The longer I invest the more I learn and grow as an investor. Learning comes in many forms for me. Some is from reading articles and books. Some is from watching videos. Some is from making mistakes. A little bit of each went into the decision to make some changes in my investing strategy. Let’s check out the details of the changes I am making!
Recently, 100 shares of Plain All American Pipeline (PAA) were called away due to a covered call that expired in the money. This was planned on my part. This position was a short term hold used for options trading. The proceeds from this transaction were used to increase my position to 100 shares in another pipeline stock, Enterprise Products Partners (EPD). I have more conviction in this stock and will now be able to sell covered calls against this position. The remaining couple of shares that I have in PAA will be liquidated and reinvested elsewhere.
I also had 100 shares of iShares Core Dividend Growth ETF (DGRO) called away due to a covered call that expired in the money. This was not planned. I had planned to hold this position long term. When it became clear that it was going to too expensive to roll this option I began to rethink why I held this position. DGRO is a great ETF, but upon further reflection it did not fit well into my portfolio. The top two positions in this ETF are Apple (AAPL) and Microsoft (MSFT). Microsoft is my biggest single stock position and makes up close to 6% of my entire portfolio. I also have significant exposure to Apple and Microsoft thru my position in the Fidelity MCSI Information Technology ETF (FTEC). So upon further review, I decided to not replace the shares of DGRO. About half of the proceeds from this transaction were used to increase my position in Schwab U.S. Dividend Equity ETF (SCHD). The rest of the proceeds will be used to sell cash secured puts. I still have a couple shares of DGRO which I will liquidate after the ex-dividend date which should be coming up here shortly.
Based upon what happened with the options trades mentioned above, I am making some changes to options trading strategy. In the past I have sold puts on stocks that I have no intention of holding long term such as PAA. This was done mainly to get better premium. Now, I plan to only sell puts on stocks that I would be willing to handle long term. As far as covered calls, I plan to be more conservative with the selection of the strike price in order to try to avoid getting stocks called away. This change in strategy will take some time to fully implement due to the fact that I currently have some open positions.
Another move I made was to sell out of my position in DT Midstream Inc. (DTM). This company was spun off from another one of holdings DTE Energy Co. (DTE). DTM may turn out to be a great company, but at this time I want to decrease the number of holdings I have in my portfolio. Since it is “new” company, I would need to monitor it closely to watch how it performs. The position was small at only 10 shares. To be honest, I did not want to invest the time it would take to monitor it because it is such a small position. The proceeds from this transaction were reinvested into another one of my holdings, Enbridge Inc. (ENB).
In the Traditional IRA, I now have my SCHD position built up to scale at over 7.5% of my total portfolio. My main focus now will be to build up my position in the Vanguard Total Stock Market ETF (VTI). I would like to eventually build up this position to the second largest position in my portfolio. I will also be looking to decrease the number of positions in this account over time. As for the positions in the account that I will be holding long term, I will occasionally add to these positions based on the fair value of the stock. I will add to the stocks that I feel are undervalued. This account is funded through dividends, options premium and selling stocks. Most, but not all, of the dividends are reinvested into the underlying positions through DRIP. I do not contribute to this account. It may take awhile to build up the VTI position because of the minimal amount of funds available in this account. These changes were made because this account has been underperforming the S&P 500 Index.
In the Roth IRA, I recently add a new position, Pro Shares Ultra Pro QQQ ETF (TQQQ). This is a triple leveraged ETF which can be very volatile and comes with elevated risk. This will be a small position that I will be testing out over the next few months. With this addition, I am comfortable with the holdings in this account. The account has been slightly outperforming the S&P 500 Index. The plan going forward will be to invest 20% of my monthly contribution into J.P. Morgan Equity Premium Income ETF (JEPI), 20% into Nationwide Risk Managed Income ETF (NUSI), 10% into Vanguard Growth ETF (VUG), 5% into Amplify CWP Enhanced Dividend Income ETF (DIVO), 5% into Invesco NASDAQ Next Generation 100 ETF (QQQJ), 5% into SCHD and the remaining 35% will be invested based the fair value of the remaining positions. I am focusing on building up the income this account produces but also want to have some growth in this account.
In the 401k I made some adjustments to my future contributions because the account was severely underperforming the S&P 500 Index. Going forward 75% will be invested into the Vanguard Total Stock Market Index Fund, 10% into Vanguard Total International Stock Market Index Fund, 10% into Vanguard Total Bond Market Index Fund, 3% into DFA Global Real Securities Portfolio and 2% into DFA Commodity Strategy Portfolio. I will not be rebalancing this account so the old positions will remain.
In the taxable account I have not made any changes yet. I will take some time re-evaluating each position. I will likely eliminate several positions in this account in order to make it more manageable. Because this account is geared toward growth and has many speculative positions it will be a little more difficult to evaluate the positions.
The changes that I made should help my accounts perform a little better. I think it is important to look over your accounts from time to time to make sure each of your positions still fit your plan. I am still relatively new to investing. I research my individual positions to make sure the companies are good investments. DGRO is a good investment as an individual investment but having my shares of called away because I was too aggressive in choosing a strike price made me think about my portfolio as a whole. As I continue to learn more and grow as an investor I will continue to re-evaluate my investing strategy to make sure it fits my current needs.
*Disclaimer – I am not a financial professional. The information shared here should not be considered financial advice. I am just a factory worker sharing my experience as I strive to achieve financial freedom. Before investing or making any financial decision do your own research and due diligence or consider seeking the advice of a financial and/or tax professional.
Here are some of the businesses that I use that I thought some of you might be interested in.
Lolli has a variety of stores that it is affiliated with and offers rewards for shopping at these stores. I use Lolli when I shop on Chewy and I get bitcoin as a reward. Who doesn’t want free bitcoin! If you are interested in Lolli and want to help support the blog here is my referral link: https://www.lolli.com/share/XP7gxDgqC4
I use M1 Finance for my taxable growth account. M1 Finance offers promotions for signing up. At the time of writing this post, the promotion is for $30. These promotions vary from time to time but is usually a $10 bonus. If you are interested in M1 Finance and want to support the blog here is my referral link: https://m1.finance/ktIiFeOI5zDr
Varo Bank is one of the banks that I use. From time to time the bank will run promotions. Currently, you can earn up to 3% on your savings with Varo, if you meet certain requirements. If you are interested in checking it out, here is my referral link: https://bank.varomoney.com/signup?r=William360
I use the free version on trackyourdividends.com. This is a quick an easy way for me to track my estimated annual income from dividends.
If you use the referral links listed above I could receive compensation. Please take the time to read the terms and conditions before signing up.
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