How much time does it take?

[mattk]

Hi all,

I'm new to the forum. My wife and I own and manage a few rental properties and we're getting a little tired of it. We will be keeping our easiest property but selling the others so I am looking for somewhere else to invest.

I am attracted to the control and cash flow from dividend stock investing and found this forum. I've read a couple books on it and get the basic concept but am having trouble figuring out if it's going to work for me exactly, due to the time needed -- but I don't really know how much time is needed to build and maintain a portfolio.

How much time do you all spend per week/month managing your portfolio? I see people have typically between 30 and 50 different positions and thinking about the time needed to stay current and all those and read all those financial statements seems like it could be pretty time consuming. I'm trying to get out of real estate because it takes too much of my time and I don't want to replace it with another thing that takes just as much time

I have little interest in spending my free time researching companies to be honest, but I do enjoy accounting and budgeting for some odd reason. Maybe I'm more of an index fund guy... don't know at this point, but would like something I can "set it and forget it" mostly.

Thanks for any feedback!

P.S. If this has already been discussed I apologize I could not find it with searching.

[ChadR]

Welcome to the forum. Now that my portfolio is established, the only time I spend on it each month is updating my spreadsheets for the dividends received from the prior month. The most time you will spend will be researching the stocks that you want to buy. And it depends on what you're buying on how much time you need to spend on researching it after you purchase it. I own JNJ as one of my stocks. They don't need constant monitoring by me. I will skim their annual report (probably should do more than skim, but I'm busy with work and kids) and if any big news about them comes out, I will look into it. Other than that, I will check once a quarter on them to see if their dividend hits my account. If you're buying a bunch of small cap stocks, then you will need to monitor them more closely than what I do with JNJ. I own about 50 different stocks. I put in very little time on them. At the end of the week, I will look to see who is paying dividends for the next week. Purchasing a stock is the most amount of time that I will put into my portfolio. And that will vary. If I'm buying more stock in a position that I already own, less time will be done researching than if I was buying a new position. And then the amount of time researching a new position will vary on the type of stock I'm purchasing. I recently bought GIS. I spent less time researching it than I did when I purchased a small cap stock AMNF.

Now buying an index fund will be less time consuming upfront, but you still need to research the fund and if it overvalued, undervalued, or fairly priced. Also, the expenses are much lower going the DGI method than the index fund method. With a stock you just have the cost to purchase (under $10) and no other expenses until you decide to sell it. With an index fund, you have the cost to purchase along with an annual fee to hold it that you have to pay every year. This can be around 0.5% or higher in some cases. That cost adds up over 20+ years.

Hopefully this helps you make a more informed decision on which way to go. Welcome to the DGI club if you decide to go this route.

[crimsonghost747]

My two cents.

I can somehow relate to your situations. I've always stayed away from real estate (even though it interests me very much) because it takes time and more importantly, you don't get to choose when and where. With stocks you can do everything at 3am if you feel like it. Or you can push back reading that quarterly report by a week if you don't have the time. And more importantly, all you need is a laptop and internet connection, your physical location makes no difference.

Getting started with investing takes time. You need to figure out a strategy for you: just stocks or also funds? Bonds? Which sectors? What sector / geographical diversification etc. How do the taxes go if you buy from abroad? You probably want to build some basic spreadsheets so you can compare different companies just so you can somehow define a list of which ones you want to look deeper into. You need to spend hours and hours reading through those financial reports so you get an idea of how each of these companies is doing, how it works, etc. Probably quite a bit of time reading different news websites, seeking alpha etc to get a better idea of what might be in the future for the company.

It's worth it to spend the time on figuring out what you want and how to accomplish that. But after the strategy is done then it can go pretty much to "buy and forget about it". Maybe once in a while you will want to take a look at a new company or re-evaluate one that you already have but that's relatively easy since you already know quite a bit about the company.

I spend maybe an hour per day right now but that is because I enjoy it. It's like a hobby for me. If I would stop trading and just revert back to pure "buy and hold" then I'm sure I could manage with an hour or two per month. In fact a couple of years ago I was working in a remote setting and I often went 3 months without even looking at my investments.

So the start takes time but after that it's really up to you. You could just build a portfolio out of 10 or 15 solid companies and split the money evenly between them. If it's a pure buy & hold strategy with stable companies in it, I'd say you'll be ok if you can spend one or two evenings every 3 months to quickly go through the quarterly reports.

[cannew]

Like everything else, look before you leap.  Having said that, IMO DG Investing is one of the simplest and safest ways to invest for your future. 

What are your goals or objectives?  Are you looking to get immediate returns or are you planning for the future?  Have you other income sources?  What is your timeframe?  Have or are you investing in 401k's?

Simply, I like to tell people you are investing to generate a growing income for the future.  One can do this by selecting a group of solid\large companies with a long history of paying and growing their dividend.  I'd say paying dividends for at least 20 years and growing their dividend consistently (say12 of the last 15 years), or growing their dividend by at least 75% over a 10 yr period. and not having cut their dividend in the past 10 years.
 
How may companies depends and in the US you have several hundred to choose from, but I'd think 20-30 should be sufficient.  One does not need to buy all immediately.  Start by complying a list of stocks which meet your criteria.  Select companies in different sector, but avoid cyclical stocks.  One does not need to own every sector or every company.  Avoid companies who's dividend yield is higher than the average of other companies in the same sector, in other words don't chase yield.  I prefer companies with yields between 2.5% to 4.5% with div growth of 5% to 8%.  Some low yield companies, 1% or above may have higher growth, say 10%, which in the long term may provide better Total Return.  Again it depends upon your needs and timeframe.
The last point is to avoid trading, rebalancing or worrying about asset allocation.  Try to buy or add to the stocks of your choice when prices drop or meet your own criteria.  Again the idea is to hold for the growing income.

Good Luck

ps: We have been retired for many years and only own 12 company stocks in all our accounts. We have no company pension and our dividend income more than exceeds our annual expenses. We hold no ETF's, Funds, Bonds, Preferred's or CD's. I'm not suggesting this is ideal or what others should do, it's what suits us and has met our needs.

As we no longer buy or sell we only record the dividends received and the increases. Even when we were accumulating, we only watched the stocks on our list and added when we could, buying one's which met our criteria. Yes we did buy some because they paid a higher yield, but later regretted straying from our core stocks. DG investing is not a Daily, Weekly or even monthly activity. One basically looks for the time to buy, not sell.

[mattk]

Thank you all for the thoughtful replies.

It sounds to me that there is a large time investment up front to build your portfolio and then it is minimal going forward. I can deal with that -- I would expect no less for a better than average investment. My goal is cash flow. That was my goal with real estate too. We focused on rents not appreciation (that was just a perk). That is why dividend investing seemed like a good bet for me, but I still have a lot to learn before making any buys.

It also seems like I might save some time by studying others portfolios. In this space it seems there are always some companies that are included in all DG portfolios (Johnson & Johnson for example). Is there a need to do an in depth analysis there? Perhaps I'm trying to cut corners where I shouldn't.

At this early stage too, I wonder if I would be able to do any better than just investing in something like the Vanguard Dividend Appreciation ETF (VIG) (or something similar) which seems like it would get me 90% of the way there for what I might be able to pick on my own.

[Kerim]

(06-02-2018, 04:45 PM)mattk Wrote: It also seems like I might save some time by studying others portfolios. In this space it seems there are always some companies that are included in all DG portfolios (Johnson & Johnson for example). Is there a need to do an in depth analysis there? Perhaps I'm trying to cut corners where I shouldn't.

I think that is a strategy a lot of us use to some extent or another. In that vein, this was an interesting exercise not so long ago, where a bunch of members submitted their top 10 holdings and we compiled the results. 

You're always advised to do your own diligence, and I think it makes sense to know enough to be comfortable with what you're buying. But on the other hand, we've come a long way from the Peter Lynch days where there was any hope that an individual investor could gain meaningful insight or information about a large company like JNJ that wasn't broadly known or available.

My DGF journey has beed evolving such that I personally focus on the biggest, best of the best, non-cyclical, huge scale companies, and just wait for my price. That might mean I go very long stretches without buying, but when I do, I'm pretty comfortable and will have to do minimal monitoring. 

And welcome to the forum!

[crimsonghost747]

(06-02-2018, 04:45 PM)mattk Wrote: It also seems like I might save some time by studying others portfolios. In this space it seems there are always some companies that are included in all DG portfolios (Johnson & Johnson for example). Is there a need to do an in depth analysis there? Perhaps I'm trying to cut corners where I shouldn't.

At this early stage too, I wonder if I would be able to do any better than just investing in something like the Vanguard Dividend Appreciation ETF (VIG) (or something similar) which seems like it would get me 90% of the way there for what I might be able to pick on my own.

Definitely take a look at what others are doing. I would never directly copy someone as we all have different goals but it's a great way to get some new ideas. In fact I was going to link the post that Kerim already did, it's a good place to start looking for some companies.

I would never skip doing an analysis myself, no matter how well loved the stock is. Not only do you gain the information you need to make the decision yourself (it is your money after all) but you also learn in the process. If you take a look at how JNJ has been doing in the past you'll see why we like it so much. And it'll be a lot easier to continue monitoring it when you have a good understanding of the company.

Regarding the ETFs. I can see the appeal for someone like you who doesn't want to spend too much time. And I'd definitely recommend that you keep that option open. They do have some downsides such as fees, owning companies you might not want to own, very poor chances for customization to fit what you want etc. But they do save time. Also there is nothing stopping you from doing something like investing 75% of your money into a couple of well selected ETFs and then finding individual companies to put the 25% in.

[cannew]

(06-02-2018, 04:45 PM)mattk Wrote: At this early stage too, I wonder if I would be able to do any better than just investing in something like the Vanguard Dividend Appreciation ETF (VIG) (or something similar) which seems like it would get me 90% of the way there for what I might be able to pick on my own.

Buffett's comment:
If you invested in a very low-cost index fund—where you don’t put the money in at one time, but average in over 10 years—you’ll do better than 90% of people who start investing at the same time.

Diversification (IMO: ETF's) is a protection against ignorance. It makes very little sense for those who know what they’re doing.  Diversification may preserve wealth, but concentration builds wealth.

[EricL]

This quote I saved from Chowder sums it up pretty well:

This is really common sense if people will stop trying to be too smart.

If I have to micro manage a position, and spend the amount of time every week, per position as Cramer recommends, then I took on too much risk.

If one owns high quality companies, a review of the companies progress, earnings and future guidance is all that is required, as far as I'm concerned.

I recall owning the Canadian Trusts and following them with an "eagle eye". I was on top of those puppies. I kept up with every article or mention of the companies I owned back then.

One day I woke up, turned on the computer, and saw that every trust I owned was down over 20% in pre-market. The market hadn't even opened yet!

That day came to be known as the Halloween Massacre, and I learned a valuable lesson. No matter how closely you monitor a company, you can't predict bad news that has that kind of effect of your holdings.

Successful investors know how to buy quality companies that don't require the day to day monitoring that the micro managers use. When your management style is to micro manage, you get micro results.

No matter how closely you watch a position, you aren't good enough to know in advance, prior to the market knowing, that a company is in trouble. Whatever it is you think you are going to know, will already be priced into the stock.

I had a few exchanges with people who owned AT. I thought it was too speculative, and I always got the response that they were watching it closely. They had an "eagle eye" on it. They read the 10K's, the 10Q's, read every article that came out, followed the conference calls, listened to the analysts, and yet woke up March 1 of this year, where the price gapped down 38% before the market even opened.

Think about that! 

So much for all of that monitoring.

--------------

If I it wasn't for me spending all the time writing/researching for articles, I wouldn't spend all that much time on my actual portfolio anymore. 

Buy quality and hold.

[cannew]

(06-04-2018, 10:37 AM)EricL Wrote: Buy quality and hold.

and Ignore Price changes, but watch your Growing Income!

[chipmunk]

Just because most of the companies mentioned on this forum publish 100+ page annual reports does not mean you have to read them cover to cover. I have done that maybe three times in the past five years. Looking back, it was not really worth the time and effort.

You can be as involved as much or as little as you want when it comes to monitoring your portfolio. Here are three recommended levels of involvement:

1) The easiest approach is to look strictly at dividend yield, payout ratio, and dividend growth. With these three metrics you can distinguish between high-payout, slow-growing dividend companies and low-payout, fast-growing dividend companies (and everything in between). All it would take to manage a portfolio using this approach is a simple spreadsheet and a few hours a quarter.

2) If you want a little more detail, take a look at the "Selected Financial Data" section contained in every annual report. This will give you a window into the companies capitalization structure (i.e. do they have a lot of debt?), profitability, and general trends over the past few years. You might even consider reading the shareholder letter if it contains any substance. (Some "shareholder letters" are not much more than marketing material.) This approach might take a few hours a month.

3) If you are a details kind of person then take a look at their financial statements. Going through a company's balance sheet, income statement, and statement of cash flows line by line can be quite educational. Depending on the size of your portfolio, this approach could take a few hours a week.

I progressed from level 1 to level 3 over a period of a few years. Looking at a company's financial statements does not take very long once you are familiar with a particular company or industry. Plus, I enjoy it.

I have gone down the route of owning ~20 companies that I keep an eye on. I bet there are a lot of people that take a level 1 approach and own a lot more companies than I do but pay less attention to them. Different is not wrong.

[dhcruz67]

Diversify Into different sectors. I like picking stocks that have plenty of room to grow, others like to pick stocks that are well established which may pay more per share but you earn less secondary to having less stock. Jump in and have fun.


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