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Dollar Cost Surfing (Meow)

So it's interesting... Basically, and I didn't even realize it...

I'm dollar cost averaging with my active trading... Well, it's more like share cost averaging... Since I'm buying a fixed number of shares with each transaction while the price changes... But for all intents and purposes it's kind of like dollar cost averaging... So, for the sake of "put it in plain English" terms... I'll just call it dollar cost averaging.

I mean, if you call it "active".

Today I did nothing.

I had work today.

But besides, there was nothing to do.

Sometimes you just gotta wait out the game.

So I'm about to use some of my income from Reality Income Corp to purchase my next dividend champ stock.

My plan, as I've mentioned before, but a quick 1 paragraph recap, is to go from less risk, to more risk, in layers.

I'm active trading Reality Income Corp, or "active" trading it.  Meaning, I trade whenever I feel like it.  And when I don't... Or don't have time... I just sit and hold, and cash out the dividend from my shares that I have sitting in the stock.

Right now I have 3 lots of 100 shares.  I go in, and out... I make money from the bumps and dips... But, I also make money from dividend checks.

Both  of those income sources go into my permanent holdings.

And those dividends go into my layer 3 holdings, All Time High stocks... and things like GBTC.

And THOSE holdings will go into venture capitalist startups.

Who knows, I might start a cat related investment fund... Would that make me a VENTURE CAT-ITALIST?

Possibly.

Meow.

Moneyow.

Anyway, dollar cost surfing...

So, basically basic investing has this thing called Dollar Cost Averaging.

Here's how it works:

https://www.investopedia.com/terms/d/dollarcostaveraging.asp

 

So, what I do... Is I surf... Dollar costing.

The price of Realty Income Corp goes up and down through out the day/week/month/year.

I buy shares, in what looks like a dip against a longer term up trend.

If I'm right, I take the profit, and do it all over again.

But I don't just do it once... I do it with lots of 100 share trades.

Now... I do get it wrong... I'm in with 300 shares right now that are technically at what's called an unrealized gain.

If I were to sell those shares tomorrow, I'd have lost money.

If  hold the shares... And hold them through Jan 1st.... I'll get 63 dollars on Jan 15th.

No matter what the price of the shares does, I get that money.

I then use that money to put into new investments.... Or pay taxes.

Or buy my cats treats.

Meow.

Now, if the price drops more... I hold my existing shares, and try to catch another bottom.  Now I'm holding 400 shares.

If I'm right, I get back out.  Back to 300.

If I'm wrong, I hold my 400, and get in with another 100 later on down the road.

If I hold 400 shares then on Feb 1st I get 4 X 21 shares... Or 84 dollars in income...

That goes on to my layer 2 level of investments...

Okay, so lets say the price pops up by a few dollars... I get back out on all my shares and take the gain... now I'm back to zero holdings... I sold all 400.

The price starts to drop again... I dollar cost average back in.

As the price drops... I buy 100 shares again... If it goes up, I take my gain.  If it goes down, I dollar cost average again... Price drops again... I go in again.

100

200

300

500

1000

Now I'm getting 210 dollars a month in income if I'm in on 1000 shares.

Okay, so let's say I don't get a return level in price?

That's fair.  It could happen.

Now, let's go back a second, without this dollar cost averaging process... If I had spotted a bottom, which turned out not to be a bottom... and the price continued lower... and I had gone in with 1000 shares.

I would be locked in.

Yes, I would be still getting my 21 cents per share per month income...

But, depending on how far the price had fallen (unrealized loss)... I have pretty much no option but to wait it out...

Let's say I wait it out... Could be years... Or never.  Who knows?

NOW... Let's say, that I had dollar cost averages it... 10 lots of 100 shares.

The price kept going lower.

One of my share holdings is only at a small loss, the newest one purchased.... Whereas the older one, is at a much bigger loss.

They are all paying me 21 dollars per month per 100 shares in income.

Let's say, I need the money for something.

I now have options to hedge against my loss.  I can sell the most recent purchase at a loss.

Let me explain something first... SO my share purchases will be capped at 1000 shares.

I won't risk any more than that.  SO if the price keeps going down, I'll stop at 1000 shares.

No more capital will be risked.

Like wise, depending on how much is falls, the purchasing slows.

So here's an example...

If the stock is at 55 dollars a share and I buy 100 shares...

I'll buy shares again at 54.

But, if it keeps going... I won't buy again until 52.

My next buy is 50.

Now, I probably won't buy until 46 now.

If it keeps going down, I may not buy until 40

30.

20.

5.

Etc.

That's an extreme example.

If the share price fell 50 percent... I'd probably stop this process and find something else to trade.

Anyway...

The point is... It has to fall further each time to trigger another buy... This brings the dollar cost averaging down.

Now, let's say the price hit 54 dollars a share, I had both at 56 and 55 and 54... Let's say it sky rockets up to 60 all of a sudden.

This triggers a sell.

Now it goes back down slowly... I ease back in.

Realty Income Corp pays a monthly dividend and the date of record for share holders is the last day of the month, usually.

SO, even if I'm dead wrong... I still cash out that money... and it goes to layer 2 of my stock holdings.

Okay, so let's say the stock isn't moving much... Let's say it's just meandering... and I'm stuck holding, let's say I'm at my cap of 1000 shares.

Now, what I can do is sell one of those 100 share lots to try and active trade again.

In order to do that I will HAVE to take a loss, I have no choice.

But I can hedge against that loss... As long as you are in the green more than in the red, all is not sour.

How can I do that?

Remember I'm holding 1000 shares that pay me 210 dollars a month in income.

But also remember that I'm active trading/dollar cost surfing.

I can play it two ways...

I can use my previous gains to balance out this loss to unlock 100 shares to start trading again.

Or, I can just wait.

Eventually, after a few months, the income from the shares will cover the loss, and then I can unlock my newest shares at the lowest loss and start trading again.

Dollar cost average in.... hedge out.

And I can use the loss as a tax write off against my other holdings.

I've lost no money in actuality... And then maybe I start trading again with that 100 share lot of shares and I make a little more...

The key to it all though, is the dollar cost lots of 100 shares.

If I had just gotten in one time with 1000 shares... If it went UP, everything is beautiful.

But it goes down?

I have ways to free up capital.

Dollar cost averaging is pointless if you know the stock is going to appreciate in value 100 percent...

The problem with any investment though is... nothing is 100 percent.

So, it's a hedge against a scenario where the stock goes down in value.

Dollar surfing combined with monthly incomes gives me the ability to create a cashflow to fund secondary levels of investments.

Active trades make money off of dips and pops of the stock price in the short term... Dollar cost averaging lets me get out of mistakes easier, and dividend income is a further hedge against further possible losses.