Are you getting the most possible out of your stock portfolio?
If you can’t answer that question with a 100% confident yes, you need to check out these 5 ways to get more income from your stock portfolio.
- Buy low: This tip can sound obvious, but in my opinion, it’s crucial to at least pull up a stock chart to see if you’re buying at a low level or a high level. There most certainly is a difference. Think of stocks like tickets to a football game. If you originally want to attend the game and you feel $200 per ticket is a tad steep, if the exact same tickets become 50% cheaper, it’s a good buy. The key here though is looking. Make sure to pull up the chart and look to determine if you’re buying at a support or resistance. Below is a quick chart on MCD. Post a comment below and let me know if it’s at a support level (buying zone) or resistance level (selling zone).
- Make sure to have some volatile stocks in your portfolio: When trading, you do want something with some meat on the bones. Stocks like JNJ, PG and GE are often investor staples. But tech stocks like FB, NFLX, and AAPL can be great additions too. Look for stocks and companies that you’re quite familiar with, you know how they generate revenue and they have a beta higher than 1. This means they are generally more volatile than the general market.
- Own stocks that pay dividends: This is investing 101. If you buy a company for the long term (I personally define long term as anything longer than 6 months, but most consider a 3-5 year time frame to be long term), see if it has dividends. This ‘free money’ is a way to capture additional gains and growth even if the stock doesn’t move very much.
- Implement covered calls: The most electrifying part of owning stocks. I love covered calls. It really is my favorite strategy. You do have to own at least 100 shares of an optionable stock, but as the stock is just trading sideways and bouncing around, selling covered calls at a level where you do not mind selling the shares can be a great way to a) reduce your dollar cost average and b) lock in gains when the trade is profitable. After all, that’s the objective of your stock portfolio right? Using the chart above, if you had bought MCD in November of 2012, you likely could have sold over 30 covered calls before being exercised for a profit, all the while reaping dividends too!
- Understand protective puts: Learning about options is a great way to leverage additional gains in a portfolio. When a stock is going down (especially one you really do want to own for years) instead of ‘stopping out and realizing a loss,’ one could buy a put option. If the stock goes down, the put option will go up! Then, before expiration of the put option is profitable, the investor could simply sell to close the protective put for gain and use those gains to buy more shares. Put options are literally designed as insurance for stock positions and can be a great tool to buy over a questionable earnings outlook, an uncertain news event, or a bearish move.
If you have any questions regarding these strategies, feel free to shoot me an email at jerremy@reallifetrading.com. I hope this helps, and until next time, remember – love life, live life, and trade it!
