Saturday, March 17, 2012
Weekend Reading - March 17, 2012
My first full week of riding my new-to-me 49cc scooter is behind me, and I must say it's really exciting riding it to and from work. Getting 100 mpg isn't bad, either! So far, I've filled it up once (requires 1 gallon of fuel) and it should last me for at least another week. I'm loving it. All the talk of high gas prices on the television go in one ear and out the other now.
In other news, the market has continued its epic run. This past week, the DJIA closed above 13,000, the S&P 500 closed above 1,400 and the Nasdaq Composite closed above 3,000 points all on the same day for the first time in history. That's a great headline, and it's nice to see the economy doing better but this kind of activity makes value investors like myself cringe a bit. It's tough to find good entry points on quality equities in this market, but that just presents a challenge that needs to be overcome. Either you choose to build cash and wait for a major dip or you dig deep and scan for value in the field. I decided to scan for European equities that have not had the major run that U.S. equities have of late and I made a purchase this past Friday. I'll post about that very soon.
Here are some excellent articles from fellow dividend growth investors, frugalists and personal finance bloggers from the past week.
Get Rich With: Blogging?
Mr. Money Mustache analyzes the real possibility of a sustained source of income for himself and his family through his blog and what it means to his early retirement. Kudos on the growth, as his blog has just exploded in popularity. Maybe I'll have to start dropping F-bombs around here? Haha!
3 Dividend Payers Benefiting from the Network Effect
Dividend Monk highlights three dividend growth stocks that have a network of users that build increasing value the more they use their products. This is the sixth article in Monk's series highlighting companies that have durable economic advantages, or moats. Good stuff! I especially like the entry on AXP, and I would eventually like to add it, along with V and MA, to my portfolio.
Building My Portfolio for Retirement, with Dividends and Bonds
Dividend Ninja pens a piece on his recent decision to move his equity holdings from index funds to dividend stocks, while still holding his bond ETF's and bond funds. I applaud this move, as you could probably guess, as I think that a quality basket of dividend growth stocks purchased at opportune times can outperform an index while simultaneously providing a larger, and growing, source of dividend income. Good move Ninja!
I disagree with an expert, buying what you know makes sense
My Own Advisor decided to take the opposite viewpoint of an expert and believes that buying what you know does indeed make sense. I agree with MOA here. Although Larry Swedroe was showing that overly investing in company stock or excessively trading in professionally close stocks is a bad idea, I think that for the most part diversifying your portfolio into companies that sell products that you know and feel comfortable with isn't a bad idea at all. Peter Lynch, the famous investor and head of the Magellan Fund, was one who always recommended to invest in what you know. Warren Buffett is also another well-known investor who invests in his "circle of competency".
Milestone: Portfolio Value Reaches $50,000
Deedubs just reached $50k in market value for his portfolio. This is a huge milestone, and one that I reached not long ago myself. Congratulations Deedubs! He's been on a tear lately, buying quality dividend growth stocks in large blocks as he continues to build his portfolio. I like his strategy!
On The Radar
Compounding Income lists a few stocks on his radar. It's becoming increasingly difficult to find value in this market, but Compounding Income believes he has a few solid choices here. I agree. I recently added to my position in one company on his watch list.
Changing Your Life By Working Abroad: The Financial Benefits
The Stoic Investor discusses the benefits of working overseas. I completely concur here, and for the open-minded out there this could be a great way to supercharge your savings. Although I'm not particularly interested in working overseas, I'm definitely open to the idea of retiring overseas. Moving to a low-cost location like the Philippines, Thailand or Ecuador where your dollar goes much further could bolster your chances of success in early retirement.
A 100% Dividend Stock Portfolio is a Safe Portfolio
The Dividend Guy gives reasons why a 100% dividend stock portfolio is a safe portfolio. Personally, about 95% of my money is long on dividend growth stocks, with the other 5% of my net worth in cash acting as dry powder awaiting deployment depending on market conditions. I feel fine with these numbers, and I actually believe bonds and fixed income is riskier than equities in current market conditions due to the low interest rates and inflation. I think real returns in fixed income is abysmal or negative, depending on which inflation numbers you use. For the risk you take, I think that is simply unacceptable. I'll wait for interest rates to rise before I take on any fixed income. Even if you hold to maturity on bonds, you'll still be collecting less than the next guy when rates rise.
Has Dividend Growth Kept Up With Inflation?
David Van Knapp penned an excellent article on dividend growth vs. inflation. This article uses real-world numbers going back over 50 years and shows that dividend growth has well outpaced inflation over this time period. I don't think I've ever see anyone else ever go back this long and compare inflation to dividend growth. This is an excellent resource.
Medtronic Inc. (MDT) Dividend Stock Analysis
D4L analyzed Medtronic and concludes that is it undervalued and a 5-star buy right now. I agree with him here. I think that the medical device makers like BDX and MDT provide some value in this expensive market. The health care sector in general has some decent value right now.
4 Money Saving Tips for the Bathroom
The Money Monk posts some intense ideas on saving money in the bathroom. Are you ready for a cold shower?
Thanks for reading.
Photo Credit: Benoit Mahe