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  • Happy Birthday! My Dividend Growth Portfolio's 7th Birthday Report [View article]
    "I joined SA in late 2012 and your articles, Chuck Carnevale, and other dividend growth investors have gotten me off to a good start preparing for retirement." -
    Dave Ryan

    With a first name like Dave, you should be a natural for DGI. Thanks for joining the discussion. Please continue, I'm sure there's something you can teach the rest of us that we would be better off for learning.
    May 31, 2015. 09:38 PM | 5 Likes Like |Link to Comment
  • Happy Birthday! My Dividend Growth Portfolio's 7th Birthday Report [View article]

    On further reflection, I wanted to also point out the difficulty of your original goal. To grow income without adding capital from ~$1,400 annually to $4,678 requires a compounded dividend growth rate of 12.82% for ten straight years. That's a pretty tall order for anyone to tackle.

    The fact that your results are tracking right along the income goal curve is an amazing performance in that light.

    Additionally, the fact that your Total Return is running equal with SPY when your portfolio has a beta of around 0.70 (my guess-timate) is also a mind-bender. The so called 'hyper-compounding' effect is just something to see in real time.

    Einstein would be proud.

    (That's an indirect reference to Albert Einstein's comment that Compounding was the 8th Wonder of the World, for those without a program.)
    May 31, 2015. 09:20 PM | 17 Likes Like |Link to Comment
  • The No. 1 Stock In The World - Part 2 [View article]
    "do you advise your clients that luck will be a big part of how their portfolios turn out over time?" - conkjc

    < Let me manage your money. I don't have much skill, but I'm so lucky at investing that you might still beat an index fund after I pay myself 2% of AUM and 20% of any profitably lucky investment guesses! If it doesnt' work out for you it's probably just because I can't overcome your own bad luck. >

    Where do I sign up? NOT.
    May 31, 2015. 06:13 PM | 2 Likes Like |Link to Comment
  • The No. 1 Stock In The World - Part 2 [View article]
    "we ... all gather at the DGI Temple of Doom to blindfold ourselves and throw darts at a stock ticker." - geekette

    Naturally. Zealots HAVE to have a Temple of Doom.

    Just remember to bring your Magic Pants to the weekly meetings. ;-)
    May 31, 2015. 05:59 PM | 3 Likes Like |Link to Comment
  • Happy Birthday! My Dividend Growth Portfolio's 7th Birthday Report [View article]
    Great job DVK! Thanks for the update.

    Keep on keepin' on.
    May 31, 2015. 03:54 PM | 8 Likes Like |Link to Comment
  • Retired Or Soon To Be? Here's A Back Test You Need To Review [View article]
    "The VTI/TLT is just the baseline; if you replace VTI by better performing assets, the returns and therefore the sustainable income will still be better." - varan

    Why not replace TLT ( a 20 year maturity bond ETF) with something less 'risky', like AGG?

    Would someone approaching retirement choose a bond ETF at the long end of the curve for the "safe" place to park money? The year-end prices for TLT range from 82.3 to 127.3 over the span considered. That's a lot of volatility and price risk for the supposed 'safe' place to park your money that bonds are supposed to provide.

    Why not use AGG (investments spread across all maturities of the yield curve) instead? It's a lot less volatile, and returns only about 0.5% less yield. The year-end price ranges from 102 to 110.8 over the timeframe. The pre-retiree has a much lower risk to capital using AGG instead of TLT.

    However, varan's comparison to Bob's portfolio comes up short if the pre-retiree plays 'safe' with his bond money. The ending portfolio value for a 60/40 rebalanced split using SPY/AGG is less than $490,000.

    Replace SPY/AGG with SPY/TLT and the final value jumps up over $620,000. Using the 'riskier' TLT makes a big difference.

    varan is employing his own form of selectivity in backtesting when he uses TLT. A long maturity bond fund will generate significant capital gains over a period where the interest rates fall from 4.3+% to 2.6-% as the 20 year maturity bond has since 2008. varan's TLT example takes advantage of the falling interest rate environment at the long end of the bond curve.

    While that may be fine for some people, it's something that should be pointed out. TLT's gains will turn into losses in a rising interest rate environment. His 60/40 split using TLT under those circumstances won't look so promising.

    Wikipedia's article on the history of the 60/40 stock/bond portfolio indicates that the use of the safest bonds is intended.

    "Note that the fixed income securities shown in the example are high quality, safe “investment grade” fixed income securities, CDs and government-sponsored agency bonds, all chosen to avoid the risk of default. ... Investors willing to take greater risks may use any quality of bond deemed acceptable in light of their higher yields, though safety would likely be of paramount importance for retirement."

    varan's VTI/TLT example works because TLT is more volatile, generally moves opposite the market, and has enjoyed an exaggerated falling interest rate environment since 2008. Should rates start rising steadily, or should TLT stop moving opposite the market in general, then his VTI/TLT mix will have a much different, and possibly lackard, result.
    May 31, 2015. 03:06 PM | 4 Likes Like |Link to Comment
  • Dividend Growth Investing: The Perfect Portfolio Moving Forward (Part 1) [View article]
    "But $128,000 thirty years from now will buy what $52,735 buys now if inflation averages 3% per year. Still a good return, but not as crazy good as $128,000 sounds." - Michael Delaney

    But that $128,000 from thirty years hence only buys $16,780 today, before it grows at 7% annually for 30 years. So buying $52,735 worth of "today's stuff" in 30 years is more than 3x as much stuff as it buys now.

    Sounds like a pretty good deal to me, but I'm sorta crazy like that.
    May 29, 2015. 07:40 PM | 4 Likes Like |Link to Comment
  • Dividend Growth Investing: The Perfect Portfolio Moving Forward (Part 1) [View article]
    "Unfortunately, I am 45% in cash and having difficulty finding "Fast Graphs" fair value equities, especially in the "CCC" list." - billbullard


    One way to use cash to generate income is to sell cash secured puts on DGI stocks. It's very similar to using a limit buy order, except you get paid to see if it fills within a certain timeframe.

    I'm not going to say you should run out and start selling puts tomorrow, but you might consider reading up on the matter and learning about it. Maybe it's something that might work for you. Maybe not.

    There is a recent article by Inzkeeper where a discussion on that topic developed in the comments. There were several links to material for learning about how it all works provided.

    Here's the article:

    Hope that proves useful in some fashion.
    May 28, 2015. 08:46 PM | Likes Like |Link to Comment
  • Dividend Growth Investing: The Perfect Portfolio Moving Forward (Part 1) [View article]
    "Recently, on another board not related to investing, a poster there said he thought a person should not invest in the stock market until they had $1 mil net worth. Nothing but crickets when I inquired how that initial 1 mil would be acquired if not invested in stocks." - geekette

    The way all great fortunes are amassed ...

    May 28, 2015. 08:52 AM | 6 Likes Like |Link to Comment
  • Dividend Growth Investing: The Perfect Portfolio Moving Forward (Part 1) [View article]
    That's some fancy Magic-Pants-ing, Dave!

    And to think, this time you picked 15 stocks (before ABT split) and they all seem to be doing pretty well after 5 years time in the market. That's got to be ANOTHER anomoly, since it's not possible to "stock-pick".

    I made a three tiered estimation of CAGR for the bunch, by breaking the final amount into three final values (3 yr, 4 yr, 5 yr holding periods), then tinkered with the relative value percentages until all three groups had a nearly equal CAGR, based on a $100,000 starting value.

    I got a 'blended' CAGR of around 15.15%.

    That's probably a reasonably close CAGR rate for the money you put into the market, though a little rigor would probably enable one to dig up a more accurate value.

    For comparison SPY had a 5 year CAGR of 14.98%.

    So even though you have NOT been reinvesting your yield, your portfolio has basically managed to match (or slightly beat) SPY, plus you got to spend nearly $70,000 in dividends over the years!

    Way to INACTIVELY manage your portfolio!! ;-)

    Seriously, this is an awesome example of DG investing. The prior articles are all here on SA describing the stocks you bought. It'd be interesting to see what would have happened if you had been DRIP-ing the entire time. I might just do that if I get some spare time this weekend, for fun.

    Thanks for posting.
    May 27, 2015. 08:40 PM | 12 Likes Like |Link to Comment
  • Lessons Learned From The Grand Canyon [View article]
    "Repent. The end is near." - giorgiolb

    "Better to have, and not need, than need, and not have." - Franz Kafka

    FWIW, I agree with Dave Crosetti. Plan like you're going to need those investments in the future, because that's the way the odds work out most of the time.
    May 26, 2015. 04:45 PM | 2 Likes Like |Link to Comment
  • Lessons Learned From The Grand Canyon [View article]
    "So 31 out of 35 outperformed the SPY over a 15 year period ending 12/31/2015" - Dave Crosetti

    Now Dave, we all know that's not possible because Magic Pants don't really exist. Even if they did, they wouldn't last for the full 15 years. ;-)

    In truth that's a pretty amazing example for "stock picking". Having 88.5% of your holdings outperform the index over 15 years would tend to indicate that there's something to the whole DGI method that works.

    You certainly would be hard pressed to claim it was only due to luck.
    May 26, 2015. 08:09 AM | 4 Likes Like |Link to Comment
  • Dividends At A Reasonable Price - Part 2 [View article]
    "Meanwhile the other book, "Understanding Options" by Michael Sincere is work to read and understand. Compared to the 2 hours to thoroughly understand Derek Foster's book. I've spent 6 hours and am only 2/3 in. I could read it all again as there's so much information that is brand new to me and I'd learn a lot a second time through." - Inzkeeper

    The second book is probably unneccessary. Options are so versitile that you can replicate almost anything if you use them in the right manner.

    My suggestion would be to focus on understanding selling puts as outlined in the first book. After that, learn about the mechanics and costs of trading options in your account.

    Then put on the thinking cap and sketch out a plan you consider 'reasonable' and try it on paper. If you have a broker who is willing to explain the details, even better. Once you think you've got it figured out from start to finish, give it a shot on a single option position to get a feel for it.

    Personally, if you can figure out how to collect more than the stock's dividend amount per share in a year of put selling (after costs), then you're ready for prime time IMHO.

    Best of luck and don't hesitate to ask questions here if that feels more comfortable.
    May 24, 2015. 08:56 PM | Likes Like |Link to Comment
  • Lessons Learned From The Grand Canyon [View article]

    For anyone interested, here is a simple spreadsheet I built to help the younger folks do some investment 'what-iffing' over a 30 year investment period.

    You can use it to estimate how much you need to save, at a given estimated CAGR, over 30 years to replace your current inflation adjusted income.
    May 24, 2015. 01:05 PM | 4 Likes Like |Link to Comment
  • Lessons Learned From The Grand Canyon [View article]
    It sure drives home Dave's point about time in the market. Additionally, the end result only reflects a single initial investment. Start adding more investments from savings each year and the end results can really add up over a lifetime.

    If you start investing when you're 30 years old, or younger, and select from quality DGI stocks at good value prices, then weeding out a few disappointments now and then won't ruin the result. As the table shows, even a "go-to-zero" choice among other good performers will only reduce performance of other good choices by small amounts over time.

    Replacing a "go-to-zero" when it is only a "go-to-70%-er" will minimally impact the CAGR in 30 years. The key, as Dave points out, is to get started and keep at it. The bigger winners will smooth over your goofs in the long run.
    May 24, 2015. 12:22 PM | 3 Likes Like |Link to Comment