If you pick a broker who will charge you zero commissions so you can buy even 1 share of a stock and pay nothing to do so, then yes, you can still do it. Choose high quality dividend growth stocks (dividend aristocrats), 3 to 5 companies, buy few shares (choose stocks in the $40 – $50 range), set dividend reinvestment (DRIP) plan, and let it go. You won’t make much (meaning that in 20 years you still will not be able to retire on it) but you will still make more than in a savings account. Note that investing in stocks is a long run. So if you plan to buy today and plan on selling in a few months or even a year or two, then this will not work and you will lose money. This will work if you buy now and let it sit there for 5 to 10 years. A good example would be Mastercard (MA). I bought the stock a few years ago for $75 a share. Today, it sells for $303 a share. Do not worry about diversification. I agree with IBD and Warren Buffett on this matter who both consider diversification a myth. You can be very well diversified with 5 stocks too. If you do your homework, study the companies you plan on buying and know their business (for example, know how Mastercard make money – and it is not in lending money to people) then you will be safe.

Is this investment strategy good: allocate 75% in savings account with high APY(~2%), 20% in long term re-investing dividend stocks and 5% in short to mid term high risk stocks (kind of a swing trade)?

How old are you? If you are close to retirement or retired, and inherited a large sum of money, this may be acceptable (although not for me either). If you had saved enough throughout your life, it still would be a bad idea.

If you are young, let’s say 20’s then this is an incredibly bad idea. If you can invest money for the next 40 years then there is no better allocation than stocks. On top of that, if you have really 40 years time frame, you should go extremely aggressive (use leverage and as you age start deleveraging your account). A good book on this topic is Lifecycle investing by Ayres & Nalebuff.

So, if you have time, invest 100% in high quality dividend growth stocks, reinvest dividends, and use options to leverage your investments (as described in the book for example, or use a “Wheel strategy” – sell puts as long as you get assigned, then hold the stock, collect dividends, and sell covered calls as long as you get assigned).

Just look at the 40 years S&P performance and compare it to a 40 years savings account performance and try to convince me again why would you waste 75% of your money in savings accounts for the next 40 years.

I bet many people will tell you that you can’t because of diversification and other myths and misconceptions what all sorts of advisers tell general public to cover their backs and lack of deeper knowledge.

I started like that myself and built up a nice portfolio. It is difficult at first but doable, mainly today when you can trade commission free. That is a key. You must choose a broker which will allow you to buy a single share and charge you nothing for it.

The next thing is to choose a high quality dividend growth stocks (dividend aristocrats) to boost your income from your holdings, and reinvest that income. At first, use DRIP, later on I would recommend buying more stocks different than those which generated the income.

At first, choose only about 5 to 10 stocks and start buying them and accumulate.

Here is my portfolio I opened in April 2019 to do exactly what I preach. As you can see, even though the portfolio is small and generates small income, but it is growing. And given the size of the portfolio it is still sufficiently diversified as the point is not in owning hundreds and thousands of stocks but stocks which can hedge each other. So you can have only 5 stocks and achieve the exact same or even better diversification than someone who is buying hundreds of stocks.

Note, the stocks above are my holdings and not a recommendation or solicitation. If you decide to buy them, do so on your own risk and you must do your own due diligence and be aware that you may lose money.

Also, my broker charges me zero commissions so I can buy a single share and it cost me nothing. Before, when the brokers charged commissions I first had to save at least $600 dollars to buy a few shares to mitigate impact of the commissions so I was buying shares every 6 months. Today, you do not have to wait and you can start buying a few shares every month and slowly accumulate.

Not at all. However, your strategy will depend on a few important factors. For example, are you starting at retirement from scratch, meaning you have nothing saved? Or you have a significant amount saved and invested elsewhere and just thinking or re-allocating it?

Generally, it is never late to start in the stock market but as in investor a young person starting investing has a lot of time on his/her side and time is your friend. If you are already in retirement, you do not have much time – but that also depends where are you ate retirement – just retired or in mid retirement? If you just retired, it is still good as you may have another 10 to 20 years in front of you. And that is a good time to start and invest. However, I personally would look for safe but aggressive methods to boost your income from your investment and reinvest it unless you need it to pay your bills.

A good way is to use cash secured puts and covered calls to generate additional income on your holdings. Do not listen to people telling you that options are risky. It is not true. The risk is in underlying stock, not options. So whether you use options or not, you still have the same risk but options offer you a better protection compared to holding just stocks.

For example, when you sell cash secured puts, you always have money to buy the stock. And if you sell puts against a stock you want to buy anyway, then you have nothing to lose but buy cheaper than when buying a stock out right.

Example: Trade A and B want to buy a stock ABC at $30 a share. A trader A buys 100 shares of the stock immediately at $30 a share. Trader B sells 1 contract of cash secured put with 28 strike price and collects $40 income from selling the put.

The stock dipped to 26 a share at expiration.

The trader A is sitting on a loss $400 dollars ($30 – $26 = $4 * 100 = $400) , while trader B just bought in 100 shares by being assigned at 28 a share. His loss is only $160 a share ($28 assignment – 0.40 received premium = $27.60 cost base – $26 = $1.60 * 100 shares = $160). And once you get assigned, you can start selling covered calls and generate more income.

So, as you can see, it is not the options which carry the risk, it is the stock. Options can actually help you to lower that risk.
And if you choose high quality dividend growth stocks, you can achieve triple income from your investments: dividends, puts premiums, and calls premiums.
And it is never late for this to implement.

A study was made (sorry no longer remember who did it and link to the source, but I may try to find it if I have time), indicating that investing smaller portions but regularly outperforms a lump sump investment long term.

So, if you have a large sump, identify stocks you want to invest the money to and then divide the sum by number of the stocks. Then divide each number by at least 3 payments (if your sum is large to divide by more, do so). Then invest those amounts in monthly intervals, usually on drops of the price.

If you want, you may use put options to buy those stocks. In that case, make sure, you divide the amount for each individual stock in a way that each purchase will allow buying 100 shares. The sell at the money cash secured put. If the stock moves away from you, the put become worthless (you can roll it higher to trail the stock price while collecting premiums). If the stock dips below the put strike, you will buy 100 shares at a lower price. Then sell another put for the next cycle.

So, for example, you have $500,000 lump sum and you want to invest to 10 stocks. That means, you can invest $50,000 to each stock. Then let’s say one of your selected stock is Apple (AAPL). Currently it trades at $298.54. In order to buy 100 shares in a cash account (not margin), you will need $29,854 sum. That means, you can sell 1 put to buy in the first 100 shares (for the rest, you will not have enough cash, so you will be buying out right.

Then you can sell 1 AAPL January 17, 2020, 295 strike put and collect 4.35 or $435 dollars premium. If the stock stays above 295 by January 17, 2020, the option expires worthless, you keep the premium (you can immediately reinvest it), and you can sell new February 21, 2020 put. If the stock dips below 295, you will be forced to buy 100 shares of Apple at 295 a share.
Do this with all other stocks until you are fully invested. Then you can start selling covered calls to collect even more premiums. I recommend investing in high quality dividend stocks as with them you can afford to sit on them through any market, collect dividends which are increased every year, collect premiums from covered calls and cash secured puts, so in fact, you will hit triple income with one stock. If you have 30 years (for example) in front of you till retirement, you do not have to worry about any risk in stocks whatsoever. No bear market or recession takes longer than 2 years and it always recover. Just look at previous recessions and today’s market. The 2008 recovered in 3 or 4 years and from there we just rallied and rallied, and rallied. And during that 30 years, you will be collecting dividends (note that many high quality dividend growth stocks increased dividends in 2008 when everybody was panicking, selling everything, screaming, running for cover, and predicting end of the world).

If you stick to the plan, you will never be forced to sell a single share of your holdings and just live off of the income it will generate. As of today, per my own personal experience, you can expect 30% annual return +/- on this triple income strategy. Note, this may vary based on selected stocks and other market factors. But over the long run, you will not lose (unless you foolishly sell in the next bear market worried about your money like many investors out there end up doing and they ultimately end up selling low and buying back high, losing money.