Recent Purchase

Well, I finally purchased stock for my re-vamped Roth IRA.  If you recall, I wrote a few weeks ago about how I was changing around my roth IRA.  I've had my eye on ARR for quite some time now.  Today was the ex-dividend date, so I decided to go ahead and buy today on the dip.  I bought 1110 shares at 6.97.  Using the current dividend yield, I will be collecting $122.10 per MONTH.  I realize this is a pretty risky play, but the idea here is to purchase high-yield, high risk stocks in the beginning, and then over time, use the large dividends and annual contributions to purchase incrementally lower yield/risk stocks.

I'll be collecting some dividends next week in my taxable account, so I'll be looking to buy something there soon as well.

Big J

Roth IRA almost rolled over, now what to buy?

I've filed the paperwork for the conversion for my roth from a mutual fund company over to a discount brokerage.  I'm looking at about another week to 10 days before the money transfers.  Until the transfer is complete, I'm trying to figure out how I want to invest the money.  We're not talking about a lot of money here; after combining both the transferred cash and the new contribution, somewhere around 7k, so my initial investment will probably only be in one thing; with future contributions being used to purchase other things.

My initial idea was to purchase shares of an mREIT.  These are companies that make money by financing real estate.  In essence, they are borrowing cash at short term (smaller) rates and then lend the cash for mortgages at long term (higher rates), but it is somewhat more complicated than this, as a lot of times they're just buying mortgages and re-securitizing them to sell to another mREIT or some other entity.  The other thing about mREITs that is appealing is that they must pay out 90% of their earnings to shareholders in the form of a dividend, so yields can be quite high.

I currently own one mREIT - Chimera (CIM) (which invests primarily in non-agency (non-governmnet) backed mortgages in my taxable account.  These are inherently riskier investments, as we're all aware with the risks of real estate investments these days, but it currently yields close to 18%.  I still think this a good buy right now, however I think I'm going to invest with another mREIT.  A roth IRA is a good place to invest in one of these, as the high yield is protected from taxation.  The two I'm currently considering are as follows:

Annaly Capital (NLY) is sort of the parent company of chimera, except that it invests in agency backed mortgages, making it a safer play.  Its currently trading around 16 dollars a share, with a dividend yield right at 15%.

Armour residential reit (ARR) also invests in agency backed mortgages, but it focuses on residential real estate.  Its currently trading at 6.78 per share, with a dividend yield at 19.4%.  I should mention that ARR is a fairly new company, probably riskier than NLY, and recently trimmed its hefty dividend by 8.5%.  I feel though at this price, its a great buy, as the book value is 7.11 per share.

The grand idea here with my roth is to initially invest it in high risk, high yielding stocks, then step down in both yield and risk with future purchases.

What do you think?

Life After Debt: The Next Phase

After paying off my car this week, I can't help but spend some time thinking about how I want to invest what used to be my monthly car payment.  Also on the horizon is my big dividend check, which comes around the 16th of October.

I feel like my first order of business is to straighten out my Roth IRA.  I started a Roth in 2002 without really knowing what I was doing.  I went into the bank I was using at the time and sat with one of those financial planners at "the desks" and set the thing up.  It was in in B shares of what is now the oppenhiemer main street fund (I had no clue what I was doing at the time).  The exit penalty should have expired by now, so here's the plan as I see it:

Next month, go to scottrade and with the dividend check I'm getting, open a new roth IRA there.  Once the account is established, roll over the oppenhiemer funds into this account.  This will give me approximately $7500 dollars in the account.  As I can, I will continue to put money into this account until the end of the year until I have reached my 5k contribution limit.  Then, in subsequent years, do the same thing, until I get wildly rich and can no longer contribute to a roth because my MAGI is too high (I know, really wishful thinking).

As far as investing goes, my thought is to set up a ladder-like effect, first investing in extremely high yielding (and much riskier) dividend stocks, then stepping it down to lower yields (and also lower risks).  I was thinking for the first investment, maybe an mREIT first (ARR has piqued my interest recently), followed by one of the telecoms, and then finally, utilities and consumer staples (think PG, JNJ).

Any thoughts?  This plan is by no means set in stone.