Monday, July 29, 2013
As I've discussed recently, it's tough to find value in the market currently and I remain cautious with deploying new capital in the face of ever higher prices for high quality assets. While I'm always more than willing to pay a fair price for shares in a high quality business, I'm not quite as keen to pay more than that. Moreover, I don't want to sacrifice quality just because the market may be pricing me out of certain equities. I continue to want to own high quality dividend growth stocks at a fair or better price, and although value is tough to find I think there are still some buys out there.
I was recently looking at my portfolio and searching for value amongst my own holdings. I have built my Freedom Fund from scratch, and it contains some of my best ideas. So I figured why not start there? Furthermore, I sorted through some of the holdings that are currently trading for below my own cost basis. If I liked an asset at $X, I most certainly like it at a price less than $X.
The following lists two high quality companies that I believe in, am invested in and are currently trading for prices less than I paid.
Thursday, July 25, 2013
As a dividend growth investor with an eye towards the long-term I mostly ignore short-term noise. I don't pay too much attention to macroeconomic news like interest rate changes and fiscal policy in Germany. I simply focus on what I know works: buying ownership positions in high quality companies that have a proven history of rewarding loyal shareholders with rising earnings and dividends.
However, that does not mean that I simply buy shares in wonderful businesses and completely forget about them. Quite the contrary. I actually spend a great deal of time reading up on the companies I own a piece of, not because this is completely necessary but rather because I quite enjoy it.While I certainly advocate ignoring slight quarterly misses or daily and monthly fluctuations, what I hope to garner from perusing over the results companies provide on a quarterly and annual basis is changes in the companies fundamentals, for better or worse.
Recently researching some of my holdings after some unusual market fluctuations I ran into some interesting news. One company has some significant tailwinds with great prospects over the next 3-5 years, while one company has some serious headwinds that could hamper growth over the long haul.
Tuesday, July 23, 2013
It's been said that life is a journey, not a destination. I believe that to be true. Always planning for tomorrow and keeping your eye on the future will give you a lack of appreciation for the moment at hand. I am sometimes guilty of this, as planning for retirement before the age of 40 takes a great deal of thought, vision and fortitude. However, that doesn't mean that I don't enjoy my days or that I'm somehow unhappy because I'm choosing to pursue financial freedom so early in life. Rather, it's the opposite: I'm extremely happy knowing that I'm hastening gratification in life because I'll have all my time to myself at such an early age.
I've received many emails and comments from curious readers as to why I would want to "sacrifice" 12 years of my life so that I can retire by 40 years old. Who would want to suffer for such a significant period of their life only to really start living at a future date? That makes no sense to me. Hopefully this post will dispel some of those crazy notions.
I believe financial independence is both a journey and a destination.
Sunday, July 21, 2013
|Having teeth can be expensive!|
2013 has been a year of changes for me. Up until very recently, I've never had any type of health insurance whatsoever. I took what I believe to be a calculated risk by forgoing any type of insurance and used those savings to invest in my future.
Just a few months ago I finally caved in and purchased health insurance. While it's a monthly expenditure I'd rather not have, it's one that has finally become necessary as I get a little older and health insurance becomes mandatory due to the Affordable Care Act. However, I don't believe the costs associated with health insurance will in any way impede my ability to retire early.
Taking it now a step further I have very recently signed up for a Dental Plan. I made this move because I visited a dentist a couple months back and was advised I have a total of four cavities. One was rather urgent, three were not. I took care of the urgent one right away, but that particular tooth started causing me some pain after the composite filling. I've since been told I need a root canal, but now that the pain has completely subsided I'll likely seek a second opinion. Obviously taking on the cost of three other fillings and a possible root canal by myself would be against my frugal ways so I decided to seek out a little assistance.
Thursday, July 18, 2013
I wrote an article a little while back explaining why I don't value the entire stock market, but rather individual companies. As an investor who buys shares in individual, high quality companies the valuation of the entire market is but a secondary concern. However, that doesn't mean that I completely ignore the valuation of the market or abstain from even paying attention. Rather, I do pay attention to overall valuations if only because I look at it like a check on the "weather". Is it sunny and warm outside, or are storm clouds brewing on the horizon?
When I wrote the above article, the Shiller P/E ratio was at 21.70. The mean value is 16.47, going back before 1900. The Shiller P/E is now at 24.64. You can see that below:
Monday, July 15, 2013
At the beginning of the year I laid forth my goals for 2013. I wanted to put a list of goals together that would be challenging, actionable and measurable. I believe that to various degrees all four goals meet this criteria.
With half of 2013 now behind us I thought now would be a good time to review these goals and see if I'm on track to exceed them. So far, I'm doing pretty good! Let's review below:
Sunday, July 14, 2013
There is a lot of confusion and fear over investing in the stock market. Although I consider myself an intelligent investor these days, there was a time not long ago that I was a total idiot with money and I certainly thought there was some mysterious voodoo surrounding the stock market. Fear holds many of us back, even when the reasons for fear aren't really based on facts, but rather self-contrived notions.
One particular notion of fear that I hope to dispel today is that investing in a large basket of high quality dividend-paying companies is somehow riskier than continuing to rely on one source of income for all of your needs - your day job.
Thursday, July 11, 2013
As a dividend growth investor, one of the primary objectives I seek is passive dividend income from my investments that increases over the rate of inflation, annually. It's always wonderful news when companies decide to reward loyal long-term shareholders with a dividend raise. Some recent dividend increases include:
Tuesday, July 9, 2013
Sunday, July 7, 2013
Another month has passed by, and it's time for me to post an article on my favorite subject: dividend income. The reason why I love to post articles on dividend income is because it's pure numbers. It's hard to argue the success of long-term dividend growth investing when you can slowly and surely see dividend income rise over time and get closer to covering one's expenses.
June was phenomenal for me, as I'm sure it was for many other dividend growth investors. This was a record month for me. I'm extremely proud of what I've been able to accomplish thus far, just a little over three years into my journey to financial independence. I started out with exactly $0 in dividend income and as you can see below I'm now far above that level. The wonderful thing is that anyone can do this. I'm not a rocket scientist, but I do have a deep desire to change my financial future. So I've decided to live below my means and invest the excess savings into high quality businesses that have a great track record of sharing profits with shareholders via rising dividends. I believe in the power of persistence, and I hope that belief shines in these reports.
I hope these monthly dividend income reports provide inspiration for any investors out there that are just starting out. It's easy to see these payments rising month after month and it shows that it's possible to one day pay for monthly expenses with dividends, which would provide an investor opportunities and freedom to pursue other interests than full-time work. Without further ado:
Saturday, July 6, 2013
I hope you all had a wonderful July 4th! Independence Day is very special. And not just for getting together with friends and family over a barbeque and fireworks, but because it's a celebration of being in one of the most wonderful countries on this planet. I try to never lose sight of the fact that I'm blessed to not only live a life free of oppression, but also have a nice roof over my head, food in my belly, running water, readily available electricity and access to almost anything I could ever want. On top of that, I get to save prodigious amounts of my net income and invest this capital into high quality companies, ensuring myself a better future.
The weekend is here. It's in the middle of the summer. Life is great, isn't it? I have some great articles I'm in the process of finalizing, so I hope to continue to produce great content for you loyal readers. Again, your support is very much appreciated. This week, I'm going to post my dividend income report from the month of June and it was my best month ever. Cheers to our success, and to building wealth!
Here are some excellent articles from fellow dividend growth investors, frugalists and personal finance bloggers from the past week.
Wednesday, July 3, 2013
That didn't take long. I received my once-a-month commission check from my day job this morning and quickly transferred some cash over to my brokerage account to get busy shopping! Of course, I already had my list made out and checked twice so it was easy pickings. There isn't a ton of value in the market currently, but as I wrote about recently I decided to concentrate on the energy, financial and real estate sectors. After some introspective thinking and deep analysis I decided on a global energy company for the most recent addition to my portfolio.
As part of my Recent Buy series, I try to let my readers know of any equities I purchase soon after the transaction is completed. This is just one way I try to document my progress toward early retirement and financial independence.
Monday, July 1, 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 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 replace my day job's income 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.
The Fund was busy during the month of June. I initiated a position with Digital Realty Trust, Inc. (DLR) very early in the month, and then shortly thereafter followed that up with an investment in Oneok, Inc. (OKE). Finally, I happily initiated a position with General Electric Company (GE). Whew! That's a lot of capital invested into the market at a time when some people are predicating calamity. I don't know what's going to happen tomorrow or the next day, or 6 months from now. I only know that it's a proven fact that a surefire way to build wealth is to invest in high quality assets, preferably those that produce prodigious cash flow which can be distributed back to the owners. My method is to invest my heard earned capital into high quality companies that have a good track record of returning higher dividends to shareholders because they're earning ever higher profits on the back of a wonderful business.