[Investing]The number game

[Limper]

I've been thinking on something and concidering the up and downsides of an action and today I figured I was right on and made it happen.

So I figured I'd share my process on this so that you can shoot holes in it or learn from it or ignore it or whatever yall do with my ramblings.

We have a stock that pays a monthly distribution (dividend) and due to it being the off season that stock is trading pretty cheap... cheap enough that the annual payout is 16% if you buy it at this price.

I can borrow money (margin) at 10.5% and have to pay on this monthly (.875% per month).

I'm about as sure as I can get that the undelying company will do pretty damn nice over the winter season so I buy 100 shares with borrowed money.

It costs me about $20 a month to borrow that mmoney but I am getting paid about $30 a month from the stock.

Near as I can tell now I just wait for the stock to rise. If it takes a dip but the payout remains solid I'll buy even more of it.

So what do you think? Good plan or bad?

[Droid101]

Good but it makes my head spin.

[FeatsofClay]

It costs me about $20 a month to borrow that mmoney but I am getting paid about $30 a month from the stock.

Near as I can tell now I just wait for the stock to rise. If it takes a dip but the payout remains solid I'll buy even more of it.

So what do you think? Good plan or bad?

How big a risk are you taking for $10 a month? What level of risk are you willing to assume for 33 cents a day?

[Limper]

How big a risk are you taking for $10 a month? What level of risk are you willing to assume for 33 cents a day?

For $.33 a day for waiting to make $200-300 on the trade by mid winter? I'm comfortable with the risk. The compay owns a refinery and the income source is from Natural Gas and Oil rights both of which are not really going down in value, even less so in given the time of year.

As far as stocks go its not much risk at all... but still we are talking about stocks so there is the inherent risk of the game.

BOC Rulz!

[Snatch]

Buy low! Sell high!

That's the extent of my investing savvy.

[doc]

What stocks are you looking at ?

[Limper]

What stocks are you looking at ?


For this? Or in general? At any given time I have shares in 25 or so companies and am looking at 25 or so other ones.

In this case I'm looking at Harvest Energy Trust.

[Pigs in Space]

I'm surprised you can't get a loan a helluva lot cheaper than that.

Which would mitigate a lot of the risk - you'd still break even if there was lower than expected returns. Otherwise you cold be losing cash.


Furthermore, we established you can't negative gear in the US right? That's where you are allowed to tax deduct the interest on that loan you are taking out.

[Ancalagon]

I think this game is called "leveraging" no? Borrowing to invest?

If you are sure of your move, do it - BUT - only if it's money you can afford to lose... which leads to the question - if you can afford to lose the money, how come you need to borrow some to make the investment?

Ancalagon

[Limper]

I think this game is called "leveraging" no? Borrowing to invest?

If you are sure of your move, do it - BUT - only if it's money you can afford to lose... which leads to the question - if you can afford to lose the money, how come you need to borrow some to make the investment?

Ancalagon

The more you have to work with the more money you can make. I can afford to lose this but that in no way means I don't need it to make the money I need to achieve my goals.

[Limper]

I'm surprised you can't get a loan a helluva lot cheaper than that.

Its actual Margin intrest so its not as favorabel as other borrowed money. My Mother is looking to make better returns on her money so I'm thinking of broaching the subject of me borrowing it from her at over twice what she is getting for it at the bank (8%).

Which would mitigate a lot of the risk - you'd still break even if there was lower than expected returns. Otherwise you cold be losing cash.

My wifes desire for new windows in the house has limited my ability to borrow at good rates (against the equity in the house) to invest. The windows have however halved the utility costs so its not a complete wash. I'm hoping to invest the savings in my local utility cmpanies.:D

Furthermore, we established you can't negative gear in the US right? That's where you are allowed to tax deduct the interest on that loan you are taking out.

You are correct I can not write off the intrest on this... if it were against the home I could.:(

[TiQuinn]

I think you've got it pretty well figured out. The only issue I see is that you're using margin. If there's a cheaper source of money, like an equity line of credit, it'd be better off, but if the margin's your only option, then it's a moot point.

[Limper]

I think you've got it pretty well figured out. The only issue I see is that you're using margin. If there's a cheaper source of money, like an equity line of credit, it'd be better off, but if the margin's your only option, then it's a moot point.

You have to work with what you can.

[Limper]

Hot damn! Margin intrest just went down 50 bp!

The cost multiple is now .00833 rather than .00875!!!!!!

[Atropine Mama]

Limper, instead of six fucking exclamation marks in a row, you can just use the :fap: smiley.

[Limper]

Limper, instead of six fucking exclamation marks in a row, you can just use the :fap: smiley.

It takes less time to type six exclamation marks than it does to tupe ': fap :' or hunt for it in the listing.

[Atropine Mama]

hunt for it in the listing.

Hunt for the "fap" smiley. The one with the word "fap" right there in the little picture. :grey:

Apparently I'm not the only blonde here anymore.

[Limper]

Hunt for the "fap" smiley. The one with the word "fap" right there in the little picture. :grey:

Apparently I'm not the only blonde here anymore.

Its not on the basic smilies to the right of the post box so it requires a hunt... it requires one to click on more and look around for it.

:tongue:

Get it right sister... I'm lazy... not blonde.

[Limper]

While I'm honing up to past ideas...

This one worked alright. I held the positions to long as i got greedy and it took a lot of trades and efffort to break even in the end.

In theory this is good but the spreads need to be larger... intrest in the 5% and payouts in the 15% makes it worth it. One also need to have tight stop limits in place and sell discipline.

I keep a playbook now and stick to it and lo and behold I make money more often.