Perpetual earnings from nothing

[jbocker]

This is an OLD game I played with stocks where I would get a trickle of income from stocks for as long as they continued to pay dividends. It was a strategy I used to trickle money into a mortgage to help pay it down.

I would buy a dividend paying stock with the little money I had. When the stock went up ~20% I would sell enough to recover my initial outlay plus costs and just held the rest ad infinitum. I likened the strategy to putting money in a bank account then taking it all out but the bank continues to pay a small amount of interest.

I did this with a number of shares and the trickle has been going for years. Several I converted to DRPs for a while. A couple even went to the point the small holding became significant. MLB (now ARQ) and BLA which I originally bought at 80c sold at $3, but later went as high as $13 which then has since been belted.

Others still held include KSC, EZL, OZG, GSC (cant recall the original codes for GCS). Several have been sold off since.

Some took a bit of time to get enough headway to sell and have a reasonable holding, the best I was able to do in a day. Anyway it was a bit of fun with the little I had. The mortgage did get paid off by the way, with some help from the dividend trickles.

 

[luutzu]

This is an OLD game I played with stocks where I would get a trickle of income from stocks for as long as they continued to pay dividends. It was a strategy I used to trickle money into a mortgage to help pay it down.

I would buy a dividend paying stock with the little money I had. When the stock went up ~20% I would sell enough to recover my initial outlay plus costs and just held the rest ad infinitum. I likened the strategy to putting money in a bank account then taking it all out but the bank continues to pay a small amount of interest.

I did this with a number of shares and the trickle has been going for years. Several I converted to DRPs for a while. A couple even went to the point the small holding became significant. MLB (now ARQ) and BLA which I originally bought at 80c sold at $3, but later went as high as $13 which then has since been belted.

Others still held include KSC, EZL, OZG, GSC (cant recall the original codes for GCS). Several have been sold off since.

Some took a bit of time to get enough headway to sell and have a reasonable holding, the best I was able to do in a day. Anyway it was a bit of fun with the little I had. The mortgage did get paid off by the way, with some help from the dividend trickles.

That's what business investing is isn't it. To own a stock/asset that earn and (hopefully) grow.

Whether the earning is kept back by the company (to expand the business) or paid out as dividend (so you can pay off your mortgage or reinvest it elsewhere)...

 

[jbocker]

That's what business investing is isn't it. To own a stock/asset that earn and (hopefully) grow.

Whether the earning is kept back by the company (to expand the business) or paid out as dividend (so you can pay off your mortgage or reinvest it elsewhere)...

Fundamentally yes. And maybe I should do it on a larger scale. I tend to just buy and hold in total, or sell in total. My thinking nowadays to just buy and let it grow. It was more fun back then even though on a much smaller scale.

Cripes it is dawning on me that I don't currently have a strategy except for a few stocks. I am just simply holding most of my stocks with no real purpose. Thanks luutzu!
I am gonna rethink (re-ignite) things over for a few days. A plan for each of my stocks.

 

[luutzu]

Fundamentally yes. And maybe I should do it on a larger scale. I tend to just buy and hold in total, or sell in total. My thinking nowadays to just buy and let it grow. It was more fun back then even though on a much smaller scale.

Cripes it is dawning on me that I don't currently have a strategy except for a few stocks. I am just simply holding most of my stocks with no real purpose. Thanks luutzu!
I am gonna rethink (re-ignite) things over for a few days. A plan for each of my stocks.

Wait, was the last paragraph sarcasm? Not sure I deserve it... I mean I sometime do but yea

I was simply saying that stock investing is owning a share in an income generating business. Be that income paid out as dividend or kept back, still the same thing. So there's no strategy or purpose beside looking for companies that can, over time, does that and not go broke.

 

[jbocker]

Wait, was the last paragraph sarcasm? Not sure I deserve it... I mean I sometime do but yea

I was simply saying that stock investing is owning a share in an income generating business. Be that income paid out as dividend or kept back, still the same thing. So there's no strategy or purpose beside looking for companies that can, over time, does that and not go broke.

No sarcasm.
I have my fair quota of speculative shares, very often die, but in hope that one or two make it through to a thriving business. Good innovation (leadership) and Good business (management) are very often NOT found together.

 

[PZ99]

I like your thinking @jbocker , deriving an income from what is effectively freehold stocks.

If they disappear off the planet, well so be it but you've mitigated your cost of living prior to that.

Something nice to hand down to the kids or charity... just remember to tell them it was all blood sweat and tears and not strategic trading though

 

[jbocker]

I like your thinking @jbocker , deriving an income from what is effectively freehold stocks.

If they disappear off the planet, well so be it but you've mitigated your cost of living prior to that.

Something nice to hand down to the kids or charity... just remember to tell them it was all blood sweat and tears and not strategic trading though

Thanks PZ99.
Yes it is good to watch the freehold shares, they can do what ever they like with no financial risk to you.
I love it when ultimately a collective of shares has cost you nothing keeps giving something perpetually.

I do tell the kids and any other young ones who dare ask.
My main advice is the 10% rule. And make a clone.
The first $10 in every $100 is (yours), use that to make a financial clone. The other 90% do what you like, pay bills, live off it, pass it up against a wall if you wish. The first 10% is your clones FULL STOP.
My clone is holder of the freehold shares in my case.
I will elaborate some more shortly. Gotta get brekkie and take grandies to school.

 

[tech/a]

Actually you are making a common "Gamblers" error.

You are at risk of substantial loss.
Here is why.

You take out the original stake and let the profit run in the form of shares.

THIS IS YOUR MONEY

You could have removed it totally from the market at the time you
took the original stake.
So if you have $10K in the market original stake free your playing with YOUR MONEY
Its not someone else's its yours its not free money just ask anyone who owns a business
profit is NOT free money.

No different to playing a pokie with $50 winning $100 taking out your original $50
and playing with what many think is "Their Money"---its not theirs its yours you won it!

 

[jbocker]

Actually you are making a common "Gamblers" error.

You are at risk of substantial loss.
Here is why.

You take out the original stake and let the profit run in the form of shares.

THIS IS YOUR MONEY

You could have removed it totally from the market at the time you
took the original stake.
So if you have $10K in the market original stake free your playing with YOUR MONEY
Its not someone else's its yours its not free money just ask anyone who owns a business
profit is NOT free money.

No different to playing a pokie with $50 winning $100 taking out your original $50
and playing with what many think is "Their Money"---its not theirs its yours you won it!

Absolutely agree. If you earned it then its yours. Quire simply put though, all investing is a gamble of sorts. Even if you kept it in a shoe box under the bed, you are gambling against not being burgled, I don't know a more appropriate term for 'free' money. Let me think on it or is their a better term.

 

[tech/a]

Its a "Perceived" form of risk mitigation.
Which is infact no more successful than
no mitigation at all. You just let it run!

Free money is a Misnomer I'm afraid.

 

[jbocker]

Hello Tech/a where did I use the term 'free money'? I was looking for the context as to why I mentioned it, but I cant see it.

 

[tech/a]

Earnings from nothing my apologies
Let me re phrase all of the above.

Where free money is mentioned replace with "Money from nothing."

 

[jbocker]

Yes it is a brig stretch to call it 'from nothing'. What I mean is the original money has been recovered and the 'nothing' is actually profit (still your earned money), but to call it that would make the subject title less captivating
Tech/a your point is still VERY valid. If anyone else is reading an implied 'free money'. There is no such thing. As much as there is no 'free lunch'.

 

[tech/a]

Capital gain is free. ( Shares ,Property, Artwork, Some Vintage Cars---etc )
You do nothing for it.

But

Once you have it it is yours and
if it erodes from a point it has a cost
to you as it has become yours.

There lies the subtle difference.
We all know what you meant

 

[jbocker]

Continuing the game I had with the kids. The financial clone I mentioned earlier is that whom you pay your first 10% earnings.
I use a 'clone' to appeal to a bizarre concept of having a replica of yourself working for you alone.
The clones job is to look after that money and to make it grow.
It will not spend any of the money without the express purpose of making more money. Ie It can only reinvest. It will add those earnings to the clone account. eg a bank account in your name.
The ultimate purpose of the clone?
You make an agreement with the clone that at some time pay the clone will you an ongoing wage very likely greater than you can earn yourself in a job. From then on the clone now pays you.
The clone of course is totally imaginary never needs its own money food clothes housing or entertainment ie the clone costs you nothing.

Of course a lot "what if" of questions come about. Which is the perfect result because we spend time discussing them.
"No those new shoes are not an investment, even if you are wearing them for a new job promotion."
The clone is the role YOU step into when it comes time to make an investment decision. You have YOUR pre determined list of rules that the clone abides by. My clone I called Dysiplyn.
It was a fun way to talk of investment with the kids.

 

[tech/a]

Good Debt
Bad Debt.

When can bad debt be good debt?-Can it?

 

[jbocker]

Good Debt
Bad Debt.

When can bad debt be good debt?-Can it?

Good question for discussion.
Debt is debt. Treat it with respect always and needs consideration with risks and consequences.
In investing It is bad if you cannot cover it and the asset value is not growing. Its tolerable if you can cover it meanwhile the debt is still being used as effective leverage.
Good debt may be difficult to define. Some could call it good, if it is used to give you something essential, like a home, some will call that same debt bad. It may good if not too excessive and it allows essentials in business, which are required for growth and sustainability of the business.

 

[Skate]

Good question for discussion.
Debt is debt. Treat it with respect always and needs consideration with risks and consequences.
In investing It is bad if you cannot cover it and the asset value is not growing. Its tolerable if you can cover it meanwhile the debt is still being used as effective leverage.
Good debt may be difficult to define. Some could call it good, if it is used to give you something essential, like a home, some will call that same debt bad. It may good if not too excessive and it allows essentials in business, which are required for growth and sustainability of the business.

Hi @jbocker

My Understanding..

Good Debt is used to purchase an appreciating asset.
Bad Debt is used to purchase a depreciating asset.

Skate.

 

[jbocker]

Hi @jbocker

My Understanding..

Good Debt is used to purchase an appreciating asset.
Bad Debt is used to purchase a depreciating asset.

Skate.

That is a beautiful summary to end the debt discussion on.
If the kids went away with that I was really happy.

 

[luutzu]

Good question for discussion.
Debt is debt. Treat it with respect always and needs consideration with risks and consequences.
In investing It is bad if you cannot cover it and the asset value is not growing. Its tolerable if you can cover it meanwhile the debt is still being used as effective leverage.
Good debt may be difficult to define. Some could call it good, if it is used to give you something essential, like a home, some will call that same debt bad. It may good if not too excessive and it allows essentials in business, which are required for growth and sustainability of the business.

My take, if I could have it, would be that... good debt are free money. Failing that, debt is good when what it purchased/enabled more than pay for the interest charges.

Beyond that it's just risky leverage. Leverage is not necessarily a bad thing, just that it's risky. Too much risk and one wrong move will break everything.