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Posted by Martin October 25, 2013
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Options ladder. What ladder?


Options ladderA few years ago when banks paid 3, 4, 5 or even more per cent interest on deposits such as CDs (Certificate of Deposit) or some savings accounts people were creating ladders. It was a quite popular method of creating an income stream.

If you had a substantial amount of money, you could spread them among long term CDs and then lived off of it. For example, if you had 100,000 dollars available, you would split them into 5 smaller amounts of $20,000 each and bought one 5 year CD the first year. The next year you would purchase the next 5 year CD and so on. After 5 years you would have your ladder constructed. The sixth year your very first CD would have matured. You could take your principal and reinvested it into the next 5 year CD. You kept the interest and spent it for living. Of course you would have needed a lot more than 100k, but you get the idea. Many people have used this strategy during their retirement.

If you are somewhat advanced in finances, you know what the ladder strategy is and how to construct it. If not, read the article How To Create A Laddered CD Portfolio for more information.

Years of dreaming

Image courtesy of David Castillo Dominici / FreeDigitalPhotos.net
Dreaming boy

It was a strategy I always admired. As a kid I wanted to have a stream of income. I wanted my money working for me and bring me more money. But I didn’t want to invest my allowances and then wait 20 years to enjoy the results of my investments. I wanted to enjoy my investment now! Every month I wanted at least few pennies available in my pocket and spend them whenever I wanted and for whatever reason and yet knowing that the next month I would have another payday of a few pennies available to spend them. It was a great feeling. I didn’t have to ask my parents for more money. They were flowing into my little savings account themselves.

Jesse Livermore, a great investor of the 20th century always said that if you make a profit, withdraw 50% of it and spend it anyway you want. Enjoy the result of your successful business.

I liked that idea a lot. I do not do it yet since I reinvest all my proceedings, but I really look forward the day, when I start withdrawing 50% or more of my proceedings and spend them the way I want.

A little banker growing

I was a special kid in case of finances. As soon as I started receiving allowances I was saving it all. I kept a record book of all my money. I always recorded when and from whom I got the cash, be it my mother or grandparents. I was 10 years old.

A little league workforce

As soon as I could work part time, which was when I turned 16 (and since we lived in a small town I could actually start earlier as the employer pretended I was older), I started working for the postal service during the summer break. Every payday I went to the nearby bank branch and deposited my money to my very first savings account.

I counted every penny I received as an interest and I was watching my little account growing. It was at the times, when saving money in these products such as savings accounts, CDs, or money market accounts made sence. At today’s low interest environment investors have very little opportunities.

Joining the dividend growth club

And that’s why I decided to go for and love dividend investing. The dividend investing strategy accomplishes exactly my childhood dream of everlasting and growing income. The dividend investing fascinated me for this exact reason of passive income. But in my early years I didn’t understand dividends. When I was depositing my hard earned cash to my savings account bearing 10% interest, I considered 3% dividend a losers (suckers) game.

I completely missed the power of dividend growth and compounding. But I learned.

A birth of a ladder

The other day I was reviewing my tracking system and stumbled upon my calendar. Recently, I opened a new trade and I sold a put contract against Taser International and received a nice premium.

This trade made me thinking about my options trading. I was staring at this calendar at the same time:

When thinking about my other recent trade of put selling against Safeway comparing it to TASR trade and comparing it with my decision selling puts every month reaping only 30 – 40 dollars because I didn’t want to wait 5 or 6 months for expiration I got an idea.

Can you see the pattern here? It suddenly struck me. Why I have a few trades expiring at the same time while I can spread them across the whole year and create a ladder?

I liked the idea and decided to try it. I will be now selling my puts so I will have at least one put contract expiring each month. This strategy would also allow me taking a long term expiration and thus bringing in a lot larger premium than just 30 to 40 dollars per contract. Now it can be $100 – $300 premiums. The risk will be the same or maybe smaller since the stock will have more time to act and I also will have more time to react and it will be a nice game for me.

It will keep me busy :)

What is your opinion?

What do you think? Will the options ladder be a good and working strategy? Would you apply it yourself?
 
 




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Posted by Martin October 24, 2013
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Another milestone reached! My account reached 10k!

Another milestone reached! My account reached 10k!

I reached my goal for 2013 today!!

My goal for 2013 was to recover my TD account after I almost wiped it out and reach 10,000 dollars balance.

A few months ago I haven’t expected reaching this goal at all. Since I decided to pay off my debt first I stopped contributing to my TD account regularly. I couldn’t see a way how to reach this goal.

But it happened.

Goals 2013

What’s next?

Although I understand that the value of my TD account may fluctuate and even drop below my 10k mark due to the market volatility, it may always recover back in some sort. This is why officially I stop contributing to TD account and focus fully to my ROTH account.

Since I trade on margin in my TD account I will only contribute from reserves to avoid maintenance or margin calls.

My next plan for the rest of the year will be to continue paying off the debt and contributing as much as I can to ROTH IRA account.

Once I finish with my debt I will contribute as much available cash as possible to ROTH IRA and continue purchasing dividend paying stocks as well as building cash for option trading. I will contribute as long as I reach the ROTH limit (currently $5500 annually) and if I still have available cash I will contribute that remaining cash to TD account and Lending Club.

I wish all of you happy investing and hope you also reached your goals. Did you have a goal or plan which you haven’t thought you would accomplish but it yet happened?




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Posted by Martin October 21, 2013
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How to sell put options – new trade – Safeway (SWY)

How to sell put options - new trade - Safeway (SWY)

Why do I sell put options and covered calls when I am a dividend growth investor? The answer is simple. I want income.

When I was looking for a strategy about a year ago after I nearly destroyed my account, I asked myself a question: “what do you want from your investment? What your account should accomplish?”

Of course, there are a plenty of answers, such as enough money for retirement, growth, hit the home run, income, value, etc.

I wanted income. Some people say that you want income when you are already retired, before you should strive for growth. And if possible aggressive growth.

But recessions, corrections and high volatility in the past convinced me that once I receive the income, it is mine. No one can take it from you. You can spend it, lose it, or reinvest it. I wanted income which I can add to my contributions and reinvest even more money.

Income source #1 – dividends

What stocks can bring you income? Cash on hand which you can withdraw anytime you want? Of course it is dividend paying stocks which can do that for you. So I decided to start buying high quality stocks, which pay dividends, have sustainable dividend growth and great dividend history.

But when I received my first dividend it was only 12 or 20 dollars per quarter. My small account couldn’t generate more cash. What can you do then?

Income source #2 – options

My next choice was trading options. Previously I had a great experience with options so I knew what options could do for any investor, not just me. But from my previous trading I also knew that it would not be any advanced option trading I wanted. I still didn’t want the “prediction” part in trading advanced options.

So what trading would be the best? Simple basic options strategies such as naked puts or covered calls.

Why selling options? When you sell options, you receive cash on hand right away. Nobody can take it away from you. These type of options are called credit trades, because you receive cash – credit.

This credit is an additional income I can put on top of my dividends, spend it, lose it, or reinvest it. And no one can take it away.

Since March 2013 I made $1919.74 in options trading of additional income. That equals to 38.39% gain or 108.31% annualized profit. I could take that money and reinvest.

Do you remember what my goal is? My goal is to pay off the debt first. So I suspended any cash contributions to my account. All growth and new investments are made only from profits made in dividends and selling options.

How you can sell put options? Here are some important steps.

Step #1 – sell put options only against stocks you are OK to buy

When I was learning how to sell puts, I had problem with this rule. I didn’t want to be assigned to the stock ownership because I didn’t want the stock.

It was crucial for me to realize that I have to sell options only against stocks I would normally buy. Stocks I want to own. If the trade goes against you, the worst case scenario will actually be your best one – you will buy 100 shares of a stock you like and you want. This gives you a great peace of mind!

Example: I like many stocks I want to own, but I chose Safeway as the stock for my put selling. I will be selling puts as long as I can or have enough money. And if the worst happen I will be forced to buy 100 shares of this stock. Will that be a tragedy? Of course not!

Step #2 – select safe strike price

To chose the correct strike price for your option you would need to be in tune with the stock, have knowledge of technical analysis and partially a fundamental analysis too.

Let’s take a look at the example. I looked at SWY chart to see where the potential support for the stock price could be.

Safeway

At the chart I can see two potential supports, one at $32 a share and the second at $30 a share. To select the proper support will be determined by the time of your option and the credit you can receive. So let’s take a look at the option chain to see what options are available around these levels.

Step #3 – select your expiration time

Open an options chain in your brokerage account to see what strikes and what prices are available:

Options chain

I want monthly income from my trades as I do not want to be waiting 5 months for expiration. If I select monthly income and will be able to collect 0.40 (or $40) dollars monthly, in 5 months I can collect $200 dollars. If you take a look at March 22 2014 put option I will only be able to collect 1.70 (or $170) for the same period and I am taking larger risk hoping the stock will remain above $31 strike in 5 months.

So I decided to check the November 16, 2013 options chain.

Then take a look at the Puts table and since we will be selling puts our corresponding column is called Bid.

When I was selling this put option the stock was above #33 a share. Today, when writing this report the stock is below $33 a share. Thus $33 strike is already In-the-money.

Do you remember what supports I was looking at? It was either $30 a share or $32 a share. Yesterday the 32 strike was out-of the-money while today it is at-the-money. Since the 30 strike offers only $10 for the contract, this trade doesn’t make sense. The 31 strike offers $25 per contract which can be considerable, but 32 strike offers 50 dollars per contract (yesterday when I was opening the trade it was 40 dollars.

I chose to open November 16, 2013 32 strike put.

Step #4 – have your plan in place before opening the trade

This is a very important step! The previous steps were just technicalities, but this step is the heart of your trade. Without it you end up blind and paralyzed to act when the trade turns against you.

Before you open a trade you must ask and answer the question – what everything can happen with my trade and what I can do to fix it?

So what are the outcomes of this trade? There are only three possible outcomes, but several possible steps to take to react properly.

  1. The stock will end above the 32 strike at expiration – November 16, 2013
  2. The stock will end below the 32 strike at expiration – November 16, 2013
  3. You will get an early exercise

The stock ends up above 32 at expiration

This is the best outcome in this trade. If that happens the option expires worthless. It will be removed from your account, your maintenance deposit will be released, you keep your credit and you can repeat the trade.

The stock ends below 32 at expiration

If this happens you have the following options:

  1. Roll the trade further in time and lower strike
  2. Close it and take the loss
  3. Let the option be exercised and buy 100 shares at $32 a share

I would opt for rolling the option farther in time and lower strike. For example, if the stock falls down to $30 a share I will buy my option back and sell January or March 2014 30 strike put option. This transaction will most likely be a wash. That means that I will use the credit received to buy back the in the money option. So this trade will cost me nothing.

If however rolling the option in time and strike won’t help, I may decide to take a loss and close the contract by buying it back. But that is not an option for me as I would do whatever it takes to fix the trade and get out either break even or with a small gain.

The third option is to get exercised. And here comes my advice #1 from above – sell puts only against stocks you are OK to own. If this happens you will be forced to purchase 100 shares of Safeway at 32 dollars a share no matter where the stock price is.

But this isn’t as bad as it looks. From the strike of 32 dollars you have to subtract the premium we received before. In my trade example it was 0.40 per contract. Thus my cost basis will actually be $31.60 (break even) per share and not $32.

Since I already collected several premiums from my previously sold put contracts, my cost basis would actually be as follows:

– $2.20 premium collected in March
– $0.35 premium collected in September
– $0.40 premium collected in October
+ $32.00 strike – stock purchase price
——————————————
= 29.05 break even – actual cost basis

As you can see, if I get exercised, I will be purchasing at $32 a share, but my actual cost basis will be $29.05 a share. Will the stock drop that deep? Of course it may happen, but if no turbulence, panic or company disaster shows up, the stock shouldn’t experience such a deep drop and even if I get exercised I will own the stock still relatively cheap.

Any questions?

Hope this step by step process on selling a put option against a stock and collect additional income was helpful. If you still have questions or need help do not hesitate to ask. I will gladly help you with your own trade.

 

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Posted by Martin October 20, 2013
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New Trade – fixing Demand Media (DMD) – put selling

New Trade - fixing Demand Media (DMD) - put selling

My covered call trade against Demand Media DMD turned to be a stinky trade. It turned against me when the stock dropped significantly leaving me with a large loss. Is there a way to repair it? I believe so.

What is Demand Media and why it sucks?

I must admit that when I was opening this trade I didn’t do my homework diligently. I failed to understand what Demand Media was and what was their business model. Now, with the hint-side it is clear, back then when I was opening this trade, it wasn’t that obvious.

So what is DMD? It is an internet company which relied on ranking in Google‘s search positions. This type of business is called a content farm. The company was producing a huge amount of content and relied on high-ranking which allowed them selling advertisement from great traffic.

The company also owns several other well known websites in their portfolio such as eHow, Stronger, Creativebug, and eNom domain names registrar. However their business model was based on junk content pushed forward ahead of any other content. Demand was hiring cheap freelancers to provide with junk content, videos and photographs.

When everything was OK, Demand media was generating 73 millions unique visitors monthly.

But then Google stroke them down. Google changed the ranking algorithm recently and the main outcome was to punish junk content. That had a great impact on Demand media. Soon after the monthly visitors dropped to 53 millions. The revenue followed soon after.

The stock lost almost 50% soon after.

How to fix this trade?

At this point my goal will be to close this trade at least break even. The company isn’t finished and based on the news it seems the management has learned their lesson. They will by progressing towards creating more loyal audience returning to their site and recover their ranking. As the now former CEO Rosenblatt said in his statement: “We’re not betting the farm on the old model.”

This may stabilise the company and its stock price.

I am betting on this and believe the stock reached its bottom. I only have two possible options what to do with this trade:

  1. Close the trade, take the loss and move on.
  2. Continue selling covered calls and puts against the stock to lower the cost basis and then liquidate the trade.

I decided to go for the second option. Here is my reasoning.

I already sold several covered calls against this stock lowering my cost basis and I am almost break even, see the following trades:

+ $9.50 initial purchase of 100 shares
– $0.60 sold covered call
+ $0.05 bought back covered call
– $0.45 sold covered call
– $1.20 sold covered call
– $0.50 sold naked put
—————————————
= $6.80 new cost basis
= $5.20 current stock price

As you can see, my cost basis is close to the current stock price and in my opinion it makes sense to continue selling options against this stock to further lower the cost basis although I am taking more risk, mainly with puts.

On Friday I sold put against this stock to further lower the cost basis:

10/18/2013 12:09:09 Sold 1 DMD Feb 22 2014 5.0 Put @ 0.5

In November my covered call against this stock expires and I will continue selling calls as long as I get assigned.




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Posted by Martin October 20, 2013
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Ten Commandments of Personal Finance

Ten Commandments of Personal Finance

For most of the people, getting their personal finances on right track is more challenging than walking on desert for 10 years. But managing your finances is not impossible and it doesn’t demand any miracle from you side. Most of the people are afraid to take some essential steps to manage their finances this is because they don’t sure whether they will succeed or not.  If you are looking for some important suggestions then here is a list of top 10 commandments of personal finance to guide you.

Stop Spending more than You Earn

An individual can’t progress if he is consistently spending more money than what he is earning each month. Living below one’s means is the key step towards achieving financial freedom. So an individual must focus on trimming his budget and try to bring the expenses below his monthly income.

Differentiate Between Your Needs and Wants

Being able to differentiate between your needs and wants is directly related to your ability to manage personal responsibility. At the very basis level, an individual has a primary needs such as food, clothing, healthcare, shelter and transportation. Anything except these is considered as a want. An individual must earn sufficient amount to meet his needs and should not spend excessive amount to meet his wants.

Don’t Show off

Don’t try to demonstrate something you are not. Spending money on unnecessary things in order to impress someone will only hurt you in long term. The majority of millionaires became rich by saving their money instead of trying to make people believe that they are wealthy. An individual who spends his money in order to enhance his status or impress other people has higher chances of incurring a bankruptcy.

Don’t Involve in Gambling

Try to grow your money in fair manner. The schemes like Get-rich-quick and gambling are a mode of earning money at the expense of losing of it from other individual. It may turn into an addiction which can take your hard earned money away from you in a less time. Most of the individuals even after facing bankruptcy, keep themselves attached with these schemes as they don’t want to give up their chance of striking it big.

Don’t Leave your Family Financially Unprotected

If you have dependent family members then nothing can damage their financial security than losing you because of disability or death. If you lose your ability to earn income during tough time then it can only create a heart wrenching situation for you which is difficult to bear. Enrolling for any form of insurance such as disability and life at a right time will help you to create provision so as to face emergency situations.

Remember to Pay Yourself First

The only method through which millionaire individuals became rich is that they kept their expenses so low that they could invest large amount in themselves. So invest a decent amount in yourself before paying for your expenses. This can be achieved through retirement savings, emergency fund or anything else. Consider it as first task of the month and you will be stunned to know that how you made it by lowering the amount on your discretionary spending.

Don’t Borrow On Depreciating Items

Avoid borrowing excessive money on any depreciating items such as boats, cars and ATVs. When you borrow excessive amount of money on any items which fall in value, you will be suffering from a double hit. Most of the people see their financials going upside down because they have to pay interest on items which have been depreciating their value significantly.

Set Realistic Financial Goals

In order to bring your financials on right track, you need to determine your financial goals. Nobody can figure out your financial goals except you. You have to give some decent amount of time to determine what your short term and long term financial goals are so that you can take some necessary steps to achieve them. If you haven’t worked on determining your financial objective for current year, next year and after 5 years then you should take some immediate steps to create them.

Avoid Using Excessive Credit

Debt is kind of slavery as it obligates you to financial lender for long duration and this obligation can take your financial freedom away from you. Therefore, if you are looking something like financial independency then you should avoid using excessive credit. Though using credit cards is unavoidable, you can definitely take some vital steps to take control on its use.

Involve yourself in Philanthropy

Once you get complete hold on your financials, you should show some generosity towards needy people. Philanthropy is a great source of happiness and the ecstasy it will bring will always keep you on proper path financially. For most of the people, being able to serve their own family and individuals who are in need is one of the vital reasons why they aspire for financial freedom.

Conclusion:

If you are wishing for your finances to come on track then simply wishing is not enough. If you want to succeed financially, then you have to stop doing things which can harm your finances and focus on things which are efficient. Bringing your finances on right track could be toughest thing. Above mentioned commandments of personal finance will definitely help you to make personal financial planning as one of your key objective in life.




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Posted by Martin October 18, 2013
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Expiration Friday, trade exit – Safeway (SWY) – put selling (1.21% gain)

Expiration Friday, trade exit - Safeway (SWY) - put selling (1.21% gain)

Almost a month ago I opened this put selling trade against Safeway , see the trade here, and I wanted to be conservative since the stock ran up too much and I was expecting drop. I still am expecting it, so I may continue in being conservative when selecting my next trade.

Well, this option expired worthless today and I can keep the premium I received when opening the trade. I keep $35 dollars and now I can sell another put for next month.

This trade delivered me a profit of 1.21% or 22.02% annualized gain. Next week I will open a new put selling trade against SWY as long as I collect enough money to buy shares of this stock or get assigned.

As far as of this writing I collected $255.00 dollars so far. At current Safeway price, my cost basis would be $30.81 a share.




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Posted by Martin October 18, 2013
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New trading strategy testing

New trading strategy testing

Recently I was working on a new strategy on picking stocks. I always wanted to develop mechanical trading – a sort of rules which would allow me to eliminate human emotions from trading.

Human emotions are the worst enemy of every trader and investor. They make us do stupid things on the market. They force us to buy when prices are on top and sell when they are on the bottom. We tend to panic when we see prices falling or be overly optimistic when prices are rising.

I wanted to make my investing or trading as mechanical as possible to put emotions aside. I wanted to be trading as mutual funds do. They have certain sorts of rules and they strictly follow them without questioning or second guessing. You buy selected stocks when they meet your criteria and sell when they no longer meet them.

But even if we have such rules, we posses lack of discipline to follow them. We have excuses we double guess them or we even do the exact opposite. Many investors do not even have them written down and do not remember them.

So I created a set of my rules and created a screener based on them. The rules are based on fundamental and technical metrics and calculated expected return. Based on those metrics I then assign rating to each stocks and sort them from the best to worst rating. All this is now automated. My program screens all stocks everyday, compares the metrics to my requirements and assign rating. Everyday I have a list of stocks I can invest in.

What happens next? I take first 10 stocks from the list and buy them.

Then I hold the stocks as long as their rating is over 50% of the entire rating scale. When the stock drops to 50% of the rating scale I sale. No analysis, no exceptions, no guessing.

I decided to test this strategy (actually the rating system) for 1 year. Although I did some back testing and the results were promising I still want to test this in real time trading. Therefore I opened a simulated account with $100,000.00 initial value and will trade this system for one year with simulated money. If the system proves profitable I will adopt it and use in one of my trading accounts.

I will also report the results on regular basis so my readers can see how the system works.

Here is the current account value:

I still will continue my dividend growth strategy on my TD and ROTH accounts. If this strategy turns out to be a winning one, I might use my Scottrade account to use it.

What about you?

If this system shows up as working system, would you be interested in it? Do you like to have a system which would cut your emotions and doubts when selecting stocks?




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Posted by Martin October 12, 2013
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8 Ways to Beat the Recession

8 Ways to Beat the Recession

Recession is the time when, media constantly talks about the doom and gloom of financial crisis, credit crunch and plummeting stock markets. During such a time, every individual starts worrying over the impact of recession on his job, finances, business and even personal life. The sudden decline in economy and rising cost of living can take many individuals by surprise. During the hectic period of recession and economic downturn, most of the individuals search for techniques to survive financially. Dealing with recession is not an impossible task and counteracting the impact which it may create on your finances is something you should learn during this critical period. Here we have explained some useful tips on how an individual can live a recession proof life and how to deal with financial catastrophe –

Take Proper Control on Your Budget

It is obvious that spending less is a great way to take control on your budget. Thinking over where to purchase cheaper items and where to splurge extra will definitely help to save you hundreds of dollars in long term. It could also mean doing some small tasks on your own such as washing the car or growing vegetables in your back garden. Being frugal will offer you great pay off in long term and you end up achieving lot of satisfaction as well.

Be Proactive

If you lose your job and owns too much of debt then set out an objective to control your expenses and work on improving your sources of income. You can also think of another job or work on part time basis. This will help you to keep busy and you don’t have to utilize your savings to run your household or meet your debts. Multitasking is one of the important things you have to learn in order to tackle with recession successfully.

Don’t Consider Switching to New Company

The worst thing to do during recession is to switch your job from one company to other. Most of the employers consider cutbacks when their profit margin goes down and new employees are normally the first to be axed from the company’s balance sheet. Recession is the time when you have to deliver optimum performance to show your competency in your current job. This way you can stand out in the competition and make your position strong in the organization.

Get Yourself Out Of Debt

Bad debt is vital reason behind any credit crunch. So keeping this crucial fact in mind, getting rid of debt must be an important priority to bring your finances on right track. If you always utilize your credit card and possess any on-going borrowings then you must consider paying them off before due date. You can also try to avail a zero percent balance transfer deal on the credit card, if you have decent credit rating. One more strategy will be to figure out a monthly budget to meet your payments on time. You will definitely feel better after knowing that your debt is sinking every month.

Don’t Ignore Your Mortgages

If you fail to meet your mortgage payments then don’t try to run away from them. The mortgage must be the first thing which should be paid ahead of your credit card bills and some other form of debts. During recession, most of the borrowers ignore telephone calls or letters sent by their lenders. Running away from your debt problems will only going to make them worse. In fact, you have to think over some effective solutions which will assist you to resolve your debt problems on time.

Contact your Mortgage Lender

If you are struggling to pay your mortgage payments on time then the first thing you can consider is to get in touch with your mortgage lender and discuss about your problems. If you take some constructive actions to meet your mortgage and show your positive intentions to mortgage lender then there are chances that your lender may figure out some personalized solution for you.

Don’t Lose your Patience

Recession is not a time to get depressed, stressed or feel panic. In fact, it is the time when you have to take every decision after giving deep thought and show utmost patience. You can focus on things which you can control and take some productive actions to work on your personal finance and business objectives. Think over your long term financial goals as they will definitely help you to take proper decisions in short term.

Consider Starting your Own Business

During recession time, you can also think of starting your own business. This may sound risky but recession is definitely an ideal time to start your dream business. This is because you can get cheap labor during economic downturn which helps to keep your business cost at lower level. The biggest advantage of running business during recession time is that if you have a great idea then you can definitely stand out in the competition.

Conclusion –

During recession time, you will get sick of watching the gloomy news and stories explaining how bad things are going there. Recession is something you can’t avoid but you can definitely follow some important tactics to beat it and keep your financials on track. The only individual who can control your destiny and financials is you. The best way to beat the recession is to rely on your own skills and capabilities. If you know your current financial status very well then you can definitely figure out some ways to cope with the tiring recession.

 




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Posted by Martin October 08, 2013
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My 3rd Q 2013 saving, debt eliminating, and investing results


This year is passing so fast that sometimes I feel like I am unable to keep up with it. Once again it is time to share with you a progress I have made this quarter on my goals.

If you follow my blog, you may know that during my accounts rebuilt period I changed my course and made debt eliminating my priority number one. As Warren Buffett says if you want to be a successful investor you must stay out of debt. He even says to avoid credit cards entirely.

Why I haven’t listened to him earlier?

Debt elimination progress in 3Q 2013

I started working on my debt last quarter, so the results are not that bright as I would wish. I started to use all free money to eliminate debt. How I hate that debt! If it hasn’t existed I could have a plenty of free cash which I could use in the stock market! And today, when once again investors are dumping everything it creates great opportunities.

Today morning I watch CNBC, right at the moment when they spoke about Warren Buffett buying stocks during the worst panic in 2008 when everybody was selling. Today, just the dividends delivered him almost 10 billion of dollars!! In just five years!

The following chart shows my debt progress since the previous quarter.

 

Debt Success

 

I made some progress on my debt which finally started showing retreat. The biggest achievement however was eliminating my debt on American Express card. This debt was literally killing me. I had to pay between 900 and 1600 monthly towards this debt and I had to use my reserves. Once my reserves were depleted I realized that this was a point to say a resolute no to this debt. I used refinancing plus paying all extra amount down and as of this writing I only owe 400 dollars. I am expecting eliminating that last piece by the end of the month.

But I am not out of the forest yet. Once my Amex is paid off, I will move on to paying other credit cards. But there will be no huge pressure. I will once again use all extra money to pay that debt off as quickly as possible.

The following chart show all my cards and debt I carry on. After my Amex is gone I will use a snowball method eliminating the smallest debt first and moving on.

 

Debt Cards

 

As you can see, this goal shouldn’t be that difficult to reach.

My 3Q 2013 Investing Goal Results

Since I decided to attack my debt with my full financial power, I had to suspend my investing goals. Thus a little progress has been done. However, I still made money and increased my overall balances.

How could that be possible?

DIVIDENDS and options income!

My 3Q 2013 Dividend Income

Yes, my accounts were able to continue growing due to dividend income, which I diligently reinvest. I wasn’t able to reach my goal in dividend income and I might not be able to reach it by the end of the year due to my debt elimination priority, but I am satisfied with the result so far.

My goal was to reach $100 monthly in dividends at TD account.
I am currently at $84 a month. Not bad however.

My ROTH dividend income reached $63.99 a month.

You can follow and watch my dividend income on My Trades & Income page.

I like to see how my dividend income has been doing this year compared to my previous year. I started tracking it and the chart below shows a current year 2013 vs. 2012. I am satisfied with the growth of my dividend income.

Dividend income

(Note, the chart reflects dividend income on TD account only)

My 3Q 2013 Options Income

I reached my options income and continue successfully increasing it. Although in August I realized somewhat larger loss due to liquidating my ARR puts, it was still greatly offset by other income from options. I plan on selling covered calls and puts in the next quarter to increase my income beyond dividends.

Options Income

My 3Q 2013 Overall Goals Summary

For the rest of the year I will however strive to continue investing as much as possible to reach my overall goal in investing:

My Goals

Let me summarize my plan and goal for the future in steps:

  1. Pay off the debt and stay debt free.
  2. Re-build an emergency account.
  3. Raise TD account to $10,000 balance.
  4. Continue Dividend Growth Strategy on TD account and reinvesting all dividends. Reach min. $100 a month in dividend income.
  5. Continue covered calls and naked puts on TD account and reinvesting all proceeds, maintain or increase income to $100 a month.
  6. Once TD account reaches 10,000 dollars balance, deposit all available money in ROTH up to ROTH IRA limit. Everything beyond the limit will be deposited to TD account.
  7. Use Dividend Growth Strategy on ROTH and reinvest all dividends.
  8. Continue contributing $100 per month to Lending Club account and reinvest all proceeds.

Below is a review of all my accounts and investments:

I was able to increase a value of my accounts by 13%. Not a bad result considering that all my free money go towards debt and a very little to investments. My overall dividend income increased to 5.1% (from previous 4.9%)

You can continue watching my all open and closed trades on My Trades & Income page and check my holdings on My Holdings page.

My 3Q 2013 Lending Club Investment

My Lending Club account continues performing excellently. I am truly amazed and more than satisfied. The account is gaining a great momentum in growth and growing faster and faster. A portion of money in the account are my daughters for their college, missionary work (if they decide to go), or retirement.

Currently this account reached 15.96% NAV or 12.81% XIRR.

Lending Club

The picture above shows my account at Lending Club. Note zero late or default notes as I continue actively managing this account and trying avoiding all notes which may potentially turn bad. You can also follow my Lending Club account on my Lending Club Holdings page.

I hope you had a great, successful, and prosperous saving, budgeting, investing and debt eliminating period as I had this 3rd quarter. I wish you all to have even better upcoming season.

Tell me how was your last investing, debt eliminating or money-saving period?




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Posted by Martin October 06, 2013
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How to Eliminate Errors from Your Credit Report

How to Eliminate Errors from Your Credit Report

Credit bureaus which are also referred as credit reporting agencies have to provide accurate credit report to customers. But, what an individual should do when he spots some serious errors in his credit report? The best solution is to take some immediate steps to correct those errors. On the virtue of Fair Credit Reporting act, eliminating errors from your credit report has become extremely easy and quick. If you want to clean up your credit report then here are some important steps which you have to follow in order to successful in your endeavor.

Order Your Credit Reports

To figure out what is exactly wrong with your credit report, order your credit reports from some major credit reporting agencies. Some details on each of the report may vary because creditors don’t report your credit status to every credit bureau. Avoid ordering credit report from any third party agency. According to law, every individual is entitled to receive at least one copy of his credit report without paying any fees.

Contact your Creditor

The first important thing is to get in touch with your creditor and explain him errors in your credit report before filing dispute to any credit bureau. Because by the time your dispute request will be processed by credit reporting agency, your creditor might have corrected all the errors in the report. In most of the cases, eliminating inaccuracies is extremely simple. But, if the initial investigation results in no change then you can opt for dispute filing process.

Pay Proper Attention to Details

You should not only give attention to some major discrepancies like court judgments or inaccurate purchases but you have to also watch out for some minute mistakes such as misspelled names, incorrect address and bank details. Bankruptcies can remain on an individual’s credit report for 10 years, while some other types of entries may remain for 7 years.

Dispute Discrepancies

You can opt for an option of filing dispute online but it may not allow you to state all the claims in one go. So writing a formal letter to credit bureau is an effective option. When you write a letter, make it very simple and easy to understand. If there are many errors in your report then try to write letter for every minute error and mail it separately. You can also consider writing separate letters to each of the credit reporting agencies.

Know What Should Be Removed

If your credit report possesses incorrect information like judgment of lawsuit which you were never participated in and any account you have never opened then you can request it to remove permanently from the records. Sometimes, your credit report may possess multiple entries, so you can also remove unnecessary entries by filing dispute to respective credit bureaus. This will allow lenders in believing that you have less credit or debt problems in your life.  Your credit report may reflect incorrect information on foreclosures, liens, judgments, lawsuits, late payments and bankruptcy which you have to eliminate on time.

If Changes Aren’t Made

In case, the credit bureau claims that the information mentioned in the report is correct then it must give you written notice which includes name, phone number and address of individual who has made the report. If any information in your credit report is unpleasant but correct then unfortunately you can’t remove it.  However, if you disagree then you can initiate one more investigation. In case, your first attempt to correct discrepancies is unsuccessful then you can ask credit bureau to provide you a detail explanation.

Submit Necessary Evidence

This is most vital part of your credit report dispute filing process. As providing detail information and adding proper documentation can impact the final result of your claim in significant way. Through this way, you can persuade the credit reporting agency to investigate your matter in detail.

Track the Overall Progress

As soon as you contact the credit reporting agency, they have to investigate the matter within one month. The credit bureaus will pass on all the information to entity which has forwarded details to them. The information provider has to investigate matter properly and submit entire research back to reporting agency. During investigation, if it is observed that you were right then you can avail correct credit report in quick time. Make sure to maintain all the details of your communication with the credit bureau. Keep the record of all the people you have interacted with in customer service department with details on time and dates when matter was discussed.

Legal Help

If you believe that discrepancies are valid and they are not verified through credit reporting agencies properly then you can opt for legal help. There are many lawyers available who possess thorough knowledge on Fair Credit Reporting Act and strong experience in dealing with cases related with credit report errors. 

Conclusion

Most of the individuals find themselves in a situation of challenging a credit report without any valid reasons. The key is to be persistent and organized but honest. Credit bureaus are extremely cooperative and if you file a genuine complaint then they are always ready to serve you on priority basis. After successfully correcting of all the errors and discrepancies in your credit report, you can think of implementing some vital steps to improve your credit score. Because, correcting mistakes in credit report is not well enough to convince your lender about your credit status and what you will require is a solid foundation to make your credit report strong.




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