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 cover my expenses and my time will be completely my own. What could you possibly want to own more than your time?
I’m extremely fortunate 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It’s important to keep in mind that while updating the overall value of my portfolio is important for historical reference and keeping track of total return, as well as giving context to the dividend income I earn, my main focus is on the rising dividend income stream the Fund provides.
August turned out to be a really, really fun month. There was plenty of volatility, and I took advantage of that as the month wore on, averaging my way into high-quality dividend growth stocks as my capital allowed. I unloaded the last BBs in my BB gun just before a large herd of prey jumped out of the woods – the stock market swayed pretty heavily toward the end of the month. Fortunately, I’m reloading as we speak, and the deals are still plentiful.
Looking at my capital deployment from August, I’m rather pleased.
First, I’m incredibly fortunate to even be in a position where I’m able to regularly save and invest. Adding to that, an ability to substantially save and invest thousands of dollars per month is just incredible. And then having access to high-quality dividend growth stocks that are available for fair value or less is a fantastic long-term opportunity.
So almost as soon as August began, I averaged down on my position in Caterpillar Inc. (CAT). Nearly yielding 4% at the time of purchase and more than two straight decades of dividend growth, I feel confident about my ability to collect a very attractive dividend check here that’s surely going to grow over time.
Shortly thereafter, I initiated a position in United Technologies Corporation (UTX). This was the only new position for the Fund this month, but it’s just a great company. I’m very excited about its future prospects, its ability to generate rising profit over its cycles, and the likelihood of it growing the dividend at a rate well above inflation over the long term.
Although it wasn’t planned, I doubled my stake in Walt Disney Co. (DIS) when the stock cratered after reporting record net income for its 2015 Q3 results. In hindsight, I wish I would have waited a bit on this one. The pitch was nice, but a fat pitch was waiting just around the corner. The stock dropped not only from concerns specific to the company over cord-cutting and how that’ll affect ESPN subscription numbers, but then also later due to the broader market pullback. But hindsight is 20/20 and timing isn’t really all that important for the long-term investor. I thought, and still think, DIS is attractively valued. Still deciding how heavy I want to go here, but recent dividend growth has been absolutely stellar.
Finally, I bought more stock in Union Pacific Corporation (UNP), which is perhaps the best-run railroad in the country. I love the business model and the built-in competitive advantages. This might be the last time I pick up shares in UNP now that railroads represent about 5% of the portfolio. But I’m glad to have these 50 shares here, which will likely pay me growing dividend income for many, many years to come.
Just incredibly blessed to be able to put so much capital to work here in a variety of high-quality companies. These four purchases, in aggregate, added $137.40 to my annual dividend income.
The current market value of the Freedom Fund stands at $196,826.45, which is a 3.3% decrease over last month’s published value of $203,440.93.
So the Fund held up pretty well through the commotion, which isn’t surprising or unexpected. Due to the low beta of many of the stocks I invest in, the portfolio tends to oscillate less than the broader market, especially when volatility picks way up. And high-quality companies (along with their respective stocks) usually do well when there’s uncertainty, like we saw during the financial crisis. However, the fact that I’m not reporting a portfolio value of $180,000 or something similar on the back of a more significant broader market correction is disappointing. Hopefully, we see even more volatility in September.
Looking forward, I won’t have quite as many BBs rolling around in my BB gun this month compared to what I was rocking in August. Quarterly estimated taxes are due and recent dental work took a chunk out of my savings. But I expect to still be quite active, perhaps being able to land as many as four stock purchases. Should be very, very exciting.
We’ll see how it goes. As always, I appreciate all of your support. Every day is an opportunity. So let’s not forget that. Let’s continue to save and invest our way toward financial freedom.
The Fund now has positions in 65 different companies. This is an increase since last month due to the initiation of a position in United Technologies.
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 to build a rising and sustainable stream of dividends over time. Thus, I don’t put too much emphasis on these monthly updates. 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. I find it a helpful exercise 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 all aforementioned stocks.
Have fun in August? Take advantage of the volatility? On track for your goals?
Thanks for reading.
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