jamaicabound said:
Couple questions for you investing gurus out there. First question how long do you have to buy a stock before you can get a divident? Do you have to own it for days or weeks in advance of the divident? I see some really high dividend ETF and stocks, wonder if I can buy in days before the dividend and sell right after?
Hi Jamaica,
First of all, not all stocks offer dividends. Secondly, for those that offer them, the size of the dividend and the periodicity vary. You can also have some stocks paying dividends for a few years, then not anymore.
Now, you have to realize that when a dividend is paid, the stock price will go down by the same amount. So let's say a company pays a yearly dividend of 3% and the previous close price is of 100, the stock price will open at 97.
Now, it won't EXACTLY open at this price, since there is pre-market trading, so it will either be slightly above or below, but on average, it would be 97, so you basically don't earn anything. High dividend yields stocks are hyped products, but many people don't understand this logic concerning the dividend payments. Therefore, your strategy of buying right before the dividend and selling right after won't work, even less since there are transaction fees that would have a pretty big impact.
jamaicabound said:
ALso, I suck at picking stocks. I used to think I was good however it was just that I was doing the bulk of my investing when the market was recovering so even a monkey could have thrown darts and picked winners, I got some confidence and really it wasn't me, just the market. Lately it seems like if you did the opposite of what I do you would do very well. I'm sick of picking stocks wondering if someone can recommend some ETF or funds to just buy and sit on.
It is extremely difficult to "beat the market", even most of the professionals don't. You are correct to consider buying an ETF (an alternative could be futures). I like the iShares Nasdaq Biotechnology Index ETF, however it's a volatile one and therefore if you get unlucky, big damages can be done, so it will really depend on what is your risk profile.
jamaicabound said:
Lastly,just started hearing about JNK and HYG and I guess what are referred to as junk bonds. In what types of markets or scenarios do these do well and are these a good investment right now?
To be honest, I'm not a specialist in bonds, but it really depends of the rating of your junk bonds. A BB one won't act the same as a BBB. Basically, the lower the rating, the more the price of your bond will fluctuate like a stock. Bonds are also more correlated to interest rates movements