My Other Portfolios – Introductions and Updates

 

As I’ve mentioned several times on this site I am relatively new to the world of dividend growth investing.  I have only been doing it for a little over a year now and I love it.

Before that, however, the vast majority of my investing life was spent day trading or swing trading stocks, options and futures.  While profitable, it was so time consuming that I had to put these activities on hold while I built up my dividend growth portfolios.

These portfolios are now fairly large, purchasing is slowing down a bit and I feel like I’m at the point where I can continue to successfully manage them while bringing back some of my other investing activities.  Therefore, I decided to allocate some of my time and funds to day trading, swing trading, options, peer to peer lending and starting a new stock portfolio for my wife and I.

I am starting slow, so the income generated from these activities is not too impressive yet, but I will gradually increase my risk tolerance as I get the trading feel back.  The goal of these activities is to generate additional funds to put into my two taxable stock portfolios: Dividend Empire (for my children) and the Freedom Fund (for my wife and I).

In this post I will briefly describe each of these new “portfolios” and give an update on how I’ve done so far.  If you are interested in detailed methods or if you would like more information feel free to contact me.  I am also planning on writing a series of posts over the next couple of months detailing each of these methods so stay tuned.

One final thought.  I realize that this is a dividend-focused website so I don’t want to overemphasize these other portfolios.  That said, I do feel like it is important to introduce these other activities and include these updates on my site since any income (or losses) generated will directly affect my dividend stock portfolios.

 

Summary

Monthly Income Summary

*Income generated from CLOSED positions only
**Dividend income from the Empire and Freedom portfolios

As you can see I got off to a rough start, losing money day trading in February and March.  Since then I have shaken off most of the rust and have been increasing my monthly gains.

So far in 2016 I have generated a total of $877.02 from all investing activities with $396.80 coming from non-dividend related trading.  My best performing portfolio by far has been Option Income (see below for details) generating over $450 in just 3 months and nearly exceeding my dividend totals for the entire year.  Unfortunately I have done rather poorly day trading, losing a total of $270 this year, but I have been improving.

Just a couple of things to point out before going on.  For option income (the sale of option contracts) I only report income from CLOSED positions.  A lot of people like to report income as soon as the contract is sold.  This is incorrect.  While you do receive cash from option sales that you can use immediately, this is offset by holding a short option position in your account.  Only when the contract is bought back, expired or exercised can you truly report it as income.  Second, I am only reporting dividends from taxable accounts that can be used immediately.

 

Option Income Portfolio

The basic goal of the Option Income portfolio is to generate income from the sale of option contracts.  I write (sell) out of the money put contracts on stocks that I wish to own at the price that I wish to own them at.  Most people simply set limit orders at their desired purchase price – but why not get paid to do this?

I won’t go into details on options or this particular method in this post because I don’t have the space to do it justice.  I am planning on writing a comprehensive article this month that will cover my strategy in great detail.

For now – here is my activity for the month of June:

June Income: $196.74

June Closed Options

I closed out 3 positions in June.  The HRL put was assigned and I was forced to purchase 100 shares at $37.50 (see open positions below).  Not a big deal because I love the company and I feel like I got it at a good price.  I will happily sell calls and collect dividends until it gets back to $37.50.

The FL call was sold against my 100 shares that were assigned to me in May.  FL dropped a bit after selling the call, enough to close out the position early for a nice $74 gain.

My VZ put didn’t expire until January but I decided to close out early for a small gain.  VZ looked extremely overbought and I’m anticipating a drop in share price.  If this does happen, I’ll jump back in when the put premiums are higher.

June Open Positions

I will most likely close out my INTC puts and my Aug 19 FL put in July.  VLO looks pretty bad right now but it will hopefully bounce off of the strong support level at $45, at which point the premium value will drop rapidly.  V and GPRO are looking good.

I sold HRL and FL calls against my stock positions at my original assignment prices.  If assigned, this will result in a break even on the stock transactions while allowing me to collect extra premium from the option sales.  The expirations I chose will also give me a dividend payment for both holdings.

 

Swing Trading Portfolio

In this portfolio I use technical chart analysis (support/resistance, chart patterns, indicators, etc) to take advantage of short-term swings in various stocks.  These trades typically last anywhere from a couple of days to several weeks.

June Income: $94.80

June Closed Swing Trades

Definitely not one of my best months but at least I finished with a gain.  I actually feel like I traded better than the numbers suggest.

I believe HSY was a perfect trade.  The setup was ideal and I was happy with my entry.  Unfortunately I got smacked by the Mondelez buyout attempt.  If this wouldn’t have happened perhaps my short would have been a winner.

SBUX would have made me money had I followed my exit rules.  I stupidly closed out too early in the wake of my MU and GLW success on the same day.  Finally, LOCK was just a bad entry.  I jumped in too early before confirmation of the reversal.

 

Day Trading

I actually use the exact same methods for day trading that I use in my swing trades, just on a shorter time frame (usually the 5- and 15-minute intra-day charts).  I trade high-volume, very liquid stocks and futures contracts that have tight bid-ask spreads to avoid slippage.

I got off to a decent start in June seeing myself up $150 through the first 3 weeks.  Unfortunately a couple of mental errors during the final week nearly wiped out these gains.

June Income: $27.02

Sorry, no time this month to provide detailed transaction data.  I’ll be sure to include it next month with an example trade.

 

Lending Club Portfolio

This portfolio is straight forward.  I use the Lending Club platform to buy notes, which are portions of loans to individuals looking to consolidate debt, make large purchases, etc.  Each month I (hopefully) receive payments from these individuals consisting of interest + principle.

The interest that I receive each month is income that can be added to principle and additional contributions to buy more notes, thus keeping the compounding snowball rolling.

June Interest Received (minus fees): $11.83

June 2016 P2P Overview

I received $12.11 in interest resulting in $11.83 income after fees.  This was my first month receiving payments and everyone is current on their payments as expected.  Hopefully this continues and my charge-offs are minimal.

I contributed $50 which, along with the $27.61 principle + interest received in June, allowed me to purchase 3 new notes bringing my total up to 43.

 

Freedom Fund Update

The Freedom Fund is a portfolio my wife and I created back in May, 2016 to help us save for retirement.  Other than our 401k, most of our savings goes to the Empire portfolio, a dividend growth stock portfolio set up for our descendants.

We decided that we needed a bit more savings for ourselves, so we created this portfolio that focuses on high growth.  There will be a mix of dividend stocks, growth stocks and some purely speculative plays.  Funding will come from monthly savings and gains from other trading activities.

Since this is the first time updating the Freedom Fund, I’ll include my May purchases here along with the June buys.

June Freedom Fund Buys

Amazon (AMZN) and Anheuser-Busch InBev (BUD) are monthly Loyal3 buys, Lending Club (LC) was a one-time purchase through TradeKing and the remaining buys were through the commission-free broker Robinhood.

 

Overall my June income total was $435.70.  The $105.31 from dividends was reinvested into stocks in my Empire portfolio.  The $11.83 from Lending Club interest was reinvested into more notes.  Finally, the $318.56 earned from other activities will be spread between the Empire and Freedom portfolios.

Hopefully the income uptrend continues and I can break the $500 mark in July!  It would be nice to have some extra funds to help build my savings and dividend portfolios.

Thanks for reading and best of luck to everyone with their investments!

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6 Responses

  1. Congrats with your success Ken!! You’re crushing it on your LC portfolio. I’d be very interested to hear your strategy with that, as I am only around 9%. And I love your selling puts plan. I mostly just write covered calls to boost income.

    Keep up the fire!

    Passive Income Dude
    http://www.passiveincomedude.blogspot.com

    • Dividend Empire Dividend Empire says:

      Thank you Passive Income Dude! Keep in mind that my LC portfolio is only about 2 months old so I have not encountered any charge offs yet. Hopefully I don’t get too many of them but they do happen, and this will likely lower my return. Selling puts has always been one of my favorite strategies and it has been working quite well. I also write covered calls against stock that gets assigned through put selling. Glad to hear that you are also boosting income with options!

      Take care,

      Ken

  2. DE,

    Nice work! I like the Lending Club exposure you are starting to have with your empire, really looking forward of that to see how it turns out. Your return and income generation on the smaller investment you have is quite awesome. Pumped to read your next month update on it. Congrats and keep it up.

    -Lanny

    • Dividend Empire Dividend Empire says:

      Thanks, Lanny! It’s been a long time since I’ve traded so I’m a bit rusty, but hopefully I’ll get the feel back soon. As long as I’m making some money I’m happy!

      Ken

  3. Well done Ken!

    Option income was huge for you this month! I look forward to reading more about how far out of the money you’ll sell puts.

    Once again, nicely done!

    • Dividend Empire Dividend Empire says:

      Thanks, Blake! I’m having a blast getting back into my old trading strategies. I’m easing back into it but the results so far are encouraging. I’m planning on posting the details of my strategy soon.

      How far out of the money I sell my puts depends on a lot of factors that include support levels, whether or not the stock is oversold, dividend ex-dates, volatility, etc. I will describe all of these factors in detail soon. But in short, there are times when I would sell puts close to at the money and there are times when my strike will be 20% off the current market price.

      Take care,

      Ken

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