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By: Justin Holden
- An in-depth view of my Roth IRA holdings with Charles Schwab
- Long time horizon (more than 30 years from retirement age)
- An explanation of investing strategy on this particular account
My first article in the series included an introduction to my investing philosophy and I listed securities held in my individual brokerage account with TD Ameritrade at the time. Since that point in time, I have fully fleshed out my Roth IRA account with Charles Schwab. I’ve found that my approach to investing in a retirement account is quite different from an individual brokerage account.
I purchase stocks and ETF’s with the intention to hold indefinitely and re-invest dividends. I have no exposure to bonds nor bond funds. I try not to buy anything that I can’t see myself holding to retirement age. I try to be fully invested in securities and not carry a significant cash balance on the account. I chose Charles Schwab because the commissions on buying individual stocks are relatively low ($4.95 per trade) and there’s a solid selection of commission-free ETF’s on Schwab’s select list. All ETF’s bought for my Roth IRA are from Schwab’s select list and therefore I pay no commissions on the trades. In addition, expense ratios on the ETF’s I invested in are quite low. This is all part of the plan. I don’t want my investments to be cannibalized by high expense ratios.
Analyzing the holdings in my Roth IRA up to this point, one might conclude that I focus too much on value and dividend growth when I should be focused more on picking a solid growth stock given my long time horizon. This is a valid criticism. However, I’d prefer to wait until a market crash scenario before researching a good growth stock to add to my Roth IRA. I simply don’t like paying above 20 P/E multiples for stocks. It just bugs me for some reason. Anyway, without further ado, here are my current Roth IRA holdings:
|Equities||Price (as of 10/24/18)||Cost Basis||% of account|
|VTR||$56.78 per share||$52.36 per share||12.53|
|BLK||$378.66 per share||$385.67 per share||12.19|
|KIM||$14.92 per share||$14.13 per share||11.94|
|TAP||$59.34 per share||$61.09 per share||10.96|
|PRU||$90.82 per share||$96.83 per share||10.82|
|ETF’s||Price (as of 10/24/18)||Cost Basis||% of account|
|MDYV||$48.08 per share||$52.18 per share||10.36|
|SCHF||$30.13 per share||$33.64 per share||10.35|
|SLYV||$59.75 per share||$66.67 per share||10.3|
|SCHD||$49.05 per share||$49.79 per share||10.17|
I view the ETF’s as a necessary part of this retirement account for the sake of diversifying my investments and to hedge against the risks associated with my own stock picking skills. The dividend reinvestment strategy on all securities will help to dollar cost average the account over time, and scoop up some shares on the cheap as we head towards a potential bear market.
Over time, I’d definitely like to continue diversifying my investments to the point where an individual stock makes up no more than 5% of the total account value. I can achieve this by adding more stocks to the Roth IRA portfolio, or by increasing my percentages in the ETF’s. I consider all ETF’s in this account to be low risk because they each have diversification among hundreds (or thousands in the case of SCHF) of securities. Furthermore, each ETF has relatively high assets under management and very low expense ratio. I can definitely sleep well at night with these ETF’s, without a doubt.
But I want to be invested in some individual stocks as well because that helps keep me engaged and also creates the potential of “alpha” returns by hitting a home run on an excellent stock. The decision to not include bonds nor bond funds is because A) I am less knowledgeable on them B) I have a long time horizon C) It is a well known fact that stocks outperform bonds over the long run.
This concludes the introduction to my Roth IRA. Please remember that earnings on Roth IRA accounts are tax-free, but cannot be withdrawn without penalty until you reach the requisite retirement age of 59 and a half. There is also a limit to how much money you can contribute to this type of account per tax year. For me, that limit is $5,500.
Disclosure: I am long BLK, VTR, KIM, TAP, PRU, MDYV, SCHF, SLYV, SCHD.
Additional disclosure: I am not a registered finance professional of any kind. Please do your own research and due diligence before making investment decisions. While I only mentioned abbreviated ticker symbols in the article, you can type those ticker symbols into Seeking Alpha or Yahoo Finance to get more information about the actual stocks and ETF’s that I am invested in.
By: Justin Holden
- This article covers my assets that are being held in an individual brokerage account through TD Ameritrade. I have a separate Roth IRA account through Charles Schwab as well.
- A brief background is provided on each company I have a long position in.
- I discuss my ever-evolving investing philosophy.
I first got interested in investing when I was a junior in high school. I took an honors economics class where they had us do a stock trading simulator competition. Even though my partner and I didn’t win the competition, I was fascinated by the project and learned some valuable lessons from that initial experience alone.
Once I got to college, I opened an individual brokerage account with Sogotrade and made my first investments in the stock market. Back then I had no idea what I was doing, and basically just bought stocks that were at 52 week lows hoping they would rebound for a profit. Needless to say, I got burned a few times by taking this approach. I closed my Sogotrade account once they changed management and were trying to get me to re-send my financial information through the mail. Overall, I lost a small amount of money on that account, but I learned more lessons about what not to do when investing in the market.
My approach to investing now centers heavily around value, fundamentals, and a preference for companies that control assets people either need or have a proven historical demand for (i.e. water, consumer staples, alcohol, cigarrettes, etc.). When I fully flesh out my Roth IRA, I expect a lot of those investments to revolve around companies that control fresh water resources. But today, I want to introduce my long positions in my individual brokerage account. I haven’t set any official rules for myself as far as what I will and won’t allow myself to do with this account. I’m viewing it as my “play money” at the moment. But having said that, I seem to be using it right now for practice in value investing.
China Mobile (CHL) is my most recent stock purchase. I’m going long on this company because it is China’s largest telecommunications company and highly profitable. I also believe it trades at a value and have no concerns over the balance sheet. I’m getting good foreign exposure through this company. The biggest risk seems to be the high Chinese government ownership within the company. You never know what foreign governments might do with the assets they own.
Crown Crafts (CRWS) is a US micro-cap stock that I purchased shares in roughly one year ago. This company focuses on manufacturing baby products. I invested in this company because of the strong balance sheet, reasonable valuation, and competent management team. I am currently underwater a bit on my investment here, but because the company has little to no debt on it’s balance sheet, I am not overly concerned and willing to wait things out.
Kimco Realty (KIM) was another recent purchase of mine. This company is classified as a REIT. The company owns real estate and leases their properties out to retailers in order to generate revenues. I invested in this company because of a low P/FFO ratio and an opportunity to make a contrarian play on the “retail-apocalypse” market overreaction. I am not expecting a quick turnaround here in terms of rising share price, but the company fundamentals are strong and I’m getting paid a solid dividend to wait.
Mind C.T.I. (MNDO) is a foreign micro-cap stock. The company is headquartered in Israel. Mind C.T.I. is part of the technology sector and trades at an attractive P/E ratio. Strong balance sheet with little to no long-term debt. I also invested in this company for a stable double-digit dividend yield. It has been a core holding in my brokerage account for a few years now.
Sturm Ruger (RGR) is a US small-cap stock. The company focuses on manufacturing firearms. I consider Sturm Ruger to be the most ill-timed purchase of all stocks currently held in my individual brokerage account. The current political climate has drastically reduced demand for guns when compared to the Barack Obama years. Still, there is potential upside in this name should any gun control measures be implemented in the future (because fear of gun control spikes demand for the company’s products). I’m getting paid to wait with a modest dividend and I don’t expect much further downside given that Sturm Ruger is a debt-free company.
Disclosure: Justin owns shares in the following – CRWS, CHL, KIM, MNDO, RGR.
Additional disclosure: Justin is not a registered finance professional of any kind. Readers are expected to do their own research and due diligence before making any investment decisions.