Sunday, January 29, 2017

Create Your Own Mutual Fund?


A mutual fund is just a collection of stocks, bonds, and other investments, which you pay someone else to manage.   It is possible to create your own mutual fund?  Yes, but I would not put all my money into it - it is run by an idiot!


Buying individual stocks, for the small investor, is a problem.  To begin with, most trading houses want at least $7.99 per trade.  So if you only have $100 to invest, you lose 8% when you buy and another 8% when you sell.   And this is a big improvement over the bad old days, when a simple trade could cost you $35 in fees, or more.

But there are two things that make individual stock-trading possible.  First, if you buy and hold solid stocks in non-trendy things, the trading costs can be minimized.   People who constantly "trade" stocks thinking that the buying and selling is how you make money, usually end up broke, anyway.

Second, many firms, such as Merrill Edge, offer free trades, if you invest a certain sum with their firm, such as $100,000 or so.   This means you can buy small amounts of stock - often just hundreds of dollars worth - without paying any sort of penalty for being a small investor.

The question is, should you do this?   And the answer is hard to provide.

When I first started buying and selling stocks, I did very poorly.  One reason was I was buying and selling stocks instead of buying shares in solid, dividend-paying companies, holding them over time, cashing those dividend checks, and watching the stock price go up.

When I started out, I did dumb things like buying Martha Stewart stock, because back then I watched television and some idiot on TeeVee said it was "going places" - not realizing that "in the toilet" was a place.   I bought a lot of stuff based on recommendations I read in the paper or on television.  Most of it tanked.

I started researching and learning more and figuring out what things like "P/E ratio" and "dividend rate" meant.   I started reading more about what the company did or made.   And the more I learned, the less I understood.   Why would someone buy stock in a company that doesn't make profits? I wondered.  Why would someone buy stock in a company that pays no dividends?  Why would someone buy stock in a company with a P/E ratio of over 200?

At first, I thought I was an idiot for not understanding these things, much as I thought when I worked at the odious law firm that did IPO's.  I thought it made no sense they offered the stock for $25 a share and watched investors buy it at the IPO price and sell it the same day for double the money.   It took  me a long time to figure out that IPOs were basically fraud on an enormous scale - designed to allow insiders to "cash out" not to "raise capital" for the company.   A lot of people today still don't get this.  And the media hypes guess what?  IPO's - that's right!

In fact, I didn't get it at the time.  Surely they couldn't just do outright fraud like this and no one would notice?  Worse yet, it seemed the media celebrated this fraud as if it were a bargain.  It was about that time the scales fell from my eyes and I realized so much of what is hyped in life is a shitty deal aimed at us and sold as smart one.  Frequent flyer miles, leasing cars, that sort of shit.  IPOs were just doing it on a massive scale with people's life savings.

But not everything is a con-job.   The problem is, it is hard to distinguish real bargains from the fake ones.

I stared looking around and found that there are a lot of companies you never hear of, or if you do, you don't give them a second thought.   Companies that actually make things day in and day out and make profits and crank out dividend checks without too much fuss.   They don't make headlines unless they go broke.   So the people on TeeVee never mention them on their "financial" programs.  Only companies whose prices shoot up in value or plummet make it to the "news".

So I changed my strategy.  I cashed in a small IRA and decided to try my hand at direct investing, first with e*trade and Ameritrade, and then rolling it over to Merrill as it was free.   The results have been positive, for the most part, but there were a few clunkers.

Not all have done well.   Some went bust, like GM stock, which in retrospect was a gambling buy, not a smart buy.  I bought it because it was trading cheap and I felt it would survive without going bankrupt.   That didn't work out.  I bought shares in a natural gas trust that is now worth about $2.50 from a $1500 investment.  That didn't work out, either.  But in both cases, I didn't bet the bank.  I can afford to lose a grand here and there, if I make more than that elsewhere.

Thus, on the whole, the stuff I bought has done well - many of these stocks going up over 100% in value in less than a decade (which they should do, if money doubles every seven years).   But not only that, most of them cranked out regular dividends that, each quarter, generated thousands in cash in my trading account.

At first, I reinvested dividends - buying more shares of the same stocks.   But I changed that and let the dividends accumulate in my trading account so I could buy more stocks and further diversify my portfolio.   That's how I ended up with a "basket" of about 50 stocks over a decade.

Does this represent the majority of my investments?  Hell, no.  Most is still in mutual funds.   Some mutual funds have done better than my self-traded account, some worse.

To the people on the financial channels, it is a laughably boring portfolio of stocks.  No Facebook, No Twitter, No Apple, no IPOs, no dot-coms.   About as radical and tech-y as I get is HP and Intel, and even those, I am not so sure about.

A few are still "losing" money, such as my buy of GE stock.  It does pay a nice dividend, though, and if I sold it today I would end up buying.... GE stock.   So just because you pay too much for a stock doesn't mean you should dump it, if the stock is a good buy today, and pays a dividend.  Others, like a tanker stock I bought... tanked.  But it was not a huge investment again, so I consider it a cheap lesson.
 
In a trading account, you can also buy mutual funds, government bonds, corporate bonds, and even foreign stocks.  In fact, you can invest in just about anything.  In addition to the stocks below, I also have a high-yield corporate bond fund, an index fund, and some corporate bonds.  The mutual funds seem to have done OK, although I think I am beating them with the stocks (averaging 75% gain to 51% - and the stocks were held over a shorter period of time!).

Here are some stocks I have bought over the years.  As you can see, it is a pretty conservative list, mostly old companies that have steady businesses and pay regular dividends.  I also have some bonds, in Dell (doing great) and Yum! Brands (not doing great - you stoners need to hit the drive-through at Taco Bell more often!).

The list is widely diversified, and thus if any one sector goes down, it shouldn't take out the entire portfolio.   If the entire market collapses, as it did in February 2009, the best thing you can do is just hang on, which I did, and earned back all my losses within a year or so - while still cashing those dividend checks!

Speaking of which, I have some money sitting idle in this account, so I need to find a new stock, or bond, or mutual fund, to add to the list.

I am not endorsing these stocks or recommending them or hyping them.  They could turn out to be horrible investments, or great ones.  As you can see, though, since I have held most of them for a long time, they have mostly gone up in value.  Like I said, my self-directed mutual fund is being run by an idiot.  


CLX
CLOROX CO DEL COM
20$120.49
$0.00
0.00%
$2,409.80$0.00
+$191.80
+8.65%
Underperform (B-3-7)
SO
SOUTHERN COMPANY
50$48.48
$0.00
0.00%
$2,424.00$0.00
+$205.50
+9.26%
Underperform (A-3-7)
HPQ
HP INC
300$14.80
$0.00
0.00%
$4,440.00$0.00
+$642.00
+16.90%
Buy (C-1-7)
UPS
UNITED PARCEL SVC CL B
50$118.09
$0.00
0.00%
$5,904.50$0.00
+$869.50
+17.27%
Buy (B-1-7)
DLTR
DOLLAR TREE INC
100$74.05
$0.00
0.00%
$7,405.00$0.00
+$1,206.00
+19.45%
Buy (B-1-9)
MAR
MARRIOTT INTL INC NEW A
24$86.08
$0.00
0.00%
$2,065.92$0.00
+$407.66
+24.58%
Buy (C-1-7)
SYY
SYSCO CORPORATION
60$52.70
$0.00
0.00%
$3,162.00$0.00
+$899.41
+39.75%
Buy (B-1-7)
CSX
CSX CORP
300$48.06
$0.00
0.00%
$14,418.00$0.00
+$6,132.00
+74.00%
Buy (B-1-7)

GE
GENERAL ELECTRIC
100$30.01
$0.00
0.00%
$3,001.00$0.00
-$457.99
-13.24%
Buy (B-1-7)
FTR
FRONTIER COMMUNICATIONS
306.3025$3.54
$0.00
0.00%
$1,084.31$0.00
-$112.92
-9.43%
Buy (B-1-7)
CVX
CHEVRON CORP
8.0840$113.79
$0.00
0.00%
$919.88$0.00
-$83.47
-8.32%
Buy (B-1-7)
DPS
DR PEPPER SNAPPLE GROUP
25$90.03
$0.00
0.00%
$2,250.75$0.00
-$123.50
-5.20%
Underperform (B-3-7)
WMT
WAL-MART STORES INC
25.1644$65.66
$0.00
0.00%
$1,652.29$0.00
+$162.30
+10.89%
Neutral (A-2-7)
PFE
PFIZER INC
100.8103$31.42
$0.00
0.00%
$3,167.46$0.00
+$359.47
+12.80%
--
F
FORD MOTOR CO
171.6516$12.49
$0.00
0.00%
$2,143.93$0.00
+$312.54
+17.07%
Neutral (C-2-7)
DE
DEERE CO
12$107.99
$0.00
0.00%
$1,295.88$0.00
+$227.64
+21.31%
Buy (B-1-7)
KO
COCA COLA COM
50$41.45
$0.00
0.00%
$2,072.50$0.00
+$372.26
+21.90%
Buy (A-1-7)
BASFY
BASF SE SPONSORED ADR
18$97.44
$0.00
0.00%
$1,753.92$0.00
+$328.68
+23.06%
Buy (B-1-7)
ADM
ARCHER DANIELS MIDLD
30.1622$44.52
$0.00
0.00%
$1,342.82$0.00
+$266.33
+24.74%
Neutral (B-2-7)
XOM
EXXON MOBIL CORP COM
25.2139$85.51
$0.00
0.00%
$2,156.04$0.00
+$439.92
+25.64%
Neutral (A-2-7)
WM
WASTE MANAGEMENT INC NEW
30$69.64
$0.00
0.00%
$2,089.20$0.00
+$465.60
+28.68%
Buy (B-1-7)
D
DOMINION RES INC NEW VA
64.6082$75.52
$0.00
0.00%
$4,879.21$0.00
+$1,140.14
+30.49%
Buy (A-1-7)
FCPT
FOUR CORNERS PROPERTY TR
16.1415$21.51
$0.00
0.00%
$347.20$0.00
+$82.69
+31.63%
--
DOW
DOW CHEMICAL CO
100.8194$61.31
$0.00
0.00%
$6,181.24$0.00
+$1,516.25
+32.50%
Buy (C-1-7)
GLW
CORNING INC
60.3625$26.68
$0.00
0.00%
$1,610.47$0.00
+$416.68
+34.90%
Neutral (C-2-7)
T
AT&T INC
30.4084$42.01
$0.00
0.00%
$1,277.46$0.00
+$343.77
+36.82%
Buy (A-1-7)
FMC
FMC CORP COM NEW
40.1127$61.75
$0.00
0.00%
$2,476.96$0.00
+$828.37
+50.25%
Underperform (B-3-7)
K
KELLOGG CO
75.5947$73.00
$0.00
0.00%
$5,518.41$0.00
+$1,866.42
+51.11%
Underperform (B-3-7)
CPB
CAMPBELL SOUP CO
88.3412$62.58
$0.00
0.00%
$5,528.39$0.00
+$2,092.11
+60.88%
Neutral (B-2-7)
CAT
CATERPILLAR INC DEL
20$98.99
$0.00
0.00%
$1,979.80$0.00
+$768.21
+63.41%
Neutral (B-2-7)
DRI
DARDEN RESTAURANTS INC
33.2835$73.56
$0.00
0.00%
$2,448.33$0.00
+$951.85
+63.61%
Underperform (C-3-8)
MGA
MAGNA INTL INC CL A VTG
100.3904$42.76
$0.00
0.00%
$4,292.69$0.00
+$1,730.79
+67.56%
Underperform (C-3-7)
INTC
INTEL CORP
50.3575$37.98
$0.00
0.00%
$1,912.58$0.00
+$887.09
+86.50%
Buy (B-1-7)
BAC
BANK OF AMERICA CORP
67.1957$23.36
$0.00
0.00%
$1,569.69$0.00
+$744.98
+90.33%
--
KALU
KAISER ALUM CORP
50.2404$79.61
$0.00
0.00%
$3,999.64$0.00
+$1,947.15
+94.87%
Underperform (C-3-7)
MDLZ
MONDELEZ INTERNATIONAL
80.3242$44.20
$0.00
0.00%
$3,550.33$0.00
+$1,795.24
+102.29%
Buy (B-1-7)
BRKB
BERKSHIRE HATHAWAYINC
100$164.40
$0.00
0.00%
$16,440.00$0.00
+$8,345.01
+103.09%
--
SWK
STANLEY BLACK & DECKER
25$125.03
$0.00
0.00%
$3,125.75$0.00
+$1,588.51
+103.34%
--
UTX
UNITED TECHS CORP COM
25.1356$109.70
$0.00
0.00%
$2,757.38$0.00
+$1,483.13
+116.39%
Buy (B-1-7)
MORN
MORNINGSTAR INC
25.0622$75.14
$0.00
0.00%
$1,883.17$0.00
+$1,053.89
+127.09%
--
MMM
3M COMPANY
25.1632$177.48
$0.00
0.00%
$4,465.96$0.00
+$2,552.59
+133.41%
Buy (B-1-7)
MO
ALTRIA GROUP INC
75$71.03
$0.00
0.00%
$5,327.25$0.00
+$3,109.26
+140.18%
Buy (B-1-7)
KHC
KRAFT (THE) HEINZ CO SHS
26.1633$89.43
$0.00
0.00%
$2,339.78$0.00
+$1,412.87
+154.87%
Buy (B-1-7)
COST
COSTCO WHOLESALE CRP DEL
25.0691$162.06
$0.00
0.00%
$4,062.70$0.00
+$2,591.45
+176.14%
Buy (B-1-7)
RTN
RAYTHEON CO DELAWARE NEW
29.1865$145.88
$0.00
0.00%
$4,257.73$0.00
+$2,921.57
+218.65%
Buy (A-1-7)
LUV
SOUTHWEST AIRLNS CO
200.4342$52.70
$0.00
0.00%
$10,562.88$0.00
+$8,012.19
+314.12%
Buy (B-1-7)
DIS
DISNEY (WALT) CO COM STK
50$109.30
$0.00
0.00%
$5,465.00$0.00
+$4,180.01
+325.30%
Buy (B-1-7)
CAR
AVIS BUDGET GROUP INC
150$39.25
$0.00
0.00%
$5,887.50$0.00
+$5,775.00
+5,133.33%





















1 comment:

  1. Nearly every stock in this list - including some that have gone up 300% or more, at one time or another, were worth less than I paid for them.

    Stifling the urge to "Sell" when a stock goes down in value is the hardest part!

    ReplyDelete

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