Haircut

IMG_20150102_125004In recent months/years, the word “haircut” has been borrowed by economists that needed a word to make “almost-default/bankrupt” sound a little less tragic and looming.

As they are next door neighbours I cannot avoid thinking about Greece.

In recent years Athens went through a phase of “debt reassessment” and it seems that unfortunately all the initial efforts were not enough to avoid a possible default. But I am not interested in the Greek case itself, there is little that I could add in a debate about it, what I am interested in is the “haircut” word, the actual meaning applied to a very “green” dividend investor such as me.

If there is something that I understood in these first 6 months is that I need to try to be as precise as possible with my personal finances, i.e. a great part of the dividend investing strategy revolves on constant reinvestments, not just of the dividends, but also of the savings that one manages to get.

By doing so, it’s easier to reach a quota of investments that might be sufficient to generate enough yearly dividend to supplement an eventual pension.

Being “nasty” about one’s savings it’s not easy thing, requires precision and total devotion to the task, right now I am not in the position to be like that, so I have decided to postpone this part at the end of the first year of my dividend investing plan. I know it sounds a bit weak on my side, but there are things that I need to wrap up this year (mostly house related) and savings are going to be very hard for me… So i’d better be real about it!

Where I think that I can apply the concept of haircut is the size of the Portfolio, instead! One of the first mistakes that I can call me accountable for is that I did not keep my “cool” when making my first investments, I had my savings and despite the research I started to spread my tanks around the Risk board to get as many nations as I could. Shame that I find myself owning a lot of states, but with only one tank. Any half decent strategists would tell you that you made a bold move (to put it nicely)…

So this is why I want to try to take this month and reassess the number of positions that I have. Clearly this course of action means that I also revise my strategy. Do I need to have NRZ or BBEP in my holdings? They are both interesting companies, great dividend yield with a good upside potential, but great fluctuations. Or should I look into GSZ and ORA, bought on a “trip to diversification” moment, and that I should have researched a little bit better?

Do you sell even if you are loosing, or do you look only to the positions that are positive (the latter could prove quite hard for me as most of the PF is in the reds)?

I have many questions ahead of me, what is sure is that too many positions are great for differentiation (and even there I’d really need to look at the Beta of all my stocks), but are hard to keep track of them all. But most importantly I haven’t added positions in great stocks that I really think should be more prominent like: JNJ, DIS, PEP, SBUX or ULVR.

So it’s back to the drawing board for me, or as I started the post… Time for an haircut!

Advice, ideas, comments are welcomed of course!

Advertisements

4 thoughts on “Haircut

  1. Hi Stalflare,

    Considering that the market is constantly toying with all-time highs at the moment, it’s likely that any purchase made will go into the red for a while.

    If your focus is on continual income, then the fact that a position might be red means you can buy more cheaper. You should only consider selling if the business prospect of the company has now changed for the worse due to new information. Otherwise price fluctuations are normal.

    I usually look at any red positions as the first place to consider buying new shares; whether I do buy more depends on my portfolio allocation.

    Best wishes,
    -DL

    Like

  2. Ciao DL,

    I totally agree on what you wrote, the only issue for me is that keeping track of 47 stocks might be a bit of an unnecessary burden at the beginning of the “trip”. The risks of loosing focus are quite high.
    The restructuring that I am planning is minimal, 3/4 stocks at best.

    As to the red numbers I am not too much concerned about it right now, I see the opportunity of buying good stocks at lower prices, part of the idea of doing some spring cleaning is also to get a bigger amount of cash to re-invest in some other positions that are more “core” stocks in my view (for example there is a good opportunity with Walmart),

    Thanks for the feedback, really appreciate it! 🙂

    ciao ciao

    Lorenzo

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s