All right. Welcome back, everybody. I hope everyone's having a good week. I just want to do a quick video and check in. See how everyone's doing. It's been a busy week. I mean, just this last Monday morning, it feels like it's been a long time, but just this last Monday morning, I posted my most recent upload. And it was the often ignored
truth about bonds. And in this video I went over and I explained I wasn't trying to advocate for bonds or say that everybody needs them in their portfolio. I just wanted to create a little bit more awareness about the role that they play. And I think it's especially useful and weeks like this week that we've been having. If I look at this, the S&P 500 is gone down about one point seven percent in the past five Market days.
So it's gone down quite a bit. So I'm going to be talking about that. I know a lot of people are new to the stock market, they're entering in and now they're in the red. And so I'm going to be going over that in just talking about a few things that you might want to look at other things is I've had maybe over 200 comments on this past video. I mean it's hundreds and hundreds is All is probably a couple dozen emails.
And so, in this video what I wanted to do for the main part of it was just go through pick a few of the questions that I thought were interesting and answer those. So I'll be doing that for the majority of the video and then there was one news item. I'm going to hit on on the end which was Carl Icahn suing Occidental Petroleum.
That's one of my Holdings. He's a shareholder of the company as well as me. He owns a little bit more of it, but he's suing because he doesn't like this deal that Warren Buffett's doing and he doesn't like the situation. I just wanted to mention that at the end of the video, I'll go over it. All right. So first, let's jump into this week and see how things are going my portfolios down 1.75 percent.
That's a little bit more in the S&P 500 mostly because real estate and utilities have been hit pretty hard this week. I mean I've been through this so many times, real estate has so much money to go in and out of it all the time that it gets a little old, it just money flows into it. Money flows out of it. And in the meantime, the important thing is whether these companies are doing well, whether they continue, To pay their dividends.
That's really what matters if I look at this from week to week. And I'm always concerned about the market going down, or I'm happy when the market goes up. That's not how I do this portfolio. I've said over and over again that I do not really care or Focus about the capital appreciation. This Top Line market gains is capital appreciation. The bottom line is earn dividends from the past month I've earned $122 in dividends that's the past 30 days market gains.
Hazard down $759. Now a lot of people say well how can you not care about capital appreciation? Right isn't that a big part of the portfolio? Sure I think capital appreciation will eventually follow the level of income. A portfolio puts out. So if I continually if I go to my chart here I'm tracking my dividends here. If I continually increase the amount that my portfolio pays out, I believe there will be a trend of capital appreciation, that follows that.
But I think the capital appreciation is a lot more Jagged than this. This line of just increasing my dividend payments and the reason why is because if you look at the news, I mean, every little thing that happens Trump talking about terrifying Mexico were or the issues with the trade, war with China or all these different things going on. Every little thing seems to affect the market and scare people, One Direction or the other.
Now, it's hard to keep track of and frankly, I don't think you should try to keep track of all the little changes in the market, but I do think that this is a good thing for people entering the market that are brand new to it. And I know that's a little bit counterintuitive because if you just enter the market and you see yourself losing money, right at the start, you might be thinking, how is that?
Possibly a good thing, but I think it is and the reason why it gives you a good gauge of your risk tolerance. It's the same type of thing where you can read about surfing, you know, you can read about that in text books all day, but you do not experience it until you actually go out on the waves. And that's what it's like, filling the market, go down a little bit. This dip 1.7% isn't a whole lot. The market could go.
Down 10% or 20%. And so, what you have to do is you have to look at your portfolio, see how your portfolio did with this downturn and adjust your risk based on that. So, if you look at this portfolio and you go, wow, this went down a lot, you know, a lot more than I'm comfortable, with for this type of downturn. That means you might want to bump up this section right here. This section that's in the green.
If this downturn was a little bit more than you're expecting or it makes you uncomfortable, you're not happy with it. That type of thing you might Be better suited, bumping bonds up to 40 percent or 30 percent, right, adjusting your risk based off of what's going on with the market. And so, a lot of people everybody has different risk tolerances if you were fine with this and this doesn't bother you
at all. And you're just buying more shares right now as it's going down and you're excited about it, then you might want to lower your amount of bonds. So it just depends on the person, depends on what you're doing. My portfolio, went down 1.75 percent in the past week. If I go to the month view, it's down. 1.7% And percent. So a little bit less for the overall month, if I go to the month of the S&P 500, it's down
4.8%. So, even though my portfolio went down a little bit more than S&P 500, just this week for the month view, it went down less than half as much, so it's still a lot more conservative than S&P, 500 over a little bit longer period of time. But regardless, I really do think if you're just getting in the market, now's the time to figure out your risk tolerance. Figure it out guys.
If you have Lower risk tolerance if you're going wow I am stressing about the amount of money I'm losing already and you just enter the market and only have a couple thousand dollars in it. Imagine if you have a hundred thousand dollars and you lose five thousand in a day or 10,000 a day. This is the time to figure out your risk tolerance. Adjust it. If you have bonds you can control risk a little bit by upping the amount of bonds you have.
You can control Risk by lowering the amount of the things that are really volatile. You have Tech over here. That went down 7% Industrials went downstairs. 6%. The bonds are the ones that you probably can adjust risk the most by. I just think it's a good time to do that. We'll see where the market goes. One thing I have been thinking about doing in my bonds pie, I have these different Holdings and I think they're all great.
I really like lqd but I've been thinking about adding another one called be n DX. And that it's vanguard's total international bond Market ETF. And the reason why is I read a article about how this is a currency hedge and it's a really good International hedge against the US currency or inflation or anything like that to happens as well as it pays a decent yield 3% and it's heavily Diversified, it has a lot of assets under
management. So it's really a liquid and Vanguard always has a low expense ratio so I've been considering adding this one to my bonds pie, but I haven't made up my mind on that. It's It's something I look at into other changes to my portfolio. I will mention because I know a lot of people are following my portfolio. You'll notice some of the actual and Target our little bit adjusted. So I started off with real estate.
When I only had like I say only, I mean it's all relative but when I had like five or ten thousand I started off with 33% real estate and as I've been gaining more and more money, I've been slowly lowering my exposure to real estate. What I did was I put it so that the targets at 25% and then I Added in percentages, to all these ones to adjust for it. And I just want to, I was really Overexposed.
You know, I had a really large amount of real estate and I want to balance out the portfolio a little bit more so that I have these other sectors a little bit more exposure to these other sectors. So, other than those changes to portfolio, not too much has gone on. I mean, with this type of week, yeah, we went down, we'll see what happens. Nobody can see the future with it. The big thing, I pay attention
to like I said, is this income? I want this to continue to go up. Up the thing that concerns me is when companies cut their dividends that's what I hate to see. I don't really care to see, this doesn't bother me. In fact if this happens and companies are doing great and they're not cutting their dividends, that's great, we get a better deal on the companies were buying but if this happens and it's an actual indicator of something serious going on and companies cut their Dividends
are struggling to survive. That's when things actually become a problem, right? So, right now, I'm not really too concerned about this, but anyway, let's move on to some questions. Alrighty, so you can write in. It's a the emails Joseph Carlson show. Gmail.com, Joseph Carlson show at gmail.com and I'll throw up. The first question is from Amelia, she says, is a new investor being able to get some dividends rolling in and
starting out as a little rough. Especially when the Mark is on a decline is increasing our contributions to our portfolio. The only way to offset that loss or do we ride the wave and trust that our investments will pull us through if we continually contribute normally whether it's weekly monthly excetera, thank you. Okay. So yeah. I mean, it is dividend investing starting off as rough to begin with, because your Dividends are
so small to begin with. There's not a whole lot of compounding that happens right at the start. It takes a lot to get the ball rolling. Now, as far as the question part of it, where they were she says is increasing our contributions to our portfolio. The only way to offset the loss. That's one way, that's not the only way. If you're concerned about the market, going down this past week, it's gone down 1.7%. If we actually let me go over to A graph here.
So if I go to the one month, In the past month, it's gone down about 4.8%. If we zoom out to six months, Past six months gone down, just point to 6%. Then if we go a year to date, the market is up 10.8%. Almost 11%. Now along this timeline, it totally depends on where you just started investing. So, if you started investing long care, you've made money. If you started investing along care, you've lost money and you can't really do anything to control for that.
A lot of that is just luck of when you start investing, most of the companies, my Folio or S&P 500, Blue Chip companies, so they're going to follow the S&P 500 pretty closely. Now, as far as mitigating the losses or what to do in the downturns, if you bought solid companies that you're really comfortable with owning for the next 10 or 20 years, you can't be looking at a one month time period. You have to understand these companies.
They're prepared to go through recessions and downturns. They're prepared for that and they've done it before. Most of the companies, I own, they went through 2009, the worst Financial recession we've ever had and Survived it. And so there's no reason to suggest they won't be able to survive the next one. It's whether you can survive. It is the real question. I think most companies I own will probably do. Okay. Some of them might fall off but a lot of them will do okay?
And so it's, whether you can survive the downturn and keep invested during that time. One thing you can do, you can dollar cost average in. Like you're saying keep investing during a downturn, but I really think it's a time to just pick your risk tolerance. You have to figure out your risk tolerance if this is a lot to handle, Like this past week or the past few weeks of it going down 4%.
Again, if we look at this graph, year-to-date it's up 11% there's nothing to stop this Market from going down 11%. So if you look at it and you would be destroyed, if it went down, 11% increase the amount of fixed income, you have increase the amount of bonds that you have, by investor grade bonds treasury bonds and you know, International bonds and those type of things to help help soften those blows.
So you can just pick a More conservative portfolio, allocation, there's nothing wrong with that if you feel more comfortable with that. Okay, so the next question is a good one. She says hi Joseph. I would like to know where m 1 Finance gets its income if it's not from transactions. I assume some of it is from the cache on the account that is below $10. I like your conservative sensible approach to investing. Thank you. Okay. So, how does M1 make money right?
There are free broker, they don't charge anything for transactions. And there's no like hidden fees anywhere either. And that was one of the biggest questions I had. When I signed up for him on finances, how on Earth they made money?
And I did a lot of research on it and there is A really sensible answer to it. So one thing is most even traditional Brokers they don't make most of their money on transaction fees, they make maybe like from 30, you know, 20 to 40 percent of it on transaction fees. Now those transaction fees are going down and down because Brokers like M1 are pushing the whole industry to reduce the amount of transaction fees are charging, but where they do make their money. There's lots of ways that
Brokers monetize, your money. The cash on the account is one way, I don't think M1 makes, Literally a lot of money that way because anything over ten dollars can be invested. So I don't think they have tons of money sitting as cash, but that's definitely one way that they make money.
Another way is called lending shares, which there's other Brokers that allow for short selling win mm1, Finance lens, your shares to short sellers, they charge interest on that an M1 Finance Pockets. The interest that they charge that helps pay for em on finance, so you don't get the interest on your lended shares and one Finance, does they? A monetize your shares that way, it doesn't affect you. Although like lending shares is a totally common practice that
every broker virtually does. So that's one way to make money is lending shares another's. Cash on account. Another selling order flows, they make money that way as well. Another one is M1 Finance has m 1 bar 0, which is a way that you can get margin on your account and you pay interest fee on. That's like a 4.25 percent
interest on margin. So that's like a fifth way they make money and then another way that they're going to make money is They're coming out with M1 spend which is their banking functionality and then they have a premium version coming out.
That's a yearly membership that gives you a bunch of perks, high yield savings account or high-yield checking account all these different things and that's called M1 plus and that's going to be like I don't know it's like 50 or 100 bucks a year or something like that to get all these extra perks.
They're not changing the price of the whole base investing system so that will always be free but they have I mean right there that's like five or six different ways that they can monetize so they have a lot of ways of making money. These aren't one of them that they want to pursue and I think the whole industry is going to move more towards that way, a lot of traditional Brokers that were charging fees or
drastically reducing them. Okay so the next question is from Brad. He says, can you please explain in a video? Why companies and S&P 500 especially like Amazon do not pay dividends. So this is a this is kind of a question about why companies return value to shareholders in different ways.
There's different ways companies can return value to Shareholders. They can either give part of the cash flow that they're generating through dividends or they can try to increase their overall company's growth and standing and market capitalization through expansion. Now, there's some companies that
I think it's great. They pay dividends those are the ones I bet invest in their companies that have excess amount of cash flow, more than necessary to reinvest in themselves and expand what they do at that excess cash flow, is they return value to their shareholders by dispersing? Some of that cash flow to the investors to us. Those are dividends now, there's other companies like Amazon and
Amazon has such a smart team. They have so many smart people working there, and they're expanding into so many different Industries all at once that they need 100% of their cash to be able to fuel that growth. And they're thinking, well, we don't need to return value to shareholders through cash because if you can return value to shareholders by rapidly expanding into many, as many different Industries as we can, and that's the goal behind it. It's a different strategy.
They're they're both successful. There's some people that do growth companies and there can be a lot of success. That way there's people that do Dividend strategy and there can be a lot of success. That way there's different benefits and pros and cons to each of them. But you have to look at what's the best way of company can return value to it shareholder, for some companies that's paying dividends for some, it's growing.
Amazon is one of the companies that has decided it can return more value to its shareholders by reinvesting in itself. And Going rather than sharing some of its cash degenerates. Okay, so I'll do one more question. I have another like six lined up, but this could go on for another hour for let it. So, I'll answer the others in another video. This last one is from Dillon. He says, doesn't growth of a stock and Trend matter. You always talk about how you don't care about capital
appreciation. But if a stock takes a 15 to 20 percent loss in a year, and you're given is 2 to 3%. Doesn't it kind of take away from return on investment curious on your take on this. Thanks man. All right Dylan. So that's a good question. I have said before, I'd it's not that I don't care about capital appreciation. It's that I don't use it as a gauge of how my portfolios doing because capital appreciation.
I mean it's decided on investor sentiment at least in the short term investor sentiment and emotion plays a huge role on capital appreciation. Investor's just moving their money in and out of a company investors decide capital appreciation. The company decides the dividend Do you see the difference there, investors and external Force are deciding the capital of the company. While internally, the company itself is deciding the dividend.
So what I'm doing is saying, I'd rather focus on the thing that the company is actually deciding, they're the ones that have the balance sheet, they're the ones that are deciding how much of a dividend they pay. They don't decide how much their company is worth by capital appreciation. That's investors. I think investors are much more finicky. A much, much more emotional than the executive team at these different companies that still
Over the balance sheets. So what I'm saying is that I focus on the balance sheets, I focus on the dividends that are reflection of that. Now, we can go to your example, specifically, for company loses 20% of its value and it's paying like a 3% dividend. What does that do to the dividend yield? When a company goes down in value. But it's paying a, you know, it was paying a 3% dividend that yield increases and what happens when a company, a good company pays a high dividend that
attracts more. Is in one more investors. Buy into a company that drives up the price of the share, which increases the capital appreciation. So, dividends do increase the capital appreciation over time.
If a company is able to sustainably increase the dividend over time, the capital appreciation will follow because investors they seek yield at. They want to find yield and when companies are able to provide that investors will follow, now there's some companies that will have a high yield and investors still go. No way I'm in put my money in that, you know, you might have GameStop As an example. And the reason that happens is because there's things actually
going wrong with the company. There's actually decaying fundamentals in the company and that will happen. Whether you have capital appreciation, Focus or not. So the people that are just growth investors. They're going to have some companies that fall because the fundamentals Decay. So there's nothing you can do about that. But my strategy is not to focus on the whims of the investors is to focus on the actual companies that things that are decided internally and see how their
fundamentals are. I think if a company is able to continually increase its dividend payment year over year and keep that as a fundamental strength of the company capital appreciation will follow because investors Will Follow That increasing yield. So that's the basic premise of this investing strategy. So that's all the questions I'll do. Let's talk about the last thing which is a news. I had a touch on this new story, so I thought it was pretty great.
This is a follow-up to the whole Occidental Petroleum, buying Anadarko deal. I talked about this like a week or two ago about how Occidental Petroleum is buying another company around the same size of them called Anadarko. And in order to make the deal work they had to find Outside funding and they found it with Warren Buffett and Warren Buffett. Made out a wonderful deal for himself where he got preferred shares and higher dividend yield
and the common shareholder. And the consensus on this was that the common shareholder of Occidental, got kind of screwed in the deal. They were they got the bad end of the deal. And that showed I mean the stock went down like 40% so I'm way down on it. Luckily, it's a very small holding of mine. Now this guy right here is Carl Icahn. He's worth about 17 billion dollars, he's an active investor. And what I didn't know is that he is a shareholder in Occidental.
So he disclosed that he holds 1.6 billion dollars of Occidental shares. Nearly 5% of the company. He's not happy about this deal at all he calls it hugely overpriced he's suing. Occidental, you know, he's trying to get paperwork and trying to figure out what's going on because he thinks that this deal is fundamentally misguided. So way that he put it and then he took a big jab at the leadership saying quote a 90-minute deal negotiation with one of History's can taste
investors. I mean like most shrewd investors is no place to gain merger and acquisition experience at least if you care about protecting your stockholders he's talking about their negotiation with Warren Buffett. He pretty much says it. Warren Buffett took advantage of them because they're green. They don't know what they're doing. And Warren Buffett is a super experience with this, which is kind of what happened. Warren Buffett really got a
great deal with this. The common shareholder did not get a great deal with this and neither did mr. Icahn, who owns, one point six billion dollars. So he's Furious about it. I think he's going to try to stir things up and you know, he's obviously doing a lawsuit. I don't think he's going to be successful at stopping this deal though. I think it's going to continue to go through so we'll see what happens. We'll see what happens but I thought it was interesting.
To mention that anyway. Well, I hope that you guys have a good weekend. I will see you next time.