I live in Russia as I said, and for you - depending on location taxes matter exceptionally. US govt takes 10% tax from a dividend a US company pays me. Now this is so because I filled a form I'm not a US tax resident, otherwise it'd be 30%. So these 30% are something.. Problematic, which should be accounted for while making your projections when buying a dividend stock. I assume if you live outside of U.S, your country is likely to grab extra anyways.
About ETFs, stocks & stuff. Generally good ETFs(good, well good = cheap, passive) are a great idea for a retail investor as they save you a lot of risks.
About value, & buy and hold. I don't want to suggest a retail investor try to catch mad swings in individual stocks, and look for opportunities to make a quick back. However, a passive balancing strategy is something the majority of people miss out from.
Let's say, you decide to invest 50%/50% into two ETFs. What would you expect your returns after X years to be? An average of the two, and you wish you put it all into the better one, right? Well, wrong. Balancing a portfolio, is this risk free tool available for "common folk" to buy low, and sell high, without actually doing any complex analysis.
Imagine you bought a high tech ETF, like nasdaq(QQQ) & some emerging markets stuff..
Let's say each of the indexes were worth 1000, and you invested 100k in each. You had 200k.
Let's say first year you got +20% on nasdaq, and -20% on the other thing.. So, after the first year you're square.. Your Nasdaq holdings are worth 120k, and the emerging are worth 80. But your balance is skewed, so you sell some nasdaq, each one is worth 1200, you own 100.. You sell 17, that's 20 400, leaving you with 99 600 invested in nasdaq (83 shares), and you spend the 20 400 to buy more of the other ETF which is now worth 800, that's 25 shares + you got $400 spare.
So you got 83 shares of NQ + 125 shares of the other thing. +400$ (0.2% not like it matters)
Imagine this returns to where it was after another year, 1000 & 1000. Then you got 83k + 125k +0.4k. You're up 4.2% on a flat market, while taking less risks than investing in either of the individual ETFs due to diversification. And 20% swings aren't much. Yes markets correlate, but balancing opportunities occur regularly.
We're all close to programming here, so developing a prettier algorithm isn't a problem.. First of all balancing should be triggered by misbalance, not by date. Let's say check it every month, should it get close to your trigger - every week, and balance when it triggers. Well, I'd use mixed triggers, both time AND misbalance. Or you could say just time, but misbalance made it shorter. This strategy will work best while using instruments that have the best volatility one against the other, hence the less "alike" they are, the better. I'm thinking dividend EM + US high tech are probably as good as it gets, given both instruments actually "return value". I could suggest something third, but it'll decrease the balancing effect. Bonds are awfully expensive now. Short term heaven yield none, trading commissions may end up being more expensive. Long term debt.. Well, you'll be at the mercy of the fed. And it has become a complex game which I wouldn't suggest anyone play, unless it's your full time job and you know really well what you're doing.
However, while the loans are as cheap, not using leverage in your life is.. Rather silly. The two cheap kinds of leverage available are mortgage, and broker's leverage. IB provides particularly cheap leverage. I don't suggest to mortgage your home, but well - surely do try to stretch it, rather than pay it asap. This is either relevant or irrelevant depending if you have it, and what kind of agreement you have on it(in Russia you can always pay it down asap, or refinance it and etc', people have free options on it).
Now broker's leverage. Actually, I'm wrong calling it the only other available one, as there are MANY ETFs which have built in leverage. Particularly interesting one is TQQQ. It's a nasdaq with 3x built in leverage, automatically managed. Means they buy MORE when it goes up, and sell when it goes down. So -33% ain't gonna be -99%. However +33%, isn't x2. It's much more, as compound interest kicks in on this thing. This asymmetry is already quite something, isn't it?
Why is this tool interesting? Well, open up the chart, questions are answered. But how can one work with this without monitoring it daily?
Well, since it has a built in leverage, you buy it for just some of your cash. Let's say 30%, which is 90% exposure. Then add to it some 40% emerging dividend ETF, and leave 30% cash. So you got 130% exposure, while still maintaining 30% cash. Why do you need it? Because TQQQ has crashed many times, and will crash many times more. So you build up an algo, on what levels of drawdown on your portfolio you start pouring in reserves. I sketched an algo on this thing a while ago, couldn't quickly find it, but I can search again or write it again if you're interested. Or rather you can write it yourself(in english), and I could add something to it.
The most important thing to understand here(especially when any kind of leverage is involved) is that your worst enemy is.. No, not the leverage. You are. Your greed & fear. That is, the algorithm must NEVER be broken. If you wish to change it, then you do. But you apply changes after a period of time. I'd say one quarter is too little. Half a year to a year.
About being a trader, I know really few successful guys. I'm more like a portfolio manager who manages his own portfolio. I CAN keep a stock for over a year, unless I find something better that fits. But yes, even doing this while regularly beating the market, while actively managing the portfolio is supposed to be the deal of your life I think, at least it'll take years to master. I'm actually thinking now i've more free "emotional energy" and time for other things than I had any previous year. Although I wouldn't say this about 2020, well, COVID was a mess.
Now, about "good value stocks".. This is a complex topic. U.S. is really poor from this standpoint. Huge amounts of cash, zero rates make their dirty job of making everything that is earning money expensive, so you're better off with kind of growth. But today I believe there's a new term, "value growth".. There's nonsense like Tesla, Zoom, & Amazon which MAY stand up to their value, but are priced to near perfection. & then there's Facebook, which P/E will become lower than this of a non distressed SP500 in a couple of years should the price of the stock freeze. And it won't, I'm nearly certain. I dumped it a couple weeks ago for some speculative "Momo". Now from a similar standpoint(as FB) I own shares of Alibaba. Yes BABA's troubles are a little more serious than FB, but it grows faster, it's cheaper and investors tend to overreact. It's a great business, long term & short term. The US-China tensions make things a bit complex. Like what's gonna happen if the US actually makes it delist? I think probability is very low, <10%, but go figure. Let's say probability is 20%, even then it's worth something.. Fine, let's say we want a discount of 20%. It should still be worth 300, and it cost <225.
So what should you be looking for?
First of all, the company should be "for shareholders", this is rarely an issue in the US, but it is occasionally in other countries. Though it should also be managed well. Taleb's "Skin in The Game" discusses this in depth. IBM seems like an interesting value play, but go figure when the management reverses its course. There's no major stakeholder who makes bold decisions and thinks about other things than his short term bonus, like there are in Tesla, Amazon, FB & even Apple, still(Tim cook seems like knows what he's doing, AND he's got a billion in the stock & stuff).
So you look at P/E(how much does $1 of a company's profits worth). What's going on with the profit(or at least revenue, for growth companies it's often more important), then you decide if it's worth your back.
Now, there's another agenda.. Dividend aristocrats. In the world of low yield, these companies are highly leveraged but seem solid, and pay great dividends. Much higher than cost of leverage for YOU, and inflation is your friend.. So stuff like AT&T, Altria & OneOK is rather interesting. Credit rating is high(well, we do remember the subprime mortgage, the companies are usually solid enough individually, but they do heavily rely on cheap credit, although their debt is cheap and already long term, so its cost is not gonna explode overnight, and inflation is there to assist). Perhaps a portfolio of such stocks could be an alternative to EM ETF, but i'd still go for the ETF if I wasn't full time in this stuff, as it makes room for less errors, AND it's country diversification could add volatility between the investment tools, TQQQ vs an emerging market is likely to be very volatile which is what you need to balance as often as you can.
I'll be glad to answer more questions, and thanks for the congrats