend remains constant or is increased over time. Where you would run into trouble is if the dividend is cut to $.55 per quarter. Now the stock is yielding 7.33% and may not meet your needs and replacement may be in order. Using a 9-11% range, having 9 other stocks yielding an average of 10% this one low yielder would not be devastating. Your average yield would still be 9.733%.
One last consideration... what is going to be your collateral for the loan? You don't want to be put our of your home in the event of serious market decline.
And before any of the other forum members blast me for suggesting any of this, I am just trying to answer spida's questions to the best of my ability.
Note: I do not like any stock in the shipping / bulk transportation industry.
Several closed end funds will do the job as well, but they are not without their pitfalls. Often the dividends are a return of invested funds and the dividends are not stable.
One idea (again not a recommendation) would be to identify a group of 20 stocks that are paying in a tight range of say 9-11% (or whatever range you determine is needed). Keep 8-10 of these in the portfolio and replace with a different stock if any get out of the range. If XYZ is $30 and pays out an $.80 quarterly dividend (10.67%) you can keep that stock as long as the dividend remains constant or is increased over time. Where you would run into trouble is if the dividend is cut to $.55 per quarter. Now the stock is yielding 7.33% and may not meet your needs and replacement may be in order. Using a 9-11% range, having 9 other stocks yielding an average of 10% this one low yielder would not be devastating. Your average yield would still be 9.733%.
One last consideration... what is going to be your collateral for the loan? You don't want to be put our of your home in the event of serious market decline.
And before any of the other forum members blast me for suggesting any of this, I am just trying to answer spida's questions to the best of my ability.
TJ, here is the problem:- a portfolio composed of only high dividend stocks, especially when concentrated in one or two, or even three small segments of the market, is open to the danger of quickly deteriorating when those segments suddenly fall from favor. The $30 REIT, when the real estate industry tanked dropped to $17 over a period of 6-8 months. The dividend was cut to maintain the internal cash flow of the company, but you still owe for the loan of $9000 to fund the original purchase of 300 shares. Say the $240 (each quarter)was enough to pay the note, and maybe have a little left for you, but now the $165 doesn’t cover the loan payment of $210. If you sell the stock, you have little more than half enough to payoff the loan.
Personally out of a portfolio of 50 stocks, I presently have 8 which pay super high dividends. They are spread across 6 different industries, and all together they constitute far less than 20% of the total portfolio. None are margined, I have only borrowed money to fund a purchase on 3 or 4 occasions in thirty years, and each time I had a plan to repay the loan quickly. Never did I borrow for more than six months.
Could I have done better using leverage? Of course, but I could have done much worse. My only regret is that I didn’t buy more house than I did in 1980, but at the time $650 a month mortgage was all that I dared. I don’t regret that I could sleep well with that loan at the time.
Back to Spida, you TJ, are not borrowing to fund your portfolio, he is. That colors how you two will deal with a down turn. TJ and I use our dalliances in high yield to fund our obsessions (for TJ, poking a hole in the water with a string and a long stick – mine is more perverse,) Spida might be much younger, and have needs of a more serious nature.
The Serious nature aspect is defiantly my venue, I've no earthly idea what calls and puts are currently. I'm fairly green to the whole thing but i'm treading lightly i've taken that list of symbols into a watch status. That one symbol you spoke of that pays out a monthly dividend that sounds awesome to me. I'm starting out with chicken scratch. I been sort of dabbling with some pretty high volatile low end penny stocks. I've heard bad tiding about the whole penny stock idea. Let's say i had $100 and I'm balls to the wall trying to make it more so i can buy something more formidable for a decent trickle payment. I'm up for a volatile risk, oh and again on the monthly dividend payout, ;0) are there a lot of those out currently? where do i sign up. I would love to find a $.o2 stock that will rise 5 cent. i guess we all would though.. Am I shooting for Pluto here guys?
Now you are asking a different question. There are a couple of us on here that do that type of thing but let me tell you, because I'm one of the ones who has done it (I went from $80 to a little over $30k in a month), it's a full time job and you have to know your stuff. I took me about 6 months before I got to where I was making consistent gains and at that point I was also doing it full time (I was trading options).
Being new in trading or investing means you will likely lose your money and not gain anything. Therefore it's wiser for you to play with a paper account (fake money) while you learn in your spare time. There is no get rich quick method in anything in life or everyone would be doing it. Penny stocks are just as hard to trade as options and so it's not something you can just pull off successfully from day one (though I made good gains in my first month using them). If you wanna do dividends, that's great but you shouldn't start a portfolio by leveraging debt (you look to get other people to put up their money at no risk to you, which nobody will do for you because you have no track record). You also don't start trading real stuff from day one because you'll lose it all very quickly.
Being new in trading or investing means you will likely lose your money and not gain anything. Therefore it's wiser for you to play with a paper account (fake money) while you learn in your spare time. There is no get rich quick method in anything in life or everyone would be doing it. Penny stocks are just as hard to trade as options and so it's not something you can just pull off successfully from day one (though I made good gains in my first month using them). If you wanna do dividends, that's great but you shouldn't start a portfolio by leveraging debt (you look to get other people to put up their money at no risk to you, which nobody will do for you because you have no track record). You also don't start trading real stuff from day one because you'll lose it all very quickly.
That would be nice (I went from $80 to a little over $30k in a month) real frikkin nice bro. Well my locomotion was to get some volatility going until i could ease into some good sturdy diverse dividend portfolio that i could go fishing on.. I have 1,666 shares of (EWSI) and 5000 shares of (USEI) I've written blogs and talked about the companies and everything else. I can bail and get about 100 bucks back. just enough for one low end penny run. I'm grabbing for straws here. I need to make some cash. and then build on it.. I keep getting emails about (VIBE) should i ditch my shares of those two stocks and just go buy a milkshake?
I don't know anything about these companies. The easiest path to take for the person with low capital is to learn about options and then watch QQQ and SPY. They both run weekly options (SPY has a larger market for them) and both have options priced under $50 bucks that will get gains in excess of 10% on a daily basis if you are able to pick your places correctly. So with $100 bucks you could break even with 10% and make gains with anything over that. That goes into the practice side however and don't expect to come out way ahead really fast either. Starting with $100 bucks it would probably take you two or three weeks to double that. You'd probably be better off getting a job and working for a month, saving all that you can from it, and then come back with $500 bucks. You'd probably end up raising an addition $400 through a job faster than you can get to $500 through trading, especially if you're new to this.
Well met, Jobs are cool when steady, The I.T. Field is kinda shaky these days. I figured I'd build something on the "Hands-Free" side of the income curve. to fall back on during the slow times of the I.T. Field. Any chance you still play with the little penny stocks? any time you find a good one let me know and i'll grab some. It's official marketing a stock doesn't work for making it go up ;0). been there done that, I owe about $5 bucks on the T-shirt. hehe
"Marketing" a stock is more like manipulating it and that is against the law if you're doing more than saying "it's a great company" or just "buy this company". I actually meant a job like flipping hamburgers. You'd end up making more doing that in the short term than trading on the open market without an extensive amount of experience which it doesn't sound like you have.
And no I quit trading stocks a long time ago because the margins were so bad. I haven't touched stocks in over 6 months and haven't bought any since September.
And no I quit trading stocks a long time ago because the margins were so bad. I haven't touched stocks in over 6 months and haven't bought any since September.
You forgot to mention the part where you went from 30k back to almost nothing.treeHamster said: Now you are asking a different question. There are a couple of us on here that do that type of thing but let me tell you, because I'm one of the ones who has done it (I went from $80 to a little over $30k in a month), it's a full time job and you have to know your stuff. I took me about 6 months before I got to where I was making consistent gains and at that point I was also doing it full time (I was trading options).
There may be some tax changes regarding dividends in the near future.
If Bam-Bam the Tax Man gets his wish of a 39.6 percent tax hit on dividends next year, this should put a dent on the bottom line calculations of using dividends to pay off the loan. .
If Bam-Bam the Tax Man gets his wish of a 39.6 percent tax hit on dividends next year, this should put a dent on the bottom line calculations of using dividends to pay off the loan. .
USEI
09:36am EDT
0.0145
0.0013 well this is promising for me today It's actually showing some bleeding profit! maybe i need to bull out my trusty chicken foot. yes that is truly a penny stock ;0) seems like with all of the governmental energy focus these days this stock would go flying. anyone? hybrid fuels and energy stocks? well besides natural gas? I hope something good happens...
0.0013 well this is promising for me today It's actually showing some bleeding profit! maybe i need to bull out my trusty chicken foot. yes that is truly a penny stock ;0) seems like with all of the governmental energy focus these days this stock would go flying. anyone? hybrid fuels and energy stocks? well besides natural gas? I hope something good happens...
His dividend tax rate would be only what his regular tax bracket rate is and I doubt he is in the top bracket based on the previous posts. So maybe he is paying 17.5 or 20%, but unlikely he is getting slapped with 39.6%.Scofflaw said: There may be some tax changes regarding dividends in the near future.
If Bam-Bam the Tax Man gets his wish of a 39.6 percent tax hit on dividends next year, this should put a dent on the bottom line calculations of using dividends to pay off the loan. .
Yeah I did drop to 5k after another month. So 80->5k in 12 weeks is great but don't expect to live off it or anything and that was a full time job doing just that, which is why I'm looking for a job in trading or as a quant where I get a salary while I manage some funds.BAKES THE GREAT said:
You forgot to mention the part where you went from 30k back to almost nothing.treeHamster said: Now you are asking a different question. There are a couple of us on here that do that type of thing but let me tell you, because I'm one of the ones who has done it (I went from $80 to a little over $30k in a month), it's a full time job and you have to know your stuff. I took me about 6 months before I got to where I was making consistent gains and at that point I was also doing it full time (I was trading options).
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