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 traditional 40-year career 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It’s important to keep in mind that while updating the overall value of my portfolio is important for historical reference and for purposes of keeping track of total return, my main focus is on the rising dividend income stream the Fund provides.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 S&P 500 continues the epic bull run we’ve been experiencing since the lows of 2009. Will it continue? Who knows. I don’t try to anticipate market moves or try to predict major macroeconomic moves. What will Washington do tomorrow? What’s up with North Korea? Will the trouble in Europe reach our shores? Questions like these are ones I avoid because, frankly, nobody really knows the answers.
There are no shortage of “experts” out there that claim to have the answers, but they’re all just clamoring for face time (or your money). I’m not an expert. I simply stick to what I know best: saving as much of my net income as I possibly can and then investing said savings into high quality companies that continue to produce products or sell services that people and other businesses want and/or need on a daily basis.
However, that all being said I do hope for a healthy correction in the broader market. A 10% drop in the general market would be a welcome sight by yours truly, and I wouldn’t be surprised to see something along those lines in the near future as some investors decide to take some profit off the table. Although such a drop would have a negative effect on the value of my portfolio, cheaper shares would allow me to buy more for my money. More shares equals more dividends and more passive income, which brings me ever so closer to my goal of financial independence. I look forward to cheaper shares in high quality companies much in the same way I look forward to a sale at the grocery store. Except I spend much more money on the former than the latter!
Over the past month I decided to sell my entire position with UNS Energy Corp. (UNS) after a strong run-up and a 31% total return. Utilities in general have been strong performers over the last year as investors continue to flee to higher yielding securities in the face of prevailing low interest rates. I used the capital from that sale, along with fresh capital from my day job, to add to my position with Lorillard Inc. (LO) and also add to my position with Kinder Morgan Inc. (KMI).
The current market value of the Freedom Fund stands at $103,131.12. This is an increase of 5.06% over last month’s published value of $98,166.64. I finally crossed the six-figure mark, which I’m extremely fortunate for and excited about. I talked about this very recently, noting my portfolio’s rise from $5,000 to $100,000 in three years.
Overall, I’m very happy with the way the Fund is progressing. It’s fairly diversified across plenty of high quality companies, with some of my bigger ownership positions in Chevron Corporation (CVX), Johnson & Johnson (JNJ) and PepsiCo, Inc. (PEP). Whether or not the global economy takes another dump or not, people will still continue to buy the products that the above companies produce. Hell, even as frugal as I am (something I take great pride in), I still buy Pepsi’s products on a regular basis. I don’t own a car, but my little 16 year-old scooter still requires gas and the bus I regularly ride also needs to stop by the gas station before the morning runs begin. If I get a headache, I’ll be anxiously looking for some Tylenol.
I’m currently invested in 30 companies. This is a net reduction from last month, due to the aforementioned sale of UNS.
These updates are mainly designed to show the increase in the value of the underlying equities I’m invested in, but the main purpose of investing in dividend growth stocks is for the rising stream of dividends over time. So, with that said I don’t put too much emphasis in these monthly updates on the value of my portfolio. I think it is a good idea, however, to keep track of the rising (or falling) value of one’s securities and be aware of where they are in terms of the marketplace and whether or not certain stocks are attractively priced. It proves to be a useful exercise, for me at least, to update the values monthly. It gives me fresh perspective on which equities are performing well and which aren’t, and from there I can make educated decisions (based on further due diligence) on which stocks I’d like to add fresh capital to (while considering portfolio weight as well).
Full Disclosure: Long KMI, LO, CVX, PEP, JNJ
How are your portfolios doing? The epic market run-up has you feeling great, or queasy?
Thanks for reading.