Freedom Fund Update - December 2014

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Includes: BBL, BHP, NOV, UL
by: Jason Fieber

Well, the time has come to update the Freedom Fund once again as we start another month. The Freedom Fund is my portfolio, and I think it's aptly named. My portfolio is my way to freedom; freedom from a job I don't desire to purchase goods I don't need to impress neighbors I don't care about. This journey is all about freedom and flexibility. One day the dividend income this portfolio generates will fully cover my expenses and my time will be completely my own. What could you possibly want to own more than your time?

I feel extremely fortunate and thankful that I'm able to post these updates every single month, which shows the power of monthly contributions to investments because of the high savings rate I maintain. It shows how a relatively large sum of money can be built through the power of time, patience and perseverance.

It's important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.

What a November, huh? No sooner was I was done being thankful for everything that I have in my life that I found some Black Friday specials on energy stocks to be even more thankful for. I celebrated that by averaging down on my position in BHP Billiton PLC (NYSE:BBL) (NYSE:BHP) not long after doing the same thing just a week prior.

But adding to my position in BBL twice wasn't all of the action for the month. I started November off by adding to my burgeoning position in Unilever PLC (NYSE:UL), which is a stock I continue to like right now. Not long after, I initiated a position in National Oilwell Varco, Inc. (NYSE:NOV), which now appears to be ill-timed. I'm not real concerned with timing the market, which is good because I'm no good at it! But I remain confident about the long-term prospects with NOV and the rest of the companies I'm invested in.

Lastly, I sold my entire stake in Sysco Corporation (NYSE:SYY). I don't sell stocks very often at all, but I felt the deteriorating fundamentals and overvaluation warranted attention, as I believe my capital can work harder elsewhere.

My Freedom Fund was charging ahead to all-time highs up until the last day of the month, when the severe pullback in energy stocks sent my Freedom Fund tumbling by more than $1,500 in one day. As always, the portfolio's value means little to me in comparison to the dividend income the portfolio can generate, so cheaper stocks are of course just an opportunity to increase the latter at the expense of the former. And that's just fine by me.

The current market value of the Fund now stands at $184,197.69, which is a 3.6% increase over last month's published value of $177,726.78. Things continue to hum along here, though I expect continued volatility in the energy sector for the foreseeable future. And since my portfolio is a bit more heavily exposed to that particular sector than I'd really like, my portfolio's balance will probably oscillate a bit more than usual as well. However, I remain committed to the long-term journey, so short-term volatility is nothing more than an opportunity.

That chart continues to move in the right direction, though a substantial broader market pullback would be most welcome. I wouldn't mind at all reporting that the Fund's value had dropped to, say, $165,000 if it meant cheaper stocks were available to purchase across the board. But this will be my last update on the Fund for this year, and I'm very happy with the progress there. You can see the portfolio's value increased from just under $147,000 to just over $184,000 throughout the course of the year. That's an increase of over $37,000! It wasn't all that long ago that I wasn't even making that much money for an entire year of work. The joy of moving from the working class to the investor class, indeed. Even better, we still have a month to go.

However, I expect December to be relatively quiet in terms of activity. I was supposed to take it easy in November so that I could replenish my emergency fund, but I did quite the opposite. So I'll have to make sure to limit my capital allocation to equities throughout the month, and build up my emergency cash to a reasonable and comfortable level. And that level, for me, is at least $4,000, preferably upwards of $5,000.

The Fund now has positions in 51 different companies. This is unchanged since last month, since I sold a stake outright but also initiated a new position over the course of November.

These updates are mainly designed to show the increase or decrease in the value of the underlying equities I'm invested in, but the main purpose of investing in dividend growth stocks is for the rising stream of dividends over time. So, with that said I don't put too much emphasis on these monthly updates on the value of my portfolio. I think it is a good idea, however, to keep track of the rising (or falling) value of one's securities and be aware of where they are in terms of the marketplace and whether or not certain stocks are attractively priced. It proves to be a useful exercise, for me at least, to update the values monthly. It gives me fresh perspective on which equities are performing well and which aren't, and from there I can make educated decisions (based on further due diligence) on which stocks I'd like to add fresh capital to (while considering portfolio weight as well).

Full Disclosure: Long BBL, UL, and NOV.