Today I watched our President’s press conference with an expectation that he will say something about our economy. I was expecting some journalist will grill him on projected 6% shrink in US GDP. Alas! That was not the case. There were few responses and contextual mention about few elements like auto industry and banks. However, I am not here to critic the press conference (who am I and how can I?).
One particular question that caught my attention was when one journalist asked about troubling, surprised, enchanted, and humbled. All through when The President was responding, I was thinking about how would l respond to those questions in the context of investing?
Troubling: It is troubling to see that free money caused the problem. And we are continuing to try to solve it with free money. We are trying to solve it with the very same tool that created it in first place. We have filled the lake with water, for it nowhere to go. This standing water is now getting polluted. We are continuing to pump in more water in a hope that it will start flowing. Flowing where? Won’t it burst out of the embankment? Burst will result in spreading of polluted water. Let it dry off, or get vaporized, or drain it slowly, only then it will get cleaned. continue reading rest of the article….
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Should I have Sold after Dividend Cuts or Freeze?
Two of my fellow bloggers (D4L and DGI) on The DIV-Net have presented their perspective on how to deal with a given company stocks when it decides to cut of freeze the common shareholder dividends. You can read their viewpoints at these links (D4L at Article1, DGI at Article1, Article2, and Article3). Both the bloggers have presented very compelling arguments supported by relevant data set. It would be hard to argue with their observations and conclusions. Here I am discussing my approach on how I dealt with dividend cuts and freeze in my portfolio.
Since year 2005 in my dividend growth portfolio, I had owned BAC, WFC, C, WL, and GE. I will not use GE in this discussion because I am focusing on financial sector. By early 2007 I had reached my limit (10% maximum) of asset allocation in terms of my actual capital allocated. Prior to peak during Oct 2007, my financial sector allocation became in excess of 14%. This was due to the increase in value. Even though I became over allocated in financial sector, I did not take any action. And that was a mistake. I should have used re-balancing (or stopped automatic dividend re-investment in same stock).
My primary reason for investing in these stocks was dividend growth (and secondary being value). Now year 2008 brought dividend cuts in all four financial stocks viz. BAC, WFC, C, and WL. The value of the share price started to plunge and I started to incur paper loses. I had to taken action of reducing my risk and cut my losses. continue reading rest of the article….