09-10-2015, 11:04 AM
Your portfolio allocations seem sounds to me, the way you described them above. Furthermore, I am happy for you that you have found a comfortable investment strategy that works well for you.
However, I take issue with some of the uncertainties you describe. You say "we don't have a clue what the next ten years will hold." You also describe "choosing a single approach and declaring it to be the holy grail of investing".
Owning a business or cash producing entity and being entitled to profits or cash flow is basically what investing is all about, and has been for thousands of years. So I don't know many other ways of investing. I guess certain funds and indexes pool many different companies together for the benefit of making sector investing easier for those inclined to invest that way. But investing is putting money aside with the desire to have it produce more for you in the future.
By attempting to cherry pick the highest quality companies and those which succeed to maintain or raise their dividend through economic recession, I hope to mitigate risk of capital loss, dividend cuts, and too much portfolio drawdown.
By simply buying a sector fund as you describe, I am also including businesses that I know very little about and have performed poorly in the past.
Like I mentioned, 8% of VNQ is Simon Property Group. Simon deals primarily with malls. I personally would not feel comfortable having 8% of my REITs as a pure play mall. I am 34 years old. Millenials growing up may not be as involved with malls as the prior generation. Furthermore, malls may not do as well as triple net leases in coming recessions. So I have a lot of runway ahead (as do you, if you live 30 more years and I hope you do) to be concerned about.
If you already have your needs met via social security, pensions, and other cash flows coming in, indexing and sector allocation might be good for you, and I hope you succeed with your portfolio in the future. For me, cherry picking and being picky about my investments are an excellent use of my time, I feel. It is a similar way of investing but with more care about the companies (I have around 80 companies in my portfolio and I look at around 130).
As far as not having a clue about what the next ten years will hold, I have plenty of clues. People will keep consuming Coca Cola products, Pepsi, my NNN leases are on average around 10 years long, people will still consume energy, population will grow, inflation will grow, minimum wage will grow, I will still keep getting paid. I keep it simple.
Pepsi is like a food and beverage mutual fund in and of itself! Tropicana, Quaker Oats, Rice Pilaf, Frito Lay, Naked juice...Coca Cola has Zico coconut water, Honestea, Minute Maid, over 500 brands worldwide. Etc.
As you mentioned, this is a themed website (dividend growth forum
) so I don't think I'm out of line in defending dividend growth strategies here.
However, I take issue with some of the uncertainties you describe. You say "we don't have a clue what the next ten years will hold." You also describe "choosing a single approach and declaring it to be the holy grail of investing".
Owning a business or cash producing entity and being entitled to profits or cash flow is basically what investing is all about, and has been for thousands of years. So I don't know many other ways of investing. I guess certain funds and indexes pool many different companies together for the benefit of making sector investing easier for those inclined to invest that way. But investing is putting money aside with the desire to have it produce more for you in the future.
By attempting to cherry pick the highest quality companies and those which succeed to maintain or raise their dividend through economic recession, I hope to mitigate risk of capital loss, dividend cuts, and too much portfolio drawdown.
By simply buying a sector fund as you describe, I am also including businesses that I know very little about and have performed poorly in the past.
Like I mentioned, 8% of VNQ is Simon Property Group. Simon deals primarily with malls. I personally would not feel comfortable having 8% of my REITs as a pure play mall. I am 34 years old. Millenials growing up may not be as involved with malls as the prior generation. Furthermore, malls may not do as well as triple net leases in coming recessions. So I have a lot of runway ahead (as do you, if you live 30 more years and I hope you do) to be concerned about.
If you already have your needs met via social security, pensions, and other cash flows coming in, indexing and sector allocation might be good for you, and I hope you succeed with your portfolio in the future. For me, cherry picking and being picky about my investments are an excellent use of my time, I feel. It is a similar way of investing but with more care about the companies (I have around 80 companies in my portfolio and I look at around 130).
As far as not having a clue about what the next ten years will hold, I have plenty of clues. People will keep consuming Coca Cola products, Pepsi, my NNN leases are on average around 10 years long, people will still consume energy, population will grow, inflation will grow, minimum wage will grow, I will still keep getting paid. I keep it simple.
Pepsi is like a food and beverage mutual fund in and of itself! Tropicana, Quaker Oats, Rice Pilaf, Frito Lay, Naked juice...Coca Cola has Zico coconut water, Honestea, Minute Maid, over 500 brands worldwide. Etc.
As you mentioned, this is a themed website (dividend growth forum
) so I don't think I'm out of line in defending dividend growth strategies here.