What is Selling Theta about..?
Selling Theta is one man’s chronologizing of his march to financial freedom. My investment style focuses on Dividend Growth Investing with the utilization of modest leverage (though borrowed money and short put options).
Why Dividend Stocks?…
Dividend Investing focuses on creating a growing stream of income to provide retirees income for years (in perpetuity if structured correctly). This is different (and better) than a total return approach where you target an asset allocation and sell off a percentage of your assets (the general rule of thumb is 4%) annually to fund your living expenses. The problem with the total return approach is the volatility of market prices during the liquidation phase of your investment cycle. While, over time, the market reaches an equilibrium fair price for the securities in your portfolio and the amount of stock sold above “fair value” and below “fair value” should equal out, the compounding effect of the volatility puts your portfolio at risk of ruin. Take a look at The Benefits of a Dividend Approach. A dividend growth investment strategy does not face the same issues so long as your portfolio’s income stream is safe (i.e. no major dividend cuts) and the companies that you invest in grow their distributions by at least the inflationary rate (most companies do).