| Jun. 4th, 2008 @ 01:31 pm Frustrated |
|---|
Current Mood:  bouncy anbu
So as I posted back in January, I bought a closed-ended fund while the financial market was at or near it's worst. BEP, if you wanna look it up. I bought at 14.80, told myself I'd probably sell off somewhere between 17.50 to 18.00 given it's chart history. Now I'm about a week or so away from this company announcing their dividend of $1 per share, and it's currently trading at $17.55. If I sell now, I'll get about a 9.5% return on my investment, net. If I wait until the announcement and (hopefully) the trade maintains current levels, it'll be a 15.8% return on my investment. Either way, not bad for 5 months of patience.
And yea, I'm lookinig to get out of it. Two reasons:
1. Not that I think it'll drop significantly or anything, but the next set of sub-prime bumps are coming up, and I'm guessing it'll drop at least a buck, buck-fifty. The S&P 500 are chock full of financials. I may rebuy at that time, so we'll see.
2. Waiting 6 months for a dividend is for the birds, no matter how sweet it is. Too much volatility in between pay-outs.
So when I get out, I'm looking into two different funds.
One is DPO, which is based on the Dow as opposed to BEP's S&P 500 modelling. Currently trading at $16.23 w/ a 17cent monthly dividend (.17 * 6 = 1.02) which is nicer than the 1.00 every 6 months given by BEP.
The other is HTR. It's staying steady and low right now because a large chunk of it is based on long-term cd's, t-bills, etc. which the interest rates were pretty much dropped like a hammer by the Fed earlier this year. So, given it's current trade of around $7, it's dividend yield of 7 cents a month, I can buy more shares and still get around .85 every 6 months. History has shown that interest rates climb and fall, so once it starts climbing back up to more normal levels, the price should go back up. At that time, I may get out of my original investment, keep the leftovers to continued churning dividends and use the original investment towards something else. Nice thing about this CEF is that it's been around for decades. I'll still need to keep an eye on it because history of other CEF's has shown me that as soon as it stops paying dividends, it's time to bug out.
BTW, if you're looking to invest in any of the shit I'm telling you, the best advice I can give you is to open a Roth IRA account and start investing in it there. You won't get taxed on the dividends (which I will w/ my sale of BEP) and if you sell, since it's in a retirement account, you shouldn't be penalized w/ a capital gains tax. So if you can include it in your 401k, go for it. If you can do the IRA and keep dropping some money every month into it, do it. It'll build nicely and with the average 12% annual return, it'll definitely make you more money than dumping it into a cd or money market account that might pay you 5%.
For myself, I'm trying to build up to $10k or so. At that time, I'll start playing w/ real stocks instead of funds that capture a sector, whether companies w/in are doing bad or good. |
![[info]](http://p-stat.livejournal.com/img/userinfo.gif){kind=small}
psychoanbu's journal
aggravated anbu
conetemplative anbu
amused anbu
ironic anbu
discontent anbu
