Freedom Fund Update – April 2014

piggybank1Well, 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It’s important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.

March was yet another really successful month for the Fund. I can’t say how glad I am that I’m able to take excess capital and invest it in high quality companies. Frugality is so underrated. So is hard work. And for that matter, luck is as well. I continue to realize how lucky I am, but also feel proud of just how hard I’ve worked to put myself in the position I now find myself in. And the greatest thing about all of this is that I’m nobody special. Anyone reading this article – and that means you! – can do exactly what I’ve done. Formulate a plan, stick with it through thick and thin, and be true to yourself. Live below your means. Focus on what brings you happiness. Do all of this and you’ll have no choice but to increase your wealth.

I had a rather active month, and perhaps one of my last really busy months for the rest of the year. I’ve taken a pretty hefty pay cut at work, and that cut is now starting to realize itself in my paychecks. It’s unfortunate, but I’ll continue to do everything in my power to maximize my savings and invest free capital intelligently.

During the month of March I invested in two companies – one of which was a new position for me. The first investment for March was adding to an existing investment with General Electric Company (GE). I’m a big fan of GE at these levels, so it was a pleasure to add to my position at what I thought was a rather attractive price for the long haul. My second investment in March was the initiation of a new position with the tiny paper products manufacturer Orchids Paper Products Company (TIS). This is an investment fraught with risk, but one also with a ton of potential upside and growth potential. We’ll see how it turns out.

The current market value of the Fund stands at $156,195.12. This is an increase of 4.1% over last month’s published value of $149,982.21. This was a rather big jump for me, as some of my biggest positions – notably Johnson & Johnson (JNJ) – had a strong month.

Looking forward, I expect less capital available for purchases due to the aforementioned changes at work. However, don’t think I’m taking this jab lightly. I’m light on my feet and I’m looking to counter with an uppercut of my own. I’m considering any and all options and I hope later this year I can make some changes that will better my situation.

I’m currently invested in 46 companies. This is an increase since last month’s update, as TIS was a new investment. I’m nearing 50 investments now, which is a number I don’t want to go much over. My portfolio will likely be completely built when I’m somewhere just north of 50 positions, and at that point I will refrain from investing in new companies unless I make room with the sale of an existing position. And as everyone knows, I don’t sell often. So I’m taking every new investment very seriously here.

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 GE, TIS, JNJ

How was your March? A great month for your portfolio?

Thanks for reading.

Photo Credit: Stuart Miles/FreeDigitalPhotos.net

Comments

  1. says

    My March was fair financially speaking. I was hoping for a sell off to put more money to work, but it wasn’t to be. Other than my purchase of China Mobile (CHL), I just let my cash position continue to build. Sooner or later we’ll get a sell off…..or at least improving finances for the underlying companies.

    I didn’t realize you were so close to having 50 investment positions. Obviously you’re going for diversification, and wanting to keep each individual position under 2% of the overall portfolio. That should provide loads of comfort for you when you quit working. Good work Jason
    -Bryan

    • says

      Bryan,

      I put more capital to work than I thought I would, but I’m quite happy with the results thus far. I didn’t expect TIS to bounce back so quickly, but I still think it’s a solid opportunity here.

      Yeah, owning a piece of 50 companies is just crazy to me. When I first started it was just mind-boggling to think of owning equity in 50 different high quality companies. I’m really blessed!

      Hope all is well with the family.

      Cheers.

  2. Daniel says

    Hello DM!

    Congratulations appreciation of heritage.
    Ai in the United States is very common investing in stocks. Much by interest rates are low.
    Here in Brazil, interest rates are altissimas.Por this is very weak culture of the shares here.
    To get an idea, the interest here run the house of 10.75% per annum.
    Many fail here through financial independence interest.

    What do you say these two totally betting realities?

    Greetings Brasileiras.

    • says

      Daniel,

      Well, our interest rates haven’t always been as low as they are right now. And they’re on the rise from a rather low base. Our interest rates were much higher than 10% in the late 70s and early 80s, with high inflation as well. Of course, back then you could invest in treasuries with sky-high interest rates as well. It’s all relative to the situation you’re in. One must always adapt to the situation they’re in and invest accordingly. With much higher interest rates I might be more interested in long-term bonds, for instance.

      Thanks for stopping by from Brazil! :)

      Take care.

  3. says

    DM,
    Once you hit 50 its seems like it will really change the dynamic of how you invest. You’ll look at current holdings to see what is cheap to buy more a lot. But my guess is you’ll start looking at selling more too, simply because out of 50 holdings, there’s always room to get rid of the weakest link. It will be interesting to see how that pans out once you get there. I’ll probably stop in the 30-40 range, but that may change when I get there. I’m hoping to pick up some JNJ, but missed the good opportunity in Feb.
    -RBD

    • says

      You’ve hit the nail on the head here RBD… the shift from looking at all available options to find value to adding a possible sale to the process is certainly big. One’s natural bias will come into play as they might “see” value outside the portfolio but feel compelled to invest within, or vice versa. Will be good to follow along and see how Jason manages this transition.

      • says

        W2R,

        Thanks for stopping by.

        You raise some really interesting points, especially in regards to one’s bias. I hope I don’t suffer from that, as I always try to stay open minded to outside opportunities (TIS being a recent example), but, of course, my choices will be rather limited once I get to 50 or so investments. I might see an investment that looks particularly appealing, but then once I start perusing my portfolio for which company I might have to jettison in turn then my attitude might all of the sudden change. I hate selling stocks, so that could be an Achilles’ heel for me.

        Best regards.

    • says

      RBD,

      You may very well be right there in terms of me looking to sell more often. We’ll see. I’m trying to be very careful with what companies I invest in at all times, but especially so as I get near the finish line here. I would say, overall, I’m quite pleased with most all of the positions in my portfolio, but I’m also quite sure that over time certain companies just aren’t going to perform well and I’ll likely have to reinvest elsewhere. It’s an exciting change. :)

      You know, I also planned on stopping between 30-40 companies, but once I got to 30 I found so many other companies that I wanted to invest in but hadn’t yet. I knew then that I’d be closer to 50 when it was all said and done. However, I don’t want to go much higher than that. If there are companies I leave on the table at that point, then so be it.

      Best wishes!

  4. says

    It was a fairly boring month as far as investing capital for my portfolio and I expect April to probably be much of the same. Maybe we’ll get some early “sell in May and away” to give some better prices. $150k is awesome and congrats on all of the hard work it’s taken to build it up to there. I’m trying to not add new positions unless they just really make sense for the portfolio. My number of holdings is a bit high but I just closed out one position over last week and this week. I’ve tried to keep it steady before but there’s always a shiny new to me DG company that catches my eye. I’ve got plans for 2 more companies whenever the prices come down so I’ll be very seriously considering trimming some other positions. I have 3 or 4 very small positions that could probably just be gotten rid of, it’s just that they’ve performed so well in both appreciation and DG that I haven’t done so yet. Keep up the good work!

    • says

      JC,

      Thanks for the kind words. I’ve worked incredibly hard to get to where I’m at, but I’ve also been really fortunate to have the support of this awesome community.

      I’ve also got some rather small positions that I could probably just sell (SYY), but haven’t yet because I don’t have a compelling reason to do so. We’ll see. I’m hopeful that 50 or so positions is enough for me for the long haul without needing to make too many changes too often.

      Best wishes!

  5. says

    50 holdings is quite a lot to keep track of. Invariably some of these will turn to dogs at some point, particularly if you’re not regularly reviewing them.

    Have you considered cutting that number down (to maybe 10-15) and reinvesting a chunk of the captial in 2-3 low cost index funds? That would still give you ample diversification along with enough concentration to hopefully beat the market by using your research skills???

    • says

      Under The Money Tree,

      That’s a good question there. I should probably review this topic quite soon as part of a full article, but it basically boils down to income diversification. Because I plan to live off of the dividend income my investments provide, I want to make sure that income is diversified and as secure as possible. Relying on 10 or so investments is just too risky for me in terms of the possibility of income loss. If I own equity in 10 companies and one eliminates their dividend I’m out 10% of my annual income, but if I own equity in 50 companies and I see a dividend elimination I’m only out 2% of my annual income. That’s a significant difference. And that difference can be scaled, so I view owning 50 or so stocks as quite important to this strategy.

      Lastly, I’m not interested in beating the market. I’m interested in becoming financially independent by the time I’m 40 to pursue my passions on a full-time basis.

      Cheers!

    • Ravi says

      I think the 10-15 stocks plus a handful of index funds probably would be a winning strategy for a total return goal, but probably not for dividend growth and income. Funds that produce cash flows are interesting, and I own quite a few of them in addition to individual stocks, but I’m predicting they will not outperform in the longer-term.

      I bought into some of these funds to see if I could create some serious income through reinvesting dividends/distributions, but we shall see.

      • says

        Ravi,

        That’s really the crux of the issue: dividend growth and income. For me, dividend growth investing allows me market-like returns, with less general volatility, while also receiving an income that I’ll one day be able to live off of. It’s a win-win. :)

        Take care.

  6. says

    DM,
    Congrats on passing the $150K mark.
    Thats quite a diversification. I was hoping to pick up more JNJ before the dividend increase announcement this month but looks like everyone else had the same thought :) I will just wait for a broad market pullback and then pick up more shares in JNJ this summer.

    regards

    • says

      R2R,

      Thanks! It’s been a hell of a journey so far. :)

      Yeah, JNJ has been stronger than I thought it would be. I’m not adding any more here, but only because it’s my largest position. I need to catch some other investments up!

      I hope we get that pullback. We’ll see.

      Best wishes.

    • says

      S. B.,

      Glad to be a fellow shareholder with you! I think GE makes a lot of sense here. The valuation and yield is attractive, and the business is firing on all cylinders. I honestly couldn’t be happier with GE right now.

      Take care!

  7. Bruce D. says

    Jason, did you detail — in another post perhaps? — how much new capital you added in March?
    Congrats on 150k. Next stop 250!

    • says

      Bruce D.,

      I generally don’t disclose what I specifically add in cash to my brokerage account. And it’s not to hide it, but rather because it’s easily deduced from the purchases I made and the dividends I received. However, I added $2,000 to my brokerage account in March. I didn’t need to add as much as normal because I received a fairly hefty Return of Value payment from my VOD holdings, and my dividends during March were rather strong. I’m glad it worked out like this because I was really stretching for even $2k this month. Taxes and dental costs have impacted my free cash flow significantly.

      I hope this helps. :)

      Best wishes.

      • Seviay says

        Thanks, Jason. I appreciate your candor. I am sure I could have figured it out if I went back and read your previous posts, but thanks for saving me the effort. Congrats again on a great month

  8. says

    After you reach 50 positions, would it make life easier to just reinvest the income back into more shares, and make all the positions perform on autopilot? Yes you might be buying overvalued shares, but it will save you time and you will still realize compound growth.

    • says

      RichUncle EL,

      Hmm, that would be the easier way to go for sure. But I’m not looking for what’s easiest. I want to make sure my capital is going as far as it possibly can, while also increasing my dividend income as much as possible. Besides, it’s all fun for me. :)

      But, as I recently pointed out, using a DRIP makes a lot of sense for many people. Especially when time constraints are considered.

      Best regards.

  9. says

    Hey DM,

    I had a weak March but so far I am having a very strong April with my UK stocks jumping quite high.

    You probably already thought of this but, one thing that intend to do is when a company I own is trading a very high valuation I would sell a small part of that position and re-invest it somewhere else (assuming there is actually room for that). Because when focusing on the dividend, if the price goes up dramatically, the dividend is still the same, so you can try to capitalize in selling a small part to actually convert that extra cash into dividend paying cash.

    Best,
    DividendVenture

    • says

      DV,

      Glad to hear you’re off to a strong April so far! I hope it continues for you, and if not that just means it’s time to start shopping. A win-win. :)

      Selling positions that have run up and have lower yields due to such for newer investments with higher yields can immediately boost your income. However, moves like this also come with friction costs in the form of taxes and commissions. And there’s no way to know that a stock that has gone up won’t continue to go up and perform well.

      I look at many of my holdings that have significant capital gains and it would be easy for me to sell some of them; especially those with lower yields (like ITW). However, I don’t look at it that way. I look at every investment as a business partner. As long as operations continue to do well and they’re rewarding me with higher payouts year after year then why in the world would I sell? If I need to increase my dividend income I just look for my next investment to perhaps have a higher entry yield. I have holdings that have doubled, but who’s to say they won’t triple and quadruple over the next 10 years?

      Just my take on it. :)

      Cheers.

      • says

        I tend to buy companies following the mindset you just described. However, I want to try to look at the ones I already own impartially. I was not advocating selling just because the capital gains would be big and not the whole position. I’m thinking about the case where the company is drastically overvalued, at a price you consider unjustly high, wouldn’t you consider selling a small chunk of your position and invest that cash on the best opportunity at the time?

        You do have a point I did not consider, which is the taxing. For now I’m investing small enough amounts to stay fully under tax-sheltered accounts, meaning I could move the cash around tax-free, but I wonder what would be your opinion on this if you were able to move the money tax free?

        • says

          DV,

          I’d absolutely sell a stock if I thought it was grossly overvalued. It’s one of my exit criteria. But, gross overvaluation is rather subjective. And I have yet to see it with any of my personal holdings. If KO jumped to $50/share all of the sudden without meaningful growth in profits then I’d likely kick it and pick something else up. But most of my personal holdings are trading hands at P/E ratios under 20, and with fairly healthy yields. But if that situation were to change then I’d change as well. :)

          Taxation is a rather minor issue for me. I prefer to avoid it when possible, but I won’t avoid selling a stock simply because of tax worries. I sell little due to my investment strategy and beliefs, not necessarily fear of taxation. However, if I’m being honest I’d likely be a bit more likely to sell if taxes were no issue at all. Or, at least, I wouldn’t think so hard on it when the occasional sales come up.

          Best wishes!

  10. BuildingYieldForYears says

    Jason,

    Congrats on your continued progress. Been following your blog for ages. A few weeks/months ago i mentioned how I’m quitting my job and traveling with my girlfriend. Well, today was the day where i submitted my resignation. Last few months i’ve been trying to cut expenditures as best as i can while positioning my portfolio in such a way that I’ll be able to mitigate the outflows of $ while we’re on the road. Have about 10 months worth of savings put away, which might grow to 11-12 when i receive my last paychecks and hope the draw from that will be minimal and slowing as dividend growth announcements are made and yield swapping investment opportunities arise. Should be interesting.

    Keep up the good work and doing what’s best for you. I’ll be reading and checking in every now and again!

    BY4Y

    • says

      BY4Y,

      Man, how exciting!

      I remember you stopping by a while ago and sharing some of your ideas and goals. I’m so glad to hear you’re capitalizing on your opportunity and making the most of your situation. That’s really fantastic. I wish you and your girlfriend nothing but the best of luck and safe travels. I hope you’ll have time to pop in from time to time and let me know how the world tour is going.

      Any particular locales high on your list? Are you guys going to stay in one place for a while, or move from spot to spot?

      Good luck!

      Take care.

  11. donebyforty says

    A 4% jump in one month is incredible. Well done! I rarely ever see that kind of monthly gain in our portfolio.

    • says

      DB40,

      Thanks! I had a 4.1% gain last month as well, but it came from a smaller base. I anticipate the gains as a % of the portfolio to slowly reduce themselves as the size of the portfolio increases. I’d rather have a 1% gain on a $800,000 portfolio than a 4.1% gain on my portfolio. :)

      Of course, it’s important to note that a good part of this gain was due to fresh capital contributions. I hope that can continue!

      If I remember right you mostly invest in index funds, so you’re looking at market-like returns other than your capital contributions. Correct?

      Cheers!

  12. says

    Hi Jason!
    Good job! thank god some one else is getting money too than the gel haired bankers!
    Did also update my portfolio currently worth around $23,000 hoping to catch you up someday :)

    keep it up!
    cheers.

    • says

      investingidiot,

      $23,000 is a great start! I was at that level not long ago myself. The progress can happen pretty quickly if you stick with it. Success begets success. :)

      Keep up the great work!

      Take care.

  13. says

    Way to go Jason! That snowball just turned into an avalanche. I just signed up for the 14 day free trial at Fast Graphs and so far I’m impressed. I screened my watchlist and have it narrowed down to ESV, TGH, BNS, CVX and TD. All of these are undervalued with great growth potential and have awesome dividend yields. I probably will pull the trigger on ESV or TGH this week.

    • says

      luckydog17,

      I’ve heard nothing but great things about F.A.S.T. I’ll have to take a look myself sometime. The free trial can’t hurt, right?

      Seems like you’ve got some solid picks there. I especially like the Canadian banks here. I was very close to pulling the trigger on BNS before I ultimately went with TIS. Good luck with your purchases!

      Best regards.

  14. says

    DM,
    Another solid month! Way to go, and thanks for the inspiration. Some of my favorite posts are ones like these since it’s so clear an easy to see the hard work paying off and compounding happening right in front of your eyes. Thank you for the continued inspiration in my own journey!
    Sincerely,
    Ian

    • says

      Ian,

      Thanks so much. Your support is very much appreciated, as always.

      And I agree with you: Posts like these involving hard numbers are the “proof in the pudding”. This is where theory meets reality.

      I hope your journey is proving to be even more successful than mine! :)

      Best regards.

    • says

      Richie,

      Thanks! It was another fantastic month, and I’m just incredibly fortunate. I expect the rest of the year to be much slower in terms of cash contributions and portfolio growth, but I’ll take it while I can get it. :)

      Congrats on getting your IRA contributions completed so early in the year! You’re well on your way to having an outstanding 2014.

      Best wishes.

  15. says

    Jason,

    Congrats! That’s huge..crossing 150K mark. I had a strong March as well.

    However, I think market is getting fully valued and we did not had correction in more than 2 yrs.So, I am keeping my fingers crossed going in summer and fall. It would be a buying opportunity if correction does happen. Keep the powder dry ;)

    Keep up the good work!

    Passive Income Mavericks

    • says

      PIM,

      I hear you. It’s tough to find value out there, but I continue to find the buys when I have to. I suppose one’s view on the market also has to do with capital available. If I had to deploy, say, $10,000 per month I might have a hard time. Needing to deploy only $2k or so per month makes things much easier.

      But I do hope we get a correction. Although my FF will see a big hit in value I’m more concerned with how far my current investment dollars can go.

      Best wishes!

  16. says

    Congratulations!

    I also hit my highest monthly dividend total yet!

    Even though the market bounced around a bit, my portfolio just hummed right along. Kind of dull =)

    Keep it up!

    ILG

    • says

      ILG,

      Congrats on over $400 in dividends this month! You’re not far behind me, my friend. I first hit that level not too long ago myself. Keep it up. Your snowball is rolling downhill now.

      And dull is beautiful! :)

      Cheers.

  17. says

    Very impressive numbers there, DM!

    As always, the rise in JNJ is bittersweet. I blinked and it was up a bunch…and here I was hoping to bolster my exposure to healthcare! Ah well. Pretty soon I’ll probably root for the market to go up =).

    • says

      Spoonman,

      I hear you on being bittersweet. I look at investing in dividend growth stocks as a win-win. If they go down in value and the fundamentals remain strong then I have an extra incentive to buy more. If they go up in value then my net worth is increasing, and so likely is my dividend income. I’m happy either way, although I prefer the former situation when possible. :)

      I think BAX offered a great opportunity in this sector until the recent pop on news. MDT is surprisingly expensive after I analyzed the company. I think I’d have to see at least a 10% pullback on MDT to buy more here, but I don’t know if we’ll see it. BDX is another I continue to watch, but I can’t buy here.

      Best regards.

  18. says

    Looking good. I like GE and will try to add some when I have some money. Just dropping by to say Hi and Thank you for reading RB40. It’s been really crazy lately and I haven’t had a chance to read much. The income reduction doesn’t sound good at all. Cheers

    • says

      Joe,

      I hear you on being busy! It looks like you were up late last night. I’m a night owl, and would love to be able stay up until 2 a.m. or so every night. Ahh, to dream!

      Yeah, the income reduction is frustrating and disappointing. I’m taking my time with some ideas right now, but I’ll likely respond in a big way later this year. I’m keeping some ideas under wraps right now, but I’m pretty excited about some possibilities.

      Cheers!

  19. says

    Hi DM,

    Question for you, when you considered and bought TIS did you look at IP, RKT and KS?

    If so what was your thought on them?

    Thank you and congrats on your progression :)

    • says

      Grox’s Stocks,

      RKT and KS have yields that are too low for me to consider.

      IP looks interesting. I was concerned about low margins for what might be classified as a commodity producer, but they’ve been able to grow dividends at a rather robust rate after a substantial cut a few years ago. For me, it’s one to watch here.

      Cheers!

  20. says

    DM, Congrats on your increasing freedom fund, I am not adding any new position or purchases, just keeping it low.
    but got a whooping march dividends!
    Dividend Mom

    • says

      dividendmom,

      Thanks for the well wishes. It’s been an amazing journey so far!

      And congrats to you for a huge month. You received over $500 in dividends! That’s fantastic. Keep it up! :)

      Best regards.

  21. Jerry says

    any thought in adding more to VOD? Seems more like a growth stock now but if you look at the Euro ETF’s this is a heavyweight. Are you considering keeping?

    • says

      Jerry,

      I don’t plan on adding any more VOD here. I’m about as heavily allocated to this company as I’d like to be. I actually never intended for it to be a large position, but I identified a lot of hidden value in the VZW partnership, and that value has since been fully realized. I’m happy to collect the hefty dividends, though. :)

      Overall, I’m not a huge fan of telecoms. I always liked VOD because of its heavy exposure to wireless over wireline, but that’s changing a bit with some of their recent moves. I like telecoms for the heavy yield, exposure to wireless data, and steady revenues, but there’s plenty of drawbacks including aggressive competition and high CapEx, among other concerns.

      Best regards!

  22. says

    Congrats on another month of great progress, and especially on taking a deserved and calculated risk with TIS. You’ve got a great attitude regarding the work situation and I have no doubt things are going to work out just fine in the long run.

    Thanks for sharing!

    • says

      Ryan,

      TIS is indeed a very interesting play. I think there’s a ton of potential, but it could go either way really. I don’t take on risks like this often, but it’s such a unique opportunity.

      It looks like you’re also doing quite well over there. Keep it up!

      Best wishes.

    • says

      Evan,

      It’s income diversification. If I hold 50 stocks and one eliminates its dividend I’m out only 2% of my income. Conversely, holding only, say, 20 stocks would force me to see a 5% pay cut. That’s a big difference, especially if dividend income is providing most or all of my income.

      I hope this helps. :)

      Take care.

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