Dividend Stocks

Part of the reason why I started this blog was to help me learn about the wonderful world of investing. Every time I learn something new, I try to post it on "Saving 30" to help me keep an investing diary.

There are a couple of different schools of thought when it comes to selecting a stock to purchase. Some folks like stocks that pay dividends while other like to stay away from dividend paying stock.

I used to think that dividends are like free money, which in some aspects, they are.

I've read that once a stock pays out it's dividend, the stock price will drop (roughly) the same amount of the payout.

For example: If my Nokia stick is currently trading at $3.50 a share, and they decide to payout a dividend of $0.25 per share, tomorrow, Nokia should be trading closer to $3.25 a share.

So, this month, I have a couple of stocks that are executing dividend payments. This will give me a chance to test the dividend-stock price drop theory.

Stock #1 - Nokia
Dividend Amount - ($0.18 a share)
May 6th Trading Price (closing bell, a day before D) - $3.41
May 7th Trading Price (opening bell, day D was paid) -

Stock #2 - Starbucks
Dividend Amount - ($0.21 a share)
May 7th Trading Price ( closing bell, a day before D) -
May 8th Trading Price (opening bell, day D was paid) -


Stock #3 - Activision
Dividend Amount - ($0.04 a share)
May 14th Trading Price ( closing bell, a day before D) - $15.14
May 15th Trading Price (opening bell, day D was paid) - $15.10


Stock #4 - Callaway Golf
Dividend Amount - ($0.04 a share)
May 17th Trading Price (closing bell, a day before D) -
May 18th Trading Price (opening bell, day D was paid) -

Stock #5 - Wendy's
Dividend Amount - ($0.04 a share)
May 29th Trading Price ( closing bell, a day before D) -
May 30th Trading Price (opening bell, day D was paid) -

Obviously, it's going to take about a month to test the dividend/stock price drop, but for now, let me try and analyze the dividend conundrum.

PRO - DIVIDENDS
- Free money
- If the stock pays a quarterly dividend, it's a constant source of income (not alot if you look at my little portfolio, but it's a source none-the-less)
- Great for long term investing (if you re-invest your dividends back into the stock)

CON - DIVIDENDS
- If you're in a retirement situation, dividend stocks might not be great. The stock price drop (if it actually happens) might be less beneficial than the actual dividend return. In my head this makes sense, might not exactly come across well on paper.

Read More

Bitcoin

Every couple of days, when I log onto CNN's Money portal, I see articles about this new digital currency called "Bitcoin".

As I continue to use this website as a tool to learn and grow my investing knowledge as I try to reach a $20,000 savings goal, I'll need to do some research on these new trendy investing options.

So what exactly is Bitcoin?

According to Wikipedia, Bitcoin was "first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it a peer-to-peer, electronic cash system. Bitcoin creation and transfer is based on an open source cryptographic protocol and is not managed by any central authority. Each bitcoin is subdivided into 100 million smaller units called satoshis, defined by eight decimal places. Bitcoins can be transferred through a computer or smartphone without an intermediate financial institution.

According to their website, Bitcoin is an experimental form of digital currency:

"Bitcoin is an experimental new currency that is in active development. Although it becomes less experimental as usage grows, you should keep in mind that Bitcoin is a new invention that is exploring ideas that have never been attempted before. As such, its future cannot be predicted by anyone."

Bitcoin has multiple "apps" that help you manage your "wallet". Bitcoin-QT, Multibit, Armory, Electrum, and Bitcoin Wallet are all multi platform apps that help you manage your digital currency.

After signing up, you receive an email address. Similar to Chase's Quick Pay, a user's email address is linked to the account and is all that's needed to make a payment to the user.

Bitcoin keeps popping up in my CNN Money newsfeed. 

At the most recent Birkshire group annual meeting, Warren Buffet and partner Charlie Munger said the following about Bitcoin:

He says doesn't know much about Bitcoin, the virtual currency that has been gotten a lot of buzz lately. Buffett's partner Charlie Munger said that he has no confidence that Bitcoin will become a viable meaningful currency. Buffett said he thinks the dollar will remain the world's default currency for years to come, perhaps forever. "Of our $49 billion, we haven't moved any of it into Bitcoins," says Buffett.

To me, that doesn't sound like a ringing endorsement from one of the world's most savvy investors.

In an April 11, 2013 article, Bloomberg's Matthew Zeitlin made the case that, due to it's volatile nature, you really can't count on Bitcoin as being the future of currency:

If you wanted to make the case for Bitcoin as a feasible and useful digital currency, yesterday wasn’t the best day to do so. According to Mt. Gox, the largest Bitcoin exchange, the currency started out at $230, spiked to $266, touched a low of $105 and then settled at just above $170 (it’s now $123). That’s, in the course of the day, a 15 percent jump followed by a 60 percent plunge off the day’s high and ending with a substantial loss.

When currencies can fluctuate substantially over short periods of time, merchants not only have to continually update their prices, an inconvenience and added cost typically borne by the customer, but they also are forced to become currency speculators, adjusting prices and inventory in accordance to data from a possibly hacked online currency exchange. Merchants who accepted Bitcoin payments yesterday morning were much better off than merchants who sold goods at the same price this afternoon.

So, looking at this from my point of view, I don't see the need to jump on the Bitcoin bandwagon right now (or even ever). 

Lessons I Think I've Learned:

Bitcoin has an odd way of tackling supply and demand. If there's a limited number of Bitcoins available, you would think that the demand would grow. But if the demand for Bitcoins isn't overwhelming right now, what's the point of owning one?

If Warren Buffet doesn't own it, neither should I.

Read More

Support and Resistance

In my little quest to save $20,000 over the course of the next two years, I'm eventually going to run into little roadblocks along the way.

I like using this site to help me figure out the complex world of the stock market, so today's post is going to help me figure out what the hell "support and resistance" means in relation to the stocks I own!

This morning I was reading an analyst's take on Walt Disney's recent success in the stock market. I own a couple of shares and have been pleasantly surprise to see the stock doing really well!

In a Market Intelligence Center article, the author kept talking about support and resistance levels. I haven't got the foggiest clue what that means, so I turn to my trusty edumicators over at investopedia:

Support: The price level which, historically, a stock has had difficulty falling below. It is thought of as the level at which a lot of buyers tend to enter the stock.

Saving 30 Translation - If a stock has a support level of $50, I believe that means buyers will start attempting to acquire the stock at $50. If the stock price falls from $55 to $50 and people buy the stock (thus increasing the price of the stock) the Support Level stays at $50. If the stock price continues to drop below $50, the support level is erased, and a new one will be determined once the stock settles and recovers.

Resistance: A chart point or range that caps an increase in the level of a stock or index over a period of time. An area of resistance or resistance level indicates that the stock or index is finding it difficult to break through it, and may head lower in the near term. The more times that the stock or index has tried unsuccessfully to break through the resistance level, the more formidable that area of resistance becomes. 

Saving 30 Translation - Let's say your stock's resistance level is $55. If the stock approches the $55 mark, but can't break past it, the $55 mark becomes the resistance level. Sometimes, if the stock breaks through, the resistance level could become the new support level. 

Read More

SigFig

As I mentioned in an earlier post, it's important to have a little help when you're trying to reach a goal.

In my case, my quest to save $20,000 over the course of two years has to be aided by multiple sources. I download random apps for my iPad, use a couple of different web browser based tracking programs, and occasionally, I use pencil and paper to add, subtract, and doodle.

I recently came across an app on my iPad called SigFig. Touted as a financial app that analyzes your portfolio and offers unbiased suggestions, SigFig seemed like a good tool for me to use.

I downloaded the SigFig app, and after a quick five minute registration process and security setup, I tried adding my investment accounts.

My Fidelity accounts were set up without a hitch. That's when things began to go south.

SigFig couldn't connect with my Ameriprise Account and kept sending me to a Quicken page within Ameriprise's site. I consider myself to be a pretty savvy web and technology user, but I couldn't get around this step.

Next, I attempted to add my OptionsHouse account to SigFig. Only problem, it's not one of the major trading platforms in SigFigs' system. E*Trade, ScottTrade, Schwab, Sharebuilder all work for SigFig. OptionsHouse did not.

I abandoned the app because, really, who wants to see only 1/3 of their portfolio when analyzing data?

Fortunately for me, SigFig partnered with CNN Money. I was able to create an OptionsHouse workaround by manually adding each stock. My Ameriprise Account still won't connect, but I've given up trying and no longer blame SigFig for that issue.

After a couple of days, SigFig analyzed my Fidelity portfolio. It liked what it saw in my employeer based Fidelity Fund, but thought that the IRA I chose could use a little work.

SigFig offered up three different fund suggestions, all with a SigFig score of 90% or higher.

SigFig compared my fund against the ones they found. I was able to have "side by side" look at each fund, comparing 3 year returns, fees, Sharpe Ratio, and Lipper Ratings.

After comparing the suggestions, I was happy to stay with the fund I picked. Despite the other funds offering a little bit more on the 3 year returns, I saved a bunch of money in fees and expenses.

SigFig also feeds in personalized news, highlighting stories that pertain only to the stocks or funds that I've entered into the program.

I'm happy to continue using SigFig, but only through CNN Money. The iPad app is a little cumbersome and is less navigable than the web browser version.

Read More

Mint.com

Every hero needs a sidekick to help him along on his righteous quest.

Batman has Robin. Fred had Barney. Howard has Fred (and Robin). Bart has Milhouse. The Lone Ranger had Tonto.

Watson sticks by Holmes, Spock saves Kirk, Donkey follows Shrek. The list is endless.

Without the sidekick, the hero often times finds himself stuck in the mud or wandering around aimlessly.

In my quest to save twenty thousand dollars over the course of a two year period, I too need a sidekick to keep me focused and in line.

My sidekick is Mint.com.

Mint.com is perfect for me. It helps me keep track of my progress towards saving the $20,000. The goal feature allows you to attach savings or investment accounts, and maps out a plan of attack to help you reach your goal. You can set up a goal to help save for retirement, buy a house, a car, or to put a little something away for a rainy day or emergency fund. 

Mint.com offers a lot more than goal setting. Once you safely and securely add bank, investment, loan, and credit card accounts, Mint will analyse your "portfolio" and offer up suggestions.

If Mint sees that your bank's savings account is offering up a pitance for an interest rate, it will suggest that you look into a high interest savings account run by Ally, Orange, or Capital One.

Mint takes a look at your investments and offers up alternatives if it thinks you're being charged too much in fees. Mint also offers up alternative investment choices like "Betterment".

Mint helps you track and organize spending patterns. If Mint sees that you spend a lot of money on a certain purchase (gas, dining, groceries) it will suggest credit cards that are geared toward earning cash back or points based on those purchases. 

Mint can send you an email when your bank accounts have a low balance, which is handy if your bank isn't mobile app ready yet.

Mint also helps you find a quote for auto or life insurance, helps you set up an IRA, and can even get your Home Loan rates if you're looking for a mortgage.

Mint.com is the perfect companion for me in my quest to reach $20,000.

Read More

Not Saving

What if I told you that all these money saving sites were actually costing you more money than the savings they're promising?

Living Social or Groupon have to be one of the biggest offenders of costing you more than the alledged savings their touting.

Sure, they're got some great deals on things you didn't know you needed. 50% off hot air balloon rides? 75% off a Spa day? Discounted tickets to your local comedy club?

These offers sound awesome, but in reality, they're costing you money. Take my past experience with Living Social as a lesson in savings lost.

Living Social was offering this great deal on a 80's themed party boat ride around the city. Tickets only cost $25 per person. $25 for a night cruise ride around New York City? That's a fraction of what it would normally cost for a wonderful night out in NYC.

The only problem, by night's end, I wound up spending over $200.

As the great Desi Arnaz once said, "Lemme splain".

I picked up my wife from work (we were both based in White Plains, a 30 minute car ride from the city) and we headed to the location where our boat was docked.

Extra Cost #1 - Gas and Tolls. Normally, I'm not headed into NYC on a Thursday night, and don't normally need to fill up my tank and pay the insane bridge crossing tolls that allow you to get into Manhattan.

Once we got close to our destination, we needed to park the car.

Extra Cost #2 - Since we drove (carpooled for that matter, we had three others in the back of my old CR-V) we had to pay for parking. Final cost for parking led to me shelling out $45. That's just short of the total cost of the two boat tickets.

After sprinting four blocks to the dock, we all quickly headed over to the bar.

Extra Cost #3 - First round was on us, which only cost $40 (mixed drinks were $10 each, beers were $7). On a normal Thursday night, my wife and I are at Chili's restaurant, spending roughly $40 on dinner and drinks.

About half way through the boat ride, the Living Social folks announced that "food" was being served.

Extra Cost #4 - For $10, you could get something that resembled a meat and rice sub. Not only was the food overpriced, you should never ever ever eat a hot pie on a boat ride.

Don't get me wrong, I'm not complaining about the event. We all had a blast, probably the most fun I had in a long time while in NYC. We never took into account the extra money we were about to plop down on an event that was billed as a saving extravaganza.

After the boat pulled back into port, and after dropping a couple extra Jacksons on beers and drinks, we all decided that the hot pie wasn't substantial food. We headed over to a 24 hour diner and ordered dinner (at 1 am, a hour I'm not quite familiar with anymore).

Extra Cost #5 - My wife and I ordered rueben sandwiches and I ordered another beer or two which came with a $35 price tag. I was hesitant to add this extra cost into the article, because technically, we would have needed to eat dinner anyway. However, we rarely spend $35 on ruebens and beer at one in the morning.

So, in closing, Living Social's promised savings actually put us back a weeee bit. Their $50 tickets to a boat ride wound up costing us more than we normally would have spent on a Thursday night. Sure, we had a great evening and we had a blast hanging out with co-workers, but the idea that we saved money that evening is completely ridiculous.

Read More

Stock Purchase: Zales

Every time I purchase a stock, I make myself write down why I thought it would be a good idea to make the purchase.

* Disclaimer: This article is in no way a solicitation to buy, sell, or trade for the stock. It is just my analysis of my thought process when I purchased the stock. *

Stock Name: Zales
Stock Ticker: ZLC
Purchase Date: (Initial) February 11, 2013
Purchase Amount: 45 shares @ $4.83

Mindset during initial purchase:

I purchased Zales stock a couple of days ahead of it's February earnings report. I also purchased the Zales stock a couple of days before their big holiday; Valentine's Day.

CNN Money forecasted Zales stock on February 8, 2013 as:

Low - $6.00
Medium - $7.00
High - $10.00

Some of the highlights that made the Zales stock interesting were the following:

- Zales had nine consecutive quarters of same store growth
- Zales is currently re-developing its website to allow for increased web based sales.
- Zales lowered its borrowing interest rates from 8% to 4%


Lessons Learned from Purchasing This Stock

Zales (at the time of this post) is currently trading around $4.10-$4.15. It's one of those stocks that I'm constantly waiting for it to break out, but it never really moves that much. Four analysts labeled Zales' stock as "outperform" and one analyst marked it as a "hold".

Just for my own edumication, stocks labeled "outperform", according to investopedia, means that analysts expect the stock to do slightly better than the market return. 

Read More