What to do with extra funds for a dividend portfolio?

Episode 2: Growing a Dividend Portfolio

Every $1K

Currently my dividend portfolio earns 4% in dividends every year. That means that for every $1,000 invested in the portfolio, those companies in my portfolio will pay me $40 each year just for owning their stocks. My mindset going into this is pretty simple… every $1,000 invested will pay one cell phone payment every year for the rest of my life. From here on out, I only have to pay 11 of the 12 payments each year because that $1,000 invested will take care of the last payment for me. After $12,000 is invested, I will have my cell phone payments covered for the rest of my life.

And then I just keep going down my list of expenses… electric bill, water bill, car insurance, rent, etc., until one day my dividend account covers each of my expenses. That’s the ultimate goal. By growing it to that level, I will have hit my retire-able net worth. And if I can accomplish that for my family, then we can have the freedom to work or not work. Volunteer. Enjoy passion projects. Travel. And so much more.

Decision on extra money

Our dividend portfolio is currently built on a biweekly amount transferred into the account. I then have a process to purchase dividend stocks across a range of industries. But recently we received an extra $1000 refund from one of our wedding vendors, which was outside the normal process. So I decided that I would split the amount evenly between all of the companies and ETFs that had a dividend percent over 4%. This led to extra shares purchased for 11 companies in our dividend portfolio. Using Fidelity, I was able to purchase partial shares for no commission, thus being able to spread out the $1000 among 11 companies without any high costs.

Overview of Dividend Portfolio

Stocks purchased with extra funds:

  • T – AT&T Inc – 6.95%
  • PEAK – Healthpeak Properties – 5.40%
  • IDV – iShares International Dividend ETF – 5.37%
  • IBM – IBM Corporation – 5.21%
  • ABBV – AbbVie Inc – 4.99%
  • PFG – Principal Financial Group – 4.99%
  • SPHD – Invesco S&P 500 High Dividend Low Volatility – 4.72%
  • O – Realty Income Corp – 4.56%
  • USB – US Bancorp – 4.50%
  • VZ – Verizon Communications – 4.20%
  • SPYD – SPDR S&P 500 High Dividend – 5.31%

Performance versus S&P 500:

Our cell phone bill is now covered for three quarters of the year for the rest of our lives πŸ™‚ We are also beating the S&P 500 earned dividend revenue by $379, but losing to the gains in the portfolio by -2.28%. It was also nice to see the portfolio dividend % pop back up to 4% from the previous week, which melds well with the 4% rule for retirement.

Stock Quote

“The dividend is such an important factor in the success of many stocks that you could hardly go wrong by making an entire portfolio of companies that have raised their dividends for 10 or 20 years in a row.” -Peter Lynch

A company paying dividends that they consistently grow over time usually (I key in on usually because companies do misstep and cut/eliminate their dividend) means they are strong and profitable. These aspects are good to have in an investment. But largely, our dividend portfolio offers versatility in two key respects:

  1. For the time being, I can reinvest those dividends back into more investments that will also grow over time.
  2. And when we are ready to retire, we can use those dividends to pay for our expenses throughout the year.

You can get started by opening an investment or brokerage account. My favorite starter account is Robinhood. Simple interface, easy to use, and beginner friendly. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.

What is net worth?

Episode 1: Tracking Net Worth 7/1/20

How much does construction suck!?

For the last year and a half of living in our house, Lizette and I have been subjected to the pains of construction in our backyard. Clearing the brush, outlining the foundation, pouring the foundation, and building a metal structure to support the unique design cover the extent of their work. That’s it! Another house down the street started construction six months ago and is already near the finish line.

As annoying, and slow, and painful as it can be, they work to build a house potentially shown in magazines and represented as one of the best home designs in the ATX. Building an award winning house takes time, careful planning, hard work, patience, and so much more.

Building our net worth requires the same mentality. The process of getting to a retire-able net worth will be frustrating. We will experience setbacks and doubt our decisions. But if we can understand that it takes time, careful planning, hard work, and patience, then the possibility of an eight year goal to retire is achievable.

What is net worth?

If you decided today, I’m going to sell everything I own and pay off all of my debts, what amount would you be left with after the dust settles? Would that number be positive or negative? In essence, that is your net worth, or the total amount of assets you own less the debts you owe.

AssetsDebts
$ Value of Savings Accounts$ Value of Credit Cards
$ Value of Checking Accounts$ Value of Car Loans
$ Value of Investment Accounts$ Value of Home Mortgage
$ Value of Retirement Accounts$ Value of Student Loans
Resale Value of Heirlooms, Jewelry, Collectibles$ Value of Other Debts
Conservative Estimate of Home Value
Sum the above assets = Total AssetsSum the above debts = Total Debts

Calculate your net worth with the following formula after completing the chart above:

  • Net Worth = Total Assets – Total Debts

Don’t be discouraged if your number is negative. I had a negative net worth in 2017 after a banner year in 2016 when I racked up student debt and had a total income for the year of $25K. Lizette’s net worth was also negative after having accumulated $150K in student debt. The true test will be the decisions you make after identifying your negative net worth because that is where the hard work and sacrifice will come into play.

Our Net Worth on 7/1/20

AssetsDebts
Savings – $67,096Mortgage – $350,520
Checking – $32,581
Investment Accounts – $96,603
Retirement Accounts – $114,493
Home Estimate – $502,000
Total Assets = $812,772Total Debts = $350,520

Net Worth = Total Assets – Total Debts = $812,772 – $350,520 = $462,252

Lizette and I have started to touch base on our net worth every two months. We pull our numbers, fill out an excel sheet and calculate the increases/decreases. We have set our retirement net worth goal at $2.5MM (using the famed 4% Rule which will be discussed in future posts, but if you want to get ahead then you can read this Investopedia overview). So currently we are approximately 18.5% of the way there!

Also of note, we don’t include furniture, electronics, cars, or other collectibles we own in our net worth total. The cars lose their value over time, as do electronics, so they are nixed from our calculations. And collectibles are just that, collectibles, and not something to be sold (unless you are an expert in art or jewelry and have bought those pieces as investments to be sold later). And finally furniture is something we will need in the future regardless of our situation.

On the other end, I do include our house in the net worth because we will have the option to sell the house and reap the profits (up to $500K of which would be tax free) or rent the house out and enjoy the extra cash flow. We are also looking to have it paid off in the next eight years, so we could just live in it and lower our expenses (thus lowering our net worth goal since it is based off of expenses).

We calculated our first net worth together on 5/1/20, and overall our net worth increased 10.4% over two months. Ahh the power of the stock market. Who knows how it will react in the near future, but it was crazy to experience the fastest drop in history and then the largest increase in one month in history. My specific net worth increased 23.3% and Lizette’s increased 8.9% (solely due to the fact that my net worth was/is quite a bit smaller than Lizette’s net worth, so the money I save will have a greater impact on the % increases).

How we got here:

Lizette and I have had our bumps but we have stuck to a few key principles over the last couple years that have put us in our current position and have us challenging ourselves to retire in eight years.

  1. Spend less than 50% of what you make
  2. Don’t pay for new vehicles
  3. Cook at home and cook healthy as much as possible
  4. Keep track of a budget
  5. Ignore the whims of the market and just keep investing
  6. Plan ahead for potential changes in finances like having a child, moving, switching jobs etc.
  7. Prioritize our needs and wants so when a decision needs to be made we look back on our ordered priorities to make that decision
  8. Talk openly and periodically about our finances and financial goals – No secrets, no jealousy (Check out this video from one of my favorite YouTuber couples “Our Rich Journey” about financial discussions)

Your money can also be your employees:

“It’s not hard. Stop thinking about what your money can buy. Start thinking about what your money can earn. And then think about what the money it earns can earn.” – JL Collins from The Simple Path to Wealth

While we work during the day, our money invested is also hard at work for us. Every dollar we invest is our employee. And everyday it wakes up at 9:30am est/ 8:30am cst and goes to work to grow wealth for us. We just need to help guide it to the right investments, where more often than not it has a good year (2 out of every 3 years). JL Collins has written a masterclass on basic investing in his book The Simple Path to Wealth. Get a copy by clicking here! You won’t be disappointed.

You can at least get started by opening an investment or brokerage account. My favorite starter account is Robinhood. Simple interface, easy to use, and beginner friendly. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

Make sure to invest in what you know. Don’t take a hot stock tip from a friend or neighbor. Stick to the basics and do your research. From 2010 to 2020, the two most profitable stocks for investors if you held them for the 10 years are two pretty well known companies: Netflix with a 4,011% return and Domino’s Pizza with a 3,989% return (thank you Motley Fool for compiling the list).

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.

What is trend/momentum investing?

Episode 1: Building a trend/momentum portfolio

Back at this Blogging Thing again!

Whelp! I am back at it again. Haha. I believe this is attempt number ten at starting a blog. I am the Thomas Edison of blogging. Fail enough until you succeed… right? At least in Edison’s case it took one thousand times before the light bulb succeeded in emitting light. So I have a few more tries to go before I get to his level.

Luckily each failed attempt teaches me something… make the blog for yourself, don’t pigeonhole yourself into one small category, create value for those taking the time out of their day to read your posts, and make it personal. Not only that, but I feel like this blog can also be an accountability partner for myself and my amazing and badass wife, Lizette.

About four months ago, I estimated that we could potentially hit a net worth that would allow us to retire comfortably in eight years (more on these calculations to come). Yeah, we were a bit surprised too. And therein lies the challenge we have set out for ourselves…retire in eight years or less.

But we have to make sure that we continue to have fun and live a rich life while we do it. She and I have worked to minimize our expenses and continue to push each other professionally in order to maximize our incoming revenue. And since any talks longer than 15 minutes with my wife on our finances/investing are not advised in our relationship, then the true test is on my shoulders.

The question I ask myself is simply, can I maximize the returns from our savings with different investment vehicles?

Love me some Calvin and Hobbes. Calvin, the quintessential hustler! Goals!
Get his entire works by clicking here!

Our investment vehicles currently consist of the following:

  1. Our house -> Average housing prices rise 5% per year
  2. Index Fund Portfolio -> The total stock market index has risen 11% per year for 40 years.
  3. Trend/Momentum Portfolio -> 7.65% gains after starting it at the beginning of July.
  4. Dividend Portfolio -> Producing $651 per year in dividends as of 8/7/20.
  5. Growth Portfolio -> Outpacing the S&P 500 by 27% since November 2019
  6. High Interest Savings Account -> Earning 0.8% interest per year at the moment (was 2.1% prior to Covid)

By diversifying into different avenues, I am lowering our overall risk while still betting on the US economy over the long term. I heard you, Warren Buffett, loud and clear. Your billions don’t have to tell me twice. Thank you to JL Collins as well! And Peter Lynch!

The Trend/Momentum Portfolio is updated every week, the Dividend Portfolio every two weeks, and the Growth Portfolio every month, so I will share updates here. Our house, the Index Fund Portfolio, and the High Interest Savings Account are set-it-and-forget-it investment vehicles, so they will be included in a bi-monthly update on our net worth.

What is Trend/Momentum Investing?

The Trend/Momentum Portfolio is something I have pieced together over the last year and finally put into place at the beginning of July 2020. It gets rid of all of the noise of the stock market and focuses on some key indicators (will be explained in future posts) that identify an upward trajectory of a stock’s price. The indicators also work for my personality and investing temperament. In my research and reading, a trend/momentum stock is like lassoing a rocket that has just taken off. The price movements of the stock will let me know if it is doing well or if I need to sell the stock and move to another.

Keys to our Trend/Momentum Portfolio:

  • The portfolio is housed in a tax advantaged retirement account, meaning that the capital gains (any profit we make on the sale of the stock) are not taxed year in and year out. This allows me to buy and sell stocks while not worrying about the potential tax implications.
  • An initial screening system was created to identify the stocks to buy each week, along with a system to track how the stocks perform and if I need to sell any stocks.
  • I stick to the system as best as I can. I have only deviated slightly as I get more experience working with the system and try to make small adjustments to manage the portfolio. I am looking to lock in all of my steps in the coming months and then continue that process moving forward.
  • I recalculate everything on Friday, submit the stocks for sale and purchase on Monday morning, and then I have fun tracking their ups and downs on an excel sheet and with Finviz throughout the week.
  • I have currently set the max number of stocks to purchase in the portfolio at 25.

Our current Trend/Momentum Portfolio

Stock sales this past week:

  • Hitting a “sell indicator” (There are four: (1) ATR Trailing Stop, (2) 5wks/Less than 5% gain, (3) 10wks/Less than 10% gain, and (4) 20wks/Less than 20% gain)
    • N/A
  • Under $1B or Over $100B in Market Capitalization (a tweak to the rules explained further down):
    • TSLA – Tesla Inc
    • TSM – Taiwan Semiconductor
    • NFLX – Netflix Inc
    • WRTC – Wrap Technologies
    • ICLK – iClick Interactive
    • RVP – Retractable Technologies
  • Increased Over 100% in Value (when this occurs we sell half and let the rest continue until it hits a “sell indicator”)
    • OSTK – Overstock.com – Currently up 111% since I purchased it on 7/13
  • Biggest losers being replaced by new “buy indicator” stocks:
    • OCFT – OneConnect Financial Technologies
    • SOHU – Sohu.com
    • NIO – Nio Inc.

Many of the stocks (ICLK, OCFT, SOHU, and NIO) being replaced this week hail from China. With the uncertainty over the China/US relations and the conflict brought about by Microsoft’s potential TikTok purchase, the Chinese stocks owned in this portfolio have seen a downward trend in their price. This is one of the reasons I like this style of portfolio. When the downward trend starts occurring, I start selling. If relations improve, then I will see those stock prices moving upward and begin to purchase them for the portfolio.

Purchases this past week:

  • AES – AES Corp
  • APPS – Digital Turbine Inc
  • CELH – Celsius Holdings
  • GSX – GSX Techedu
  • HOME – At Home Group
  • MOS – Mosaic Group
  • PBI – Pitney Bowes Inc
  • SRNE – Sorrento Therapeutics
  • SYNA – Synaptics Inc

The portfolio was tweaked slightly this past week to accommodate for the stocks that passed the initial screen test to purchase. With nine companies passing, this more than maxed out the stock portfolio limit of 25 total stocks. So for our Trend/Momentum Portfolio, I will no longer purchase stocks of companies that have a market capitalization (the dollar value of all the stocks of the company) under $1B or above $100B. This will help me manage the portfolio better over the long run.

Overview of the Trend/Momentum Portfolio:

The ultimate goal of this portfolio is to out pace the S&P 500 year in and year out. Since inception (which by no means proves anything as of yet), the Trend/Momentum Portfolio has outperformed the S&P 500 by 2.31%.

Getting Started Investing:

With terms like trend/momentum, growth, dividend, market capitalization, portfolio, high interest savings account, tax advantaged retirement account, and more, I’m sure it is a lot to absorb if you are new to investing. My goal is to make these posts a 15-minute or less read (see the note about finance/investing conversations with my wife above). So these terms and more will be covered on future posts as I continue over the years, but if you have any initial questions, then leave them down below in the comments section and I will do my best to answer them for you.

At the least, you can get started by opening an investment or brokerage account. My favorite starter account is Robinhood. You can open up an account in minutes and they will give you a free stock. Plus, if you use my link below, then Robinhood will give me one free stock too.

Click here to start an investing account!

And if you choose to get started investing right away, then take a moment to listen to the Motley Fools Investing Dos and Don’ts, or you can read the transcript. Building a Trend/Momentum Portfolio takes some time and understanding, so I would start with the simple initial steps of buying a stock or index fund.

Disclaimer: These are my own personal thoughts and opinions on investing and finance. I may own companies discussed in this post, and I may have recommendations for or against any stocks mentioned, so don’t buy or sell anything based solely on what you read here. Please make sure to do your own research prior to investing any of your money.