My Picks for the Money Pros Index Fund Challenge

A group of personal finance bloggers are having a stock picking challenge and I am competing. The challenge is at Money Pros and the contest is simple. You pick three stocks and have $1000 invested in each of them. All dividends will be reinvested in additional shares. Whoever has the best return at the end of the year wins.

For my three stocks I just chose three stocks that I already own. My portfolio returned a little over 7% last year which isn’t bad at all considering the stock market as a whole was basically flat. My stock strategy is to pick stocks that consistently pay dividends and have a history of increasing their dividends. My stock picks follow with a little information on each stock.

Atlantic Power (AT) – This is a utility stock that offers a 7.7% yield. You shouldn’t buy a stock just for a high dividend yield but it is one of the factors I look at. The dividend payout ratio is fairly low and the P/E is low. It also has a good albeit short history of consistently paying dividends. Adding up all those factors makes this stock.

Gabelli Global Gold,Natural Resources & Income Trust (GGN) – This stock combines an 11% yield with a bet on gold and natural resource stocks. This stock might be a little risky but I’m betting natural resource stocks are going to rise this year. If I’m wrong I’ll still be getting the 11% yield.

Enerplus Corp. (ERF) – This stock has a nice 8% yield. This company invests in crude oil and natural gas assets. This is another bet that there will be increased demand for natural resources leading to a stock price increase. It has hedged most of its oil production for the next year which should help keep it a fairly safe investment.

Those are my picks for the contest but I’m not saying you should invest in them. Be sure you do your own research before you invest in any stock.

The stocks for the contest were all high yield stocks but I also own solid consumer stocks such as JNJ and MCD that pay much lower dividends. I try to diversify my portfolio with high yield and low yield stocks.

What do you think about investing for dividends?

13 Responses to “My Picks for the Money Pros Index Fund Challenge”

  1. Penny Stock Blog February 22, 2012 at 7:14 pm #

    I would like to comment about traders being overly concerned about indexes like the standard and poors five hundred. Why not concentrate your efforts on concenrtated narrow sectors though exchange traded funds.Their are now over fifty single country funds available and maybe over 100 narrow sectors like airlines steel solar so why the concern for the nasdaq or the standard and poor five hunderd each one of these countries and sectors is a index of and by itself. The solar exchange traded fund {TAN} is now down 90% from its high in 2007. If I were an investor or trader. I would simply look for any exchange traded fund or closed end fund that does not use any leverage in their portfolios and start buying after their is a 75% decline from its all time high’ and than buy twice as much if that exchange traded fund or closed end fund declines another five percent an 80% decline from its all time high’ buy twice as much at a 85% decline from its all time high buy twice as much at a 90% decline from its all time high’ and finally buy twice as much at a 95% decline from its all time high. Now I know that some of these funds will not decline 90% from their all time highs maybe not even 80%. Another thing that you might be wondering about I would run out of money If I followed that method right wrong. Example take one hundred thousand dollars. Buy 500 dollars of xyz fund at 25 dollars off 75% from its all time high of 100 dollars. Buy 1000 dollars of xyz at 20 dollars off 80% from its all time high of 100 dollars. Buy 2000 dollars of xyz at 15 dollars off 85% from its all time high of 100 dollars Buy 4000 dollars of xyz at 10 dollars off 90% from its all ltime high and finally Buy 8000 dollars of xyz at 5 dollars off 95% from its all time high for a total of 15500 about 15 percent of total cash assets. I am giving an example here the actual investment amount for an exchange traded fund or closed end fund that you are investing in would be the percentage of cash in the account not the percentage of both equities and cash combined.. The investment percentage for each fund would be based on the cash portion of your total portfolio at any given moment in time simply because the dollar amount of cash in the account would change fairly often, So if you have 40% of your portifolio in cash you would use that as your basis for determining your allocation not the total value of both cash and equities. The idea is to have your biggest positions in the funds that have declined the most and the smallest positions in the funds that have declined the least. Also keep in mind when you buy an exchange traded fund you are buying a basket of stocks so the fund cannot go to zero unlike a stock.Than when any fund has regained three quarters of its value that would be 75 dollars in the case of eyz use a 10% trailing stop loss to protect your gains. Who knows you may sell out of the fund with in 90% of its all time high. And their you have it a simple but brilliant strategy. Also keep in mind that you will have tremendous diversification using this method which would mean you could easily employ some leverage in the form of buying on margin. Even without margin I believe that this could be one of the greastest investment methods of all time you will be almost assured of crushing the performance of the standard and poors five hundred. The.Only thing that could change this outcome would be a great worldwide depression.

  2. Investment Management Sydney January 19, 2012 at 5:40 pm #

    I haven’t heard of this competition before, but I think it’s a great thing! I wish you great luck with it. I might look it up on the internet and look forward to maybe compete in it next year. Additionally it might help, to understand investment and stocks better.

  3. Six Figure Investor January 18, 2012 at 1:01 pm #

    Andy, I’m also in the contest. AT and ERF are under the radar picks that most investors miss. I like AT better it doesn’t have the commodity exposure of ERF.

    • Andy Hough January 20, 2012 at 10:46 am #

      AT is the safer bet but I think ERF and commodities in general will go up considerably in the next couple of years and I can collect some nice dividends while I’m waiting.

  4. Dana January 18, 2012 at 4:27 am #

    We’re only in mutual and index funds as well but are considering dividend stocks. Good luck to you in the contest!

  5. Jackie January 14, 2012 at 11:17 am #

    If I’m trying to decide between two stocks and they seem pretty much the same otherwise, I usually choose the one that provides dividends — especially within my Roth. I think it’s a good idea.

    • Andy Hough January 15, 2012 at 11:22 am #

      Holding the stocks in the Roth is a good idea so you don’t have to pay taxes on the dividends. My income is low enough now that I don’t have to pay tax on the dividends anyway but taxes are something I’ll have to consider in the future.

  6. Robert @ The College Investor January 14, 2012 at 10:15 am #

    I’m all about investing for dividends, but I’d be concerned about the gold play in 2012. Good luck!

    • Andy Hough January 15, 2012 at 11:20 am #

      The fund is gold and natural resources, I’m hoping if the gold starts going down the other holdings will offset it. The fund is doing well so far this year.

  7. Jeremy @ Personal Finance Whiz January 11, 2012 at 3:16 pm #

    I’ve thought about getting into a few dividend stocks this year. Right now my entire portfolio is in mutual funds, index funds and target date funds. I love the idea of building a portfolio that provides passive income. I just need to sit down and do it.

    • Andy Hough January 12, 2012 at 4:01 pm #

      Good luck with your future dividend portfolio.

  8. SB @ One Cent At A Time January 11, 2012 at 3:06 pm #

    I have a few stocks giving me hefty dividends MO, LLY, MCD etc. Don’t have any of the ones you mentioned.

    In this down market, dividends provide highest return I guess apart from P2P lending.

    • Andy Hough January 12, 2012 at 4:10 pm #

      MCD is in my portfolio but wasn’t one of my picks. I mentioned it at the end of the post. In addition to the dividends it has gone up $40 a share since I bought it.

      I’ve invested in P2p too but don’t have any money in it at the moment since it isn’t as liquid as having stocks.