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  • My First Quarter 2015 Portfolio Review [View article]
    Nicely done Bob. Thanks for taking the time to detail what's happening in your DGI retirement investment portfolio. Adding the credit ratings is a big plus. I'm sure everyone is grateful to have the chance to learn by watching you learn.

    Even the SDRL dividend cut serves to show the benefit of originally choosing to have your investments spread out over many stocks. Losing all dividends for 1 in 50+ stocks is probably not going to hurt your income stream gravely, like it would if SDRL was instead 1 of only 10 investment positions.

    Doing all the 'hard thinking' at the plan writing stage saved you from a great deal of much harder thinking which might have resulted had you not done so originally. Fortunately it appears more like you stubbed your toe than fell flat on your face, so the exercise serves to demonstrate the margin of safety you built into your approach from the beginning. Great job! Surviving mistakes without significant damage is a stellar quality to have.
    May 2, 2015. 10:47 AM | 2 Likes Like |Link to Comment
  • Comparing The DG50 To My 3-Fund Portfolio On The Road To Retirement [View article]
    "[PS - this does not require a bunch of comments about Berkshire, as I just used the name as a real life example, but the name is not important.]" - FinancialDave

    I beg to differ. The name is all important if your goal is TR.

    If your hypothetical exercise started in 1999 instead of 1970, and you picked Cisco (CSCO) instead of Berkshire, your results would be much different.

    This is one often overlooked assumption made by those who continue to insist that more TR is better because you can 'buy' more income at retirement. What if the presumed TR fails to materialize? What you buy, and when you buy it matters a great deal. Naturally buying a fund or ETF reduces that risk at the cost of additional annual fees and expenses.

    Jan 2, 1999 - April 24, 2015 CSCO CAGR = 1.83%
    $2,000 invested then is now worth $2,689

    If instead the goal is to replace a paycheck with investment income then one can ignore the price entirely and focus on the growth in income. When that goal is reached one can retire with little or no financial stress.

    Either way is a workable approach. Which one is 'better' is a matter of opinion. It's sad that you insist on evaluating only the TR aspect of the exercise when there is nothing to lose by providing the income numbers too.

    I also second DVK's comment below, if you're already doing the work, why not post the income? Doing so doesn't reduce the validity of the TR generated, but it provides information that others might find useful. Please reconsider.

    None the less, I'm glad to see you post and track a TR portfolio in 'real time'. I look forward to seeing how it fares as time goes by. Thanks for taking the time and making the effort and sharing the results.
    Apr 25, 2015. 10:12 AM | 7 Likes Like |Link to Comment
  • Comparing The DG50 To My 3-Fund Portfolio On The Road To Retirement [View article]
    "Here is the question I have with that -- what are you going to do with the income?" - FinancialDave

    Oh, I don't know ...

    1) Perhaps keep watching the income increase during the next market downleg when the Total Return goes into reverse gear?

    2) Seeing the continuous and steady growth of the income over time while the portfolio value fluctuates up and down by 20% or 30% on occasion.

    3) Being able to compare how steady the income stream of the two approaches is annually, and over time.

    I can imagine that sort of data might be useful information for some people, even if it isn't what's important to you personally.
    Apr 24, 2015. 10:36 PM | 1 Like Like |Link to Comment
  • Comparing The DG50 To My 3-Fund Portfolio On The Road To Retirement [View article]
    "keep in mind the goal of the article is a sit and forget test for growth. Many get hung up with how the growth occurs -- income for instance, that is just reinvested, commands no greater value than stocks with no dividends, unless you plan to use the income." - Financial Dave

    I believe what DVK is saying is that you can provide useful information for both TR and income investors if you also provide the income generated by each portfolio as you post reviews. While the income may not be important to your goals, it might be important to the goals of others.

    It is quite possible that there are DGI investors who would be very interested in finding a way to generate reliable growing income via the use of ETFs or funds so that they can provide for surviving spouses or heirs should they become incapable of doing so themselves. Your fund mixtures might be just the ticket, so it seems a shame not to provide both sets of data; income and total value.

    Providing information to the widest possible set of readers seems like the most beneficial result. Let the readers interpret it as they wish for their own uses and goals.
    Apr 24, 2015. 05:54 PM | 5 Likes Like |Link to Comment
  • Investors Should Remain Cautious Of Hasbro [View article]
    Agreed. HAS might not be a value at current prices, but the stock has been a rock star since I picked up my shares in January of 2013 at $32.50.

    In a bit over 2 years I'm up 102+% and my YOC is over 5.25%. I wouldn't buy here, but I would suggest you put it on your watch list and hope you can get some shares on any dips that might come along.
    Apr 19, 2015. 12:53 AM | 1 Like Like |Link to Comment
  • Tough day for income favorites [View news story]
    I bought my OHI just under $26 a tad over 2 years ago. What is there to panic about?

    Besides, today's 5.5% WBA gain more than made up for the REIT losses in my portfolio. It's all good, and the income keeps arriving just the same.
    Apr 9, 2015. 10:36 PM | Likes Like |Link to Comment
  • Dividend Growth Portfolio - Spring Checkup And Semi-Annual Review [View article]
    Wow! Has it really been almost 7 years now? It's great to see your actual income hug that predicted income goal line every year while your 0.70 Beta portfolio outpaces SPY in TR. Way to go DVK!

    Anyone else notice an ominously increasing silence from the DGI detractor crowd as DVK's portfolio proves their initial claims wrong, over and over again?

    DGI Stockpickers: 1 _______ Indexers / MPT'ers: 0

    I suppose it's pretty difficult to argue that success isn't possible when it's staring them in the face after 7 years of the same-old, same-old.

    :-) <------- That's DVK smiling all the way to the bank.
    Apr 7, 2015. 07:02 PM | 7 Likes Like |Link to Comment
  • Dividend Achievers Top 20 Hits The Mark, Again [View article]
    "Consider that you can purchase the Dividend Achievers Index for 10 (.10%) basis points, meaning a cost on a $50,000 holding of $50. It may only become more cost effective to purchase the individual holdings on equity portfolios of $200k or more." - Dale

    You can achieve better cost effectiveness with index skimming via the use of the Motif platform to create your own personal mini-ETF:

    Anyone can set up their own Motif consisting of your equally weighted Top 20 stocks and buy it for a $10 commission. That means you can match the cost effectiveness of VIG with an investment of as little as $10,000 in a Motif. It's certainly worth considering for the investor who is just getting started and has yet to build up a sizeable nest egg.

    I would also point out that it is a one time cost for Motif and an annual cost for VIG. The longer you hold your individual stocks or a Motif, the larger the savings vs. VIG.

    Thanks for posting your investigations Dale. Index Skimming is an obvious evolution of Indexing for the individual investor. Returns will most likely be similar but the costs can be reduced, which will generate out-performance over longer time frames.
    Mar 28, 2015. 12:26 PM | 2 Likes Like |Link to Comment
  • Bogle's Views On Retirement Income [View article]
    "With billions of dollars being lost yearly -- the answer is not to stop SS -- but to STOP the fraud." - misscbd

    The problem is that any program set up to stop the fraud would likely cost more than $5.9 Billion annually and only stop half the fraudulent payments while likely making a lot more people who _should_ get payments be 'shut off' due to bureaucratic error in processing the necessary paperwork.

    In the end it would cost more than it does now, in all likelihood.
    Mar 16, 2015. 07:11 PM | Likes Like |Link to Comment
  • Bogle's Views On Retirement Income [View article]
    "in any bureaucratic organization there will be two kinds of people: those who work to further the actual goals of the organization, and those who work for the organization itself." - Kiisu

    In addition, even those who 'work hard' are hobbled by bureaucratic rules which require nonsensical waste at the expense of the taxpayer. Most of those dedicated, hard working bureaucrats will acknowledge that as a fact, in many aspects of their work.

    One prime example I am personally aware of is the way the federal government's contracts are overseen. When a contract is awarded, a Statement of Work (SOW) is agreed to and then the cost and schedule are negotiated. Once agreed to, it is a government Program Manager's (PM) job to periodically verify the contractor is meeting the original plan.

    Believe it or not, if a contractor completes ALL the work required in the SOW and there is still money left over, the government's rules consider that to be a very bad thing (unlike the private sector where repeatedly getting the job done under budget is a great way to be promoted).

    The more a government program's actual execution deviates from the initial plan, the more harshly it reflects on the PM. It reflects poorly on the PM's future evaluations too, so even though a good PM _knows_ that his program might achieve the program's objectives at a cost below the originally negotiated price, he also _knows_ that he will be 'punished' for allowing it to happen.

    Ergo, most PMs 'manage' their programs to spend all the money available, regardless of whether some of it is wasted in the process or not.

    In addition, any money allocated for supplies or maintenance is ALWAYS spent, even if the things it is spend on are not necessary. If it is not spent and is instead returned then the amount allocated for the foll.owing year is usually reduced (obviously they didn't need it all last year).

    The one thing you can count on any bureaucrat to fight tooth and nail is a reduction in their annual budget. The amount of budget under their control is the primary measure of their importance and capability. Whether that money is used effectively or is wasted is truly of secondary importance.

    It is a real pity that even ethical, honest, hard working bureaucrats will be forced into wasting resources in order to get ahead in their career, but that's the system which has evolved over time. Based on the rules in place, saving the taxpayer money is not viewed as a good thing.

    The system is broken and is unlikely to be fixed any time soon. It would mean a complete change in the way things are done so that an efficient use of tax dollars is rewarded instead of punished. And that's contradictory to the career development goal of controlling a bigger budget.

    Even going so far as replacing the bureaucrats won't change the system. New bureaucrats will simply result in a higher percentage of contracts where the original cost and/or schedule are overrun since they won't know the most 'efficient' way to work within the system.
    Mar 16, 2015. 06:42 PM | 2 Likes Like |Link to Comment
  • Bogle's Views On Retirement Income [View article]
    "Too many here simply hate all that is government, refusing to see any benefits provided, and accepting all the theoretical Libertarian think-tank scenarios how the private market can do it all better in every respect without infringing on the holy grail of freedom. This is confirmation bias at its worst, and leads to extremism in thought that is unhealthy for individuals and a free society. This argument equally applies to all other extremist positions, left, right, or any other corner or edge of belief certainty." - AlanInTempe

    Are you saying that nothing helps promote a free society more than requiring everyone to conform in thoughts and deeds within some 'acceptable' set of bounds?

    Seems sort of contradictory, but that's just me.

    The question is, who get to set those bounds and enforce them (selectively, if at all)?

    Is our country better off because bankers and politicians can conspire to break the law with impunity, stealing millions in bailouts from taxpayers while Joe Sixpack has his life ruined over the malicious escalation of a petty charge into an arrest warrant and endless probation due to an inability to afford the cost of a fine, a lawyer, court costs, and/or any penalties that follow?

    As George Washington noted, "Government is not reason, it is not eloquence,—it is force! Like fire, it is a dangerous servant, and a fearful master; never for a moment should it be left to irresponsible action."

    If we're not careful we'll conform our nation to a place where the poorhouse looks like a luxury resort, IMHO.
    Mar 11, 2015. 08:20 PM | 3 Likes Like |Link to Comment
  • Bogle's Views On Retirement Income [View article]
    "Then, find an insurance company that will sell you an annuity that will pay you $2550 for life, with survivor benefits, and inflation adjusted. Compare the cost of that annuity with the balance in your simulated account. If the annuity costs more than what you would have in your account, then SS is a GOOD deal for you (even if you don't want it!). If the annuity costs less, then SS is not a good deal." - AlanInTempe

    This is something of a strawman because there are other ways to provide the $2,550/month, inflation adjusted cash flow than by using an annuity.

    A $1,000,000 portfolio of diversified DGI stocks yielding 4% and DG of 5% to 6% would initially yield $3,333 / month and grow that income stream faster than recent rates of inflation. In addition, when the 'insured' passes on the entire portfolio will be bequeathed to his heirs while the annuity owner's heirs get nothing.

    "However, subtract a fair amount for continuing deductions for life insurance and disability insurance (fair market price for insurance equivalent to what is part of your SS benefits)." - AlanInTempe

    A 20 year term life insurance with a $1 Million benefit for a healthy 40 year old costs about $56/month. For a 20 year old it costs $37/month. So let's take an average of $47/month to buy back to back $1 Million dollar policies to cover a worker from age 20 to 60.

    I'm not much on disability insurance, but let's just say it also costs as much as the life insurance at $47 / month. That's $94 / month total.

    So for a household earning an income of $40,000 the monthly FICA taxes would be 0.153 * $40,000 / 12 = $540. $94 is 18.4% of the FICA tax paid, so adjusting the initial $40,000 income down by 18.4% leaves $32,640.

    Starting with a $32,640 income and increasing it by 1.5% annually over a span of 30 years and investing the 15.3% FICA tax amount at a CAGR of 9.9% (SP500 equivalent) produces a final sum of more than $1,000,000.

    As noted above, a $1,000,000 portfolio of DGI yielding 4% produces $3,333 / month, far exceeding the SS benefit for that income stream, and does so at age 50, ten years before the second life insurance policy expires.

    Working until age 60 would generate a portfolio value in excess of $2.7 million and a monthly 4% income exceeding $9,000.

    That leaves a lot of room for a higher cost of life and disability insurance while still producing a much higher, inflation adjusted income at retirement AND a nice nest egg to leave to the kids.

    Social Security doesn't come close.
    Mar 11, 2015. 12:20 AM | 3 Likes Like |Link to Comment
  • Kinder Morgan sells first euro bonds [View news story]
    "Makes no sense. The world is littered with financial disasters created when companies borrow in foreign currencies to fund domestic assets, only to get wiped out when exchange rates jolt." - Gene Jaquet

    They can hedge the Euro/$ in forex markets to mitigate that potential risk.
    Mar 10, 2015. 08:23 AM | 2 Likes Like |Link to Comment
  • A Dividend Growth Portfolio Is Not Replaced By VIG [View instapost]
    Thanks for the article Doug.

    It is a constant source of amazement for me to repeatedly hear the same rationalizations for using a cap-weighted ETF instead of holding the individual issues of the top ~50% in holdings.

    FWIW, I did some back of the envelope figgerin' and came up with a performance estimate for an equal weighting of the top 10 current VIG holdings since VIG inception on 5/2/2006 (just under 9 years ago):

    VIG: CAGR = 7.7% ....... Current Yield = 2.01%
    T10: CAGR = 9.6% ....... Current Yield = 2.54%

    All dividends DRIP'ed into same stock over that span. Values estimated using

    The current VIG top 10, in order, are:

    (represents 35.5% of VIG dollar allocation)

    Why someone wouldn't just build an equal weighted Motif using the top 10 to 30 stocks from VIG and use that instead is beyond me.

    FWIW, the top 30 holdings make up 66.8% of the money allocation in VIG. The remaining 133 holdings account for only 33.2%.
    Mar 8, 2015. 04:10 PM | 1 Like Like |Link to Comment
  • Bogle's Views On Retirement Income [View article]
    "My earlier questions remain. Is this bad system better or worse than the obvious alternatives of pure welfare or expanded poverty?" - AlanInTempe

    Strangely our country grew from an upstart backwater to the dominant economy on the planet in about 125 years under your hyperbolic system of "expanded poverty". And, like it or not, a truly improving economy is one of the most efficient means of improving the lot of those at the lower end of the economic scale (ie. make the pie bigger).

    Sadly, since the 1980s our country's debt has been growing much faster than the economy. The debt has been growing @ 9.4% CAGR since 1982 ($1.0 T to $18.0+ T), GDP growing @ 5.4% CAGR since 1982 ($3.3 T to $17.7+ T). The poverty rate has ranged from 11% to 15% over that span, rising and falling with the economy itself.

    Our country has been borrowing its way to prosperity, which is not sustainable over the long run. As AgAuMoney points out, the math doesn't work.

    As for Social Security, the 2014 Trustee's Report shows the current 75 year unfunded present value of OASI and DI at -$13.3 Trillion.

    (Table IV.B5, Page 76 of 259)

    Which is an accountant's way of saying that SSA needs to add an extra $13.3 Trillion to the trust fund TODAY in order to cover all the anticipated distributions for the next 75 years. That's an amount equal to more than 72% of US GDP needed NOW, in cash. Oh, and in case you were wondering, we all have to continue paying those FICA taxes too or that $13.3 Trillion number would be a lot higher.

    So in the name of compassion for the needy, let's all just cut a check for $42,000 per capita (ie. for each man, woman, and child) and send it in to the SSA tomorrow. Then we can all sleep at night knowing we made things right.

    If anyone objects, we can always pass a law to MAKE them pay up, right?
    Mar 8, 2015. 03:12 PM | 3 Likes Like |Link to Comment