If you follow my blog you know that I developed from a chaotic, ignorant investor (sucker) into a dividend investor and later progressed into a chaotic, ignorant options sucker (hoping one day progressing into a trader).

 
A few years ago I created a plan to build a dividend portfolio for my retirement and learn options trading to create an income stream to invest into the dividend portfolio.
 

As of today, I am still partially failing with this plan.

I can proudly claim that I am successful in creating and building my dividend portfolio, which is growing satisfactorily but that trading part is still lacking any good results. Actually I must admit, that I suck in trading. But I learned my expensive lesson and hope in 2016 I will be successful again.

This post will review my dividend investing throughout 2015 and sets my goals for 2016. I plan on writing about options trading in 2015 and goals for 2016 in my next post.

 

 · My accounts review

 

I do not hold all my money in one account. I have a few more accounts because I believe in diversification not only inside a portfolio but also among brokers. Do you remember a scam of Bernie Madoff? Some people invested with him all their money. Instead of retiring, they have to continue working to be able to retire with at least some pension. They lost everything.

I am not saying that the broker I invest with is a scam or will go belly up, but it may happen. It happened once and it can happen again if a broker house gets itself too close to the margin limits. This happened in 2003 when the dot com bubble blasted and many brokers were left with uncovered margin calls and had to foot the bill. It happened again in a currency market in January 2015 when the Swiss National Bank de-coupled the Swiss Franc from Euro and forex brokers found themselves insolvent.

That’s the reason for me to spread my investments among several accounts (but still keep it on a reasonable and manageable level).

Because of that, I have a trading account with some play money to trade options – I call the account as “TD account”

Then I have money invested in a 401k account where I invest into dividend/distribution paying mutual funds. I do not report this account, as there is nothing to report much. All I did in 2015 was some rebalancing to trim gains from health sector and large caps and moved them into basic materials and energy which were underperforming. I also increased my contribution into 401k by 1% along with my salary raise. So as of now I contribute 7% and my employer adds another 3%. If in 2016 I get a raise (usually in June) then I will be again raising my contributions by 1% too.

I also have money in Scottrade account and motif investing. In both accounts I use strictly dividend growth investing and do not mix trading styles. With Motif investing I liked the idea of fractional purchases of the stocks. First you create a desired portfolio of stocks you want and then you are buying the entire portfolio and money you use are spread and spend into all stocks in the portfolio according to your desired target allocation. I loved this idea because in my regular ROTH IRA account I couldn’t afford to buy some stocks I wanted to own, for example at some point it was a Visa (V) stock. Before split, it traded for $200 or more dollars and I didn’t have enough cash to buy this stock (and I didn’t want to buy one or two shares only). Using Motif Investing was a great idea to buy all stocks at once with little money. With Motif investing I can invest the same way as you invest into mutual funds only this is your own mutual fund you create yourself.

Lastly, I have my ROTH IRA account where I use dividend investing and some options trading. This report and all reports on this blog is about this account.

 

 · My 2015 goals review

 

I didn’t set any specific goals for my ROTH IRA account for 2015 as I considered investing in this account as a secondary task and I mostly focused on my trading account and trading results.

It came a lot later to me to work on my ROTH IRA account more than I originally wanted.

During 2015 I made the following steps:

 
1) I activated a DRIP program

I did this because this year I started teaching my kids how to invest money into dividend stocks. I started their own accounts and set up DRIP for them as I wasn’t sure whether they would be able to manage dividend reinvesting the way I was doing it. For their age I considered my method too complicated. DRIP was easy.

Before, I used no-transaction-fee ETF into which I invested all dividends and contributions and once I saved enough, I sold the ETF and bought a stock.

Once I saw how easy and effortless the DRIP was in my kids’ accounts I decided to switch and use DRIP too.

 
2) I decided to start options trading in ROTH too

At some point I polished my options trading strategy so well that I felt invincible and my strategy almost perfect. So I decided to use it in my ROTH IRA account too. Well, Mr. Market showed me that my strategy wan nowhere near to perfection and I lost money.

I stopped trading opt6ions in this account until I learn better. I still have one bad trade in that account which will cost me money and I will be closing it soon (most likely for a large loss). However, I plan on returning options trading in this account as an income generating strategy.

 
3) I renewed my contributions

During 2015 my family budget prevented me from contributing into my account (that was one of the reasons why I hoped for options as an income tool to substitute my contributions – and I still hope for it). At the end of the year I was able to renew small contributions into this account and partially use bonus to contribute.

 
4) My dividend income in 2015

My dividend income was at a satisfactory level considering that many of my stock holdings (mainly in the energy sector) cut the dividends. I noticed a drop in income on a monthly basis, but overall year end result was surprising to me.

In 2014 my dividend income was $1,096.28 and in 2015 I ended up with $1,074.90 dividend income; only $21.38 dollars less. Considering dividend cuts in KMI (true, KMI will show the drop later this year) or LGCY stocks, it is not a bad result at all and it actually came in as a surprise to me.

 
Here is my dividend income on annual basis:

 

I contribute this result to the DRIP program which helped to offset the losses of income from the dividend cuts.

When reviewing my portfolio, my overall portfolio dividend yield is now 9.43% (thanks to some stocks price drop such as AGNC, LGCY, or KMI). Not bad if those companies continue paying their dividend.

 
5) My capital gains/losses 2015

When I started trading options, overall I realized -$801.89 (-0.99%) loss in 2015
My unrealized gain/loss for 2015 is -$2,648.04 (-7.17%)

Part of that unrealized loss is the option trade I was talking about above which will most likely end up bad in two weeks, unless the market jumps up a bit, which is unlikely, or I do not expect it. The rest is stocks which were beaten down significantly during last two years, such as KMI, LGCY, AGNC, etc. and I still sit on a loss. However, in dividend investing I do not consider capital value of the portfolio and unrealized loss important. I consider dividend income important and I believe, that my portfolio is already stable (I do not expect more dividend cuts) so I should now be well,

Remember, I am investing for the next 20 – 25 years. In this time period I can afford to wait for some stocks to come back up from current losses.

 
6) My stock holdings EOY 2015

Here are my holdings of stocks I have in my portfolio:

 

 

 · My 2016 goals

 

 
1) Contributions

I will continue contributing my small money into ROTH. I can only afford $50 dollars per month and bonuses throughout the year. I will keep all contributions in my account as cash until I save at least $1,000 dollars to buy another set of shares to minimize commissions’ impact.

Typically, I will be able to contribute at least $1,000 semiannually my bonus (part of my bonus) and that money will be used directly to buy new shares or invest into existing holdings (accumulate).

 
2) Dividend investing

I plan on continuing using DRIP program reinvesting all dividends into the companies I hold. I will continue building up the portfolio by adding more shares of the companies I want to have such as AT&T (T), Verizon (V), Chevron (CVX), Abbvie (ABBV), Walmart (WMT), etc. I will focus on high yield (but safe) stocks with high yield growth and long dividend history. The stocks listed here are just an example and not the actual list although these are stocks I want in my portfolio so I will be buying them at some point in 2016 or following years. I will be performing my selection process individually when the time comes.

I will only invest minimum $1,000 dollars or more into each company at one time only to save money on commissions.

 
3) Options trading

I will be trading options in ROTH selling spreads against $SPX (S&P 500 index), but I will only limit the trades to risk $500 at this point and no more. Overall, I will risk no more than 10% of my account, which means that in 2016 I can risk no more than $1,500 dollars. That gives me an opportunity to take up to (3) $500 dollar trades at one time (3 contracts), but I will start with one contract only and grow to those three contracts slowly and gradually.

I will trade short term (less than 4 days to expiration), 5 dollars spreads. I will not compound any gains should they occur (meaning increasing number of contracts traded). I will only increase the number of contracts as long as the value of the entire portfolio increases so my total risk will still be within 10% limit.

The goal will be to reach consistent 5% – 8% gain every week trading SPX spreads. There will be drawdowns in options trading and I am aware of it. In a losing week I may realize up to 50% loss, but that wouldn’t be a loss of the entire portfolio, but of the dedicated trading limit (in this case $1,500 limit for 2016). That can be a wipe out of approx. 7 weeks of trading.

All profits will however be kept in cash reserve and once they reach $1,000 amount I will invest them into a dividend paying stock.

As of now, my goal is to reach 5% – 8% weekly profit and $360 monthly cash income from options in 2016 in my ROTH IRA account.

I will write details on trading this strategy in my next post about options trading review and goals for 2016 where I will be lining up the strategy, opening trades, trade management, and trade protection.
 

Please let me know what is your investing plan and what do you think about mine. What would you add to it if it was your account and your money to invest?