Having said that though, I am still mostly in the accumulation phase, with a fairly heavy exposure to biotech. I have never shorted a stock, and don't plan to, but do write covered calls to boost my return.
Long: MNKD, CTSO, GERN, MCD, ARNA, WBA, T, WMT, PSX
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I am a retired investor with market experience going back to the 1960s. I was a software
engineer for 42 years, and currently do some part-time consulting, which lets
me contribute to a Roth IRA. I am not an accountant and not a financial
My wife and I
have established a set of guiding principles for our investment life:
• Change is the
only constant in life. Everything in this plan is subject to change.
• Never touch
your principal. Wealth is built and maintained by not spending it. Wealth is
the primary buffer between ourselves and blind chance.
• Exploit folly,
do not participate in it (thank you, Chuck Carnevale). Do not follow the crowd,
which is more often than not wrong.
• A portfolio is
like a bar of soap – the more you touch it, the smaller it becomes. Do not be a
• Own assets,
avoid liabilities. Assets generate income. Liabilities generate expenses.
Based on these
principles, we have established two investing goals: 1) sufficient current
income with a comfortable buffer, and 2) increasing future income to maintain
investing goal is to generate sufficient current income to cover that part of
our living expenses not covered by pensions, with a comfortable buffer. We are
retired and depend on investment income to meet a significant minority of our
As we age and get
closer to the end, current income becomes ever more valuable, and future income
becomes ever less valuable. This reality informs all of our investing
decisions. However, we know that inflation will cause our income needs to rise,
so we also plan for increased future income, which is our second investing goal.
To meet our
current and future income needs, we rely on 2 Social Security pensions, 1
private pension, income generated by investments, and fully paid up long term
It is common to
allocate a retirement investment portfolio with some percentage in stocks and
the balance in fixed income, such as 60/40. We look upon our pension income as
the equivalent of fixed income, with the added benefit that Social Security is
indexed to the CPI. We therefore own no fixed income and have no plans to do so
in the future.
dividends and interest as income, and capital gains as return of capital, not
income. Therefore, our goals are to be met from dividends and interest only.
currently meets our primary investing goal. We invest in a blend of mostly
medium yield (3%-6%) stocks with medium dividend growth, a few high yield
(>6%) instruments with no dividend growth, and low yield (<3%) stocks and
funds with high dividend growth.
We expect our medium
yield and low yield stocks and funds to provide the income growth needed for
the future, or second investing goal.
We currently own
only stocks and several ETNs. Our portfolio requires regular attention to avoid
possible dividend cuts and deletions. As we age, our mental faculties are in
decline, and we will become increasingly less able to perform portfolio
monitoring intelligently. There will come a time when we will need to use some
form of income oriented index ETFs to carry the income generating burden.
We want to behave
like landlords and collect rents, but without the risks and demands of owning
real estate directly. Dividends and interest are our rental income, and as
once-removed landlords we expect to own real estate investment trusts (REITs).
We want our non
REIT income to be generated by long-lived, steady companies that provide
products and services that we all need regardless of the economy, and thus can
be relied upon to provide steady, and steadily growing, income. This
requirement points primarily at consumer staples stocks. We own some of the
best consumer staples stocks, such as mighty MO, and plan to own one or more
ETFs that concentrate on the consumer staples sector of the S&P 500.
• Some of my
During much of my
working years I used technical analysis (TA) to invest in individual stocks (I
was an early fan of Joseph Granville and I bought an Apple II in 1980 because
Granville brought out OBV software for the Apple at that time), and I
speculated with short selling and commodity trading. Later I invested in stock
mutual funds and ETFs for total return, with inconsistent results, and no
comprehensive plan. Being a software engineer in a lead position left little
time or energy for serious investing skills development. In 2005 I had pretty
much given up on getting market beating results, and felt that I was getting
too old and too close to retirement to continue swinging for the fences, so I
decided to buy a variable annuity that guaranteed a minimum return of 6% per
year, compounded, with the upside limited only by the performance of the mutual
funds offered for investment. I decided to let the insurance company bear the
market risk for me. I also had a 401k plan at work to which I contributed the
maximum and got the company match. A year or so before 2008 I used a retirement
investing projection tool provided by Fidelity, which said the worst returns I
could expect in retirement were positive but not spectacular, and the best were
hard to believe. At that time I was invested in mutual funds and ETFs through
my 401k and the variable annuity and had not directly owned stocks since
shortly before the start of the great bull market in 1982 (Granville famously
missed the whole thing). I thought, with a bit of skepticism but not much, that
I was set. We all know what happened in 2008-09. That experience put me off
Monte Carlo simulations and Modern Portfolio Theory for life.
When I retired I
converted my 401k to a rollover IRA brokerage account and invested in ETFs. I
thought I was being appropriately conservative but also ready to capture
capital gains by investing in VIG and VCSH.
Then I found
Seeking Alpha, and then - thank my lucky stars - David Van Knapp, and the DGI
light went on. I had spent most of my adult life thinking I was smarter than
most people by relying on TA, and then later letting the insurance company
assume market risk. I remember learning about the 200 DMA when I was in my 20s,
which is a long time ago, and thinking how revolutionary this idea was and how
I should be able to use it to my advantage. Fortunately for me and my family, I
also was pretty good at software engineering, so I had a reasonable retirement
nest egg accumulated when the time came. With the concepts and methodology of
dividend growth investing, I now have sleep well at night investments that just
keep on churning out increasing income, something that could never be said
about using TA.
I started with
DGI too late in life to commit totally to low yield, high growth stocks. I hope
to capture the double compounding of DRiP investing with that part of my portfolio
that is low yield, high growth.
We have recently
(Nov 2014) rolled over all of the variable annuities into brokerage accounts.
We now believe that we can get sufficient income from our dividend investing
strategy, and we want to retain ownership of the annuity capital.
• Tools and
Tools I use include
the CCC list, F.A.S.T. Graphs, Morningstar Premium, BigCharts, the EDGAR web
site, longrundata.com, and Excel. I get ideas from the many informative
articles by (among others) the following (in no particular order): Chuck
Carnevale, Brad Thomas, Ron Hiram, David Van Knapp, David Fish, Robert Allan
Schwartz, Dividend Growth Investor, Dividends4Life, David Crosetti, Tim
McAleenan Jr., Reel Ken, Bret Jensen, Alan Brochstein, Chowder, Dane Bowler,
Philip Trinder, Bob Wells, BDC Buzz, Scott Kennedy, Bill Maurer, Darren
McCammon, Richard Shaw, Bruce Miller. Favorite commentators who are not yet
authors include Elliot Miller, Paul Leibowitz, mbkelly75, surfgeezer.
to dividend stock valuation are the Tweed Factor and the chowder rule. Like
F.A.S.T. Graphs, 'a tool to think with', these are 'rules to think with'.
fair P/E = yield + 5 year dividend growth rate
current yield + 5 year DGR >= 12%; 8% for utilities, MLPs, REITs
investment advice outside of Seeking Alpha has been 'The Intelligent Investor',
‘Securities Analysis’, and 'The Single Best Investment'.
• Some historical
My DGI portfolio
was started on 2011/4/20 with CTL, which I have since sold. It was a beginner's
mistake. Subsequent mistakes were MLPs, and to a lesser extent, mortgage REITs.
I did not allow for any circumstance that could cause WTI to fall as far and as
fast as it has, so I lost money on MLPs. The prolonged flattening of the yield
curve, plus the persistent markdown from NAV for the mortgage REITs, has made
these unappealing as long term investments. Now I keep my distance from
anything that is dependent on commodity pricing, and I invest very little in
the carry trade. A glaring mistake was selling JNJ when it languished for
• Some ongoing
dividend growth rate for our entire portfolio is 5%.
I use yield on
cost to allocate our investments so that each position in aggregate generates
approximately the same amount of income. I learned the basic method for doing
this from a comment on a SA article. SA is a wonderful resource! I have
published an SA Instablog that describes the method: http://seekingalpha.com/instablog/902946-be-here-now/4581516-portfolio-allocation-for-equal-income-from-each-position-using-excel
equity REIT: CCP,
DLR, EPR, HTA, LTC, O, OHI, STAG, VTR, WPC
GIS, MO, PEP, PM
financial: GBDC, GSBD,
HTGC, MAIN, TCPC
ETN: DVYL, HDLV
equity REIT: ESS,
Advocate value investing, determining the intrinsic value of a business, through quantitative and qualitative measures.
Opportunities are always available in the market but it is a full time job that requires extensive research, analysis, objectiveness, and sometimes secondary opinion. Even if the market is relatively expensive, pockets of value always exist.
Psychology within financial markets (i.e. momentum, sentiment) is completely relevant and tends to create trends (especially with commodities and forex). We are well-versed in technical analysis.
Having failed to pay attention to my retirement portfolio prior to 2008 (it was all in stock funds at the time), waited until early 2010 to get the main rebound. Then started to actively engage in my own financial planning and portfolio management. Started treating this as a 'full-time job' in 2011. Started to get comfortable with my portfolio management approach in 2012 - and managed to get almost 14% last year (2012) in my main IRA with a basically 'conservative' 65% bond funds to 35% equities model ;-)
Sadly, two smaller portfolios didn't do anything like that well, and I am working on understanding why - I believe it is largely because they were much less diversified, despite being nominally more aggressively allocated.
Started drawing pension this year, but still need to draw down the portfolio by around 15-20% a year (assuming no return) until I draw social security (target in around 4 years), at which point I should finally become cash-flow positive - yay!