Best investment story by Joseph Marc Blumenthal
- When I choose which securities to buy, be sure to pay attention to the multiples and potential profitability. In September 2015, ABC shares looked favourably on these indicators. The company was clearly underestimated by the market, and I decided to invest in it. That being said, I advise the beginner to choose preferred shares over common ones.
The fact is that, first, the privileged are often cheaper. This is due to the fact that holders of preferred securities do not have the right to vote at shareholder meetings.
Secondly, in the charter of companies, you can find a condition according to which dividends on preferred shares cannot be less than on ordinary shares. And since my stake in the company is too small to have any weight in voting decisions, preferred shares are more profitable for me than ordinary ones: they are cheaper, and the payouts are the same. As for ABC, the price of the shares is about the same, but the payouts on preferred shares are higher.
So, in September 2015, I bought ABC preferred shares into my Individual Investment Account (IIA). Then they cost USD 518 apiece. Then the securities began to rise in price gradually, and I bought them three more times. As a result, there were 35 ABC shares in my portfolio, on which I spent a total of about USD 15 thousand.
On August 4, 2016, I received my first quarter dividend for the first time. The yield was 10%. In October of the same year, he sold part of his preferred shares of ABC at USD 1,902 - I thought that the shares had become too expensive in terms of multiples.
It turned out that in a year I earned more than 100% only on the difference in the purchase and sale prices. In 2016, the company was still paying dividends, which I received on those shares that I had left after the sale. As a result, the dividend yield was 62%.
Three years have passed. I had to close my Individual Investment Account and sell all ABC shares. The fact is that if you open an IIA and do not close it for three years, then after this time the investor can receive a tax deduction. And if you then open a new IIA, this will allow you to scroll through the same scheme again.
Now, in another portfolio, I also have ABC preferred shares. I will sell them if the company does not perform well or becomes too expensive in terms of multiples.
It seems to me that in the market there is often an opportunity to buy stocks cheaply, but then their price quickly rises to a fair one.