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Strategies for Building a DGI Portfolio
#21
(12-13-2018, 02:22 PM)fenders53 Wrote: That absolutely applies to me Crimson.  I don't look at this the same as I did when I was your age and I am monetarily better off for it.  My opinion evolves over time and your's will too if your mind is open, which I believe it truly is.

Otter, you gotta have some faith and patience in  core positions longterm , but I find flaw in the attitude that I researched in once and my work is done forever.  I don't think you really believe that.  Feel free to dissent.  That's we are here  trading experiences and thoughts.

I will admit, set and forget is more of an aspirational goal than a bright line rule that I don't deviate from. Sale of GE position last year is one example of this, as was sale of OHI this year. I also keep a close eye on my IBM shares, as I think management is a disaster, and the years of declining revenues are concerning. Buybacks have allowed them to keep raising the dividend, but financial engineering can only go so far in a rising interest rate environment with declining revenues. 

The set/forget rule of thumb is mostly there to remind me that I can't realistically keep on top of all of the holdings in my private index fund, so not to stress about any one holding too much. 

That said, I'm also a hopeless investment junkie. As much as I love the thrill of figuring out what is a good value to buy next, I'll also spend Saturday mornings trawling through articles about my existing holdings. If I form the opinion that a once-favored holding is a dumpster fire in waiting, I'll kick it to the curb. I try not to rush into any such decision, and certainly wouldn't base it off of any one article or quarterly report.
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#22
That sounds prudent.  If you run at the first bad quarterly it will be hard to assemble a full port of DGI stocks.  Dishonesty from management is the one thing I am not very patient with.  Especially if the CEO is involved.  There is almost always a better day to get back in later if the board rights the ship.
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#23
Great thread – thanks all! And sorry I’m late to the party.
 
A lot of great points to consider and respond to. In no particular order:
 
  • As to living exclusively off the dividends versus selling off a portion of the assets, all I can say is that I hope this is a decision I’ll have to wrestle with one day. I save and invest aggressively, but my monthly expenses are really high (largely due to daughter’s medical condition). So even rosy projections don’t show me being able to live exclusively off dividends, unless circumstances change dramatically. I did a thread on this a long time ago, complete with tables, arguing that a willingness to sell assets allows you to aim at a lower total savings target, and that can free up time and resources for other important things in your life. There is a danger to over-saving!
  • Incidentally, I’m with fenders about driving the older cars. If you saw my apartment, you’d probably think I’m living paycheck to paycheck. I love the stealth approach to affluence!
  • Here are my thoughts on equal weightings, with more illustrations! In short, I’ll worry about that much closer to retirement. For now, I’ll buy the best opportunities as they present themselves.
  • I don’t have a strong opinion as to the appropriate number of stocks in a portfolio. I think we all agree that past some point, the diversification value decreases. But there isn’t much harm there, except for each individual’s ability to manage and track the portfolio. To each their own. For me, I’ve held as many as 30, but I’m in a long, slow process of winnowing that down. As I’ve gained experience, I’m focusing more and more on only the highest-quality companies I can find…
  • …and waiting for the market to present good entry opportunities into them. I completely agree that your fate in holding a stock is largely baked into the moment of purchase. 
  • (And with great trepidation, I’ll mention that I have some qualms with the “Chowder Rule.”)
 
Thanks again everyone!
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#24
This was a good thread. This is a very good forum. I really like that everyone is open minded enough to discuss opposing views. No one is here trying to "win the internet"

Randomly from Kerims post..........

-I've had time to think about my last post and it wouldn't be so terrible if I can't live strictly off dividends. It also wouldn't be so terrible if I don't achieve $100K annual income in retirement either (including some pensions so don't start thinking my DGI port is $3M lol). It wouldn't hurt me to work part-time a few extra years either. This is nothing to obsess about until retirement time.

-We'll have to talk about this Chowder rule sometime. I'll have to plead ignorance of it.

-I've never owned an extravagant auto, though I have owned some new cars and trucks. I told myself if I bought many I'd be working years longer. I wouldn't be any happier in a $50K+ car. No judgement of anyone that would be though.

-When it gets true retirement time, I think I'll own about 12 of the very highest quality stocks. Add a few high div sector ETFs I really believe in like healthcare or real estate.. I am fooling myself if I believe I can truly understand the business of every single sector, and how the macros like inverted yield curves truly affect them. Doesn't mean I haven't invested in stocks I didn't understand well enough, I surely have, but when they got hurt I sometimes didn't see it coming because I wasn't informed enough. I keep getting bit by oil, even though I think I know what drives those stocks. You could interpret what I said as supportive of Otter's "too damn many stocks plan, but I can live with that". His idea isn't completely crazy lol. Smile I doubt anyone has ever went broke attempting to own 100 good DGI stocks.
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#25
(12-16-2018, 09:20 PM)fenders53 Wrote: This was a good thread.  This is a very good forum.  I really like that everyone is open minded enough to discuss opposing views.  No one is here trying to "win the internet"  

Randomly from Kerims post..........

-I've had time to think about my last post and it wouldn't be so terrible if I can't live strictly off dividends.  It also wouldn't be so terrible if I don't achieve $100K annual income in retirement either (including some pensions so don't start thinking my DGI port is $3M lol).  It wouldn't hurt me to work part-time a few extra years either.  This is nothing to obsess about until retirement time.

-We'll have to talk about this Chowder rule sometime.  I'll have to plead ignorance of it.

-I've never owned an extravagant auto, though I have owned some new cars and trucks.  I told myself if I bought many I'd be working years longer.  I wouldn't be any happier in a $50K+ car.  No judgement of anyone that would be though.  

-When it gets true retirement time, I think I'll own about 12 of the very highest quality stocks.  Add a few high div sector ETFs I really believe in like healthcare or real estate..  I am fooling myself if I believe I can truly understand the business of every single sector, and how the macros like inverted yield curves truly affect them.  Doesn't mean I haven't invested in stocks I didn't understand well enough, I surely have, but when they got hurt I sometimes didn't see it coming because I wasn't informed enough.  I keep getting bit by oil, even though I think I know what drives those stocks.  You could interpret what I said as supportive of Otter's "too damn many stocks plan, but I can live with that".  His idea isn't completely crazy lol.  Smile  I doubt anyone has ever went broke attempting to own 100 good DGI stocks.


The Chowder Rule is really just a handy shortcut for attempting to estimate total return potential for DGI stocks. To get the Chowder Number, you just add the current yield and the average annualized past five-year dividend growth percentage (available on the CCC list, as is the Chowder Number itself). For slower-growth defensive sectors like Utes and Telcos, a Chowder Number of 8+ is considered good. For other sectors, 12+ is good if the current yield is 3%+. For low-yield (sub 3%) high-growers, 15+ is considered good. 

It is by no means a perfect metric (there are as many ways to carve up investing stats as there are baseball stats), but I find it helpful when used in combination with the other buy criteria I listed.
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#26
(12-16-2018, 01:39 PM)Kerim Wrote: Great thread – thanks all! And sorry I’m late to the party.
 
A lot of great points to consider and respond to. In no particular order:
 
  • As to living exclusively off the dividends versus selling off a portion of the assets, all I can say is that I hope this is a decision I’ll have to wrestle with one day. I save and invest aggressively, but my monthly expenses are really high (largely due to daughter’s medical condition). So even rosy projections don’t show me being able to live exclusively off dividends, unless circumstances change dramatically. I did a thread on this a long time ago, complete with tables, arguing that a willingness to sell assets allows you to aim at a lower total savings target, and that can free up time and resources for other important things in your life. There is a danger to over-saving!
  • Incidentally, I’m with fenders about driving the older cars. If you saw my apartment, you’d probably think I’m living paycheck to paycheck. I love the stealth approach to affluence!
  • Here are my thoughts on equal weightings, with more illustrations! In short, I’ll worry about that much closer to retirement. For now, I’ll buy the best opportunities as they present themselves.
  • I don’t have a strong opinion as to the appropriate number of stocks in a portfolio. I think we all agree that past some point, the diversification value decreases. But there isn’t much harm there, except for each individual’s ability to manage and track the portfolio. To each their own. For me, I’ve held as many as 30, but I’m in a long, slow process of winnowing that down. As I’ve gained experience, I’m focusing more and more on only the highest-quality companies I can find…
  • …and waiting for the market to present good entry opportunities into them. I completely agree that your fate in holding a stock is largely baked into the moment of purchase. 
  • (And with great trepidation, I’ll mention that I have some qualms with the “Chowder Rule.”)
 
Thanks again everyone!

I'm all for frugality when it comes to cars. Purchased my current car new for $16,000 six years ago (it's tiny). Only has 21,000 miles on it, and I intend to keep driving it until it doesn't go anymore (which should hopefully be a long time, given the low mileage). To me, it is a utilitarian appliance, and I could care less about driving something flashy. That said, keeping the mileage so low is a factor of moving very close to the city center and my office, so I don't waste a lot of time commuting. I end up spending a fair amount more on housing than the median home price in my city as a result, but the improvement in quality of life is worth it.
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#27
In the end we should pay ourselves first, and then enjoy or lives with some disposable income. My wife thinks expensive makeup and Starbucks coffee is a good investment Smile I've spend some serious money on fly rods and tools in the woodworking shop. Ten years later I am still enjoying those purchases so I find justification easy. I am almost always frugal when it comes to purchases that will be consumed in a month, or an hour. That's a waste of investing funds in my mind.

As Kerim suggested whether he intended to or not.... finding some balance and enjoying this life is probably best. Few are going to remember how many assets I accumulated when I'm gone from this world.
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#28
(12-17-2018, 10:46 AM)fenders53 Wrote: In the end we should pay ourselves first, and then enjoy or lives with some disposable income.  My wife thinks expensive makeup and Starbucks coffee is a good investment  Smile  I've spend some serious money on fly rods and tools in the woodworking shop.  Ten years later I am still enjoying those purchases so I find justification easy.  I am almost always frugal when it comes to purchases that will be consumed in a month, or an hour.  That's a waste of investing funds in my mind.

As Kerim suggested whether he intended to or not....  finding some balance and enjoying this life is probably best.   Few are going to remember how many assets I accumulated when I'm gone from this world.

Travel is the "enjoy this life" spending bucket for me and my wife. Headed to Japan and Vietnam for 10 days next week, and really looking forward to it. Fourth trip to Japan, and first to Vietnam. We have been fortunate enough to visit 83 countries on six continents so far, and have enjoyed our travels immensely.
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#29
(12-17-2018, 10:57 AM)Otter Wrote:
(12-17-2018, 10:46 AM)fenders53 Wrote: In the end we should pay ourselves first, and then enjoy or lives with some disposable income.  My wife thinks expensive makeup and Starbucks coffee is a good investment  Smile  I've spend some serious money on fly rods and tools in the woodworking shop.  Ten years later I am still enjoying those purchases so I find justification easy.  I am almost always frugal when it comes to purchases that will be consumed in a month, or an hour.  That's a waste of investing funds in my mind.

As Kerim suggested whether he intended to or not....  finding some balance and enjoying this life is probably best.   Few are going to remember how many assets I accumulated when I'm gone from this world.

Travel is the "enjoy this life" spending bucket for me and my wife. Headed to Japan and Vietnam for 10 days next week, and really looking forward to it. Fourth trip to Japan, and first to Vietnam. We have been fortunate enough to visit 83 countries on six continents so far, and have enjoyed our travels immensely.
That's awesome!  I'm happy for you.  Most of my travels outside the US were sponsored by the US Army.  Other than that only a trip to Mexico, and some time in Seoul where we picked up my daughter at an orphanage.  I've been married 32 years and lately it's been separate vacations.  She loves Vegas and has a high school friend there.  I would just be a drag on her fun meter as I don't like gambling.  I have a close friend that is a flyfishing guide from Alaska, so I spend some time there.  I used to be a client and now he just invites me up for a few weeks, and when we aren't chasing salmon or trout I spend some time working on his cabin in the bush, waaaay off the grid.
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#30
(12-17-2018, 11:49 AM)fenders53 Wrote:
(12-17-2018, 10:57 AM)Otter Wrote:
(12-17-2018, 10:46 AM)fenders53 Wrote: In the end we should pay ourselves first, and then enjoy or lives with some disposable income.  My wife thinks expensive makeup and Starbucks coffee is a good investment  Smile  I've spend some serious money on fly rods and tools in the woodworking shop.  Ten years later I am still enjoying those purchases so I find justification easy.  I am almost always frugal when it comes to purchases that will be consumed in a month, or an hour.  That's a waste of investing funds in my mind.

As Kerim suggested whether he intended to or not....  finding some balance and enjoying this life is probably best.   Few are going to remember how many assets I accumulated when I'm gone from this world.

Travel is the "enjoy this life" spending bucket for me and my wife. Headed to Japan and Vietnam for 10 days next week, and really looking forward to it. Fourth trip to Japan, and first to Vietnam. We have been fortunate enough to visit 83 countries on six continents so far, and have enjoyed our travels immensely.
That's awesome!  I'm happy for you.  Most of my travels outside the US were sponsored by the US Army.  Other than that only a trip to Mexico, and some time in Seoul where we picked up my daughter at an orphanage.  I've been married 32 years and lately it's been separate vacations.  She loves Vegas and has a high school friend there.  I would just be a drag on her fun meter as I don't like gambling.  I have a close friend that is a flyfishing guide from Alaska, so I spend some time there.  I used to be a client and now he just invites me up for a few weeks, and when we aren't chasing salmon or trout I spend some time working on his cabin in the bush, waaaay off the grid.

We love Alaska. Fly fishing can definitely get spendy quick, but the areas where it is popular tend to be pretty gorgeous. Have only tried it twice, once near Ketchikan and once on a fly-in day trip from Juneau. Although most of my fishing experience has been deep sea (pretty much an excuse to play cards and drink beer until something hits the bait), I can definitely see the appeal of fly fishing from my limited experience. I've been planning a good deal of vacations lately that tend to be far off the grid. Stayed at a propane lamp lit, wood-fired cabin in the Yukon not too long ago. Being cut off from email was bliss.
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