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Clearly, Not Everyone Is Getting Rich Off The Stock Market

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Well, the NY Fed was out today with its Quarterly Report on Household Debt and Credit for Q4 2017. Clearly, Americans are in a lot of debt. Take a look. Just a couple of quick hits from the report. Total U.S. household debt rose $193 billion in the 4th quarter, to a new all-time peak of $13.15 trillion. That's 17.9% above the most recent trough in Q2 2013. Broken down by segment, what do you suppose was the largest gain in percentage terms? Credit cards, with a 3.2% increase. In the picture above, the widening gap represented by the red arrows reflects the fact that non-housing debt is rising at a faster pace than housing debt. Here's what's troubling about that. Below is a picture of the stock market, as represented by the S&P 500 index, over that same period; from the most recent credit trough in Q2 2013 to the end of 2017. And thus, the title of this article. Over that period, the S&P 500 index rose by 75%; from roughly 1,600 to 2,800. Apparently, ho...
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T & VZ: Another Example Of Rebalancing Theory At Work

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Regular readers know that AT&T and Verizon represent two of the four individual-stock positions in my portfolio. Combined, my target weighting for these two stocks is 5% of my portfolio. These are significant income-generators for me. With dividend yields just a hair under 5% at today's prices, these two stocks contribute almost 10% of my total dividends in the portfolio.

Today, I own 5 shares more of each stock that I did at the beginning of the year. And those shares were virtually free, thanks to my process of disciplined rebalancing. Let me explain.

As of June 21, 2016, following sharp increases in price, AT&T & Verizon held weightings of 2.87% and 2.84%, respectively, in my portfolio. Combined, that represented a 5.71% weighting, or some 14.2% (in relative terms) over my target weight.

So, in disciplined fashion, I sold enough of each to bring their weightings back to approximately 2.50%. Here are the transactions:

  1. Sell 50 shares of T at $41.29. Total proceeds after commissions: $2,056.01.
  2. Sell 35 shares of VZ at $54.32. Total proceeds after commissions: $1,893.20.
Today, due to a rise in the overall market yet a simultaneous decline for these stocks, AT&T had dropped to a weighting of 2.32% and Verizon to 2.24%. In other words, combined, they were now about 10% below my target weights. So I bought. However, in each case, I bought 5 shares more than I sold. Here are these transactions:
  1. Buy 55 shares of T at $38,67. Total invested after commissions: $2,134.58.
  2. Buy 40 shares of VZ at $49.16. Total invested after commissions: $1,974.21.
In summary, while the price of AT&T is $38.67 a share and Verizon is $49.16 a share, my 10 additional shares effectively cost me a grand total, including commissions, of $159.58 or roughly $16 per share.

To reiterate, this all happened, not because of any particular brilliance on my part, but simply through a disciplined process of rebalancing. "Buy low, sell high."

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