When I left last week the DOW was sitting comfortably at 12,500 and here we are today looking at 11,866 at the close. 634 points or 5% in less than a week’s time!
The bright side (there’s always a bright side) is that we can start looking for some bargains.
Perhaps I’ll be able to pick up those shares of Caterpillar (ticker: CAT) that I spoke of a month ago. While we wait for the US government to finalize a debt ceiling deal, I’m guessing this is not the end of all the selling in this market – let the bargain hunting begin!
While you were out…
While I was out the DDI portfolio generated another $124.85 in income which brings my cash balance to just over $1000.00. I should be able to pick up 2 or 3 good new positions or possibly add to my existing positions.
New near-term goals
Now that I’m comfortable with the diversification of the portfolio I’m going to focus less on adding new positions and have decided to implement the following two short term goals:
Begin “topping off” existing positions to reach even 100 share increments
Focus on adding to higher yielding positions (primarily positions with 5% or greater yield)
By “topping off” existing positions I’m setting up the portfolio to begin implementing a covered-call option strategy to increase monthly returns by selling option contracts.
In addition, by focusing on the higher yielding stocks I’m hoping to pump up the DDI portfolio’s overall return in the shorter term. With talk of a double-dip and possible weakening economy I’m taking a risk that these higher yielding plays may be more susceptible to dividend reductions should their revenues be adversely affected.
My take is that the average investor is still seeking out above average yields by investing in equities – specifically those in the 5-7% range. Why 5-7%? Primarily, because investors typically search for yields above 3% to beat inflation, while trying to maintain some sense of “safety” by staying below a percieved danger zone above 7%.
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