Friday, February 1, 2013
Freedom Fund Update - February 2013
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 working at a job I don't enjoy to purchase goods I don't need to impress neighbors I don't care about.
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It's important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.
The Dow Jones Industrial Average closed today over 14,000 points for the first time in 5 years, so my portfolio, like many others, has gotten quite a boost lately. Of course, as I always point out, it's the dividend income that I really care about. A big portfolio value can give one a false sense of euphoria, as that balance you see when you log on to your brokerage account is all based on underlying stock prices that are at the mercy of a bi-polar and very moody Mr. Market. The dividends, however, are completely removed from the market's mood swings and are rather at the discretion of the individual companies we invest in. The stock market can move up 500 points or come crashing down 1,000 points and the odds are very good that my dividend income will remain the same, or even better it'll rise like clockwork.
I had a fairly busy January, overall. With a heavy heart I decided to part ways with one of my oldest holdings and sold my entire position in Abbott Laboratories and the recent spin-off Abbvie, Inc. (ABBV). I used some of that capital to add to my position with Johnson & Johnson (JNJ). My portfolio would actually be showing a much larger balance in terms of invested capital, but I have an unusually large cash balance right now due to the sale discussed above. I'm still scanning opportunities to use that cash, but am having a hard time finding something attractively priced. The market is littered with expensive stocks right now, so I'm mainly trying to find high quality stocks trading for fair prices.
The current market value of my Freedom Fund stands at $90,345.18. This is an increase of 2.68% over my last published value of $87,985.11. Not an impressive increase, considering the S&P 500 is up some 6.1% over the same period, but that's mainly due to the fact that I haven't reinvested my cash from the sales of two of my larger holdings. My portfolio (not including cash) was actually well over $93k before the sale, but the monthly balances aren't really a main concern of mine. I also contributed fresh capital to the portfolio this month, but didn't make a purchase with it due to my desire to remain a little conservative right now due to personal reasons.
Looking forward, I'm quite excited. The market's epic run creates a possible opportunity for volatility, which could provide attractive entry points on quality dividend growth stocks. The fact that I have such a large cash balance currently (over $5k) means I'll be ready for such opportunities if they come my way! Defense stocks are already seeing some volatility due to looming sequestration, so volatility is on the horizon.
I'm currently invested in 28 position. This is a net decrease from last update due to the sales outlined above.
These updates are mainly designed to show the increase 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 in 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 JNJ.
How are your portfolios doing? Enjoying the market run-up?
Thanks for reading.