Criterion for Mid- to Long-Term Investments in Securities
Christopher Clayton
09/09/2024
Basic Approach
I am not a financial or investment professional. However, I have always managed my own investments and have my own ideas that I wanted to share for holding securities on a mid- to long-term basis; both my original strategies and goals, and how they have changed.
When I first began investing part of my wages into non-bank vehicles, besides pre-tax contributions to a handful of mutual funds in a 401k, I also started those additional accounts with seeds into various mutual funds. My goal was solely to spread money around into region/country and industry-diversified funds for long-term growth, and which generally held an above-average rating with firms such as MorningStar.
For non-US regions, this generally meant a concentration in large and established markets such as various countries in the EU, Japan, China, and some in India. Then I moved on to trying to invest more in south America, eastern Europe, Africa, southeast Asia and Austronesia, but few funds managed in the US tend to invest in such locations, and fewer still which met my criteria. I eventually stopped balancing for exposure to mainland China because of macroeconomic developments depressing long-term fund share prices for funds with heavy China investments. I also explored investing in mutual funds managed in other countries, but because of other regions' weariness of taking US customer funds due to highly rigorous FATCA regulations, I gave up on that possibility quickly.
Eventually, because I noticed that I invested at too high of prices sometimes compared to ideally buying for long-term price appreciation potential, I started to filter mutual fund possibilities further by their current prices relative to recent price history. If the price wasn't at least somewhere in the middle of its five-year high and low, I didn't find that fund worth investing in at that point. If I wanted to invest money immediately, I would select some other fund that met this price-point and diversity criteria.
The point of targeting a purchase price somewhere in the middle of a reasonable range for establishing a high and low point reference was to ensure there was some level of proven room for price growth, while allowing for expected volatility and hedging for the viability of the fund. I.e., I didn't generally buy into funds near a price rock-bottom, especially if that occurred or was in the process of occurring counter to the trend of other funds. When prices did bottom at certain points for funds I did invest in, that meant dividends and capital gains were re-invested at those lower rates (more shares purchased). I was not actively managing this 'fund of funds' of sorts so I left gains to be automatically re-invested.
Now that I've seen a need to switch toward earning more passive income, and with some of the funds at a high price-point and others somewhere in the middle of a recent high and low price point by my range standards, I liquidated all of the positive price-gained mutual fund holdings in the non-IRA accounts. This was on top of the re-invested gains. I focused on liquidating shares in funds in the non-IRA accounts because gains can be taken out to use toward expenses. I hold a Roth IRA but of course, taking money out of it means paying capital gains plus a penalty, and is akin to a permanent loss in income tax-advantaged principal given that only a certain amount can be invested per year.
I concentrated first on pulling out of a few funds that consistently suffered from 0% yields. I don't know why some of them were like this when the main benefit of mutual funds that I could see was a stable (albeit low) yield because of prices generally oscillating about a central price for long periods in most of the tens and tens of mutual funds I've been invested in. Then some of those ones in particular hardly appreciated in price on top of that.
In terms of moving to higher-yield vehicles, this entailed much the same diversification, current purchase price and equities rating strategy, while factoring in a yield rate goal as well. Based on where I'm at with my expenses and mortgage, I targeted at least looking at individual stocks with a current yield of 4% or higher (current percent yield based on absolute annual yield divided by current price). Ensuring some reasonable room for prices to grow while hedging for possibilities in extended price declines is more important for individual stocks when allowing for a medium-term strategy of selling them at a relatively high price-point in the volatility cycle to re-invest in another stock, and as part of earning capital gains for expenses besides the passive dividend earned up to that point.
As far as determining when to divest of certain stocks, I've taken the view that when the price has appreciated, check the current percent yield rate. If it has fallen below one's yield rate goal, may as well sell the security and re-invest in a different vehicle with a current yield rate within the goal, even if the absolute yield divided by original price paid is still within the percent yield goal.
If a security has dropped in price significantly, it's also still worth checking the current yield for reference. In my strategy, I don't see a reason to sell a security at a loss, but if the security has fallen heavily in price and the current yield rate has dropped below one's goal, keep that in mind to sell the shares as soon as the stock manages to break even.
As far as further scrutinizing the price of a security versus current yield rate, check its high price point within a five-year range (or by whatever range one finds appropriate) and check what the yield rate would be if it achieved that price again, assuming the current absolute yield remained stable. If the yield rate would drop below one's percent yield goal by that point, even though it would meet the yield rate goal now at its current price, it may not be the most effective stock to invest in versus another opportunity with otherwise similar characteristics and which would meet relative cost basis, diversification, etc. criteria.
In terms of creating a criterion regarding ideal buy and sell prices and extrapolating when such prices may be achieved, of course, one could get into probabilistic forecast modeling and so on. However, an overarching diversification strategy and price analysis tactics on the scale of reviewing the fundamentals is designed to make decisions to immediately invest money in securities (not automated by timed conditions, or options as such) out of a large multitude available at any given point for mid-term to long-term retention.
Creating an exact forecast model based on previous price data as a sample population basis with potential shocks and seasonal changes accounted for while keeping the model parsimonious could still be done, but I say to target buying somewhere in the mid-range price level of established stocks relative to their recent histories to get a sense of the price growth possibilities without completing such detailed quantitative analysis. The primary goal is also to earn passive gains via the dividend yield with conditions in mind for when to move into a different stock, where part of the sales gains could also further go toward paying one's expenses; and to invest at such scale and diversity to increase the probability of a stable pattern emerging to achieve such outcomes.
Personal preferences regarding industry and company types - 4/27/2025
After refining strategies since 2014 with fundamental respect toward the idea that previous outcomes do not determine upcoming events, even while recognizing that stock trading has a conscious basis (the collective impact on securities prices from trade decisions in the form of aggregate Buy/Sell orders), I still have increasingly based decisions not only on the fundamentals described above but also on my knowledge of and attitudes toward certain industries and product categories.
I've always been skeptical of the volatility of US tech companies (both software and hardware), and a general propensity for US stocks to experience extreme volatility (or perceived volatility) compared to other markets. Now US tech companies have been the subject of some of the largest stock valuation gains as well as losses within only a range of a few days. Even without recent extreme highs, this phenomenon is partly what spurred me to mostly keep investments outside of the US, and even then I tend to devote a small minority of investments to health services, IT or similar industries perceived to be relatively more volatile than others.
I tend to invest in mutual funds weighted toward industrials or in individual stocks whose issuers are involved with industrial products. Not all such products are necessarily always stable in demand and thus company performance may not be stable by that standard, which all inform society's investment decisions in general, but I generally assume that they are likely to have stable revenue (e.g. especially regarding concrete or chemicals, or other equivalent precursors to other products). However, I'm also fine to go into energy production companies in spite of potential for supply and demand volatility in that space which can then affect buying and selling patterns of the related stocks because the dividend yields tend to be higher than those offered by other industrial or consumer product companies.
An early investment issue I'm still stuck with has to do with a consumer goods company I invested in, where such companies can have lower profit margins in the same vein of retail companies, resulting in it offering a relatively low dividend yield. I had also invested right before that particular company posted even lower revenue than targeted for that year with resultingly diminished growth prospects, and I hadn't yet considered current dividend yield in my investment strategy before I had invested in it to begin with. However, I have done fine with a few food production companies otherwise in terms of actualized price growth after purchase. I also invested in some communications companies right before their stock prices plummeted as part of another early issue starting out with individual stock investments, and I still haven't resolved it (holding out for the prices to at least break-even). However, even relative to what I had paid, the dividend rate is still well beyond my minimum standards. I still see communications companies (offering both the telecommunications services as well as hardware, either in the form of devices or the network infrastructure) as offering decent dividends by my standards, and can have mid-level or low stock price offerings by my buy order standards.
As far as IT services (software) companies that do not offer hard products, I generally don't prefer to invest in them, but if a given stock price offering relative to the price history range I prefer to utilize for analysis meets my standards, and if the dividends meet my standards, I'll consider them. However, in a sector such as recruitment services, I have not seen any combination of price offering or current dividend yield that interests me, besides that I'd still prefer hard product sectors.
Mechanics of navigating a stock trading website (Schwab in this example) - 5/3/2025
I have used Schwab for all of my mutual fund and individual stock trading activity, and it utilizes a highly paginated structure to regulate bandwidth use on all of its research systems. Its mutual fund and US stock systems have many filtering options to choose from, including Morning Star rating, Schwab equity rating, industry type and categorization (e.g. large cap; small cap). To see a long range of price fluctuations and current dividend yield requires clicking on each sub-page result for a given filtered search.
The same principle is largely involved for Schwab's non-US stock research system ('international' stocks) but the interface is different. The primary categories have to do with selecting a region and then which countries out of that region should be filtered. Industry type and Schwab equity rating can then be filtered, with the primary difference being that market cap can only be filtered by exact amounts in USD.
That all of the data I typically use for making buy and sell decisions is in sub-pages means that in theory, all of the asynchronous filters could be set via a data mining script that then also collects and visits each stock sub-page to scrape the needed data by which HTML container types they are in, while also visiting each asynchronous pagination to traverse every possible paginated result. However, this would likely be against data scraping policies that Schwab and other websites have adopted. I do not review data and trade at large scale anyway, but finally started using keyboard shortcuts to quickly open and close sub-pages as new tabs.
As far as 'international' stock, there is also the matter of depository notes where a bank or other over the counter institution technically still owns the shares, or a setup where the shares can be directly obtained via over the counter USD-dealing intermediaries ('Y' and 'F' suffix offerings). Those can be obtained via a Schwab individual account versus needing to go through a Global account and exchanging into target currencies to execute orders directly through various regions' stock exchanges via a Schwab broker (the ones that Schwab offers, at least). However, many of these over the counter offerings go through a very particular third-party company or set of companies that charge a noticeably high commission fee compared to buy and sell orders of US-listed stocks (free) or going through a Schwab broker to access non-US stock exchanges that Schwab has deals with (typically the equivalent of $20 per buy or sell order). 'Grey market' over the counter trades for US depository notes or intermediated non-US stock acquisitions have a much lower commission but the asking price can be noticeably higher than the market price; i.e. I've typically seen thirty cents to multiple dollars higher. This to me acts as a commission by another name, with supposed justification in the competition to buy such stocks, and putting in too low of a bid (limit price) can very well mean the order getting canceled. There is no way to set such orders as market orders; they have to be limit orders and thus are in essence bids.
Even Canadian stocks seem to be potentially subject to this grey market phenomenon even though I have obtained some without a grey market commission fee via my Individual Schwab account, probably because those ones were dual-traded through the New York Stock Exchange or an equivalent US exchange (search via that account without adding a ':TSX' suffix). It is also possible to buy Canadian dollars through a Schwab Global account, but trying to buy stock symbols with a ':TSX' suffix with that account doesn't seem possible. They do not show up as a valid symbol in the Global account trade interface, and neither do the equivalent symbols without that suffix, which would need to be purchased in USD anyway.
Getting into a buy and sell schedule relative to market orders and grey market limit orders - 6/14/2025
Given that my securities investment goals involve selling assets as soon as the they reach specific growth levels (i.e. around 15% to 20% growth compared to purchase price), timing sell orders to hit these goals matters to some extent because of market opening and closing times. I focus on medium-term growth (less than a year but at least waiting multiple weeks, if not months, to sell), so it isn't the same specification as attempting to day trade. However, I find it still matters to some extent given that some stocks can fluctuate wildly within a day. Again, particularly US stocks and volatile industries such as information technology in my experience.
Normally I will wait until the weekend to plan a number of sales and purchases so they execute right away when a given market opens. Saturday is essentially when all global markets are closed (Asia being about fifteen hours ahead of the west coast United States at any given point in a year). However, in my thinking now, if there is a relative price rally occurring throughout a given week for stocks I own, I might sell the stocks that have already hit my growth goals (or that have gotten close) on Thursday on the psychological assumption that various people and institutions might be gearing to sell various assets at the close of the working week under these conditions.
However, when it comes to the grey market (US depository notes or equivalent that are offered via additional intermediary institutions or platforms) where limit orders have to be placed (market orders not allowed), the complication is that buy or sell orders may not be matched with a seller or a buyer (respectively) on the day of execution. I go with setting the limit price of such assets to around equivalent market price (what the depository note or equivalent is reported as being valued at in US dollars relative to the country of origin's formal stock exchange offering). Then if a sell order doesn't go through, there's no choice except to try again later which may involve a delay while waiting for prices to increase again. Or for buying, I may try another buy order that targets some other asset.
This is part of the layer of uncertainty I see with the grey market, but there's no other way (at least with Schwab) that I understand to increase diversification outside of the selection of countries offered via a given platform's formal stock exchange partnerships. This is especially the case when certain markets such as Indonesia are otherwise entirely unavailable without registering one's identification through an intermediary trader or platform that's specific to that country, and passing order requests through that separate intermediary. I still can't realistically find many options, but it can at least act as some level of diversification and does not involve paying high transaction fees.
The other potential problem as I outlined before is when ask prices of certain grey offerings are significantly higher than market-equivalent prices which makes it impossible to reasonably invest in them, but I at least don't see such a disparity with Canada. I can get limit orders of Canada grey market offerings to execute close to market price consistently, and the ask prices are not usually upwards of thirty cents to a dollar (USD) per share higher than equivalent market prices as I see with other countries (e.g. Indonesia), even though some definitely can be even in that context. However, the consistent concern regardless of country of origin of the underlying asset is timing due to these extra institutional layers that prevent direct buying and selling via market price through a formal stock exchange (risk that orders won't be executed), but I still plan to follow the trend of generally reviewing and executing actions on a Thursday or on the weekend.
Macrostructural influences on investment choices by industry - 6/26/2025
As described previously, I tend to avoid service sector-type industries for investment in favor of raw materials or industrials because of my perception of stability combined with growth potential. Regardless, most important to me is keeping to relative buy price targets (relative to where the price of a stock sits in a five-year span) and sell-price targets (looking for a specific level of growth before selling to meet my financial goals).
However, of course, it's also worth considering economic trends which can be predicted as having an influence on the psychology of institutional and individual investors en masse, and thus which have an ultimate impact on stock prices due to the volume of buy/sell orders. The most obvious recent example has been universal US tariffs on multiple products (at least the effects they had after they largely ended up being very temporary), particularly impacting finished automobiles ('consumer discretionary' as far as Schwab calls the industry, at least) and car parts.
I had invested somewhat into finished automobile stock before tariff changes. Then afterward, I decided to get into some auto parts (industrials) manufacturers at relatively low prices compared to my analytical standards. Then I also went further into finished automobiles/motorcycles. The finished automobile manufacturer stocks were gotten into with knowledge that they may take longer to become saleable by my growth standards, but nevertheless I adhered to choosing ones in line with my percent dividend yield strategy. One auto parts manufacturer met my growth targets for sale rather quickly; in about a month.
As mentioned before, I don't prefer investing in service-related industries, but many publicly-traded recruitment firms that I have reviewed in particular are relatively low-priced or even reached recent near lows over a five-year price history. Schwab counts such firms under 'industrials' but I don't see them that way for my purposes. Some of this downturn may have to do with employee headcount reduction resulting in lower demand for those services. I.e., the capabilities of large language models being perceived as being able to amalgamate previous knowledge and data work in a convincing enough manner into derivative works that fewer workers are needed, where such data is now mass-captured in training databases, regardless that such a pattern-based amalgamation process in itself does not constitute an innovative or creative process. My stance on workers being treated essentially as commodities subject to supply and demand in themselves by a vast majority of companies who then enforce a system of making people almost entirely individually responsible for meeting very exact constantly-changing skills requirements, such companies' ever-increasing disregard for cross-transferrable capabilities and peoples' ability to learn, alternatives to that model and how recruitment/contracting firms may operate differently if a majority of businesses change how they perceive labor are analyzed in my article outlining a concept for worker cooperatives.
Retail and hotel service business stocks are also largely low in price now, which may have to do generally with the seasonality of consumer spending on vacations or a recent downtrend in such consumer spending. I perceive those industries as having a generally low profit margin and having heightened volatility compared to what I prefer, but I've seen multiple such stocks offering percent dividend yields that would work for me.
I further continually see pharmaceutical companies (health care with an industrial aspect) at very low prices relative to my standards. This may also have to do partly with US tariff policy scares and current innovation patterns in the industry, or perhaps investor fears that the industry will experience more government regulation to cap drug prices. I still don't prefer to invest in that area because of my perception of a high propensity for volatility in the space, and many such stock are paying low dividend yields compared to my goals.
Dealing with non-ideal growth against schedule constraints - 7/22/2025
Given that I have now been using investment income (dividends and capital gains from sales) to pay for regular monthly expenses, inevitably I was going to encounter a scenario where I was at risk in a given month of not having enough earnings to meet those expenses. I.e. that a 12% to 15% growth target was not achieved in enough stocks going by my standards, or even that a 10% target was not achieved.
Such a scenario then requires shorter-term, heavier turnover tactics. Making this temporary shift isn't ideal relative to transaction fees paid (to buy and to sell), especially in the non-US markets I'm in, but there's no choice by that point. In this scenario, I found some selections to sell within my ideal range early in the month but then nothing else materialized by the mid-point of the month.
Toward making up this difference, I started selling stocks that had achieved 5% growth or more at the consequence of nearly tripling my expected turnover. Subsequently the research and buy order activity to find replacements had to nearly triple. It still isn't 'day trading' by any means, but didn't meet my ideal conditions for 'medium term,' necessarily.
Even so, this is exactly what has to be done when a schedule constraint of a sort exists (looming expenses) to keep utilizing this type of income, which will never be predictable. In my situation, the money that I have aside for individual capital investments has to work hard because the rest is in an IRA, 401k and a property.
At least as part of overcoming a given month under lower price growth conditions without dividend earnings to cover a shortfall, I'd say give securities at least a week to potentially reach closer to one's target. Then especially if it's at the mid-way or 2/3rds point of the month without enough stocks achieving an ideal price growth rate, a heavier turn-over strategy must be utilized, including trading on the target market's hours to ensure execution as quickly as possible. The concern would be if this had to become akin to a regular monthly strategy due to encountering the same conditions regularly, but it nevertheless has to be done as necessary and because it isn't ideal, I still find it acceptable to have a 'wait and see' buffer before resorting to heavy turn-over actions.
This has made me rethink Hong Kong investments in particular given that the transaction fees, at least through Schwab, are larger than Europe, the UK, Norway, Australia and Japan (over $40 USD instead of about $20 to 23 USD or so in these other markets). Needing to execute a higher-than-desired turn-over rate at lower price growth rates is too punishing to me relative to that market. Also, even filtering down to what Schwab calls 'C' grade equities (relative to how Schwab rates how their market growth may go), that in combination with 'A' and 'B' grades only amounts to the low-tens of potential selections for Hong Kong; versus hundreds of potential selections in EUR currency-denominated stocks, hundreds for Japan, and high-tens in the least for Australia across this grade range at any given point. Further, the lot sizes can be 100, 500, 1,000 or 2,000 so it's difficult to keep turning over a relatively uniform amount of core HKD principal from one stock to another unless the combination of price and lot size works out, while also meeting one's price and dividend characteristic to justify executing a buy. Japan by contrast is a flat 100 lot size, and the other markets I listed do not have lot size requirements.
Dealing with multi-month downturns - 11/12/2025
As is wont to occur even in spite of a continuous record period of general stock growth, there has been an extended downturn across my worldwide portfolio over the last few months. This meant an inability to make any real active income from sales.
The only choice in such a scenario is to keep some previous profitable divestments fully liquid to handle expenses as needed. Then wait for more effective opportunities, such as when general stock indices start to rise. This is all relative to when I purchased the stocks because the downturn only started a few months ago and I have had to turn over parts of the portfolio on a medium-term basis to keep up my target standard of income. Still, I was surprised to some extent that even stocks obtained at relatively low prices already (compared to recent highs and lows, and absolute five-year highs and lows) have dropped so much further.
However, generally, none of this is surprising with intense geopolitical tensions and current US policies; particularly tariff policy. This is also exactly why I left a substantial amount in mutual funds within IRA vehicles which are, as aggregate vehicles, less volatile. Further, when mutual funds are well-managed, they trend in an appreciating price direction. As part of the scramble to make the entire portfolio more active, mutual funds that were not yielding a passive dividend very often anymore, especially if not appreciating in price, have gradually been cut and converted to individual stocks as they achieve near break-even price in the least. I have kept investments in most funds anyway because most have consistently yielded a dividend, and to me this helps preserve total net worth even in a down stock index period. Even so, for meeting expenses via investment income, some non-IRA and non-401k assets have to be actively divested in such conditions.
Such market conditions could be an opportunity for options trading (shorting in particular), but there have still been patches of small recoveries as usual that could always signal an impending large influx of money back into the market again. I've always wanted to keep to solid ownership of assets rather than gambling with conditional buy/sell agreements, myself.
Relative to an asset ownership position (no options strategy), market conditions like this would not require holding back re-investment if passive income could keep up with my intended level of expenses, but this isn't the case. Regardless, the point is to keep to the same buy and sell strategy consistently in general. Keeping some money available after sales because of observing no foreseeable prospects for further sales (most or all assets in negative price relative to cost basis) is only a conditional delay within the entire strategy, where the selections taken based on previous reasonable prices (according to consistent criteria) and dividend outputs that meet personal needs is the key to weathering such conditions (expectations for most owned assets to recover from shocks to get back to the same active medium-term turn-over strategy).