Dividend reinvestment is a loser bet in my opinion

The reason I dont reinvest dividends is that I feel its a rippoff.

Consider the fact that you are locked into buying stock on 1 day and 1 day only, every 3 months.

Now consider the fact that the specialist who controls that stock knows he has probably 1 million people who will buy at least 1 share of stock on that day.

Tell me why that specialist won't jack the price up on that day, after he dropped it a few days or weeks before when he accumulated shares.

Every dollar he raises the price is a dollar pure profit on a million shares.

I have traded this specific trend and made a profit for many years.

A real example of this is cat in aug of 2007 and or Nov of 2007.

NOTICE how the price dropped within a couple days of the ex div day.

That was the specialist covering short sales he made on the ex div day.

This is only my opinion.

Playing quarters in stocks

This is a theory I use when I play leap call options or a small priced stock like DPL dayton power and light or RGR strum ruger.

Basically quarters means 25 cents and out.

I track a stock back 10 years using its graph and compare the years looking for a consistant rise or fall in a consistant 3 month period.

I look at what the average rise is.

You must have at least a consistant 5 buck in a stock rise to play quarters with leap call options.

Leap calls that are good for at least 2 years and that are no more than 20 bucks out of the money will rise at a rate of 25-30 cents on the dollar.

In my experience this is what I have seen.


I have found that a 5 buck expected rise will give you a 3.50-4.00 buck play range

Since most options have a 50 cent spread between their bid and ask, a 3.50 move in the stock gives you a 75-90 cent rise in the leap option.

After the 50 cent spread is subtracted, you have a 25cent to 40 cent profit.

A stock option controls 100 shares, so the 25-40cent profit is worth 25-40 bucks per contract.

So 5 contracts means 125- 200 gross profit

Now most leaps I play cost 500-700 a contract, so five contracts cost 2500-3500.

So if you make 125 on a 3500 investment you made about 3.5% return.

If you do this 5 times a year, you made 15-18%.

Timing the sale is easy, you simply enter a good to cancel sell order,at your chosen price, 5 min after your buy order executes.

I have done this with stock options on high quality stocks like Ibm and Cat Caterpiler, and Dis Disney

I have done this with pure stocks like Rgr and Dpl

The so called stock repair or averaging

This is something that brokers push to make more commissions.

Here is an answer i recently gave.

I have bought cpl hundred shares of morgan stanley last october,and now its trading $10 below my purchase price..do you think applying stock reapair strategy would help me break even or cover any of my losses. if yes, who is the best person to ask? someone from my brokerage firm?or anyone else?please write me back at your earliest convience.


OK so you have say 200 shares of morgan stanley valued at 47 a share

ie 9400 worth.

Now looking at the 5 year chart of MS,

it shows a trend toward going sideways from may to jun then dropping from jun to jul

in 3 out of 5 years.

That tells me I have a sell signal right now

MY OPINION ONLY BUT THIS IS WHAT I WOULD DO IN MY PORTFOLIO

IF your loss is only 2000 now

I would look at other stocks that you have a profit in

and take that profit while you take the loss in MS

ie you break even.

As for stock repair or stock averaging or whatever they call it now

I CALL it good money after bad

ASK ANY person who repaired or averaged priceline when it dropped from 130 a share to 2 a share.

But Merril Lynch said it was a great repair stock.

Now why do you think Merrill Lynch is now called ING.

Stock repair or averaging is where you buy at 50 and it drops to 30 so you buy again

hoping it goes to 40 and you break even

or whatever your stock repair plan says to do

In the long run I have lost

so I just don't do it any more

period

good luck

2 weeks later I gave this follow up

Hmm its a couple weeks later and MS is 42.95 ie its down 4 bucks

from the 47 price it was at when I suggested to you to sell.

I hope you did

good luck

Tyler Hicks stated The secret of success in business is the effective use of other peoples money

IN my opinion this is a stone cold fact.

My own belief is that investing can be considered a business.

The good thing about Schedule D investing is that if you have a bad year and a major loss in one year.

You can carry that loss forward to the next years and use it to offset gains.

SO if you lose say 30k in 2003 and in 2004 and 2005 you made 12k a year.

That 12k a year or 24k total would be tax free. because the 30k would have a 27k carryover in 2004 and a 12k carryover in 2005.

The other 6k was sent to your form 1040 as a loss to be written off against your ordinary income at a rate of 3000 a year.

30k loss in 2003 became 3k going to your 2003 1040 as a loss and a 27k carryover for 2004.

In 2004 you made 12k profit on sch d, so you have 27k - 12k equals a 15k loss and then 3k goes to your 2004 1040 as a loss. So you carry over a 12k loss to 2005.

You made 12k profit in 2005 so its zero'd out by the 12k loss you carried over from 2004.

This is why I consider investing a business that you might consider funding with a low interest life of the loan balance.

ONLY USE A LIFE OF THE LOAN TRANSFER.

This is only my opinion

Is paying down your equityline with a lower interest credit card balance transfer a good idea

In my opinion its not a good idea to pay down an equity line loan using a lower interest credit card loan.

One reason is you lose your tax deduction as credit card interest is not deductable.

2nd reason is your payment on the credit card loan is based on a 7 year loan.

the equityline loan is based on a 15 year term.

That means the mininmum required monthly payment is lower on the equityline loan.

you also can pay more if you wish to reduce the principle owed.

So my main reason to not reduce an equityline loan is this.

You can either pay a lower tax deductable home loan payment and risk paying more in IRS taxes.

Or you can keep the higher payment and the higher tax deduction and use the low interest credit card loan to invest.

AS I DO

Refinance an auto loan using a low interest balance transfer

If you can take a 6.5% 15k auto loan and change it to say a 4.99% life of the loan credit card balance transfer.

You will save money if you continue to pay the same payment as the car loan was.

This explanation will include a balance transfer fee of $200.

A credit card is a 7 year term that floats.

This is why the minimum payment will drop each month.

Thats the catch the credit card companies use.

A 20 k auto loan at 6.5% will have a fixed payment around 370 a month.

The credit card at the same rate will be 340 the first year but around 300 a month 6 months later.

All you have to do to accomplish saving yourself money, is to pay the same payment you had paid on your auto loan.

With the 2.5% difference in interest, you should pay the loan off a year or so earlier then with the auto loan.

A 200 buck fee is equal to 1.3% of your 15k balance.

So in the first year your loan interest cost you4.99 = 1.33 or 6.32%.

In the later years it will cost 4.99%.

To approximately calculate the average interest, you pay in a year, take 5% of 15k ie 750 and subtract it from 15k ie 14250

5% of 15k is 750 5% of 14250 is 712

Add 712 to 750 and divide by 2.

so 1462 by 2 is 731

divide 731 by 12 months and you have your approx monthly interest in year 1

repeat for year 2-7.

The only way this loan will cost you more interest then your old loan.

Is if you only pay the reduced monthly minimum each month.

I would simply pay exactly what I paid for the old car loan, If I could afford it.

The beauty of the credit card loan is you have an option to pay less in a tight month and stay current.

JUST DON'T BE LATE ON YOUR PAYMENT, EVER

You can also select a higher deductable insurance plan. REMEMBER the car is paid off the loan is on your credit card.

That saved premium can also be applied to the loan.

FREE,the cheapest way to get your credit score

The cheap way is to apply for credit cards till you get denied

then you are entitled to one free copy of your credit report per year

the denial letter will give you the contact number for the credit rating institution they used.

You can achieve this same result by asking all your credit cards for a large credit increase.

1500- 2000 this will usually never get approved,

and now you have been denied credit and are able to get that one free report per year.

Or you can simply pay for one. NOT AN OPTION I WILL EVER DO.

Call your credit card company and ask them for the customer service number of the credit reporting agency they use.

This way costs around 8- 15 bucks

I am not sure anymore as I always get mine for free

YES I AM A CHEAPSKATE

I also never pay those credit finder outfits that offer a free report

as the fine print will get you ripped off 90% of the time.