Dollar-Cost Averaging

In the world of investing there’s what I like to call the big 3, in regards to investment strategy. There’s the “Buffet Rule” better know widely as “Value Investing”; which focuses on the company’s fundamental rather than the stock price. There’s growth & technical investing, these strategies involves technician analysis in addition to growth companies with the highest upside. And lastingly, Day and Short-term trading, which is exactly what it sounds, a trade that is as short as 24hrs. But there is another strategy that isn’t as widely used as the other three but has been gaining traction over the past decade or so, Dollar-Cost Averaging.

Essentially, you invest a fixed sum of money into Mutual Funds, ETFs or individual shares on a regular(weekly or monthly) basis regardless of where the market stands. Dollar-cost averaging can be emotionally difficult at times(especially for investing novices) if you don’t know what to expect. By investing on a regular basis, you will also be investing during bear marketing and corrections. Which means you could reach a phrase where you’re buying even when fund or individual is have consecutive bad weeks or months. But the overall risk outweigh short term pain you might experience.

By putting in a fixed amount weekly, bi-weekly, or monthly, you are buying more shares when the prices are low and fewer shares when the prices are high. Though this is a investing strategy itself I believe it requires a sub-strategy within its implementation. This strategy should not be used against highly volatile companies that have high swings in stock prices, that would cause you to go from being able to buy 10 shares one week but only 1 shares the next. This strategy is best used for fundamentally sound companies, preferable those that buy an attractive dividend.

Mutual funds and ETFs are so vastly diversified that they are less prone to market volatility so they are already structural forms to suit this strategy. And if you pick the correct one they will also pay a fund dividend. But the real back bone of this strategy is the compound interest mechanism at its core. This strategy seeks to have you invest a fixed amount monthly and then have you reinvest your dividends or ROI amassing more shares. Thereby multiplying your return 3, 4, 5, perhaps even 10X fold.

This strategy should sound familiar with our investment club members because we sorta of use a hybrid version of this strategy with our monthly contributions and survey votes. Though we might not buy all the same securities every month we have in our portfolio we buy at least one of those holding with each monthly contribution. This is a highly effectively strategy not widely yet practice but I think as people become more financial literacy will take on more visibility.

Jamaal W Vetose

President

Todd Capital Investment

Appreciation vs. Preservation Pt 9. Bond Diversification

Diversification is an important part to your investment portfolio just as important as the money you use to invest in the financial vehicle you amass. Stocks provide investors with a variety of options to choose from and bonds are no different. In this latest part of the series, we’re going to examine some of the various bonds types that you have to choose from.

There are a variety of bonds, ranging from government issued, to the more speculative and even foreign company and government bonds. They all fall under these five bond type categories:

  • U.S. Government Securities
  • Mortgage-Backed Securities
  • Municipal Bonds
  • Corporate Bonds
  • Junk Bonds
  • Each offers distinctive benefits for an investor but also has it own unique drawbacks as well. Some will fit best in your portfolio while others shouldn’t be trifled with at all. And since I covered Treasury, Municipal, and Corporate in part 8 of this series, I’ll focus on the junk and mortgage backed securities bonds to compliment that writing.
  • High Yield Bonds
  • These bonds are better know in the financial markets by their official name(High Yield Bonds) and their more recognizable name by investors is, junk bonds. These bonds can offer a higher rate of return or higher yield than most other bonds because their risk is much greater.
  • Junk bonds are bonds that don’t make the grade or pass the traditional smell test. They are issued by corporate companies either growing, struggling, restructuring, and most importantly considered at great risk to default on their bond issue, for whatever reason. These get issued when companies are merging and have debts to pay in completely said transactions.

    These high yield bonds include not only a risk of default by the company but also that their market value will decrease suddenly and drastically. This usually will occur because the company that issued these bonds are not as secured as the high-grade bonds. Sometimes a company that initially issued high yield bonds will improve and than those bonds will become low yielding one. So if you are daring and strategic the idea would be to buy some high yield bonds from a company initially that you feel that will become low yield and get out of the trade.

    Mortgage-Backed Securities

    Mortgaged-backed securities(MBS) can be a highly profitable, extremely complicated, and highly risky investment mechanism. Yes, these are the same bonds that nearly brought down the world financial system back in 2008, but this vehicle had been around long before than and had made a lot of people a lot of money.

    Financial institutions help create MBS by selling part of their residential mortgage portfolios to investors; investors basically buy a piece of a pool of mortgages. With the banks being the creators of these type of bonds to alleviate these bonds risk a hedge bet might be to buy the shares of banks either in ETFs or individuals to be defensive against the pull back of these bonds. But that’s a whole another blog post.

    There are several types of MBS available today for purchase. And of course in addition to the private offering by company, the government also has their hands in this as well. One of the most common pass-through Ginnie Mae, issues by the Government National Mortgage Association, an agency of the federal government. The benefits of all MBS is investors receive high interest payments, consisting of both principal and interest.

    In Conclusion

    The most important factor of bond investing is diversification, that is the key to success. You should hold just one type of bond you should invest in a variety to mitigate the over risk and maximize your potential profitability. Holding a range of maturities-a strategy commonly called laddering- helps your portfolio not to take too big of a hit when interest rate raise too high. Make sure your bond ladder correlates well with your overall financial plan. But if bonds make you uncomfortable stay out of them all together. Honestly if the rest of your income in relatively safe from the negative effects of inflation, you may not have to make risky bond choices to stay ahead anyway.

    Jamaal W Vetose

    President

    Todd Capital Investments

  • Manic Monday: Weekly Update

    Greetings Members, 

    Happy Manic Monday to you all. Hope this week fine you all week and I’m good spirit. We are in historic times this week as a federal government shutdown has become the longest in the country’s existence. Hundreds of thousands of federal are being deprived paychecks while still coming to work and millions more are at risk of losing federal government assistance programs in a game of politics one upmanship. I hope none of you are suffering as a result of these perilous times but if you are we collectively as a group hope this standoff ends soon for the sake of human decency. 
    Club Update
    On this past Friday, Charles and I, took the first initial steps to put some of the investment club’s capital back in the financial markets. But being a subscriber to Jim Cramer school of slowly build your full target position it was only a portion of the entirety of the funds. We invested $10,000 into the six stocks voted on back in November covering five sectors of the economy. This strategy will continue over the coming weeks in a effort to not only maximize how many shares we amass but to alleviate some of the risk with the current volatility. 
    In addition, we will also be adding to the $50,000 total we currently have by getting back to our monthly contribution schedule. For those new to the group, our monthly contribution schedule and deadline coincides with our monthly call, in an effort to make everything more streamline. Our contributions tiers vary from $25-$100 monthly. And the contribution are made to our Voleo platform account. 
    I have also been receiving your messages in slack as well as your email in reference to need slack links and invites to Voleo. I have sent the link to several of you with varying success. Please let me know if you still need the various links so we can get everybody involved as quickly as possible. 
    I also wanted to remind you all that we are having our monthly call tomorrow (Jan 15, 2019 7:00 PM Pacific Time).  On that call we will briefly touch on the stocks and real estate and then open up up for questions.  We will also explain how the club works since a lot of people are new and aren’t up to speed on how we operate. Link to meeting: https://zoom.us/j/655241894

    In Conclusion

    Information from this weekly email is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for analysis  purposes only. Be sure to understand all risks involved with each strategy, before attempting to place any trade.Per usual hope you all have a great and prosperous week and an even better investment week. Will talk to you soon!! 


    Jamaal W Vetose 

    President 
    Todd Capital Investments 

    Appreciation v Preservation Pt: Different Government & Corporate Bonds

    This is the fourth part of our introductory series in Appreciation against Preservation. And we are nearly done all of our info on the bonds side. Today will focus on the various bond issue or create by corporate and governmental bonds. Bonds come in many different varieties, and here we will cover just the most common types.

    Governmental Bonds

    These types of bonds can be issued by national and federal governments as well as local city and state government agencies. At the federal or national level, these types of bonds are know as “sovereign” debt, and as backed by said nations ability to tax its citizenship and/or print its own currency. In the U.S bonds are classified according to the maturity timeframe set. Bonds maturing in a year or less are generally referred to as “Bills”; one to ten year old maturity dates are referred to as “Notes” and are only actually called “Bonds” if they mature after a ten year target date.

    All debt issued by the U.S. government is regarded as extremely safe, often referred to as “risk-free” securities, as is the debt of many stable countries. The debt of developing countries, on the other hand, does usually carry substantial risk.Credit ratings agencies also rate a country’s risk to repay debt in a similar way that they issue ratings on corporate bond issuers. Countries with greater default risk must issue bonds at higher interest rates – which essentially increases their cost of borrowing.

    Municipal bonds also known as “munis” are bonds issued by state or local governments or by government agencies. These bonds are typically riskier than national government bonds; cities don’t go bankrupt that often, but it can happens. For example, some years ago the city of Detroit declared bankruptcy and all bond holders loss BILLIONS of dollars. Back in the 1970 the city of New York City almost nearly declared bankruptcy as well. So thought municipal bonds are safer than Corporate bonds they are risker than federal issued bonds.

    Corporate Bonds

    The other major issuer of bonds are corporations, and corporate bonds make up a large portion of the overall bond market. Large corporations have a great deal of flexibility as to how much debt they can issue: the limit is generally whatever the market will bear. Short-term bonds from corporation are labeled as such if they are under five years. They are then labels intermediate if they go five to twelve years and long term if over twelve years. Corporate bonds are characterized by higher yields than government securities because there is a higher risk of a company defaulting than a government. The upside is that they can also be the most rewarding fixed-income investments because of the risk the investor must take on, where higher credit companies that are more likely to pay back their obligations will carry a relatively lower interest rate than riskier borrowers.

    In closing, bonds are both a preservation tool for capital appreciation already obtain then other investment vehicles. But if you choose the more risker bonds like “Munis” or the even risker corporate bonds you can also get some capital appreciation as well if you’re willing to take the risk. Whatever the case bonds should definitely be in your investment strategy. Stay tune for the next part of this series coming soon.

    Jamaal W Vetose

    President

    Todd Capital Investment

    Appreciation Vs Preservation: Pt3. Bond Features & Risk

    Welcome to the continuation of my introduction to stocks and bonds, appreciation versus preservation in the broader market. This part will focus on the features of bonds and the risk.

    Bond Features

    When you consider a bond for your portfolio, remember to analyze the key features;

    • Price
    • Stated Interest Rate
    • Current Yield
    • Maturity
    • Redemption features
    • Credit rating
    • Income tax Impact

    I will go into details later in another series about each of these features but these are the factors that you should be considering whether a bond fits into your portfolio and meshes your personal investment goals.

    Bond Risks

    As a general rule, bonds, particularly U.S. governmental bonds, are considered less risky than stocks and are therefore considered a more conservative investment. The most basic risk is that an issuer may default, meaning you will not get your money back. You can also lose money in bonds if you are forced to sell when the interest rates are high. These are the three most formidable bond risk:

    • Credit Risk
  • This is the risk of default by the company issuing the bond, resulting in the loss of your principal investment. This is why bonds are rated, just like people looking for credit.
    • Interest-Rate Risk
  • If you are holding a bond to maturity, interest-rate Risk is not a terribly significant, since you will not be affected by the interest rate change. However, if you are selling a bond, you need to concern yourself with this rate of interest that ties in the yield of the bond.
    • Income Risk
  • This is a double risk; first that should you sell, you won’t get the full value(or par) and second that inflation will surpasses the rate of income you are receiving from the bond(know as inflationary risk).
  • All of these factors and insight are helpful tools to use when you are considering amassing a bond stake in your investment portfolio. Always remember, that investing should research before purchase and logical assessment over emotional ties.
  • Jamaal W Vetose

    President

    Todd Capital Investments

    Manic Monday:Weekly

    Greetings Members

    Long time no hear from………. HAPPY NEW YEAR!!!! I hope you all had a safe and joyous holiday season with your family, closing 2018 with reflection and preparation. This is our very first Manic Monday correspondence of 2019 and I couldn’t be more EXCITED!!!! 2019 is set to be a compelling year on the stock market in terms of fed policy, market volatility, and IPOs of some of the most iconic names in tech. But I believe we are a group are in a great position for 10X greatness. So let’s get into!!!!
    Annual Fee

    As we discussed at the last meeting we have decided to charge $25 in fees/dues for the entire year that will help us cover things like software expenses, tax filing and regulatory expenses and also get you your Todd Capital T shirt (please send your size when you send the $25). 


    You can send that $25 to capitaltodd@gmail.com via zelle or to propertymanagement@capitaltodd.com via paypal. Deadline for payment is Jan. 31st



    Strategy Implementation

    The group has been out of the market since the completion of 3rd quarter of 2018, since that’s when we return our first profit taking to our members. And because of that addition we missed a lot of the volatility that followed in the 4th quarter. But we weren’t sitting unproductively we decided on a new investment strategy, thought we wisely decided to wait to see how the year would end. But now after discussing it with the operations team I believe the time is NOW!!

    Based off the results from the survey monkey poll done in November, will begin over the next 5-6 weeks to inch our way back into positions. With the volatility still present in the market I think it’s best to take our positions in $10,000 increments($2,000 in each position we agreed upon) in an effort to best gain an edge and most bang for our capital. Thought I don’t believe in trying to time the market I do believe in strategic slow position acquiring.  You will be informer on a weekly basis of investment progress.

    In addition, I believe we should get back to our monthly investment contribution as well. If you’ve been with us for a while now you know we have various tiers of monthly contributions. Whether you are a $100, $75, $50, or $25 monthly member, the position is to constantly have working capital for us to add to our existing positions once we have gotten our $50,000 back in the market. 

    As you all know we achieve a massive 47% ROI on our first investment cycle as a club. And I have ambitiously have set a goal of 60% this go around. And I feel like there is no reason if we are diligent our efforts that we can’t achieve this. We have set a great path thus far in terms of group-economics and I believe we are on more great things.

    Communication 

    In addition to these weekly emails I would also like all of our members to be more active in our slack groups. This group is not merely a passive experience but a think tank to share ideas and gain other perspectives. Please use the slack links below: 

    Investment Club for Stocks: https://join.slack.com/t/tcinvestmentclub/shared_invite/enQtNTE2MjUxNzY5NzYyLWZjMGI0MzA2MTA4Y2IyMGM1NzU2NjBkZTlhNGY4YmY2ZmZmNGQ1ZmE4YTIwZWVkN2VhNTczMjk0MmRmNzY0YTI


    Investment Club for Real Estate: https://join.slack.com/t/todd-acquisitions/shared_invite/enQtNTE0MjQwNzc4Mjk0LTQzMWMyOTkxMGE5YzAwZWQ4OTk4OTA4ZDRmMGEzNjk0NjBmN2IyODZlMTMwZmE0ZjBkODRjNDdlZGVjNzYyOTg


    This is just the chat thread so you can stay abreast of what is going on.  You wont be actual RE Club members until you partner on a deal IF you decide to partner on a deal.



    In Closing

    Information from this weekly email is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for analysis  purposes only. Be sure to understand all risks involved with each strategy, before attempting to place any trade.

    Per usual hope you all have a great and prosperous week and an even better investment week. Will talk to you soon!! 



    Jamaal W Vetose 

    President
    Todd Capital Investment

    Appreciation vs Preservation Pt.2: Bonds

    As promised this is the continuation of my introducing you all to Appreciation(Stocks) and Preservation(Bonds). This blog will be completely about the Bonds. But in addition the next several parts will also feature Bonds and how they operate. The Bond market is so complex I didn’t want to do a disservice by cramming all the info in one long blog. Thus, I will be breaking it up in several manageable parts.

    Bonds are part of a completely different asset class than Stocks. Like the stock market, the bond market is heavily influenced by global economic and political trends-but to a much higher degree. In fact, the world bond market is considerably larger and more influential than the stock market, and much of the world economy depend on the international bond trading.

    Bonds are marketable securities that represent a loan to a company, a municipality, the federal government, or a foreign government with the expectation that loan will be paid back at a set date in the future, better know as “Bond Maturity Date”. Bonds also come with an interest component, which can involve periodic payments over the life of the bond or single payments at maturity. Bonds can be bought directly as new from the entity mentioned before or from bond traders, brokers, or dealers on a secondary market.

  • Bonds are sold in discrete increments( typical multiples of $1,000) known as their par value or face value. Bonds maturities and interest rates vary:
    • Short-term bonds mature in five years
      Intermediate generally mature 7-10years
      Long-term bonds usually 20-30years

    The longer the maturity rate the higher the interest rates usually averaging about 6% over the last 20 years than shorter term ones. Bonds value often move in the opposite direction of the stock market, bonds can help you diversify your portfolio, hence reducing risk or market downturns. Also as stated before bonds are no substitute for stocks but they are a nice complement. Especially because they can provide a steady interest income.

    Jamaal W Vetose

    President

    Todd Capital Investment

    Appreciation vs. Preservation Pt. 1

    My commitment for the club in 2019 is to be more informative and less passive. To be a teacher of investing not just a dispenser of statistics and investing information. We just closed what in my opinion is one of the most volatile stock market years in my lifetime. There are dozens of theories about where the market is headed, Bear or Bull market, but I thought I topic on how you can position your investing strategy between the two major points: Appreciation Vs Preservation.

    Key Players

    Stocks and Bonds. These financial instruments serve the same core purpose to investors, TO MAKE YOU MONEY. But their methods and functions go about that business in two very different ways. Stocks are the instruments of capital appreciation. In the history of financial markets, nothing has shown a better track record of giving you a return on your money than the stock market and its equity securities.

    Stock as we all know are ownership of an entity or company in exchange for operating capital. In exchange for this capital, said entity offers you a variety of benefits: voting shares(depending on class), dividends (not always guaranteed), and hopefully an increase in stock price to give you a profitable ROI(return on investment)

    Bonds are a completely different instrument of the financial markets. Their key element isn’t a massive increase of your capital investment but rather the preservation of profits and gains you have amassed before coming to this financial instrument. Bonds are more like loans made to companies or government municipalities in exchange for a fixed income. What do I mean by fixed income? Unlike its stock cousins, a bond has an end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments that will be made by the borrower. 

    Current Environment

    Under 50

    If you are at least 15 years from the retirement you should always be in a CAPITAL APPRECIATION strategy. Even when the market seems to be imploding, never abandon the market to hide money under your mattress. Over the long haul any losses you may endure in the short run history shows can be recouped in the market over the long term. Losses are only permanent if you cash out of your positions when you’re in the red, allow the market to recover so that you at the very least can get back to even. This is only effective if you have years and years life to run. Let’s call this a young person game.

    Over 55

    The closer you are to retirement the less risk inclined you should be with money you will need for the retirement you plan to live. The construct of bonds allows for modest return on money you’ve already amassed so that you can live off the quarterly income comfortably without having to worry about your financial state. Let’s call this the old person settlement.

    Up Next

    On part two do these financial instruments introductions, I’m going to focus solely on the complexities of the instruments of bonds and how they best serve your financial strategy. STAY TUNED!

    Jamaal W Vetose

    President

    Todd Capital Investments