Money Reasons

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Archive for November, 2009

Lunch Budget Experiment #2 – Buying the Stock

November 30th, 2009

In my previous post about my “Lunch Experiment“, I mentioned that I was looking at buying a type of dividend producing stock called a REIT (Real Estate Investemnt Trust).

My Stock Hunting Adventure Ends

Well, this past Friday, I decided to jump in the market while it was low from the Dubai World credit crisis fallout.

Even though the market might move lower on Monday, I’m pretty confident that it isn’t going anywhere near the recent recessionary low that we experienced in March 2009. “Sell high, buy low”, if possible (actually I prefer dollar-cost-averaging for my real investments).

So what did I buy?

First, let me say that I can afford to lose this money. The stock was bought with money that I would have wasted on buying ”out of the office” meals at work. This is the reason that I call this an experiment, and the money involved truly is non-necessary money.

On to what I bought. Drumroll… I bought AHN (Anworth Mortgage Asset Corporation)! This REIT company does the following:

“…invests primarily in United States agency mortgage-backed securities issued or guaranteed by United States government sponsored entities, such as Fannie Mae or Freddie Mac, or an agency of the United States government, such as Ginnie Mae, including mortgage pass-through certificates, collateralized mortgage obligations, and other real estate securities, on a leveraged basis…” - from finance.yahoo.com

Why did I buy it?

I bought this stock for the 15.5% dividend yield.

How much did I buy?

I bought $2,000 dollars worth. I decided to take an extra $1,000 from my regular brokerage account (that was sitting in cash) and put it extra towards the experiment. So now I owe my regular account $1,000.

How much money will I get from the quarterly dividend?

If you consider taxes as part of the decision this is trickier than it sounds. Not taking into account taxes (for example, if I put bought ANH in a Roth IRA), I would receive ($2,000 x .155) = $310 dollar annually ($25 a month and about $6 a week). Currently, I’m holding this in my regular stock account, but in January 2010 this is going into my Roth. For more information about REITS, see this wiki article (especially the taxing info.)

Why did I put in extra money?

The extra $1,000 that I added will enable me to take 1 additional lunch as soon as the dividend is paid out, instead of waiting 25 24 additional weeks. this will enable me to start enjoying the lunch out with friends in a few months, instead of waiting 1/2 a year (not to mention the current high dividend). Though honestly, I could have waited…

Potential Pitfalls

The company may cut or reduce it’s dividend. Yes, I’m taking more risk than is customary for me. I’m willing to roll with the punches though.

Tell me what you think of my latest move? What kind of strategy would you pursue? Is my timing bad?

-MR

Related Posts:

Lunch Budget Experiment Update #3

Lunch Budget Experiment Update

Paying An Adult Allowance

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Posted in Experiment, Investments

Tags: AHN Budget Experiment financial goal investment REIT stock

Emotional Reactions to Stock Market Swings

November 28th, 2009

I found this really funny cartoon while I was searching MonyNing.com’s website. While looking at MoneyNing.com blog archive, I came across this article “Not Caring About the Wild Stock Market Swings” and I would like to point out the importance of the article, especially how I was affected.

I hope the stock I just bought doesn't do this!

MoneyNing posted the article last year during October (2008), right after the DOW index at one point was down 800 points. Although, I’m sure she wasn’t happy about it, she goes on to say that she wasn’t depressed about it either. This is the perfect way to approach it! This means that the stock market movements has lost control over her. You might think how can an abstract concept like the DOW index control us? Sadly, too much… I was depressed as I saw the value in the market practically cut in half.

How depressed was I about it?

Very, :( “nuff said”… but today it’s different. As I sprint into the next few months, I’ll be running towards becoming debt free. After I’m debt free, I’ll be able to relax much much more. In fact, I’ve already started to do so. I’m also starting to diversify my investment allocations, so that I don’t have as much money in just risky (high beta) stocks.

If you are only in risky stocks as I was (not counting my 401k), perhaps you should try asset diversification too. First pay off your debt (Credit cars, car, house, etc), next check out the options that are available for money to be diversified into (Stock, Mutual funds, Foreign mutual fund, ETFs, Bonds, etc…). Next check out some of the investment blogs out there. There is some excellent advice out there.

-D

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Posted in Investments

Tags: controlling emotions market emotions stock market swings

Black Friday Tips

November 27th, 2009

Well, I’ve decided I’m not going to do “Black Friday” shopping today. The hustling and bustling of the crowds just is not worth it to me this year.

Black Friday Craziness

If you are going out into the “Black Friday” jungle, I have some suggestions for you.

Don’t go to the crazy places. Target, Best Buy, Walmart… I prefer to go to less crowded places like Staples, Sporting Good stores, etc… They have deals too, but they should not have the massive crowds.
If you have to go to one of the “crazy places”, think it out before hand with friends. The strategy I know of takes planning with your kids (or siblings) and friends. So say you’ve determined that you want items from 2 or 3 stores. You won’t make it to all 3 before the item is out. So and your friends take your kids (or brother/sister) to stand in line with you. Your friends (along with their kids) will stand at different store lines. Then you’ll be able to buy multiple items at the store you are waiting at, while your friend do the same. Then each of you and your friends will reimburse each other at the end of the ordeal. This is a win-win for everybody. Note, it’s important to use cell phones to coordinate during these transactions.
This is obvious, but make sure you don’t have to go to the bathroom during your long wait in line…
Keep your cool, you’re going to see things that will make you mad. Even though you’ll save some dollars, remember this is still a small event in life…

Good luck in your pursuits, I hope you reap the reward of “Black Friday”!!!

-D

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Posted in Savings

Tags: Black Friday Black Friday Sales Black Friday Tips stategies for Black Friday

My Thanksgiving Day Routine

November 26th, 2009

Well, it’s Thanksgiving Day in the United States! Instead of listing the history, I thought I’d detail my family’s Thanksgiving Day routine.

Thanksgivings Day feast

After waking up, we watch the Macy’s Thanksgiving Day parade on TV. This parade is in New York, and we don’t live close enough to see it in person.
While still watching the parades, we drift downstairs to get a light breakfast. Since we are going to have a big meal at noon, we’ll typically just eat a bowl of cereal.
We all get ready to leave. After showers, the kids get dresses up nicely, my daughter puts on a fancy dress.
Next, we hit the road to my in-law’s house. Once there we’ll have our Thanksgiving Day feast consisting of: turkey, ham, mashed potatoes, cranberry relish, stuffing, vegetables (broccoli, corn, green beans, cauliflower), noodles and rolls. For dessert, we have cake, pies (pumpkin and chocolate), brownies and ice cream.
I’ll try to watch some American football (maybe I should call this United States football), but this isn’t so popular at my wife’s parent’s house. I have to sneak the channel change… Later, we’ll try to watch “A Charlie Brown Thanksgiving” on TV or video (my little girl gets a kick out of it).
After the feast, we just socialize for a few hours, then pack it up and drive home.
Here’s the kicker, the next day, we have another Thanksgiving feast at my parent’s house. We do it that way because my sister goes to her husband’s house on Thanksgiving day and they live over 3 hours away from my parent’s house. Before my sister was married, we’d celebrate thanksgivings day meals twice on Thanksgiving day. Once at my parents, then later at my wife’s house.

Overall, it’s a fun but hectic day.

I’m not sure if we are going to try to go out to the “Black Friday” or not. If you go out and do “Black Friday” with friends, it be a bit more enjoyable. This is a very frugal day to go shopping.

I’d like to say “Good Luck” to all the frugal bloggers out there that will participate in this event!

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Posted in Holiday

Tags: Thanksgiving thanksgivings routing

REITs as Investments

November 25th, 2009

Okay, I decided to take the money from my Lunch Budget (Experiment) and put it into a REIT (Real Estate Investment Trust). Now, I don’t expect the stock price of the REIT to rise much higher than the levels that they are currently at. So you might be wondering why am I doing this? …The dividend!

REITs historically pay a dividend percentage payout of about 6% to 7% for their dividend.

Why? Because they get special tax treatment if they do so.

To qualify as a REIT tax structure, a company has to:

invest at least 75% of total assets in Real Estate
deriving at least 75 percent of gross income as rents from real property or interest from mortgages on real property
distributing annually at least 90% of taxable income to shareholders in the form of dividends

So why would a company decided to be classified as a REIT? Because they are able to pass the taxes to the shareholder instead of paying it themselves. So these investment would be great in a Roth IRA, or in a child’s UTMA account where they don’t earn much money or the tax consequence is minimal.

I’m hoping that the addition of a REIT company while the fed interest rates are low will benefit me by the REIT stock appreciating and by receiving the juicy stock dividend that is higher than normal at this time!!!