Money By Mark - Big Dogs » Funds

Sell In May And Go Away (Holding Cash – Part 2)

admin — Thu, 21 Apr 2011 13:56:27 +0000

In my previous post, I discussed and linked an article about following the rich’s lead to hold cash and buy bond when rates rise. However, I am still suspect to when rates rise given the amount of cash already held and the enormous amount printed in the last couple of years as I also mention in my previous article.

But, to continue on with the idea of holding cash, a couple of sayings have come up. First, with the drought and wild fires in Texas, April showers bring May flowers doesn’t look so possible at this point. Next, with May approaching, the other saying in the world of finance is sell in May and go away.

Today, I was reading another article from Seeking Alpha called “Sell in May and Go Away? Yes“ The idea is to protect your positions, using several strategies but doesn’t mention ways to increase cash by using money sitting in money markets for example. Sitting on cash, but waiting to buy is not a bad idea, but the returns could be enhanced by selling naked puts.

Selling naked puts are simply collecting cash for selling an option at a particular price. If the price of the underlying asset meets the target price, you buy the stock, ETF or whatever at the strike price. If the price does not go to the target price, a nice premium (cash) is collected for money sitting in a money account earning virtually nothing right now. (Thanks, low interest rates.)

Whether or not to use option strategies such as selling naked puts, renting stocks (i.e. covered calls), dividend funds, or selling in May and going away, the point is having cash and creating income allows the ability to take advantage of opportunities – and that’s why following the rich is better might just allow us all to stop and smell the roses a little more often.

How To Generate More Income

admin — Sat, 19 Feb 2011 22:31:58 +0000

I like getting paid; who doesn’t. As I written and talked about time and again, I use strategies such as selling naked puts and covered calls to get cash.

I’ve also have dividend paying funds.

When looking for ways to get paid, it’s important to see the money is coming from earnings the fund is producing, or if the funds are simply a return of principal.

While looking for sources paying nice dividends, I came across the following article discussing an important ratio and thought it would be worth sharing. The article is easy to read, and the ratio is easy to understand. Take a look at the payout ratio.

Death of Mutual Funds

admin — Fri, 23 Apr 2010 13:41:54 +0000

In my previous post, Top 10 Reasons ETF and not mutual funds, I mentioned why I do not like mutual funds, such as:

1. Transparency of the portfolio – what companies are in the fund on a daily basis

2. Liquidity – meaning I can sell an ETF during the day just like a stock

3. Fees and taxes are high on mutual funds

4. No options – selling covered calls or naked puts is how I generate additional income, which mutual funds do not have.

Exchange Traded Funds are similar to mutual funds because you can get a pool of companies in the fund.

Today, I found a great article, “The Death of Mutual Funds”. It’s a little long (15 pages), but worth reading and sharing especially if you are the type of person to take control of your finances instead of “just being told what to do”.

Death_of_Mutual_Funds