Investing... What Expats Like For 2022

First, let's see how the index that tracks the largest USA stocks has performed in the past six months (May 5, 2021 to November 4, 2021).

The S&P 500 has gained 11.91 percent in value in those six months -- an annualized rate of just under 24 percent.

The broader U.S. market -- as seen in the chart for Dow-Jones All USA Stocks index -- has almost exactly equalled the S&P return by percentages since May 5.

cccmedia

Here are two stocks I particularly like for my portfolio....

I have held AirBnb (ticker symbol ABNB) for several months with strong returns.  Last week, with travel during The Situation increasing in various countries that are breaking the back of covid .. the lodgings company beat earnings estimates;  the stock rocketed from 180 to 210 on Thursday, settling back down at 195 this week.  I have more on this company on the Expat Café thread about How to Legally Game the System at AirBnB.

Iron Mountain (ticker IRM) is my new acquisition as of today, after my research showed the 'storage' company has been paying annual dividends in the 5 to 6 percent range .. and offers services for which demand is probably not going to be reduced any time in the foreseeable future.

cccmedia

A while back, I did a thread to guide expats in the GCC about investment options.  This would be applicable to other expats as well as I tried to keep it pretty basic.

https://www.expat.com/forum/viewtopic.php?id=885444

Nowadays, I am focusing on long positions and dividend yields.  Not holding many individual stocks, rather, more ETF positions.  The few that I am holding are BEN, IVZ, PG, O etc.

I have started investing a portion of my primary brokerage account in a class of investments called high yield covered call ETF's.

Investors looking for income are partial to these offerings because they offer monthly interest payments.  The shining example is QYLD, which covers the monthly payments by selling call options on its holdings in the NASDAQ 100, to the tune of a 12 percent annual yield.

Other offerings in this class hold positions in the S&P 500 or another index, also writing calls for monthly income.

JEPI, from JP Morgan, offers downside protection by investing a portion of its assets in low-volatility products.  The trade-off is a lower annual yield, around 7 percent.

Other offerings in this class include XYLD and RYLD.

Investors are somewhat protected by the fact that these ETF's are typically comprised of more than 100 different equities.  An investor can also institute stop-loss markers to the extent enabled by one's brokerage.

Are you familiar with this type of investment, X?

cccmedia

Yep, I have both QYLD and JEPI in my portfolio since ages.  The only watch out with call options is that in a booming market or rapid rises, the person selling/writing the options takes the hit .

Secondly, the yield is not really that high for investors who don't file for US Taxes (Non citizens) as a withholding tax of 30% is automatically deducted from you on dividend proceeds.  So the real yield for us lot is around 5-8%.

2022 moves.

I have just sold dozens of individual stocks .. and have invested about half of my portfolio(s) this year in the Lean Muscle strategy of the author of The 12 Percent Solution.

The strategy adjusts monthly according to trends/algorithms, typically investing a large portion of one's liquid holdings in QQQ, a stand-in ETF for the NASDAQ.

Another portion of the Lean Muscle program, adjusted monthly, is in TLT, a stand-in for cash related to long term Treasuries .. and other portions may be devoted to uptrending sector ETFs.

According to David Alan Carter, the author, this strategy -- a sister strategy to his American Muscle strategy but with greater downside protection -- has produced gains averaging 18.6 percent per year as backtested to 2008 (with dividends reinvested).

QQQ has risen from the 160-dollar range to the current $380 in the last several years.  A disproportional part of that rise has been due to the success of the popular FAANG stocks.

Resource... trendlineprofits.com

I do not receive compensation for mentioning any of the above.   Past performance, as always, is not a reliable predictor of future results. 

cccmedia

Apart from dividends (which are usually a minor portion of returns), no value is created on the stock market - meaning your gain is always somebody else's loss. Therefore, in the long run, you can only gain if you are better in predicting the future than most others. Are you?
I am not, so I do not invest in shares I pick myself. Most managers of investment funds are also not, so they are out, too. ETF's are fine as long as you are o.k. with being average (i.e. not better, but also not worse than most). They only rise as long as new investors (who are worse than most) enter the market and the overall invested sum rises -> pyramid scheme.
I personally prefer to invest in property, which does create value (the possibility to live/work in it, which people are willing to pay for).

beppi wrote:

Apart from dividends (which are usually a minor portion of returns), no value is created on the stock market - meaning your gain is always somebody else's loss. Therefore, in the long run, you can only gain if you are better in predicting the future than most others. Are you?
I am not, so I do not invest in shares I pick myself. Most managers of investment funds are also not, so they are out, too. ETF's are fine as long as you are o.k. with being average (i.e. not better, but also not worse than most). They only rise as long as new investors (who are worse than most) enter the market and the overall invested sum rises -> pyramid scheme.
I personally prefer to invest in property, which does create value (the possibility to live/work in it, which people are willing to pay for).

Ummm yes and no.  The definition of value is key here.  Are you referring to value created for the world or for yourself (i.e. your personal wealth).   For the former, I would agree with you as the financial markets (once stocks are issued) really do not create much value.  I will talk about the latter below. 

1) in the long run, you can only gain if you are better in predicting the future than most others. NO. In the long run, considering past performance, the stock market has out performed practically every single investment that is out there.   I am referring to long term value appreciation.  This is not linked to any specific stock but rather the overall index.   If you look at annual average returns, these are high double digit and stand alone returns (i.e. snapshot between years only, would be 50-80%+ or more).  To keep it simple, you can apply it on the vanilla S&P 500 index - no picking of winners required
2) Is ETF a Pyramid scheme.  NO.  This is a long discussion but simply speaking, the value of the ETF is derived from its holdings, the performance (for actively managed funds) and / or speculation driven by supply / demand.    It is absolutely not a pyramid scheme and you can google independent views on it's structures
3) Dividends being minor portion of returns.  Yes and No. .  This depends on what you are comparing this with.   A dividend yield of 3-5% is respectable and better than bank accounts but on the lower end of rental returns.  A dividend yield of 7-10% is nothing to laugh at.  A leveraged dividend yield of 15% practically beats most investments out there
4) Property investment vs. stocks.  Yes and No. .  Again, it is relative. 
Is it a good investment if you want a place to live in = Yes
Is it a good investment to diversify your portfolio risk profile = Yes
Is it a good investment to generate market beating returns = No
Is it a good investment if you want quick cash on hand = No

On the above points, I will share my experiences:
1)  My return on equity invested, since 2018 is 26% (measured now with the market decline) and YOY comes to around 8%.  This is not like for like as I made some investments recently so adjusting for dates, it comes to 36% ROE and 10% YOY.  I could have made a lot more but this was a conscious effort to balance my risk profile per my strategy (wealth creation and cash income)
2) I hold ETFs which have very little trading in them i.e. people not putting money in.  So far, over the years, no noticeable value declines and rather appreciation (as they have holdings in FANG stocks)
3) I clear $40,000 USD net a year in dividends - I am referring to cash in my bank account
4) I hold property in my portfolio and rental yields are around the 5-6% mark

I also wrote the below for expats to look through earlier to get an idea about the types of investments out there:

https://www.expat.com/forum/viewtopic.php?id=885444

As always, these are my views and no one has to agree .

01/11/22

I agree with XTang, and there's nothing substantial that I can add to his excellent presentation.   Except for my visceral aversion to residential rental property, my investor profile and my returns are similar to his.  I'm willing to accept higher risk in return for higher liquidity,  and freedom from the issues that come with even good tenants.

I'm the original buy-and-hold guy.  I view a balance sheet that grows stronger year over year for a company that sells real goods or services to willing customers as evidence of the creation of real wealth and real value, not a zero-sum financial game or a Ponzi scheme.   

Obviously, I don't execute a lot of trades every year, so I have no advice to offer on beating the market, except to avoid panic selling during corrections, like the one that could come any day now.   

cccmedia wrote:

2022 moves.

I have just sold dozens of individual stocks .. and have invested about half of my portfolio(s) this year in the Lean Muscle strategy....

In the remaining half of the portfolio, I am retaining some ETF's not related to the Muscle strategies .. and very few individual stocks.  I am keeping AirBNB for reasons I have discussed earlier .. CarMax, which in my experience is an excellent company based on an excellent premise .. and Netflix.

My ETF's include NOBL for its dividend stars, BJK in the casino gaming sector and MOAT, which represents companies that maintain a "wide moat" that keeps them ahead of the competition for whatever reasons.  Also, VEU, a Vanguard fund based on companies outside of the USA.

I also keep four high-dividend funds (discussed earlier on this thread) that use strategies such as covered-call writing to earn extra cash that is passed on to investors as regular dividends -- JEPI, QYLD, XYLD and DIVO.

cccmedia

Hello sir, how are you doing

Hello Gabby I'm good and you?

I hope, it must be really great!