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Online Share Trading

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Timing a buy

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SkarlakenKoos
Frequent Contributor
Hi First of all, ignoring all the other indicators and principles, when is typically a better time to buy? Before the dividend is paid out (say 10 days before) or ex-div? (Specifically for medium-long term.) Many might say that for long term, it shouldn't matter, but I don't agree. If you can get 5% more value for your money, that R2000 that you save, may, in a few years be much more. I'm not saying to delay the buy indefinitely (that's also unwise) - but shaving a few cents off the price, IMHO, is a good idea.
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13 REPLIES 13
Not applicable
Interesting idea but ,on a pure statistical level I would say, it matters not. with Div you get that R2k into your account and the share usually drops by about the div value that was priced in probably upto 4 weeks before. So if you want technical the same applies if you spend R2k more than ex-div you back to square one as you gained the R2k with divs. More shares at lower price means more divs next time but next time might be smaller div or no div (could happen). Over time thus it is not a factor unless you a "cheapskate" and want to prove you bought shares cheaper than the next guy....

If you keep a sheet of all div dates for companies you follow you should be buying about 8 week before div is expected (that way the price of div is not priced in and you get it "cheaper")- buy with spare cash (other that what you wanted to invest anyway) to catch the extra div and then either keep or sell the shares you bought to the value of div to release spare cash again - that way you accumulate more shares with the div and you get cash out again.
Many strategies to kill a bird
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geordie1
Super Contributor
if after researchg I like a share and want to buy for long term I wait until some bad news hits the price down and I buy ideally when div is around 5% and pe around 10.
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GarethJ
Regular Contributor
Last year I had great success buying shares about 10 days pre-LDT (and selling 10 days post-LDT) as the share prices almost always appreciated more than the DIV drop. I especially chose shares with a high-ish DIV yield. However, I suspect that this was working well as Investors were using good DIVs as a signal to re-enter the market after the crash. So this strategy worked very well then, but is likely to be very hit-and-miss in this volatile market - success will be more heavily influenced by Market Timing rather than DIV effect. IMHO
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SkarlakenKoos
Frequent Contributor
Thanks for the replies guys - so in a nutshell: it does not matter that much.
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Russ
Super Contributor
As far as selling goes is it not better to take the div and then sell at a lower price(and lower profit) as divs are not taxable?
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GarethJ
Regular Contributor
From my research DIVs are taxable if you short term DIV scalp like this - must hold share for 3 years plus to avoid income tax. Exception is CFD's as discussed a few weeks ago.
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Not applicable
Timing a Buy ? Easy. Look at the chart.Buy at Support.Sell at Resistance. Do you have the Patience required ? You only learn this simple rule the hard way.### Oscillators and Div payouts.All just Noise. Scar-Face has spoken.The Cat looks up.
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john_1
Super Contributor
Actually it can make a massive difference...! buy just after results can be very rewarding simply because people use finacial results to base there buying and selling decisions...so good results can lead to a shares re-rating and because markets look forward that re-rating so there might be a sustained buying period of a couple of days pricing in the future growth.
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Not applicable
hi John, Look at Clicks, as an example of such a system. Trading update has led to 10% gain in two days.
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john_1
Super Contributor
EXACTLY... I was going to add this morning that the best moves and momnetum are likly to come from surpise earning updates ahead of the results..clicks being a case in point...Also its a bull bear thing.. in Bull markets its likly that you see a strong jump up remembering that markets dont move in streght lines so eanings adjustments are price over a couple of days perhaps a week or two.
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john_1
Super Contributor
one other thing use an installment cheap entry and you get x2 dividend relative to share price exposure..so if you have trading profits the absolute worst thing that happens is you get dividends at the expence of capital... very good risk reward...and If you actually do some very serrious study like the analysist you can possition size acording to research and earnings statments...
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Not applicable
I have been working on a system using this technique for the last 2 years. The principle is to catch stocks that get rerated (based on sens announcements). Then the entry price (plus slippage margin, holding costs, etc) becomes the stoploss, effectively leaving me with 0% risk exposure. I then leave the position open, with the strategy that a rerated stock won't retest its old levels. I repeat this exersise until i have massive leverage (more than 100 times my total trading capital). The theory is that then that a 1% move on the holdings will double my initial capital.
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john_1
Super Contributor
sounds good but retests do happen.. so perhaps buy half on anouncement and if pulls back by second half on the break out after the retest.. then stop as suggested...just a thought but your reaseach will be more conclusive.
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