Investment Strategy 2015

investment strategy

How does a panda invest his hard-earned bamboo?

I am still in the infancy stages of my investing career, and I am certainly still learning something new everyday, but what I do, is give you a glimpse into the world of my investment strategy.

Since I started working part-time jobs during high school and college, I have been putting away money into Roth IRAs.

That money is spread across accounts set up with T. Rowe Price and Vanguard as high growth and index funds. Since the money can’t be touched until age 60 anyway, I look at them quarterly just to make sure they’re not complete losers.

In T. Rowe Price, I have PRWCX and PRNHX, both in Roth IRAs.

At Vanguard, I am holding VDIGX in a Roth IRA and VIMAX in a regular brokerage account. Mutual funds – I buy then review quarterly and adjust accordingly.

Since there is such a long time frame for the money to sit there, I can be patient like panda and just let it grow big enough until I can eat it as a snack upon retirement age.

My biggest thing to note is to never invest more than you are willing to lose.

Investing is never a 100% sure thing, although there are pretty good bets for long-term growth, but you should still never invest any more than you can easily part with.

A little background..

Back in the day, and I really only mean maybe 4-5 years ago, trading fees made it difficult for small traders to trade frequently. That, coupled with the increase in tax liability for capital gains, cut into profits by frequently trading stocks.

I was fortunate enough to open a Roth IRA account with Wells Fargo as part of their PMA account before they changed their pricing for trades.

Before April 1, 2013, we get 100 commission-free trades per year, and $8.75 for each trade thereafter. As of April 1, 2013, they changed their pricing structure to eliminate the 100 free trades and just made it a flat $6.95 per trade. Brokerage accounts linked to a PMA account prior to that date are grandfathered in to the 100 free yearly trades.

This saves money that would otherwise be taken away from trading fees that eat into profits.


My goal is to be able to sustain early retirement using a combination of dividends, interest, rental income, and potentially capital gains. In a sense, early retirement has to last from 45-60 years old, inclusive, which is a 16 year time span.

The idea is to allow the early retirement fund to last past early retirement to allow for manipulation of withdrawals from a variety of sources to reduce tax liability once retirement age hits. When I say retirement age, I mean the age at which one is able to start withdrawing from retirement accounts.

Stocks, stocks, and more stocks

The majority of early retirement income will come from stable dividend paying stocks, which means I should focus on getting my dividends to a level where it would be possible to retire on. Currently, that amounts to $2,000 per year, a far cry from my goal of $45,000 per year.

My current stock portfolio consists of many dividend stocks such as Accenture, General Electric, Coca-Cola, Duke Energy, Mondelez, Pfizer, Proctor and Gamble, Target, etc.

In addition to dividend stocks, there are also several long-term hold stocks with growth potential that pay less to no dividends, such as CarMax, Delta Air Lines, Hilton Worldwide, MGM, and Papa John’s. These lower or nonexistent dividend payers lower the dividend yield of the portfolio.

My goal for year-end 2015 is to generate $3,000 in dividend income.

It’s a start.

Once I hit that mark, I should have the ability to ride the market up and down with the ability to preserve the dividend income.

I am a firm believer that stocks are the way to go and a necessity in my planning for early retirement.

With a roughly 20 year time frame for early retirement, I believe I have the ability to invest some money in speculative growth stocks. This allows for the potential of generating additional gains with the same potential of additional losses.

My biggest quip with finding these high growth stocks is the potential short turnaround time that may result in a jump in stock price (20-40%). I hate selling short positions in stocks due to the tax liability, but sometimes I do wonder whether it’s worth holding until a year out.

Currently, I continue to hold these stocks while I figure out what to do regarding the tax liability that would incur from it (whether to sell some stocks at losses to offset the gains or to just donate the shares toward charity and not even realize the gains).

Learning from my mistakes

My biggest mistake may have been which account I bought certain stocks in. High, quick-growing stocks that may be bought one day and sold the next should really be bought in a Roth IRA where no taxes would be incurred due to buying and selling. This, coupled with the 100 commission-free trades per year, allows me to trade freely in my Roth IRA without having to worry about fees or taxes. Best of both worlds!

The stocks I do currently hold in a regular brokerage account that are not generating interest as stated above, I’m still trying to figure out what to do as previously stated, but as of right now, it plays to the whims of Wall Street.

Another mistake of mine is the investment of REITs, specifically Realty Income Corporation, or stock symbol O. I made the mistake of again, putting this into my regular brokerage account. This is a mistake because dividends are non-qualified and are taxed at your ordinary tax rate

I have since sold my position in Realty Income Corporation in my brokerage account and will look to add more shares in my Roth IRA account when the price per share drops and the dividend becomes attractive again. As a double whammy, the short position sold in O also resulted in short position capital gains – more taxes.

On a positive note, I learned something, made some money and gave some back to the government unnecessarily.

Learn from my mistake – if you are going to invest in an REIT, buy it from a tax-free account.

Investment strategy going forward

My current investment strategy lies in maximizing dividend income from my regular brokerage accounts to hopefully increase it to 3-4% while reducing those high growth stocks that could be better traded in tax advantaged accounts such as my Roth IRA.

As the first quarter of the year has come and gone, I plan to set aside some cash to buy shares in strong dividend stocks whenever a pullback in the market occurs. Most of these companies are companies I already have a stake in such as GE, DUK, MO, WMT, KO, etc. After all, the lower the share price, the higher the dividend rate at that price.

On the other hand, in my Roth IRA, I continue to search for potential stocks waiting for a breakout, or my favorite, stocks that have taken a serious beating recently and bound for a full recovery.

Target Corp

For example, Target’s share price dropped from around $65 per share to $56 when the news broke out about their credit card security breach. This was following a drop during the third quarter of 2013 from a high of $73 to $65 which preceded the announcement of the security breach. Don’t get me wrong, I know it’s horrible that Target had a massive security breach that compromised a lot of people’s credit card information and personal security, but Target is a great company.

The stock was oversold and this presented an opportunity to buy the shares of the stock at a great discount. To top it off, the drop in share price also generated a dividend of 3%. In this case, this stock was bought in a regular brokerage account and will be a stock to hold on to forever, while collecting a healthy dividend every quarter. A year out and Target has returned 40% from the bottom of the crisis at $56.23 and still continues to sport that healthy dividend.


Another example is CarMax. Fourth quarter earnings in 2013 sent the stock tumbling 15%. Everyday on my commute to and from work, I would see at least one or two cars with a CarMax placard or bumper sticker. Every night watching TV, I would see a commercial about CarMax and how it’s “the best place to start to buy a car.” They’re obviously doing something right if they’re able to sell those cars, and as far as used car places, it’s probably one of the more well-known ones.

Again, this drop presented a buying opportunity that has since returned 35% from a purchase price of $46.85. My only issue with CarMax is that they don’t have a dividend and that it currently sits in my brokerage account being waited on an action by yours truly.

Should I sell and realize long-term capital gains? Should I donate shares to a charity and completely negate the capital gains and be able to write off the donation? Or should I just keep it thinking it will continue to go up as more and more people turn to buying used cars and turn to CarMax to do it? I’ll be honest. I’m not sure how high it will go, but my guess is that it will hit a ceiling anywhere from $68 to $74, but hopefully more.

As of right now, I’ll continue to hold it until some revelation pops into my head. Had this stock been held in a Roth IRA, I probably would have gladly sold this stock and realized the gains when it hit $68 back in December, but it would have resulted in short-term capital gains had I done so in a regular brokerage account. Another mistake..

Final Thoughts..

Buy strong, steady dividend stocks in regular brokerage account on pullbacks and market corrections and increase dividend income.

Keep a lookout for oversold, solid companies with high potential for a bounce back in Roth IRA and continue to buy shares of Income Realty Corporation when the stock pulls back enough for a nice, juicy dividend.


I would love to hear what your thoughts and ideas are about investing and your investment strategy!

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