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Our 10-Stock Dividend Income Portfolio and Tips for Your Own! | Stock Market for Beginners - YouTube
Channel: Let's Talk Money! with Joseph Hogue, CFA
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Our dividend income portfolio is almost double
the market return so far, a 16% return with
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just one month in.
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One stock is up 47% and I鈥檓 adding another
investment that could go even higher.
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In this video, I鈥檒l review the portfolio
and reveal a critical piece in your investing
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strategy.
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We鈥檙e talking dividend investing today on
Let鈥檚 Talk Money.
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Beat debt.
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Make money.
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Make your money work for you.
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Creating the financial future you deserve.
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Let's talk money.
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Joseph Hogue with the Let鈥檚 Talk Money channel
here on YouTube.
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I want to send a special shout out to everyone
in the community, thank you for taking a little
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of your time to be here today.
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If you鈥檙e not part of the community yet,
just click that little red subscribe button.
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It鈥檚 free and you鈥檒l never miss an episode.
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I started the 2019 Grow Your Dough challenge
just last month and our portfolio of dividend
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stocks is already exploding higher.
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I鈥檒l update you on the portfolio including
two stocks I took gains on as well as a favorite
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new name I鈥檓 adding.
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More importantly though, I鈥檓 also going
to talk about a crucial piece of your investing
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strategy.
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Selling is always a tricky subject for long-term
investors.
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You have to be careful not to sell your winners
and hold on to your losers but the rebalancing
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rules I鈥檒l show you are going to be critical
to producing those returns that will beat
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your goals.
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This is something we talked about last week
in a video on the five reasons professional
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investors use to sell stocks and it鈥檚 something
that most investors get wrong so make sure
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you stick around after the portfolio review
for those rules.
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I鈥檓 putting this video into our 2019 Stock
Market Challenge playlist so if you haven鈥檛
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seen the other two updates, check those out.
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Along with some of the biggest investing channels
here on YouTube, I created a $1,000 portfolio
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in January and will be tracking it all year.
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To track my portfolio of dividend stocks,
I鈥檓 investing $1000 on M1 Finance, a no-fee
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platform that lets you pick your stocks and
automatically invests any new deposits across
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your group.
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Unlike some of the other investing apps, M1
doesn鈥檛 charge a monthly management fee
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which is why I鈥檓 using it for no-cost investing.
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It also has retirement accounts available,
something Robinhood doesn鈥檛 have so that鈥檚
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important anytime you鈥檙e investing in high
yield stocks paying dividends.
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I don鈥檛 want to spend much time talking
about the challenge because I really want
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to get to those massive returns in our dividend
income portfolio.
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Make sure you check out those first two videos
to see how I鈥檓 picking our dividend stocks
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and the first ten names in the portfolio.
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Here鈥檚 the portfolio as of last Friday with
a 15.8% return on some really blowout numbers
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on some of the picks.
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We鈥檒l go over each of the 10 dividend income
stocks in the portfolio, one with a 46% return
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already, as well as a new dividend stock I鈥檓
adding.
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For the year so far, our dividend portfolio
is just under twice the return of the broader
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market shown here with the S&P 500 and is
more than twice the return on the Vanguard
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Dividend Appreciation fund.
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But let鈥檚 look at those individual stocks
in the portfolio because some of these have
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just boomed higher.
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Eight of the 10 dividend stocks are beating
that 7.9% return on the market with only the
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Alerian MLP, ticker AMLP, and the iShares
European Financials fund, ticker EUFN, lagging
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the market return.
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I still like these two dividend funds though.
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First because they鈥檙e giving me broad diversification
in high-yielding energy assets with those
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master-limited partnerships and with those
international financials with the European
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fund.
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Also though, because I still think these are
great contrarian themes.
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Those MLPs own hard assets that pay a hot
8.2% dividend yield.
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Oil has been battered down to about $50 a
barrel but is finding support and I love the
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theme.
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For more about why I invest in these high-yield
companies, I鈥檒l leave a card up here in
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the corner of the video about why they鈥檙e
some of the highest-paying dividend stocks.
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The European financials fund is 30% off its
and nobody is expecting anything but chaos
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this year from the theme.
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I think that鈥檚 overblown and the fund pays
a 6% dividend yield with banks selling for
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bargain prices.
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Now let鈥檚 look at some of our winners and
I know half of you have already opened a new
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internet window to check out Hanesbrands and
Bank OZK.
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Hanesbrands blew away its fourth quarter earnings
last Wednesday for exactly the reasons I pointed
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out last month, strength in that activewear
category and the direct-to-consumer sales.
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Higher profitability direct sales were a bigger
chunk of the total and revenue from activewear
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beat estimates by seven percent.
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Now I did take some money off the table on
Hanesbrand.
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We鈥檒l talk more about how to decide when
to sell and rebalance after the review but
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specific to the company, there were a few
reasons.
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First is just that after almost a 50% jump,
the price was pretty close to my estimate
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of fair value.
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Fourth quarter numbers surprised Wall Street
but activewear has a contract with Target
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expiring early next year.
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I still think there鈥檚 some upside and I
don鈥檛 want to totally abandon the stock
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so I sold out of the profits and will use
it to buy into our new investment.
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I also took our profits out of Bank OZK.
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The bank also reported stellar earnings last
month and I still like the valuation but the
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dividend is now just 2.6% and I wanted to
use profits to buy into our new investment.
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To reiterate, I鈥檓 still in both of these
stocks for about the same amount as when we
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started last month.
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I just think the bulk of the upside is probably
out so I want to keep riding it higher while
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I limit the downside by booking those profits.
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Elsewhere in the portfolio, chemicals maker
Olin, ticker OLN, and China Life Insurance,
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ticker LFC, are both producing 16% returns.
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Again, if you haven鈥檛 watched that first
video on why I think this could be a once-in-a-generation
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opportunity for some of these Chinese stocks,
check that out.
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China Life issued a huge warning on profits
late last month and the stock is still up
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16% so that tells me the bottom is in on these
names.
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Our Vanguard real estate fund is doing well
at just over 12% and I love the REITs, not
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only on that four and a quarter dividend yield
but on the idea that Fed rate hikes might
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be on pause this year.
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REITs and that commercial real estate space
have struggled over the last couple of years
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on higher interest rates but this could be
the year they break higher.
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I want to get to that dividend stock we added
and how to know when to rebalance your portfolio
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so I鈥檓 going to update on these other stocks
in our March update.
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Make sure you click that subscribe button
so you track the portfolio each month because
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it looks like it鈥檚 going to be a market
buster this year.
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Now if you watched how I put the portfolio
together in our first two videos, you know
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I love the beaten down plays.
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It鈥檚 a dividend portfolio so I set a 3%
yield requirement but I love to go after those
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best of breed companies that investors have
abandoned.
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As we saw with Hanesbrands and Bank OZK, these
deep-value stocks offer huge upside returns
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along with the dividends.
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ConAgra Foods is a U.S. powerhouse in prepared
meals where it鈥檚 the second-largest in the
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industry.
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It has a 40% market share in canned tomatoes
and more than a fifth of the meat snacks market
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with Slim Jim.
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The company has some solid brands in that
relatively safer consumer staples sector so
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we鈥檙e talking dividends as well as protection
from the economy.
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Management fumbled big time with last year鈥檚
Pinnacle acquisition and had to lower the
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profit outlook by 20% late last year.
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The problems were centered around Pinnacle鈥檚
distribution business so a little harder to
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read but management has been very transparent
since December about its plans going forward.
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I think they鈥檙e being overly conservative
on estimates for a 5% sales decline and margin
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loss on the Pinnacle assets so the next surprise
could be on the upside when things come out
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better than expected.
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Shares of ConAgra pay a 3.9% dividend which
management has affirmed with its new 2019
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outlook and trade for just 9.9-times trailing
earnings, that鈥檚 a 41% discount to the price
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multiple where it was trading in November.
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Cash flow is still solid and management is
expecting $215 million in cost savings through
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2022 on the acquisition.
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The average analyst price target is 50% higher
than the current price and even the lowest
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price target is 8% higher.
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Now I want to talk about why I sold off some
of our stocks because it鈥檚 a very important
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topic that most investors really don鈥檛 understand.
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Even for long-term, buy and hold investors,
you have to follow your stocks.
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If you鈥檙e not ready to spend a little time
watching for those five warning signs we talked
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about in that previous video, then you鈥檙e
better off just investing broadly in ETFs
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and don鈥檛 worry about stock picking.
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But it鈥檚 not a matter of holding or selling
all of your position and that鈥檚 what a lot
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of investors get wrong.
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They think it鈥檚 all or nothing, you either
love a stock and ride it higher or you sell
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out of the investment.
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You see here that I鈥檓 still holding Hanesbrands
and Bank OZK in the portfolio even though
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I sold the shares back down to our original
investment.
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This is called rebalancing and there are a
few reasons you want to do it.
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First is that no individual company should
be more than about 5% of your total wealth.
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The risk is just too high that something unforeseen
happens to the company and it could destroy
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your portfolio.
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I know it looks like these stocks are between
7% and 12% of the portfolio here but they鈥檙e
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actually a very small part of my overall wealth.
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Remember, I鈥檝e got investing accounts on
five different websites so these are just
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the percentages of these stocks on the M1
Platform.
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Nevertheless, that 5% rule is extremely important
and I鈥檝e seen lives destroyed over it.
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Everyone likes to talk about dollar-cost averaging
and buying more of an investment as the price
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falls.
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What can happen though is that you chase that
stock down, adding more and more just hoping
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that it rebounds a little and you get even.
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Pretty soon, you鈥檝e got 30% or 50% or more
of your money in this one company and it never
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gets back up.
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I鈥檝e seen it happen with friends investing
in coal companies around 2015 and in some
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tech names.
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You also might rebalance your stocks on valuation.
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Every time you buy an investment, you need
to have an estimate for what it鈥檚 worth.
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Now that can be based on some simple measures
like price-to-earnings or cash flow analysis,
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whatever it is, it鈥檚 what the fundamental
business measures say the company is worth.
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For example, while Wall Street analysts were
climbing over each other to downgrade Hanesbrands
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on the way down.
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My own analysis of the activewear segment
and direct sales told me the shares were worth
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at least $20 each and that was confirmed with
last week鈥檚 20% pop to almost $19 a share.
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I still think there鈥檚 some room for upside,
especially as everyone piles into the good
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news but I wanted to take some of my risk
off the table as we got closer to that fair
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value.
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One more reason for rebalancing stocks in
your portfolio is just to keep your money
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from being over-exposed to one particular
sector.
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This wasn鈥檛 so much the case with our dividend
portfolio but say your stocks of technology
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companies have been surging and adding up
the percentages you have in tech stocks is
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like 20% or more of your portfolio.
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Here again, just like having that 5% rule
on any individual stock, I think you should
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limit any particular sector to less than 15%
or 20% of your portfolio.
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This is also why I don鈥檛 recommend investing
in the market fund, for example the S&P 500
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ETF ticker SPY, which owns all the stocks
in the S&P 500.
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I know a lot of passive index investors love
the fund but if you look at what you鈥檙e
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getting, this fund is always 20% or more tech
stocks with almost half the fund in just three
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sectors of the economy.
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Like I talk about in our goals-based investing
course, you need to diversify across different
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sectors of the economy that are going to react
differently to inflation and growth.
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It takes a lot of the risk out of your money
and makes for a much better portfolio.
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That 15% return is a great start to our 2019
stock market challenge but I gotta tell you,
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some of these other YouTubers are giving me
a run for the money.
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What鈥檚 great about this year鈥檚 stock market
challenge is that we鈥檝e got 14 other YouTube
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channels participating, all taking a different
perspective on investing and tracking their
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portfolios for the year.
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I鈥檝e started a playlist with all the Grow
Your Dough channel videos that I鈥檒l link
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to in the video description below.
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You鈥檝e got some heavy-hitters like Wealth
Hacker Jeff Rose and Tela Holcomb investing
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in stocks.
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We鈥檝e also got fellow Marine David Pere
of Military to Millionaire He鈥檚 doing a
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flipping strategy that is intense so make
sure you check out that playlist and each
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of their channels.
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I鈥檓 linking directly below the video to
those first two videos detailing how I set
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up our dividend income portfolio and how you
can set up your own challenge.
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I鈥檒l also leave a link to M1 Finance, the
no-cost investment platform I鈥檓 using for
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the challenge that鈥檚 going to save you all
those fees whenever you rebalance.
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We鈥檙e here Mondays, Wednesdays and Fridays
with the best videos on beating debt, making
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more money and making your money work for
you.
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If you鈥檝e got a question about money, just
subscribe to the channel and ask it in the
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comments and we鈥檒l answer it in a video.
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