Over this last weekend I did a lot of soul searching and trying to see if the way I was buying stocks was really working for me. Currently I own 58 stocks. That’s a lot and the problem is, some of them were a little bit pricy and I just didn’t want to spend a whole lot at that time. There are many stocks that I only own 1 or 2 shares of. I guess I was thinking that a little bit of a stock is better than none. \
I have been reviewing my 58 stocks to see if there are reasons that I have so many. Most of the stocks I own are because I was hoping to hedge my bet. I was hoping that if one stock went down another would go up, keeping me balanced. The problem with being balanced is that growth is pretty darn slow! Let’s face it, if half of your stocks go down and the other half go up, you basically had a net zero change. It’s kind of like running on a treadmill. You are expending energy, but you are not getting down the road!
I have not been terribly excited about selling my stocks once I buy them. I have held on to some losing stocks way longer than I should have. FMC is probably the biggest example of that. I bought 4 shares at 61.00 each and it has been as low as 11.00. I held onto it because the dividend was still pretty good, but they recently dropped the dividend rate and to be honest, that convinces me that it is not worth it. It has started to climb back up but it’s slow going.
I had been looking at it as it only costing me 55 dollars to hold onto it. That was all I had left of the 253 dollars that I had invested. Because it was starting to come up slowly, I had thought maybe I should buy a bunch to reduce my cost basis to the stock didn’t have to work so hard to get up to 61 dollars, only having to get up to 45 or so. The bad news is that I learned that many of their products are coming off of patent protection, so it’s likely that they will find it harder to keep a strong business growth. So maybe the time has come and just accept that I lost the 182 dollars, and move on, using that leftover 62 dollars in a better way.
It’s hard to make the move though. I bought the stock because they are in agriculture and my father was in agriculture, so I bought it as a nod to my dad. That’s a little tough to let go of. But many of my purchases were really done for something personal. But it’s now time to readjust my portfolio to work a little better for me.
One thing I have noticed that having 1 or 2 shares of a stock doesn’t pay much in dividends even if it’s a high dividend payer. Some companies pay 5 or 6 dollars per year per share but having one share of it just doesn’t do much. Those stocks are usually over 140.00 per share at least so at 5 dollars a year, (I’m thinking of Chevron) it would take 28 years to buy another share. On the other hand, if you owned 30 shares it would only take one year to buy another stock. The problem is that you have to spend 4200 dollars to buy 30 shares, which makes me wonder if that’s worth it.
One of the things that opened my eyes to this is NWL which has products like Sharpie, Mr. Coffee, Oster and others. I use a bunch of those, so I bought it, but I got it when it was priced at $3.25 per share. I ended up with 30 shares. It’s been 3 months and I already own 1 more share purchased from re-investment. I realized that owning more of a single stock is going to make compounding work much faster.
I guess it makes sense, because if a stock goes up by 1 dollar and you have one share, you made 1 dollar. If you have 30 shares and the stock goes up by 1 dollar, you made 30 dollars! That is whether it’s a dividend stock or not. Of course, if the stock goes down by 1 dollar, you lose 1 dollar if you only have one, but you lose 30 dollars if you own 30. Also, buying 30 shares costs you more to get in the first place.
But I remember hearing someone say that not diversifying for balance will make you more money, but you have to pick the right stock! How often does that happen? That’s why people suggest doing diversification, but I think you have to balance the safety with the bigger gains. With this in mind, I am going to rebalance my portfolio. I have also been having difficulty keeping up with so many stocks and worse than that, I want to buy more! (good grief!)
I’ve been reviewing my scheme while the weekend has kept the market closed. I won’t move immediately on Monday because there is so much bouncing around in pricing in the first morning back. I’m hoping I make the right choices!
