Freedom Fund Update – November 2014

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It’s important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.

October wasΒ very interesting month. For my personal life, it couldn’t have beenΒ better. Claudia and I celebrated our five-year anniversary with an engagement. Meanwhile, the weather here in Sarasota has been amazing. We’ve been trying to take advantage of this as much as possible, and just this past Friday spent a couple of hours out at Siesta Key while we watched a gorgeous sunset from the comfort of our $6 beach chairs. Who said having fun on a Friday night had to be expensive?

Of course, the stock market has offered plenty of free entertainment all by itself. Well, not so free if you’re losing money! But, then again, what have we really lost?

My portfolio’s value took a big dip toward the middle of the month, dropping down to a bit over $167,000 on the 15th. But this exercise is really valuable. A temporary drop like that basically turns my portfolio into a coiled spring. I added fresh capital throughout the month in a more aggressive manner than usual, which allowed this spring to really pop when stocks recovered.

I started the month off with an ill-fated addition to my position in American Realty Capital Properties Inc. (ARCP). I don’t regret the logic, but I obviously regret the timing. I’m honestly not that upset about my mistake hereΒ because managerial incompetence that leads to accounting fraud isn’t something I can really foresee, nor can anyone else. Although, I did note that complete mismanagement was possible, albeit unlikely, when I analyzed the company earlier in the month. Obviously, this was a bit more realistic than I thought. But this is an important lesson on risk and diversification.

I felt ARCP was a fairly risky play as it was, due to massive acquisitions in such a short time frame, recent equity issuance after it was indicated that wouldn’t happen at such a low price, a questionable transaction involving Red Lobster, and a management team that left me a bit uneasy. However, I felt the risk was priced in and the company’s real estate portfolio was among the biggest and best out there. But even though I thought ARCP shares offered an attractive risk/reward relationship, I still decided to keep ARCP a small position in the portfolio due to it naturally carrying more risk than most of the stocks I typically invest in. I’ll never sacrifice substantial quality across the portfolio for the potential of outsized gains. I’m still holding shares here because they seem incredibly cheap based on all known information, but that could change in the near future as the risk has increased beyond my comfort zone. Q3 results should be released soon, and I’ll have more information with which to make an educated decision.

Soon after the ARCP purchase I added to my position in BHP Billiton PLC (BBL) for the first time in more than a year. This allowed me to average downΒ at a cheaper price and, hence, a higher yield. And the yield wasn’t higher only because of the lower price, but also because BBL has increased its dividend twice since my initial investment. Nice!

Then I noticed toward the middle of the month that shares in consumer giant Unilever PLC (UL) were attractively priced after a recent 7% pullback. Shares seemed at least 10% undervalued, with a yield that competes with some utilities. Meanwhile, the company’s business continues to hum along. So I initiated an investment in the company and I’m actively looking to add here.

Late in the month we saw some serious volatility in two blue chip stocks that are members of the Dow Jones – The Coca-Cola Company (KO) and International Business Machines Corp. (IBM) both fell significantly after releasing poorΒ third quarter results. I view volatility as an opportunity, especially when we’re talking about high-quality companies, so I decided to add to my position in IBM for the first time since my initial investment in the company in September 2013.

The current market value of the Fund now stands at $177,726.78, which is a 4.1% increase since last month’s published value of $170,704.39. This increase comes even though I have a fairly significant unrealized capital loss in ARCP. Again, diversification is always important; the rest of the portfolio is well-diversified and was able to largely overcome the ARCP issue. Furthermore, you can see that my portfolio swung by over $10,000 in value this month. That’s the coiled spring I was speaking of earlier. When stocks are cheaper, you add capital aggressively and that spring is able to pop a little stronger when stocks recover. It’s a lot of fun to watch, if you can stand five-figure swings in your portfolio over the course of a week or two. I personally don’t mind at all.

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So the Fund continues to hum along. This is now an all-time high, and I’m slowly closing in on $200,000. Although I’m a steadfast value investor that loves to see stocks cheaper, it’ll also be wonderful to see the portfolio surpass that milestone.

November, and possibly December, will likely be light in regards to capital deployment. I was a bit aggressive in October due to what I thought were attractive deals in a variety of economic sectors. I try to always keep at least $5,000 both for emergencies and a little capital reserve for when the stock market offers opportunities I don’t want to pass on. So I’ll have to simultaneously refill that capital reserve while adding to the portfolio over the next couple of months.

The Fund now has positions in 51 different companies. This is an increase since last month, as the investment in UL is a new position for me.

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 ARCP, BBL, UL, KO, and IBM.

How did the month of October treat you? Is your portfolio now sitting at all-time highs?Β 

Thanks for reading.

Photo Credit: BimXD/FreeDigitalPhotos.net

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98 Comments

  1. The largest asset you have is your ability to put money to work in dividend paying companies. Not all of them are going to work out, but overall, you will be much better off in 5 – 10 years of saving, investing & reinvesting.

    You are only a few short years away from reaching that coveted FI income target. As a side question, now that you and your fiance are together, do you plan on keeping finances separate or together?

  2. Hi DM,

    Looks like you had a ver interesting October yourself (stocks-wise)! You also got plenty of deployed cash on new opportunities. Also, I didn’t have the opportunity to congratulate you on the marriage success! Well done!

    You have a tough one on your hands with ARCP, but overall the whole portfolio looks incredibly sturdy. Have you considered adding a couple more foreign holdings to provide extra income security?

    Best,
    Dividend Venture

  3. Dividend Mantra,

    Congrats on a solid month amid the market turmoil and increasing your portfolio overall over 4%. I squeeked out slightly over 1%, which I am impressed with. Some of the stocks I own are highly voliatile so they take a hit in a down market.

  4. Onward and upward Jason. Congrats on the engagement and the Fund. I don’t think you made a mistake in ARCP at all. You didn’t know that a group was committing fraud. It does serve as a good reminder to diversify however.

    Have a great week
    -Bryan

  5. DGI,

    Absolutely. Not every investment will work out. And sometimes you just have to lick your wounds and move on. The great thing is that not every investment needs to work out in order for this strategy/journey to be successful. There’s some room in there for a few losers, so much as you don’t allocate too much to them. That’s the whole reason for diversification.

    As far as our finances go, we’re probably going to keep them separate for now. I must track everything down to the penny, and Claudia takes a more, shall we say, laissez faire approach to budgeting/spending. Plus, we’ve mutually agreed that I take a somewhat hands-off approach in regards to how/why/where she spends money on her son.

    I hope to discuss Claudia and her plans a bit more at some time. The interesting thing is that, due to her age, she’ll be collecting SS income five years after I (hopefully) hit my FI mark at 40. So I suppose there’s actually a margin of safety in there that wasn’t really intentional.

    Thanks for stopping by! I suspect you’ll hit FI before me, so I’m excited to see what that looks like for you. πŸ™‚

    Best wishes.

  6. DV,

    It was a very interesting October in more ways than one. Appreciate the congrats! πŸ™‚

    Yeah, the ARCP situation is difficult. But I’m actually looking at it as a learning experience. And not just in regards to diversification/risk as I discussed in the post, but also what to do when something like this happens. It’s definitely an exercise in patience, critical thinking, and not overreacting.

    As far as foreign holdings go, I plan on adding UL at some point this month. But I don’t actually target foreign stocks specifically. Most of the US multinational stocks I invest in have a substantial (sometimes the majority) portion of their revenue/earnings that are generated from international operations. So the geographical diversification across the portfolio is actually more robust than it looks like on the surface.

    Thanks for dropping by! Looks like you had a great October, even if the rest of the year is a bit more subdued. Keep it up. πŸ™‚

    Cheers.

  7. IP,

    Thanks for the support!

    Yeah it was an interesting month. Watching the portfolio swing by five figures over the course of just a few weeks is really fun. πŸ™‚

    You may own some volatile stocks, but those may also provide you some of the most opportunity.

    Thanks for dropping by!

    Best regards.

  8. great progress as always mantra, I too took a hit on ARCP and absolutely felt sick to my stomach that first day it fell 36%. I didn’t sell however, as I see their portfolio of real estate properties appear to be quite impressive. That said, the accounting irregularities doesn’t sit too well. I’m waiting for the fate of their dividend as well.

    I agree on the diversification part. My portfolio took ~1.2 % hit during that period, and with the help of other holdings; it actually had a gain after a few days. I’m tempted to buy another small position, purely as a speculative play.

    I’m curious, you don’t have much exposure to utilities in your portfolio. There’s a bunch of them that are fairly stable; although not high flyers, their dividends can be counted on and have consistent dividend increases every year or so. Thanks again for the great job with your posts.

  9. Awesome work Jason,
    Its pretty damn impressive to keep increasing that freedom fund even without having a regular day job! very inspiring my friend. Keep on keeping on!

  10. Congrats on a positive month and the engagement! It’s unfortunate that ARCP had accounting issues. The stock is trading below book value now, but who knows how accurate that even is! You’re inching closer to that $200k mark. Maybe early next year you’ll reach it?

  11. The ARCP fiasco is the first opportunity I’ve had to stay rational instead of joining the panic selling. It’s also a good reminder that I have to continue diversifying and not let positions get overweight. Ah well, experience is the best teacher.

    Congrats on another great month. The Freedom Fund is looking fabulous!

  12. Jason,

    Your portfolio is growing leaps and bounds. I have about 420 shares of “ARCP” but at this point I think if everyone remains calm and waits we’ll be ok. The findings will be released and the stock may recover. REITs have to pay a percentage of what comes in back to the shareholders, so even if the dividend were cut I think it will still be a good div. thoughts???

  13. Bryan,

    Absolutely. No way to foresee accounting fraud. I knew the risk was there, but I felt it was priced in. Even though hindsight is 20/20, I still feel the risk was priced in. If the accounting issue hadn’t happened I’m sure shareholders would still be relatively happy ARCP owners just wishing that they’d firm some things up. Now we have a disaster on our hands. But such is life, and that’s why we diversify. πŸ™‚

    Thanks for stopping by. Enjoy this great weather!

    Take care.

  14. jm,

    We’ll see what happens with ARCP. I thought for a second about buying more at that $8 level, but it would just be too speculative for me. There’s just no way to know what’s going to happen because we don’t have all the facts in front of us. No way to tell what’s going to happen with investigations, legal action, their credit, etc. A lot in the air.

    I don’t have much exposure to utilities on purpose. They are capital-intensive businesses subject to heavy regulation which limits growth. Their cash flow metrics (as a group) are typically poor, and the total return prospects are somewhat lower than what I can get elsewhere. Furthermore, I wonder where some of these utilities are going to be 10-20 years from now as alternative/green energy becomes more commonplace and inexpensive. I remember coming across a study (for utilities by utilities) that doesn’t exactly paint a bright picture, although the current/past environment isn’t all that great for utilities anyway:

    http://www.eei.org/ourissues/finance/Documents/disruptivechallenges.pdf

    There’s an opportunity cost there. Many of the major utilities grow earnings and dividends in the low single digits every year. Combine that with a yield of, say, 4.5% yield and you’re just not looking at really attractive total returns. I typically use 10% as a hurdle, and I find it hard to find many utilities that can cross that.

    Cheers!

  15. Ace,

    Thanks, bud!

    I’m incredibly grateful to be in this position. I had no idea how much I’d be able to grow the portfolio/dividend income by once I made this leap, but it’s been great thus far. My progress has largely been unimpeded up until now, which is just incredible. I’m doing all I can to keep it rolling. πŸ™‚

    Appreciate you stopping by. Keep up the great work!

    Best wishes.

  16. Henry,

    Thanks, man! It’s been a great month in many ways. πŸ™‚

    I anticipate I’ll hit $200k sometime next year, but it’s difficult to tell. The market could go anywhere from here. Assuming a relatively static market, I’ll probably hit that mark next summer. It’ll be a great milestone.

    You’re inching closer as well over there. You had a big month. Keep that new capital flowing!

    Cheers.

  17. Seraph,

    Experience is the best teacher, indeed. πŸ™‚

    Like I mentioned earlier, I’m glad it happened in a way. Gave me the opportunity to test my fortitude, which I’m happy to say is strong.

    Appreciate all the support. You’re doing great as well!

    Best regards.

  18. cheong,

    Well, I’m taking a wait-and-see approach. There’s a lot of speculation right now, but the last real information we received was directly from the company. They insisted it was bad decisions, not bad people. The dividend is safe, and it’s just a slight adjustment to AFFO. So if the information changes, then I’ll have to reassess and go from there. I think we’ll know a lot more in the next week or two.

    Cheers!

  19. Hey Jason,
    I am with on holding ARCP for the long haul and I decided to drip the dividend in order to buy new shares at the cheaper price. I don’t see myself buying anymore shares at this point because of the loss of trust. Luckily I only have a small position because of the risk that was involved. Your portfolio has the perfect balance and was able to recover very nicely. I like how you were aggressive with buying in October. I wish I had done the same, but I still see some fair value plays with UL, KO, and MCD at the moment.

  20. I don’t think we’ll forget October anytime soon. Between the wild ride, we saw the market dipping about 8% in a couple weeks to all time highs two weeks later, witnessing dividend stalwarts KO and IBM fumble and take a punishing hit to one of the largest REITs getting spanked big time. Who knows where November will lead us? Still, despite the highs and lows it’s the dividends that matter and the dividends that must keep rolling in. Watching your FF grow, dip or maintain a certain level is secondary to the goal at hand which is to always grow our passive income stream. Good and inspiring stuff to see how and where a portfolio is on a monthly basis. As always, look forward to your next update.

  21. The two century mark is within sight, congrats! I think you did well deploying capital agressively this month, that’s the sort of opportunity that one should take advantage of these days.

    As far as ARCP is concerned, just continue to roll with the punches. A few years ago I got embarassed by CTL when they cut their dividend. Thankfully I only had a small position at the time and I was able to recover by redeploying capital to other stable companies. I also learned not to fall in love with companies and make hard decisions when I have to.

  22. I suppose it’s always good to see that a disciplined approach wins in the end. Even with the best of intentions, it’s not really possible to foresee things like ARCP happening, but it’s better to stay the course than to start reacting emotionally… after all that’s when we all get in trouble!

    This month was great for me as well. Interesting to see the Dow drop 1,000 points and then regain it all right back.

  23. You’re making great progress on your freedom fund Jason. Way to go. ARCP is an interesting development so far. If I were you I’d keep an eye on the dividend. If dividend is not cut I may invest a bit more capital into the position.

    One question… what do you use to display your graphs? Is this a plug in that you use?

  24. 4% is very solid. Not much u can do about arcp but u had the foresight to diversify and easily take that capital hit on it. With a portfolio of 50 equally weighted stocks if one where to go bankrupt every year that is only 2% of your portfolio which is not bad considering the situation. Good to see people in the green this month thats for sure.

    Keep on grinding and motivating us all!

  25. Jason,

    When considering everything that happened in October, it’s quite awesome to see a 4.1% increase from September. Especially so because you gave up your day job a while ago now!

    Too bad about the bad ARCP timing, but worse things could have happened. You can’t do much now and wait until the investigation is finished to see if the company is worth keeping or not. As someone who is not yet invested in ARCP the current price point is really attractive, but I’m not sure I could handle the associated risk.

    It won’t be long until you breach the $200k mark, keep it up!

    Best wishes,
    NMW

  26. Congrats on a solid month. 4.1% and $10k+ gain is pretty impressive. I liked the buys you made earlier in the month and I’m looking at IBM right now. Lots of companies I would have purchased if capital wasn’t limited. I was tempted to add to ARCP down in the $8-9 area but like you decided to hold off because it’d be a purely speculative play at this point. Who knows what else lies down the rabbit hole.

  27. Congrats on a massive income swing this month. In regards to ARCP, looks like they are getting another major haircut this morning, the FBI probe and cancellation of the Cole Capital deal is not helping, could it be a beginning of the ship going down to the very bottom, hard to say, but I’m seriously looking to get out and take the loss.

  28. Hi Jason,
    My portfolio also made some swings in october but recovered nice till the day ARCP announced the stuff, too bad. ARCP is a big one in my portfolio so I feel the pain when looking in my broker account. But as long as dividend is safe, I’m not gonna sell. Like you say, it’s a good exercise and stay rational by not selling in panic… I will keep my 2000 shares of ARCP but I’m not going to buy more. Lesson learned, don’t but too many eggs in one basket.

  29. What do you recommend for a new dividend growth investor? Is it best to start out with an index fund until you reach about 20k, so that you can stay diversified until you have enough to own several sectors?

  30. Hi Jason,

    I had some questions about investing in stock and dividends. I am new to this financial arena and very overwhelming. I would like to start investing in stock companies but my main issue is unfortunately I went through a bad divorce and lost all my assets. I am starting over financially. My questtion is how I can invest with little to no money? I read your story and very inspiring how you started. I am trying to turn my life around and pay off my divorce debts. What would be a good approach to take? My financially adivor Edwards and Jones advised me to pay off my debts first before trying to invest in stock and dividends. Any insight would be most appreicate.

    V/R
    Aaron

  31. DM,

    I’m on the same page here. The valuation is obviously extremely compelling if it’s just the slight adjustment to AFFO, but there’s a breach of trust there. So I’m holding, awaiting further news, rather than selling out of fear/panic. That being said, any further issues that show more dishonesty and I’m probably going to move on. We’ll see.

    There’s definitely still some stocks out there that appear attractive to me, so it’s just business as usual for November. I think UL in particular is attractive right now.

    Thanks for dropping by!

    Cheers.

  32. DivHut,

    October was definitely interesting. I know I certainly had fun watching it all and adding more capital than usual. πŸ™‚

    And the Fund is definitely secondary as far as importance or focus. The dividend income is what will truly buy my freedom.

    I hope we both get some opportunities in November!

    Best wishes.

  33. That’s a great question and i’d love to hear Jason’s answer! I had about 10k to start with 3-4 years ago and i felt nervous at the onset due to diversification. That actually prompted me to be a little more lenient on what price i bought in at. IE: I would buy slightly higher than i would today because i know i have a sector covered.

    As far as i can tell Jason is a tad on the “zealous” side as far as early retirement goes. He’s 100% full on individual DGI stocks with a relatively small emergency fund. I should go back in time to find some of his posts but i’d be curious to hear about the “early years”. I wasn’t following the blog back then πŸ™‚

    I personally maxed out my 401k (index approach) and emergency fund (super important depending on your field!) before i started heavily investing in individual stocks. To each their own, there is no “one strategy”.

  34. Spoonman,

    I’m with you all the way on not falling in love with a company/stock. Investing is best when it’s most businesslike, right? This is all just business to me, which is how it should be. But you have to be able to trust the managers running the show, so it’s unfortunate.

    Appreciate all the support! Sounds like you and Spoongirl are all settled in up in PNW. Enjoy the ride. πŸ™‚

    Best regards.

  35. Ravi,

    Definitely. Staying the course through thick and thin is difficult, but it’s gotten me pretty far.

    This past month was a little different. I have an article all ready to go that actually discussed that 1,000 point swing in the DJIA. πŸ™‚

    Thanks for dropping by. Hope you had a great month!

    Cheers.

  36. Tawcan,

    Yeah, the dividend is one of my signals here. If it’s cut, I’ll most likely sell. Just a line I’m drawing in the sand. Same goes for any other further mismanagement news.

    I use RJ Quickcharts for my graphs. Easy to use, which I like, because I’m not much of a graph or spreadsheet guy.

    Take care!

  37. Glad you were able to finally open a position in UL this month, and of course, the joy and excitement you experienced with Claudia. I’m happy for you and her to really begin to build a future together, and work towards joint financial independence.

    Of course, the ARCP news was tough, but for now I am just going to hang onto my position and let it ride. While it doesn’t feel like a small amount of money right now, given the $90-100k I plan on putting into the portfolio over the next couple of years, it will be insignificant in the long run.

    Let’s hope for another fire sale during November!

  38. A-G,

    Thanks! I’m grinding away. πŸ™‚

    There’s nothing anyone can do about an accounting scandal. Just something we can’t foresee, which is exactly why I diversify so heavily. I’d probably be pretty upset if I had a substantial portion of my net worth invested in ARCP.

    Appreciate you stopping by. Keep up the great work over there!

    Best regards.

  39. Just wanted to give you a shout out that I also went through a nasty divorce. Set me back about 4-5 years from where i wanted to be. I double down on the “Jason’s story is inspiration” comment. If it helps, I personally paid off all my debts (except mortgage which i cut in half) and built up an emergency fund before i started investing heavily. It is a really good feeling to not owe any money. I can only imagine what it will one day be like to be financially independent. I will live vicariously through reading Jason’s posts in the mean time =P

  40. NMW,

    Thanks! Yeah, I didn’t know how things would progress once I moved away from the day job. I was prepared for a drop in free cash flow and a slowdown in investments, but it’s been fantastic thus far. Just a dream come true. I’m incredibly grateful.

    Appreciate all the support. You’re doing great over there as well. That savings rate is impressive!

    Best wishes.

  41. JC,

    Thanks, bud. Appreciate it!

    Yeah, ARCP is purely speculative now. Tough to price in the risk when you don’t exactly know what the risk entails.

    Hope all is well with baby Luke over there.

    Cheers!

  42. Anna,

    Well, the FBI probe isn’t all that surprising. I think they generally get involved anytime there’s something like this going on. I remember they probed JPM after that trading scandal, looking for criminal wrongdoing. Same here, I suspect. I’m actually glad they’re on it. The more eyeballs on ARCP right now, the better. If the FBI finds something they shouldn’t find then I’m definitely selling.

    Thanks for stopping by. πŸ™‚

    Cheers!

  43. Zol,

    Yeah, I heard about that. Like I just mentioned, I’m glad the FBI is on it. The more people probing ARCP for mischief, the better. As an owner, I’d like to know that the shenanigans are done. It’s really not surprising, however, as they investigate anytime there could be criminal wrongdoing. Same with JP Morgan a while back, which, incidentally, was an opportunity.

    Take care!

  44. DD,

    Sorry to hear about the pain there. You have a much bigger position in the company than I do.

    This is definitely a great learning exercise. Teaches us a lot about risk, diversification, panic, and emotion. It’s unfortunate it had to happen like this, but I also remember that not every stock I’ll pick will be a winner. Some will be duds. Just the nature of things. ARCP might be one of them, we’ll see. I’m not panicking here, but it’s definitely unfortunate to have to deal with this. They have this great real estate portfolio and all they have to do is run it right and make a lot of people a lot of money. Instead, we get this.

    The good news is that you learned this lesson early on, while you can still recover. It would have been much more difficult to deal with later in life when perhaps you were living off of your dividend income. Probably much more difficult to remain calm.

    I wish us luck, my friend.

    Best regards.

  45. Conrad,

    I don’t think that’s necessary. I started out with investing in individual stocks right away, and that’s what I would do if I were starting all over again:

    https://www.dividendmantra.com/2014/05/if-i-were-starting-all-over-again/

    That being said, index investing is a fine way to go as well. It’s especially recommended if you lack the time and/or interest to follow individual stocks. But you’re paying a fee for the privilege, and the yield/income you’ll receive is probably lower than what you could achieve on your own.

    The good news about just starting out is that it’s easy to diversify and change your diversification as you go. Every new position immediately changes the weighting in your portfolio by large percentages. Much more difficult to achieve somewhat “immediate” diversification when you’re running a six-figure portfolio, as the additional buys don’t move the weighting as much.

    I hope that helps!

    Best wishes.

  46. Aaron,

    Terribly sorry to hear that you’re starting over. That’s really unfortunate. The good news is that it’s possible to start over, especially in a first world country. There’s opportunity everywhere you look.

    I don’t know all of your details, so it’s really impossible for me to give you accurate advice. That being said, I have always preferred paying off debt to investing. The debt is like an anchor that will weigh on you and try to keep you underwater. And paying off debt is like a guaranteed return on your money, somewhere in the vicinity of the interest rate. The only debt I still have on my balance sheet is student loan debt, and I only retain it because the rate (around 3%) is low and it’s tax-deductible.

    I had no money when I first started. In fact, I was worth a negative amount of money. But paying off debt is a good start.

    What I would actually recommend before you do anything at all is start tracking all of your income and expenses. You need to know where every penny is coming from and where it’s going. Otherwise, you don’t know how much you’re saving/spending and how much capital you have to pay off debt/invest. So that’s the first step. Once you know where you stand you can make informed decisions on where to cut and how to increase the spread between income and expenses. I use Mint.com, but there are a number of tools out there you can use to track your income/expenses.

    Let me know if I can help further!

    Best of luck. πŸ™‚

    Take care.

  47. Zol,

    The good news is that you actually don’t have to go back in time. The posts are all stored. πŸ™‚

    I wrote about my emergency fund a while ago. And my opinion hasn’t changed:

    https://www.dividendmantra.com/2011/10/my-thoughts-on-emergency-fund/

    That was one of my earlier posts, so don’t judge too harshly. Luckily, my writing has improved.

    But I agree with you. There is no “right answer” or “perfect strategy”. You have to really do what works best for you, your goals, needs, means, risk tolerance, time horizon, etc.

    Cheers!

  48. W2R,

    Thanks for all the support. It was definitely a great and memorable month, most of all due to the engagement. I’m lucky. πŸ™‚

    And you make a great point there. The unrealized loss stings a bit right now, but it’s rather inconsequential relative to the long-term story. And that’s kind of what I was mentioning before. This strategy is robust in that you can pick out a few losers along the way and be just fine. I’d hate to lose the money if I have to realize the loss and move on, but I also know that, as this update shows, the portfolio is just fine.

    Let’s indeed hope for more sales over the coming month. I’m ready! πŸ™‚

    Thanks for dropping by. Hope you had fun on your vacation!

    Cheers.

  49. Nicola,

    Thank you! I appreciate it. πŸ™‚

    I’m looking forward to that mark as well. It’ll be a really wonderful milestone.

    I hope all is well.

    Best wishes!

  50. Hi Aaron,

    For low cost investing you might want to look at Loyal3.com You can purchase some great dividend paying stocks for $0 commish and can invest as little at $10. Loyal3 makes investing very easy and affordable and slowly build up a growing dividend income portfolio.

  51. Hi Jason

    Good performance in a roller coaster month.

    Do you think you need to rename your portfolio now you have escaped from wage slavery, perhaps it should be called Freedom Found!

    Nice to see you buying to companies I own (BHP Billiton & Unilever), so hope your dividends from these companies continue to grow.

    Congratulations on your engagement, I assume you won’t be blowing all your cash on a huge fancy wedding?

    Best Wishes
    FI UK

  52. Hey DM, I am also adding to UL, BBL, and a bit in IBM. Regarding ARCP I would just hold on and see what happens. The price drop may be all we see on the downside. Certainly I believe they will have to cut their dividend. I have about 20 stocks in my “fund” and no position in ARCP. My big holding in the REITs is symbol O ( Realty Income Corporation). I love that stock for the reputation it enjoys as putting shareholders first.

    I’m considering a position in COP as I have been adding to all my oil stocks because of the drop in crude. When the “players” have finished with oil, I think it will certainly go up. I realize oil is cyclical, but this is ridiculously low. I think Buffett just bought a ton of shares in SU, the largest Canadian Oil Company. Also, Bob Brinker (Marketimer) recommends SU. So I did buy SU about a month ago.

    Thanks for sharing all your thoughts with us. It is much appreciated. Dan

  53. DM,

    “Always killing it” is my motto for you for October. Huge events for you – the engagement (CONGRATULATIONS BY THE WAY!!!), market roller coaster which poised you to purchase many shares into stock you already own – re-upping on the positions into a higher yielding price when increases were the main part is very satisfying; and then all of a sudden the market pounces right back up to all time highs again. You are close to hitting the 200K mark.. it’s intense isn’t it?! My portfolio actually crossed the 120K mark by the end of 10/31, which something that seems surreal to me when I first crossed the 100K mark not more than 6 months ago. Due to capital infusion, appreciation and reinvestment from dividends – it’s been fun seeing the upswing of a portfolio.

    November is in play, today was an “eh” type of day, not really moving in any which direction. Hopefully we see more/better signs similar to October that allows us a chance to perform similarly as we did last month.

    Congrats on crossing $175K and we shall talk soon DM, have a great rest of the night!

    -Lanny

  54. Hey DM,

    Long time reader and first time commenter. Love the site, keep up the good work. Fellow shareholder in ARCP here, I was wondering if you or anyone else knows the implications of the lawsuits against them. Obviously, there are many unanswered questions regarding the lawsuits, but I am assuming most of these will be covered by a D&O insurance policy? Will some of these go after the auditors that signed off on the financials? Has anyone ever dealt with this sort of thing? Are these suits for the benefit of large shareholders or can small shareholders get in as well.

    Thanks,

    Pat

  55. FI UK,

    Freedom Found. I like it! πŸ™‚

    I’m not free quite yet, though. I’m incredibly grateful that I’ve been able to escape the 9-5 grind (7:30-6 in my case), but I still write for a living. I’m not financially independent until passive income can cover all of my expenses. Perhaps then it’ll be time to change the name.

    Glad to be a fellow shareholder with you in BBL and UL. I’m anxious to increase my position in UL here pretty soon.

    A fancy, expensive wedding? Definitely not. We’re going to do a courthouse deal. I think it’s a bit over $100 after everything. It’ll be about as frugal as a wedding can possibly be! πŸ™‚

    Thanks for dropping by. I hope you had a great month over there. Looks like you’re getting very close to FI – about 2-3 years out. That’s fantastic! Keep up the great work.

    Cheers.

  56. Dan,

    Sounds like we’re on the same page there regarding some of those names. IBM might be one of the better values on the market if you believe in their future.

    I hear you on ARCP. I’m in a wait-and-see holding pattern right now. A lot of this is just noise, although the cancellation of the Cole Capital sale was indeed a bit surprising. Of course, that means the previous guidance adjustment to the downside would also be cancelled, if things don’t work out there. It’s been a ride, that’s for sure. I’m also long O, and that one has obviously been a lot more stable. πŸ™‚

    I still like some of the big oil plays. SU is interesting. I think there’s a lot to like there. Although, the heavy oil they specialize in is a bit more expensive to procure and is worth less in the market. I remember there being some supply takeaway concerns when I checked it out not long ago. But I hope to take a real in-depth look at SU at some point.

    Thanks for stopping by!

    Best wishes.

  57. Lanny,

    Hey, congrats on crossing over $120k. That’s awesome! πŸ™‚

    Yeah, I’m hoping we get some volatility this month. I didn’t actually even have a chance to look much at the stock market earlier today. I didn’t even log into my brokerage account until like 4:30. But the knowledge that things will hum along without me worrying is one aspect of this strategy that I enjoy. Just business as usual, for the most part.

    Keep up the great work over there. Best of luck with those 2015 goals!

    Cheers.

  58. Pat,

    Thanks for the readership and support!

    As far as the lawsuits go, there are a lot of them out there. You’d have to contact one of the legal firms/plaintiffs for more information on that, as far as how to participate, recourse, etc. I don’t anticipate participating in any of that.

    Not sure where all of these are going to go, to be honest. There’s still really a lot up in the air as far as how deep things go. I’m running on the assumption that it’s just the adjustment that Kay announced during the most recent CC. If there’s more than that, then I’ll probably have to sell my position and move on.

    Best regards!

  59. DM,

    There is for sure more drama and excitement at ARCP then I prefer or like. I am likely going to hold onto it though and stay the course. Panic selling this low is not for me unless there is a lot of skeletons coming. They still have real properties and rent income. The issue is they grew to be the biggest instead of the best, and not able to absorb it. Had a minor accounting error covered up by a couple possible crooked executives. For the current price I think if someone did come in and acquire them it would be worth more then currently trading at. Noone likely wants to touch them for a long time with the FBI and SEC involved though. I read somewhere that an Ernst and Young preliminary audit has not turned up anything new.

    Being in school for Finance and taking accounting related stuff I for sure know how serious it is to lie and knowingly falsify financial statements. That is too bad to have to go out that way.

    Realty Income and NNN quietly and steadily performing much better than ARCP. I may be wrong, but I suspect the issues and selloff at ARCP will to pass eventually.

  60. SWAN,

    I’m with you on that drama. Way too much for me. I like ’em slow and steady. πŸ™‚

    I don’t think this particular issue was that they grew too fast to absorb it, though that certainly was a separate risk. But the accounting error had nothing to do with their growth, from what I can see. It appears to be incompetence on the part of a couple of executives, and then stupidity to cover it up. I suspect that had this accounting issue never had happened that shareholders would still be happily collecting their dividends and the share price would be unchanged.

    That being said, I hope they slow way down on the acquisitions for a while. I predict they’ll have no choice now. We’ll see how it turns out, but you’re right in that they have real properties providing them real rent which gets converted into real dividends.

    Q3 numbers should shed some more light.

    Thanks for dropping by!

    Cheers.

  61. Hello Jason!

    This may be offtopic so I do understand if you choose to not answer. (I commented earlier but couldn’t see my comment – do you have to accept it before it shows up?)

    My portfolio is worth approximately 80k USD and consists of KO (21%), PM (16%), MCD (14%), WMT (10%), PEP (3%), MO (3%), a foreign bank (4%) and Cash (26%). Lately i have been think of selling half of my stake in KO, PM and MCD. To avoid any company to make up for more than 10% of total portfolio. Yet, in the beginning of 2014 i told myself to not sell any company because I have done it before and I regret selling great companies just becuase they increase in value. However, both MCD and PM hasn’t impressed on me and i think some diversification would be good for me, especially when reading about ARCP. This maneuver would obviously increase my cash position pretty hefty. Do you have any tips, thoughts or recommendations?

    Cheers!

    Roger A

  62. Happy to hit just over $500 in dividends again this year, that makes 4months this year that i have achieved this marker – looking forward to what NOV and DEC brings me πŸ™‚

  63. I also bought a tiny bit of Hindustan Unilever on dips. Not exactly cheap– but people are not going to stop using toothpaste or shampoo. πŸ™‚
    Plus TCS. Plus Tech M. Tech rules.
    Also parked some into a close ended Micro Cap fund.

  64. Another great month DM. ARCP was unfortunate and as a fellow shareholder, I am upset too. But thankfully, it is a small position in the portfolio. We will have to wait and see if a dividend cut is going to happen and how the stock responds to the accounting scandal.

  65. It will be interesting to see where ARCP goes from here. I knew it was a bit risky when I saw them growing so rapidly with only 12 employees. It didn’t make sense, but I hope they don’t go under and switch management somehow. How do you view Hellman’s Mayo now after you became an owner of UL? ITs crazy how we as owners now feel obligated to support the companies we invest in. UL has some many great products I use all the time.

  66. DM,

    Not everyone can stomach the five-digit swings and it’s important to mention that. As our portfolios grow the swings will grow as well. You have to be able to stomach and dismiss a $25k or more drop in your porfolio on a bad market day or Bear run, and instead keep your eye on the prize: those dividends coming in. Markets are ultimately designed to rise, not fall. When they fall, we take advantage. Eye on the prize πŸ™‚

    Best,
    DWC

  67. I got hammered by ARCP as well. It’s really one of only two black marks in my entire pretirement fund. (ALTV being the other one.) Very distressing to have a blatant fraud issue come up like this and know that now we’re in chaos and lawsuit land. That thing with Core only made it worse. I went back and loaded up on a little more ARCP when it was down 30% from my original position and it dropped again! AAAAaaaargh! But fortunately the rest of my porfolio has been doing very well so I’m just switching to viewing it as a speculative buy for now. I haven’t decided if I’ll dump it if they drop their dividend. I suspect they probably will, though, as a market-calming measure. What a mess!

  68. Roger,

    Hmm, I’m not sure why your comment wouldn’t have appeared. I don’t moderate comments in that way, so they show up immediately.

    That’s a tough position. I personally wouldn’t ever be in a position like that in the first place, because that’s really not diversified enough for my comfort level. So in that regard, it’s tough for me to give you specific advice because it sounds like we might be different investors.

    I think my answer would depend on how much you’re investing every single month. If you’re investing, say, $3k or $4k per month then you probably don’t really need to worry about selling off the shares in those companies. You’ll naturally diversify your portfolio by building it out around those stocks. So you would simply start allocating new capital to anything but MCD and PM. Your weighting in those two stocks would naturally start to decrease after every single month of new investments elsewhere. If, however, you’re unable to invest that kind of capital every single month then you may want to reduce your stakes.

    That’s also a pretty big cash weighting, especially for your portfolio size. If it were me, I’d simply start allocating that existing cash position and any new cash you’re able to come up with to different stocks. That’s just me. It’ll take a little while, but eventually those heft weightings to PM and MCD will reduce.

    I hope that helps!

    Oh, and I have an article coming out very shortly on cash. You might find some value in it. πŸ™‚

    Best regards.

  69. John,

    That’s fantastic. You had a better October than I did. πŸ™‚

    I’m especially looking forward to December. Should be a huge quarter. Lots of fun!

    Thanks for dropping by.

    Best wishes!

  70. austereseeker,

    I hear you there. No matter what happens with the economy people aren’t going to stop cleaning or grooming themselves. That defensive nature of Unilever’s business model is very appealing.

    Best of luck with the tech plays! πŸ™‚

    Cheers.

  71. DGJ,

    Yeah, it’s just the old wait-and-see game with that stock. I’m optimistic they’ll come out alright, or I wouldn’t be holding. But we’ll see. I anticipate things clearing up a bit with Q3 results.

    Thanks for dropping by!

    Take care.

  72. RichUncle EL,

    Well, I always try to use the products that the companies I own a stake in produce. That’s part of my owner mentality. I don’t buy may very often, but I’ll definitely be looking at Hellman’s the next time around. πŸ™‚

    But I’ve long used some of their products, even though I didn’t own a stake in the company. Dove soap, for instance, has long been the only soap I’ll use. Glad to finally be profiting from that!

    Thanks for stopping by.

    Best regards.

  73. DWC,

    Absolutely. I discussed that phenomenon a while back. If you’re scared of watching your portfolio rise or fall by $10k or so, imagine how Buffett feels watching his portfolio swing by billions of dollars. You just really can’t look at it that way. Having that “today” mentality rather than thinking about the long-term and the income the portfolio provides will surely lead you to trouble.

    Eye on the prize, indeed. πŸ™‚

    Thanks for stopping by!

    Best wishes.

  74. DB40,

    Thank you! I appreciate it. The portfolio is definitely coming along nicely, and it’s been a hell of a ride thus far. πŸ™‚

    Hope you’re experiencing just as much success, if not more! :

    Cheers.

  75. Nick,

    Yeah, it’s a mess. They have a great business model on their hands with fantastic properties. All they have to do is not screw it up and everyone does well. Unfortunately, it appears they had a couple of bad apples in the bunch. I’m taking Kay at his word – the two guilty parties are it, they’ve resigned, the rest of the numbers appear okay outside the adjustment to AFFO. If there is more going on than what he’s led me to believe then I’ll probably have to exit. He also stated the dividend is fine, so that would also be incredibly disappointing if it’s cut. We’ll see. I hope to know a lot more in a couple of weeks here.

    Take care!

  76. Hi,

    impressive work Dividendmantra. I hope for myself that I can reach the millstone $100,000 as quick as you. I really think after one passes this limit the exponential booster starts massively.

    Best
    Tim

  77. Thanks for the answer!

    Yeah, I have not been thinking in terms of diversification earlier. I just bought shares i found reasonably priced. And I still think MCD, KO and PM is reasonably priced that’s why it would hurt a little bit selling, because I’m not sure I have any better place to put the money in this market. Moreover, selling and adjusting the portfolio seems to me like a good way to lose money. Yet, deficient diversification does lead to higher risk.

    Currently I can save approximately 1k USD per month.

  78. Tim,

    I agree. I’ve started to really notice how fast things are rolling after passing $100k. And that’s because a $100k portfolio should be producing $3,500 or so in annual dividend income. So that’s basically $300/month that amounts to extra investment capital, supercharging the fresh capital you already add. It’s good stuff. πŸ™‚

    Appreciate the support. Hope all is well over on your side!

    Cheers.

  79. Roger,

    Yeah, I agree that PM is priced rather attractively here. So I wouldn’t be very interested in selling.

    So you can invest $1,000 per month, plus you have over $20k sitting on the sidelines. Investing this cash flow will further build your dividend income, thus adding even more cash flow for you. It’ll take time, but you’ll diversify around these holdings. The good news is that your shopping list just became shorter by two stocks, since you already have more than enough MCD and PM. That limits your universe of available opportunities just a bit.

    You’ll get there. Keep at it.

    Cheers!

  80. Hi Dm,

    Seems like you had a great month. Keep rolling that snowball to the 200k mark and beyond.

    Cheers,
    G

  81. Geblin,

    Thank you. Appreciate the support!

    The snowball is rolling, and I’m not getting tired yet. πŸ™‚

    I hope things are moving along just as well for you over there.

    Cheers!

  82. Awesome work! What are your thoughts about some cash on hand for dips(versus the opportunity cost of having it invested)?

  83. Great work, even if I find your 51 positions a bit too much, but you are doing well.
    For me it’s OK; 2014 revenue target is well behind the current revenues. I have some virtual/non realized losses because of oil, but nothing is affected on a revenue basis, I will monitoring how my companies cope with it. Most of them are hedged for 2015 anyway.

  84. envisionhappy,

    That’s a great and timely question. I actually already have a very lengthy article penned on that very subject. I plan on publishing it within the next few days. Keep a look out. πŸ™‚

    Best wishes!

  85. farcodev,

    51 positions is probably a bit too much for some, but very few of them require any regular attention from me. Now, if I had a portfolio of microcaps or something, that would be a different story.

    I hope you have a strong finish. Still two months to go. πŸ™‚

    Take care.

  86. Very nice rebound in the portfolio value. I had ARCP on my short list and was about to pull the trigger on it to add some nice yield to my portfolio. Luckily, I got hit by the cold first and totally missed the hammering it took. I’m still thinking of nibbling a little here soon if it keeps going down. I’m hoping they can turn it around with some new management.

  87. Agent,

    Sounds like that cold was a blessing in disguise. πŸ™‚

    I wish you luck if you buy here. I think it was a high-risk investment before, but I believe it’s drifted into speculative territory now. Not that you can’t make money in spec plays, but just that it’s not really in my wheelhouse. So I continue to hold awaiting Q3 results.

    Thanks for dropping by!

    Best regards.

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