I'm starting a new series on Reducing Cost Basis because I think reducing your cost basis is a powerful concept many traders/investors miss. It's important you don't just focus on your original purchase price, but instead think: "how can I reduce my cost basis", and you don't always have to buy more shares to do this! For me cost basis reduction is always on my mind. It's why I sell premium against my shares I want to reduce the effective purchase price to as little as possible.
When we think about buying stock it easy to just focus on the trade price, but in the Good Kids Trading (GKT) universe, our perspective goes beyond that initial entry point. It's all about reducing your risk, and ultimately, enhance your profitability.
If you know me, I’m always focused on the simplest way to achieve my trading objectives. This series isn't about selling you a shiny or complex solution; it's about sharing simple techniques I use, so you can learn, implement, and make better decisions.
Over the course of this series, I’ll show you a few simple yet powerful tactics I use to reduce cost basis.
We'll discuss the importance of dividend income, particularly from dividend aristocrats – companies with a history of consistent dividend payouts. These dividends aren't just pocket change; they are tools to help shave down your cost basis over time.
We'll also explore selling premium, a strategy that includes covered calls and strangles. It's about generating income while gradually decreasing the cost basis of your stock holdings.
And let's not forget the concept of pyramiding – buying more shares as a stock's price dips. It's not just about getting a good deal; it's about utilizing market dynamics to your advantage.
So, if you're excited to discover the "secrets" of reducing cost basis without the need for complex formulas, stick with me! My next article is a real-life example involving Cardinal Health (CAH). It's all about learning, understanding, and taking your trading to the next level. Ready to dive in? See you next time Good Kids!
Disclaimer: this isn't financial advice. I’m basically just some dude on the internet who’s been trading a while, and I use the stock market as my primary source of income. None of this is financial advice it’s purely educational!