FAILURE DUE TO LACK OF PLANNING

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

When it comes to investing, there is no substitute for having a clear and concise plan. A plan followed by actionable steps leads to success.  In life, we have so many reasons to delay our starting to invest.  We may think that we simply do not have any extra money to invest.  There are always unexpected expenses that will give you an excuse to wait until next week or next month.  Thinking like this is a sure way to never get started.

“He who fails to plan is planning to fail” according to Winston Churchill.

Even a minimal plan with minor amounts of savings is a plan to get off to a good start.  The number one regret I hear from investors is that they wish they had started investing sooner.   I know that is true in my own life.    I started investing in my 20’s but failed to be consistent year after year.  And  then life happened.   We raised three kids, and it wasn’t until I was in my 50’s that I got a serious plan of action in place.   Since then, I have consistently invested monthly.

In his book Personal Finance, Matthew Collins states that “A plan without action is just a dream.”  Action is required on your part.   And your first action is to get started.  Maybe just $10 a month, but start and be consistent.  Once you see some returns, you will find a way to increase your investing amount.

Investing is not all easy.  Andrew Carnegie once said “Anything worth having in life is worth working for. “

So we must make up our minds to get started, and then come up with a reasonable Investment Plan.  I can not over emphasize the importance of starting now while you are young.

Last year I read the book “I Will Make You Rich” by Ramit Sethi.  In his book, he gives an excellent example of two people, one who started at age 35 and the other who started at age 45.

Smart Sally sets up an investment account with $200 a month and only invests for 10 years.   Dumb Dan waits until he is 45, and he puts in $200 a month for 20 years.  Who has the most money based on a conservative return of 8% at the age of 65?

Smart Sally, having only 10 years of monthly investments has $181,469.

Dumb Dan invests $200 a month for 20 years, but because he started late, his balance at age 65 is only $118,589.  He invested twice as long, but is $60,000 less because he started late.   Think the huge difference if the monthly amounts had been $500 monthly.

Now starting late is better than never, but see my point.  START NOW.  Time is on your side when you invest when you are young.   Time is not on your side after you pass the age of 50.   

Don’t let me hold you back if you are over 50.   It is much, much better to get started now than to never start.

In this Ramit Sethi book, he goes over dozens of excuses why people do not invest.   Many have to do with the claim they don’t have the money, or that it is someone else’s fault.    It is not someone else’s problem.  

Ramit Sethi lists several counter-cultural excuses:

LOL!  Invest?  I can’t even save enough for a pizza.

Maybe if baby boomers hadn’t ruined it for all of us.

I have social anxiety so I can’t do that.

Do you know who’s the real victim here?    

Me. I’m offended at you being offended.  And at the stupidity of this entire victim culture.

I refuse to play into the theatrics of how you can’t afford to save even $20 a month.   We play the cards we’re dealt.  I believe in focusing on what I can control.
 
I love Ramit’s in-your-face approach.    So many today blame someone else when the issue is really ourselves.  It is your problem.  As Dave Ramsey has said over and over, the main problem is the guy in the mirror.  Knowing what to do is 20% of the equation, and doing it is 80%.
 
Once you get started, it will be easier. I know.  It was hard for me to get disciplined and consistent.   We are creatures of habit.  I will close this article with a little poem I read.
 
Sow an act and you
Reap a habit.
Sow a habit and you
Reap a character.
Sow a Character and
You reap a destiny.
 
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Ways to Protect Your Investments on Huge Market Drops and Systemic Loss

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

We hear a lot of brokers and investment professionals promoting diversification as a method to prevent loss in the stock market.   While being balanced has some logic to it and does prevent some losses, what happens when the market has systemic loss?   This is when all the market goes down.  Your retail stocks go down at the same time utilities, banking, and high techs go down.  You watch as all other classes go down like we had happen in early 2022.  During that time, I lost 30% of my stock market portfolio value.

When the whole market drops 20 to 40% in a short span of time, diversification does not lessen the blow.   In 2022, not only did we lose money on stocks and ETFs, but bonds also suffered losses.

Today I am going to go over a way I have learned to protect against systemic loss.    Before that, we will discuss some other methods to prevent losses.
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One of the reasons many people refuse to invest in the stock market is the fear of loss.  It is real, and I understand your feelings.   Anyone who says that big market drops do not bother them either has very little in the market or the money is of little significance to them. 

For years, I have recommended riding out the market bumps with the ebbs and flows.   And for all the bull markets we have seen, they are always followed in time by a bear market. 

If you are unfamiliar with those terms, a bull market means stocks are going up the majority of the time, whereas a bear market is when the stocks are dropping most of the time.   Trying to time the market is very difficult.

I tried a few times and found that most of the time I was either late in selling or waited too long after the bottom to buy back in. Typically when the market rebounds, it is by 1,000 to 2,000 points.   So on those days, you want to be invested to gain the most traction and good returns.    

I have tried to take the buy and hold strategy the last few years, and have done well. However, a huge drop in the market can throw a wrench in your plans when you reach your retirement years like me.  The reality is that a huge loss would be very difficult in which to recover.   A young person can lose a lot and still come out in the long term.  So this article is geared toward you that are in your 50s or older.   However, some of the strategies might be wise even for the younger audience due to the current market. Below is the method I have for years recommended.

This article from Fidelity came out in June urging people to stay the course even in the choppy markets.

Fidelity shows that people churning money in and out on a whim rarely break even with the people who continue to buy when everyone else is panicking.
 
Here is an excerpt from that Fidelity article:

Stick with your plan, even when markets look unfriendly 

When the value of your investments falls, it's only human to want to run for shelter. But the best investors don’t. Instead, they maintain an allocation to stocks they can live within good markets and bad.

The financial crisis of late 2008 and early 2009 when stocks dropped nearly 50% might have seemed a good time to run for safety in cash. But a Fidelity study of 1.5 million workplace savers found that those who stayed invested in the stock market during that time were far better off than those who headed for the sidelines.

In the decade following the start of the crisis in June 2008, those who stayed invested saw their account balances—which reflected the impact of their investment choices and contributions—grow 147%. That's twice the average 74% return for those who fled stocks during the fourth quarter of 2008 or the first quarter of 2009. While most investors did not make any changes during the market downturn, those who did make a fateful decision with a lasting impact. More than 25% of those who sold out of stocks never got back into the market and missed the gains that followed.

If you get anxious when the stock market drops, remember that’s a normal response to volatility. It’s important to stick with your long-term investment mix and to have enough growth potential to achieve your goals. If you can’t tolerate the ups and downs of your portfolio, consider a less volatile mix of investments that you can stick with.

So the old, proven, continual purchasing whether the market is up or down appears to be a good way to go.  The term is dollar-cost averaging.  If you buy when the stock price is high and sell when it is low guarantees a loss. But if you purchase while the price is down, the average price per share drops. This hopefully gives you the ability to make up quickly for earlier losses.   

With that being said, let’s look at where we are here in November of 2023.  I think a little insurance might be wise at this time.  Normally when the bellwether stocks go down, the bonds kick in to offset some of the losses.

Will a bull market return?

A bull market is likely to return, as it typically has. But when? Well, every period is different and there can be no guarantees. We have had about 1000 point up market since mid October.    
 
I personally at my advanced age have 30% of my investments currently in Cash or bonds, with a large segment weekly going to I-Bonds.  This is probably too much in stocks to be honest.  After bonds and CDs, the next thing to invest in is the overall stock market indexes.  ETFs like:  ITOT   VTI  SCHB   VOO  SPY etc.   Having some of your money in good quality Growth Mutual Funds is always a good conservative investment.

And then be sure you have some investments across all the 11 sectors of the market.   Mutual funds help to give you a lot of diversification.   I discussed those 11 sectors in my article on investing with ETFs.

When you diversify, that helps you to offset bad sectors with those that are great.   All of the time some sectors are outperforming others.  This year the oil and gas business has been up again this year as well as the high tech stocks.   Health care is another sector performing well in the current market.

If you are diversified, and have a lot of money in full market stock indexes, does that guarantee you no loss in a huge drop in the market?   No, it does not.  That is why I am so cash conscious right now.  When you look at the news, with problems all over the world, Russia invading Ukraine, and the leaders in Washington out of step in almost every area, what is the likelihood that we will go from the current 33,900 NYSE average to 36,000? 

It might happen, but with all the gloomy news, we may be ready for another huge drop like in 2008 or 1972 or worse of all, 1929.  I wasn’t around for the great depression, but I remember both 2008 and 1972, and both were hard to bear.   I hate to be a bearer of bad news, but realistically, we could go from 33,800 to 25,000 very easily, and a drop to 15,000 would not be impossible.

That would mean a 50% or greater loss in your average stock holdings.   Can you withstand a loss of 50%?   I am too old to recover from such a huge loss.  If you are in your 20’s, you probably could.  But would it not be smarter to have some insurance against such a catastrophic loss?

Warren Buffet, probably the world’s most respected investor, has 2 rules that he follows.  Rule Number 1 is to never lose any money.   Rule Number 2 is to always remember Rule Number 1. 😊

In the past two years, I have read 4 of Richard Kiyosaki’s books in the Rich Dad, Poor Dad series.   Last year, I watched one of his online seminars, and in that presentation, he said he does all he can to NEVER lose money.  (like Warren Buffett.) Now to never lose money and invest is pretty much impossible, but there are ways to hedge your losses.    Mr. Kiyosaki introduced me to several, and one of them I want to cover today.   

This method is like having an insurance policy.     How this is done is by issuing a STOP LOSS sell on your stocks and ETFs.   Mutual funds and Nasdaq stocks are not eligible for this, but the ETFs and Stocks with 1 or more shares held are. If you have never heard of a stop loss sale, let me explain it a bit.   A stop loss LIMIT order allows you to specify the price you will receive on the stock or ETF when you set the value to trigger the sale. 

Now, remember that a down market generated this sale.  Is it possible that if you specify a LIMIT, you will receive it?  Possibly, but unlikely.   So, your order might never process.    Now if you do not specify a LIMIT on the stop loss order, then it probably will be filled, but not at the price that you specified to submit the sell order.   You would receive the current market price if there is a buyer. 

So if you specify the stop loss to be issued at $40 for example, probably the best you could hope for would be $39 or a bit over.  And someone has to agree to buy it.  For every sell order, someone has to buy.   So if it is a huge market drop, your $40 stop loss might wind up sold for $35 or not at all.   So keep in mind, that a STOP LOSS order is not a contract for the price you specified.   Just a request to sell at the current market price.

What I did this past week was I went into my holdings at Fidelity and Schwab, and  any with a substantial balance on them, I clicked on the SELL tab.  From there, I choose   STOP  or STOP LOSS (depends on the broker), and you key in the price you want to trigger the sale.   As I mentioned earlier, I buy all my stocks and ETFs to hold long-term, so I do not want them to sell on a minor bounce in the market. 

Richard Kiyosaki suggested using 80% of the current value which is what I used.   So on a $50 stock price, if it goes to $40, it will trigger the sale.  Now of course this does mean I would lose 20% of the value of the security, but a 20% loss is so much less than a potential 50 to 80% loss.  

I do not use Stop Limit orders, just Stop orders. So when the price hits the specified price it triggers a sale at market value.   You may not get that price but it should be close.   On risky investments, I set the stop loss at 92% of the current price and review them monthly for gains and move the price up.   On what I consider good investments paying solid dividends, I set the stop loss at 85% to prevent unneeded sales in market daily fluctuations in price.

At Fidelity, I chose a GTC order meaning Good until closed or canceled.   I did the same at Schwab, but their GTC orders are only good for 60 days.  So in 60 days, I will have to rekey those.  Of my 80 or so holdings, I am only entering 45 to sell with Stop Loss orders .  I may bump those up in time, but the big holdings are what concern me.   I think Fidelity is now limiting the GTC orders to 90 days so they are not forever also.

I found a great video on Fidelity explaining how to understand and place stop-loss orders.  Watch it here:

Fidelity Article on How to Enter Stop Loss Orders

 
Should you consider a STOP LOSS order for your larger holdings?   If you consider the danger of the current market, I do think it is worthy of consideration.    In life, I have found that you normally don’t need insurance if you have it.   So, if you key in some stop loss orders and never use them, it is just insurance.   BUT, if the market takes a huge downturn, and it could happen, you will eliminate some of your loss.   

Think about it and read some other authors on the topic and discuss it with your broker.  Since we no longer pay commissions to buy and sell Stocks or ETFs, we can simply repurchase the sold items if it was done in just a market shakedown.   But if a catastrophic drop, I think you will be glad you did sell.  

I want to point out that all my investments are in ROTH IRAs so I do not have to consider the short term or long term capital gains.   Be aware that in a non-Retirement account, the capital gains may cause you some real tax problems.
 
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The Path to Investing Using ETFs

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 
 
Learning how to invest is sometimes a scary thing to many people.   If you are young (or old) and have never invested before, determining where to start is difficult.  I remember opening my first investment account back in 1973 at Merrill Lynch. 

I was the tender age of 22 and thought I was ready to get started.  Immediately I realized that Investment houses and stock brokers talked a whole different language than I did.   I was blessed to have a good broker, and he bought me a copy of “The Intelligent Investor” by Benjamin Graham and suggested I read it.   

It has been years since I read it, so I have not done a book review on it. In the book, Mr. Graham spends a lot of time explaining how to read company financial statements and how a person should try to buy a company’s stock when its price is less than their Net Asset Value.   

Probably just reading that one paragraph is enough to make many of you want to stop reading.  But hang in there with me. If you have a background in finance or accounting, this will make more sense.  But if you know nothing about accounting and financial statements, there are still plenty of ways for you to invest.

In two of my earliest articles, I tried to explain the 4 main vehicles that are used to invest.  They include Stocks, Bonds, ETFs (Exchange Traded Funds), and Mutual Funds.  Now there are many other ways to invest than these, but these four make up a large segment of the stock market financial opportunities.  

To read about Stocks, ETFs, and Mutual funds, read here:
STOCKS, ETFS, and MUTUAL FUNDS

To Read about Bonds, read this article:  What is a bond.

Today I want to discuss ETFs in a bit more detail.   An Exchange Traded Fund is much like a stock.  With a Stock, you are effectively buying ownership into the company.  Say you like buying at COSTCO discount stores, you might go down and buy a few shares of that company’s stock.  When you buy 10 shares, you become a minor partner in owning Costco.  If they pay dividends, each quarter (or yearly), you will receive a dividend check.   I don’t own Costco, but I own Walmart and McDonald’s.  

Both of these companies pay like 3% dividends, so if the stock was $20 per share, you would receive $6 per year in quarterly dividends for each stock share you owned.  So if you owned 100 shares, you would receive $600.  And on top of that, if the stock goes up in price when you sell your shares, you will have a capital gain from the difference.  

To prevent having to pay capital gains taxes, you can invest in an IRA (Traditional or Roth), and you never have to pay taxes on the gains in the ROTH IRA, and only pay them on the traditional IRA when you withdraw funds.  But IRAs are good ways to invest money.   Read about Both Types of IRAs

My wife and I both started off with Traditional IRAs, but have converted all of them to ROTH IRA’s so we never have to pay taxes on any money withdrawn.  When you put money into a ROTH IRA, you get no tax break.  But the biggest break of all is all that money comes back to you tax free when you retire or need it.

So the $600 of dividends which is Passive Income (money you did not have to work for), comes in and that is great. But say your $20 stock goes down to $15.  Until you sell it, you have lost no money. 

But if you needed the money for an emergency, then you would have lost 25% of your investment.  It is best to never buy stocks without a large cash emergency fund so that you can ride out the ups and downs of the market.

If you are like me, the idea of losing 25% of my investment is scary.  What if there was a way to minimize that loss?   There are MANY ways, but we are going to zero in on one of the best.   Don’t buy that one stock, but buy an ETF.  The ETF is based on some index or sector type.   There are 11 different sectors to invest in.
 
List of 11 Sectors
1.        Energy
2.      Materials
3.      Industrials
4.      Utilities
5.      Healthcare
6.      Financials
7.       Consumer Discretionary
8.     Consumer Staples
9.      Information Technology
10.   Communication Services
11.     Real Estate

ETFs are available over any one of those sectors, and then they can get very specific.   This is just one type of industry inside Sector 2 above (Materials).  SLV is all the silver companies.   There is one on GOLD which is GLD. (SPDR GOLD SHARES).

So a person can identify what they want to invest in, and suddenly you are no longer at the whim of any one stock.  However, you may not reap the higher dividends of specific stock selection, but you are going to get a very consistent average over that sector/group you have chosen. 

If your goal is to invest in DGI stocks, you can still use ETFs.   I believe that DGI stocks and REIT (Real Estate Investment Trusts) are the two most promising of all the types of investments available today. 

DGI stands for Dividend Growth Stocks.  A few ETFs that specialize in those are:  NOBL   FDVV  SDIV DHS and my favorite LVHD.  Another great ETF for DGI investing is PFF, I-Shares Preferred Stock Income Sectors.  Preferred stocks are some of the better investments when given proper scrutiny.  We will cover those in an upcoming article.

If you buy any of those ETFs, you are getting a broad range of Dividend Growth Stocks.  Will they give you an exact percentage each month?  No, but it is an average of all the stocks these companies chose to include in their portfolios.     So each of these ETFs will provide varied returns.  

Why I like LVHD the most is in this year with the S&P 500 falling this ETF is still making money.  That is a tough thing to do.  The others have done well, but LVHD is very, very good.

How can you buy an ETF?   Well, you have to use a brokerage firm or some app that allows you to purchase the ETFs. 

Now be aware if you purchase the ETF outside of an IRA, then you will have to pay taxes on both the dividends and the capital gains as the stocks appreciate in value.  I do 99% of my investing inside of ROTH IRAs so I never have to pay any taxes on the dividends or the capital gains.

What is super about ETFs is they constantly change in value throughout the day, and they are totally liquid.   What I mean by that is that you can buy or sell them at any time the market is open. So if you need your money, they can be sold by simply opening your browser or app and issuing a transaction to SELL.  

Of course, it all depends on the market as to whether you will make or lose money.  I have never used ETFs to do short-term trades.  Some people do and some ETFs are designed for that purpose giving 2 or 3 times a certain category in movement. 
 
So say you have 3x Energy ETF, it will go up or down 3 times as great as the underlying sector moves.   So you can make huge profits or lose it all very quickly. 

I don’t believe in day trading myself, and do all my investments as long-term investments.  That means I don’t try to time the market or move in and out of stocks or ETFs, but continually purchase more.   If I see some sector going down with no good outlook, I may sell out that ETF.  But on the larger sectors like the FULL Stock Market ETFs like ITOT, VTI, DIA, and SCHB, I simply continue to buy even more on market dips.

You have to get in and get your feet wet to find out what works for you.  If you are unsure of what to buy, discuss it with your broker, accountant, or lawyer.  All of the ETFs I have mentioned today are very consistent performers, especially in good markets.     

I urge you to study and read a lot of resources.   I feel comfortable investing today as I have a feel for the market after years of study and some struggles.   I have no crystal ball and can not tell you if the market is going up or down.    Being as high as it is now, it may very well have a huge downturn in the upcoming year.    But putting some money in ETFs in a ROTH IRA is a very logical way to get some passive income.
 
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Winners Never Cheat by Jon M. Huntsman

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.  Consult a Broker or Lawyer before making any investment. 

 
Winners Never Cheat By Jon M. Huntman is a great great book.  I am still so happy this one was recommended to me by Patrick Bet-David.  If you think old style morals and living a principled life is no longer happening, you definitely need to read this book.  

Winners Never Cheat is a super book in regards to business success, and I would rate this the best book I have read on business success.   For years I have lived a principled life and God has greatly blessed me.   The Huntsman Brothers are proof again that great things await those that live right.
​
In the year 2022, I read a total of 90 books.   I am ahead of that count in 2023 with 82 books completed in this first week of November 2023.   My goal is to try and reach 100 in 2023.

I started reading only about investments, then branched out into business success.   This led me to study Mindset and Habits.   All of these things interweave together in life.   To be successful in business (or life) requires discipline and the right mindset.  Jon M. Huntsman ws trained as a child to have great discipline.

Personally, I had never heard of Jon Huntsman before reading this book.   It was recommended in the book Your Next Five Moves which I reviewed below:

Your Next Five Moves 

WHAT I LEARNED FROM WINNERS NEVER CHEAT.

Jon Huntsman and his brother started Huntsman Chemicals in 1970 as a  family run business.   The company has grown and evolved into a 2 billion dollar a year revenue successful corporation.

Huntsman Chemicals have made many products including the first plastic egg container, plastic forks and spoons, and the original Big Mac container.
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Through the years, they have worked dozens of business deals ranging into hundreds of millions of dollars using a simple handshake to close the deal.  They consider the Huntsman Cancer Institute as one of their greatest philanthropic accomplishments. Jon Huntsman believes one day that they will find a cure for cancer.  Many of Jon’s family members died of cancer, and he has overcome 3 bouts of cancer in his life.

This book is much more than a story about running a business successfully.  The original book was published in 2004 but this revision was published in 2007 when the housing crisis and other issues seemed to make traditional values no longer in vogue.

The Huntsman Brothers believe to reap an abundant harvest can only be done by being responsible, never cheating, or using any fraudulent behavior. Jon Huntsman states that more is learned in times of adversity than in good times.
​
Prosperous times never mean that a person will continue to do right.

Whatever our lot, we must have a fixed code of ethics to adhere to in both good and bad times.  Always stand upright regardless of the consequences. They believe all we really need to be successful we learned as children in the sandbox.   Fair play and being kind one to another is what life is all about.   Treating others with respect and making decisions without having a room full of lawyers looking for contract loopholes.   Always be honest and stay far from greed or dishonesty.

No matter our background, each of us really knows in our hearts what is right and what is wrong.  There is no place in business (or in our personal lives) to look for gray areas that the lawyers live to promote.
 
Huntsman Business Standards Tests

1. Do what you’re supposed to when you are told to do it
2. Kindness and honesty determine your heart and character.
3. Never tell lies.
4. Treat others as your desire to be treated (The Golden Rule)
5. Play by the rules
6. Respect others.

 
Character is most determined by a person’s integrity and courage.   Your reputation is how others perceive you.  Character is how you act when no one is watching.

Jon Huntsman makes a point to never lie or mislead in business negotiations.  He is a tough negotiator, which is fine, but do the business deals honestly and above board.   Keep both hands on the table with your sleeves rolled up.

Three R’s of Leadership

1.  Risk – You must take risks to grow.
2.  Responsibility – If worth doing, do it right.   Be honest and humble.
3.  Reliability – Above all things, do what you say.  Your word should always be your bond.  Use determination and courage to accomplish all things.

​He quotes Andrew Jackson who once said:  One man with courage makes a majority.

No matter what, always keep your word.   To do this takes great resolve.

In selecting advisors, be extra cautious.  Be sure they share your core values and are not wrapped up in acquiring wealth.   Money should never be your main focus.   Be sure in tough times that your advisors will default to higher ground when in times of stress.
 
Show graciousness to competitors, customers, and employees.  Showing respect never goes out of style. Whatever successes we receive in life we should give back.   Jon Huntsman received a scholarship to go to Wharton College of Business.  This gave him his start, and since gaining success, he has given hundreds of scholarships to deserving young men and women.    He believes in philanthropy so much that when the business has been slow, he has borrowed money to continue to fund his charitable giving.    When you make a promise, don’t break it is his philosophy.

Take your values to work and never allow a conflict between making a profit and adhering to your life principles of decency and fairness.

At the end of the book, he lists some F’s to practice and put first.

Family
Faith
Fortitude
Fairness
Fidelity
Friendship.
 
On the wall of his friend and doctor John Andrew Holmes is a plaque.  It says:  No exercise is better for the the human heart than reaching down and lifting up another.

The Huntsman Brothers have lived a life of reaching down and helping people all around the world.
 
Is this book worth reading?   For sure it is.   One of the best books on business and life I have ever read.  It will really inspire you to live a life of character and to never compromise your core values.   Winners Never Cheat.
 
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Minimalism and The Importance of Learning to say “NO”
 
One of the great things about minimalism is that it allows us to eliminate things that are time wasters and put our focus on the important things in life.   To do this, we must learn to determine what is important and be able to say NO to those things which are not.
 
Most of us live in a world where our daily lives have become too busy. To be pleasing at work to our employer or more importantly pleasing to the Lord, we have to learn to do those things most important and not do those that are of little importance.  Jesus desires us to be people who are about God’s work.
 
Luk 9:23  And he said to them all, If any man will come after me, let him deny himself, and take up his cross daily, and follow me. 
Luk 9:24  For whosoever will save his life shall lose it: but whosoever will lose his life for my sake, the same shall save it.  
 
If you were with us Sunday night when Jordan Lindsey preached out of the book of Haggai, he taught how God was very displeased with the children of Israel for not doing the work of God first. The people found time to do their own thing and build their houses, but put off the rebuilding of the temple.
 
(Hag 1:1)  In the second year of Darius the king, in the sixth month, in the first day of the month, came the word of the LORD by Haggai the prophet unto Zerubbabel the son of Shealtiel, governor of Judah, and to Joshua the son of Josedech, the high priest, saying,
(Hag 1:2)  Thus speaketh the LORD of hosts, saying, This people say, The time is not come, the time that the LORD'S house should be built.
(Hag 1:3)  Then came the word of the LORD by Haggai the prophet, saying,
(Hag 1:4)  Is it time for you, O ye, to dwell in your cieled houses, and this house lie waste?
(Hag 1:5)  Now therefore thus saith the LORD of hosts; Consider your ways.
(Hag 1:6)  Ye have sown much, and bring in little; ye eat, but ye have not enough; ye drink, but ye are not filled with drink; ye clothe you, but there is none warm; and he that earneth wages earneth wages to put it into a bag with holes.
(Hag 1:7)  Thus saith the LORD of hosts; Consider your ways.
(Hag 1:8)  Go up to the mountain, and bring wood, and build the house; and I will take pleasure in it, and I will be glorified, saith the LORD.

Like God told his people in verses 5 and 7 to consider their ways, we need to consider our ways also.

Each of us has only 24 hours in a day. We must learn to prioritize our lives to be pleasing to God.  When something comes up and you are asked to do something, it is crucial to realize that the little two-letter word NO may be way better than YES.  When you say YES, you are saying that the thing you are about to do is the most important thing there is and in fact, saying NO to all other things you might be doing.
 
Now if it is God’s will for your life, you best say YES.   But my point is we can be so good-natured that we tie up all our lives with things that are not all that important and waste our time away.
 
Psa 90:12  So teach us to number our days, that we may apply our hearts unto wisdom. 
 
I read a book recently by James Clear who is a motivational speaker and a very great teacher on how to use your time precisely. I want to read a couple of portions of his book on learning to say NO.
 
 
 
The Ultimate Productivity Hack is Saying NO by James Clear
 
How often do people ask you to do something and you just reply, “Sure thing.” Three days later, you're overwhelmed by how much is on your to-do list. We become frustrated by our obligations even though we were the ones who said yes to them in the first place.
 
It's worth asking if things are necessary. Many of them are not, and a simple “no” will be more productive than whatever work the most efficient person can muster.
 
But if the benefits of saying no are so obvious, then why do we say yes so often?
 
We agree to many requests not because we want to do them, but because we don't want to be seen as rude, arrogant, or unhelpful. Often, you have to consider saying no to someone you will interact with again in the future—your co-worker, your spouse, your family, and friends.
 
Saying no to these people can be particularly difficult because we like them and want to support them.  
 
We find ourselves over-committed to things that don't meaningfully improve or support those around us, and certainly don't improve our own lives.
 
Perhaps one issue is how we think about the meaning of yes and no.
 
The Difference Between Yes and No
 
The words “yes” and “no” get used in comparison to each other so often that it feels like they carry equal weight in conversation. In reality, they are not just opposite in meaning, but of entirely different magnitudes in commitment.
 
When you say no, you are only saying no to one option.  No to just that one thing. When you say yes, you are saying no to every other option.
 
“Every time we say yes to a request, we are also saying no to anything else we might accomplish with the time.” Once you have committed to something, you have already decided how that future block of time will be spent.
 
In other words, saying no saves you time in the future. Saying yes costs you time in the future. No is a form of time credit. You retain the ability to spend your future time however you want. Yes is a form of time debt. You have to pay back your commitment at some point.  And I think we know from my last devotional that debt is not good.
 
No is a decision. Yes is a responsibility.
 
The Role of No
 
Saying no is an important skill to develop at any stage of your career because it retains the most important asset in life: your time. “If you don’t guard your time, people will steal it from you.”
 
“Saying no is so powerful because it preserves the opportunity to say yes.”
 
Saying no can be difficult, but it is often easier than the alternative.  “It’s easier to avoid commitments than get out of commitments. Saying no keeps you toward the easier end of this spectrum.”
 
In a spiritual connotation, I think you can see how crucial it is to say NO to a lot of things. 
 
No - to wasted time on social media.
No - to much wasted time on videos or TV. 
No - to things tying up all our free time.
 
If we are not giving our all to the Lord like He wants, we need to learn the simple word:  NO.
 
It all ties back to what God wants for our lives.   Let’s read that verse from Luke again.
 
Luk 9:23  And he said to them all, If any man will come after me, let him deny himself, and take up his cross daily, and follow me. 

Luk 9:24  For whosoever will save his life shall lose it: but whosoever will lose his life for my sake, the same shall save it. 
 
We need to make full use of NO and YES as needed and mean it.
 
(Jas 5:12)  But above all things, my brethren, swear not, neither by heaven, neither by the earth, neither by any other oath: but let your yea be yea; and your nay, nay; lest ye fall into condemnation.
 
So be sure when you say YES, it is a commitment that you follow through on and you will do what you promise.   
 
But realize that NO is acceptable and may be the right answer to free up time to do the work of the Lord and at the same time, simplify your life. It is up to each of us to manage our lives and time. Don’t be over-committed and miss out on the important things in life.
  
Check out great article on Minimalism by Heather Aardema on How to Let Go to Live Light from No Side Bar website.

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DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm. The opinions given are my own and are not to be used as professional advice.  These are my findings and can hopefully help you make informed decisions on investing.  Consult a Broker or Lawyer before making any investment.

What I Love About Passive Income – Part 3

What is greater than Passive Income?  I started asking that over a month ago in our first article on Passive Income.    I think that every investor needs to make it a goal to build a large stream of Passive income.

What Is Passive Income?

In our first installment of What I Love about Passive Income, we discussed the vast number of methods for creating Passive Income.  One of my favorite methods of passive income is to buy an asset.   That could be a rental property, but my choice is to buy stocks and ETFs (Exchange Traded Funds) that make me money via dividends.

Investing with ETFs

Read The Whole Part One Article on What I Love About Passive Income

There are so many good dividend-paying stocks.   I like to use my Schwab IRA to buy ‘stock slices’ in companies I feel are good dividend payers and also are potential growth companies.    This is called DGI / Dividend Growth Investing.   These are companies that will make you steady dividend income, but due to growth may also gain in value as their stock prices go up.

What is Dividend Growth Investing
 
This week US News Investing wrote an article In October 2023 on 7 of the highest-paying dividend stocks available.   I have some of these in my Schwab Portfolio.
Article on Seven High-Paying Dividend Stocks
 
In the past year, I have come upon another class of investments that are making me money which are called Preferred Stocks.  Briefly, the advantage of Preferred Stocks over normal stock is they sell at a fixed par value which is normally either $25 a share or $10 a share.    And because the stock market is liquid, these vary in price a lot. 

Article on Understanding Preferred Stocks

So, buying a company’s preferred stock that is out of market favor will sell at a discount to par.   I try to buy all of mine on those with 14 to 70% discount to par.   The dividends are still paid on the par value.  And if purchased at a discount, normally these move back closer to par value over time.  

Complete article on Part 2 of What I Love About Passive Income on Preferred Stocks.

In the second part of What I Love about Passive Income, we covered real estate.  It is truly one of the best passive income sources.  If you don’t have the volume of dollars to invest in additional houses or apartments, a good way to invest in real estate is by buying ETFs on REITS.  (Real Estate Investment Trusts.)

Article on Investing in REITS

In that article, we discussed a super simple method to get into real estate with minimal investments.    Some ETF names are given to help you get started.

This week we will wrap up our articles on What I Love about Passive Income by covering the last 2 of my four favorite methods.   These last 2 are a huge reason this year's income is way up over 2022.

My two highest-paying Passive Income investment providers are CEFs (Closed End Funds) and BDCs (Business Development companies.) 

What are Closed End Funds?

Read the full article above for all the details, but in summary, Closed-End Funds are like mutual funds in regards to how you are diversified over a large number of stocks based on the contents of the CEF.  Closed End Funds are much different than mutual funds in that they have a set amount of shares.  This is set at the time of IPO (Initial Public Offering) when introduced.  

The number of shares does not change without a management decision.   Normal mutual funds constantly buy and sell more shares, but not CEFs.    This gives them less volatility, and they have a NAV (net asset value) which gives you an idea of what the fund is worth.   But the CEF rarely trades at the NAV value.    Many can be purchased at a large discount to their NAV.  If you can buy a CEF at a large discount to NAV value, not only will you receive dividends, but most likely the stock price will rise coming back closer to the Net Asset Value.

One of my favorite CEFs is the Pimco company.   I probably own more of their holdings than any other. I love the fact that they don’t just pay a quarterly dividend, but they pay MONTHLY.  Steady consistent income stream many times above 10%.  Check out the PIMCO CEFs of PDO, PTY, and PDI.  NLY is another good non-Pimco CEF.
​
Just because a fund is a CEF does not make it a good investment.   You must study any kind of investment to be sure it is a quality product.
 
Here are two websites to help you find good CEFs.   I use both of these for research on Closed-End Funds.

CefConnect.com
CEFA.com – Closed End Fund Association.
 
The last passive income category we will discuss in this series is BDCs. (Business Development Companies.)

What are Business Development Companies?

Business Development Companies are a lot like a bank.  They provide financing to small to medium-sized companies who may have trouble obtaining financing.   Many relate these to REITs (Real Estate Investment Trusts), but they are not specific to the Real Estate business.   They can provide financing to any kind of business.  
​
So if you are looking for those who loan just to Real Estate investments, you must research and see who they provide financing.  In many cases, I have found those tied to real estate to be safer than some others.   However, each company must be researched in all aspects of their business, as no specific type of loan is a sure bet. It truly depends on the success of the borrowing company and its management.

Perhaps one of the reasons these tend to pay excellent dividends is due to their design.   These were specifically organized by the government to allow special tax preferential status.  They can distribute up to 90% of their profits to their investors.   No other type of company has this unique taxing advantage to my knowledge.

Read that article on Making Money on Business Development Companies.

In that article, I list a large number of BDCs that have worked for me.   And it goes into greater detail about BDCs.   Some of them include MAIN, ARCC, ORCC, TPVG, and HTGC.  I believe we all need to consider Preferred Stocks and BDCs in our investment portfolios.    These two have been solid income producers for me.
  
I want to close with a recommendation to read this week’s article on No Side Bar about viewing life properly.   None of us are perfect, and we need to embrace life and accept our limitations but REALLY LIVE.   I love the whole article.  Rachel Oberholtzer gives reflections on What Would Sunshine Do?

Another great article on the same website explains about the 15 types of Minimalists.   I found it quite interesting and found I fit into multiple categories. 

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Dividend ETFs using Covered Call Options

One of the easiest ways to make money in Dividend Investing is to buy ETFs that specialize in Dividend Growth stocks.   DGI (Dividend Growth Investing) is a very efficient and consistent method to grow your portfolio.

What is DGI Investing?
 
I have many ETFs that invest in Dividend Stocks and found out this week why a number of them are making a lot more money than the others.  Those making the most are using Covered Calls options on the dividend stocks.

Options are not anything new, but I have not written about them as most of the time, they seem limited to speculative investors (loosely called investors) and very wealthy investors like Warren Buffet.    Anyone can write an option, but only those holding shares in the stocks should do this.   Many day traders sell naked options without holding the stock and sometimes make a lot of money.   But most of the time, people who deal only in options go broke very quickly.

I will try to briefly explain how options work.   Let us say you have 100 shares of stock XYZ.  (A fictional stock symbol.)  The stock price is $25 a share and pays a 10% dividend.   So in a year, your $2500 investment would yield you $250 if the stock price stayed the same every quarter.    If you placed a covered call option to sell your stock in 6 months for $28, the option would vary in price as the maturity of the option closed.   Let us say hypothetically that you could sell the $28 a-share option for $3 a share.

Anytime in the time of the option until maturity, the option owner could call the stock and pay you $28 per share for it.   You would get to keep the $300 payment for the option.  So not only did you make $3 a share, you received quarterly dividends while you owned it for 10% of the current stock price, plus the $2800 the option caller paid for the stock.    Let us say it was worth $26 at the end of the quarter and if we still owned it, we would have received $65 in dividends ($2600 * .10 = 260 then divided by 4 for quarterly value.)

So you made $65 in dividends, $300 on selling the option, and gained another $300 over the purchase price of thestock(Capital gain).    So you made $665 on a $2500 investment in less than 6 months.   That $665 makes you over 25% net profit on an investment that was held for less than 1 year.  Now all these assumptions are based on this being done in a non-taxable investment account like an IRA or a 401K so you have no taxable capital gains.

See the difference in your net dividend or gain? 10% is a good return, but 25% is way better.  Now suppose that the stock never went to $28 a share.  What happens then?    The option buyer has two options.  One is to take the loss and pay you the $28 a share and exercise his option, or just let the option expire.  Either way, you win.   You keep the $300 on option purchase and still get $28 a share when stock is of less value.  

Think about how great that is.   You got $300 of free money by writing the option.  The numbers I am using are made up, and you may receive more than $3 a share or less based on the market sentiment for your stock.   The longer the maturity window on the option, the higher the amount the option buyer pays as it gives them a long window of opportunity to exercise their option.

Why would anyone pay you $3 a share for an option?   Their $300 investment is controlling the full value of the 100 shares.   So speculators like to take a chance and make money on what could happen.  If the shock was to shoot up to $33 a share, they come out good.   Most options buyers that I have met are either very intelligent with a good plan or they are mainly gamblers hoping for a free quick payout.   Most of these last only a few months until they lose all their investment money.   Dave Ramsey said on his show today that 78% of day traders go broke in the first 6 months.    No way to invest if you want to retire with a large sum.

Remember that this is a super simple explanation.  Study out options in detail before selling (or buying) covered call options.    An investment professional or broker can give you details and explain all the risks.  They are not totally risk free, but most of the time a conservative play to bump up your income.

So why talk about this opportunity?   Two reasons.  One is when you get to owning 100’s of shares of stocks, this is easily one of the most secure methods to bump your income up with minimal risk.     And secondly, you don’t have to own hundreds of shares to do it right now.

There are several ETFs designed for this exact purpose.   I own a bunch of them and just found out why these pay out over 12% most of the time.   Here is an article published in October 2023 from Morningstar explaining some of the ETFs.

Why Investors are Pouring Billions into Covered Call ETFs.

They list a lot of ETFs in the article.   Some that I own that have done very well for me are QYLD, JEPI, JEPQ, PFFA, and SDIV. (I am not 100% sure SDIV uses covered call options, but they pay consistently high dividends.)  I have owned all of these for quite some time, and all have been very constant in paying excellent dividends quarter after quarter.   These are examples of some that have worked for me, but never buy any investment without talking it over with a broker or investment professional.

So keep this strategy in mind.  If you are a big investor with thousands of shares of stocks, this is a way for you to supplement your income with very minor risk.  If you are a new or small investor, get started by using some of the ETFs I have listed or those mentioned in the Morning Star article.
 
 
 
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​Originally published 6/2/2022 on LifeCanBeSimple.net 
Published on LifeCanBeSimple.blog on 10/10/2023

DISCLAIMER -  I am not a Financial Advisor and do not work for any Brokerage Firm.   The opinions given are of my own and are not to be used as professional advice.  These are my findings and can hopefully help you to make informed decisions on investing.   Consult a Broker or Lawyer before making any investment.

​ 
DGI investing – Dividend Growth Investing

Probably the most underused method to acquire great gains in your investment portfolio is DGI Investing.   Ever heard of it?    It has been around for years, but few people have adopted it.  It is Dividend Growth Investing.    We have discussed dividend stocks in two previous articles.

Dividend Aristocrats
Dividend Kings
 
The Dividend Aristocrats and Dividend Kings are lists of stocks that may or may not be ideal DGI investing instruments.  A Dividend growth stock will not only provide you dividends, but the company will continue to grow and the stock will appreciate.   So if a stock pays a 6% dividend and in a year grows 8%, you received a 14% growth in that one year.  (Added value of your investment plus the dividend paid.)   I code all my Stock Schwab Slices where I purchase most of my DGI stocks to automatically reinvest the dividends by purchasing more stock of the company.  Is it possible a company could return in one year more than 14%? 

Does it sound too phenomenal to be true?  It happens all the time.  But as I warned you in the earlier articles, don’t chase high dividend percentages only as the company may be paying out more than 50% of earnings to pay that high dividend.   A company without sufficient money to reinvest will not continue to grow.   So pay attention to the percentage of profits used to pay out the dividends.  Some REIT (Real estate) stocks by law return the profits to the investors, so there are a few exceptions to this rule.

So you are looking for high-quality companies with the ability to continue to grow.  With this and the compounding of interest and growth price (appreciation), this can turn into a fine return.  In 2022, I have been putting over ½ of my investment money set aside for ETFs and Stocks into DGI investments.

Review those two lists on Dividend Aristocrats and Dividend Kings.   They are different lists, and if a company is on both lists, it should be carefully considered as a potential DGI investment.   If you continue to buy stocks all through the year with consistent investments, you will gain the average cost on the price throughout the year. 

That way if you invest $50 each month into say McDonald's stock when it is lower priced you will purchase more shares, and as it gets higher, fewer shares. For example only, if the stock was $10 a share, you would get 5 shares for $50.   If it moved up to $20 a share, then you would only get 2.5 shares for the same $50 investment.   But your per-share cost would be 100 / 7.5 =$13.33   

s time goes on, and the stock goes up and down as the market fluctuates, your average cost will vary.   This is what Dollar Cost Averaging is all about.  Income investing is much like DGI investing.  In both cases, you receive dividends from the company.   The big difference is in DGI investing, you have a much greater chance of stock appreciation in value.

Finding companies that have good dividend returns and excellent growth potential are sometimes difficult.   Many websites offer not only last year's growth rate,  but the EPS percentages for next year and sometimes for the next 5 years.   EPS stands for earnings per share.  If a company has a projected EPS of 3% or more, that is probably a worthy candidate.    Also, remember to look at the P/E ratio (Price to earnings ratio.)  As I have mentioned in earlier articles, an ideal P/E is 8 or less.   Many today are well over 20, so don’t let this deter you if other reasons are compelling to include the company.

Some of the best options for DGI investing include REITs (Real Estate Investment Trusts) and Preferred Stocks (possibly via ETFs) and also CEFs.  (Closed-End Funds).  These are unique mutual funds that can not sell more shares but are fixed at the IPO shares sold.   You buy these looking at the Dividend Return and the discount to NAV.  (Net asset value)  

A few of my DGI favorite investments are  O - Realty Income (Reit), CVX – Chevron, WMT – Walmart, ABBV – ABBVIE(an Abbott labs spin-off), PEP – Pepsi, and KO – Coca Cola.

These all appear to have good growth potential and are paying dividends of 3% or more. 
 

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