Thread Rating:
  • 0 Vote(s) - 0 Average
  • 1
  • 2
  • 3
  • 4
  • 5
Strategies for Building a DGI Portfolio
#13
I'm in the Otter boat. I currently have 58 different companies. It wouldn't surprise when I retire, I'm at close to 100 companies. I'm a part of the buy and forget set. Would I be better off buying an index? I don't think so. An index would buy stocks that are over priced or that don't fit my investment goals. Also, after the initial purchase fee, I have no costs associated with my portfolio where I would have yearly fees with an index.

Also, I don't want to kill the golden goose. With having all of these stocks, I can just collect the dividends and keep the portfolio intact so if I happen to retire at the start of a bear market, I'm OK with it. And I've learned during my investing career that I do more damage to my portfolio when I start tinkering with it by trimming my winners and selling when I think something is over valued. Will some of my investments go to $0? Most likely, but with numerous different companies, I'm not worried about it. Now if 15% of my companies go under in quick succession, I've got bigger problems to worry about than my portfolio.
Reply
#14
Seems like most of the participants on this thread are very worried about our goose. Smile I do think Crimson offers some wisdom, even if he is a young whippersnapper investor. If the market turns against me, I should probably not go in full stock miser mode while I worry and eat cheese and crackers for dinner. Or are crackers properly called biscuits Crimson? You English folks have really screwed up our language lol.

Anyway, my daughter knows I am willing my estate to the "Cat Foundation". That's been a family joke for a long time. If she doesn't put me in a nursing home too soon, I'll consider hooking her up with nice paid for house and a stock port to sell off and waste if she pleases.
Reply
#15
(12-13-2018, 10:29 AM)Otter Wrote: It's a mental thing for me. The thought of selling the principal gives me extreme anxiety. I get the statistics and understand the 4% rule, but it's just not for me. If I needed to, I could live off of the dividends generated by my DGI portfolio today. It would be a bare subsistence sort of Lean-FIRE existence, and not really pleasant or what I'm aiming for long-term. So, I have every expectation that in 20-30 years' time, when I am contemplating a proper "retirement," the income stream will be sufficient to meet my goal of living off the eggs and leaving the golden goose alone.

Well, we all have our own little quirks and we definitely need to adjust to those. I do know how you feel like, I've always been a bit skeptical about butchering that golden goose. But I've run all sorts of calculations (monte carlo simulation is a good one to play around with) and quite frankly it just makes sense to withdraw a little when you need it. Or constantly, it's up to you. Personally I wouldn't go as far as the 4% but rather stick to 2% or 3% and adjust as necessary.

The s&p 500 div yield is currently around 2%. We mostly tend to leave out the non-divi payers so how about we say that our portfolios are expected to generate around 3% div yield? If you add withdraws of 2%, you basically add 67% more income. And with 2% withdrawal, unless something terrible happens, your portfolio will still, on average, keep growing faster than inflation.

It's a win-win. But again, if it makes you uncomfortable then there is no point doing it. But at least consider it as an option, a lot of things (including you) might change in the next 20-30 years. Wink
Reply
#16
Also, I've stated this in other threads, but the resources that help me the most in identifying potential purchases that fit my buy criteria are the CCC List (RIP David Fish), and FAST Graphs. Once I have a candidate list, I can do further diligence on SA and in the 10-Q/Ks. I tend to do less diligence if I am just adding to an existing, well-established holding that looks attractively valued on FAST Graphs (like when I picked up some additional JNJ shares in May for $120.88/share). The reasoning behind those purchases is pretty much "hey, this stock I already have and like is fairly valued again, might as well buy more."
Reply
#17
(12-13-2018, 01:33 PM)crimsonghost747 Wrote:
(12-13-2018, 10:29 AM)Otter Wrote: It's a mental thing for me. The thought of selling the principal gives me extreme anxiety. I get the statistics and understand the 4% rule, but it's just not for me. If I needed to, I could live off of the dividends generated by my DGI portfolio today. It would be a bare subsistence sort of Lean-FIRE existence, and not really pleasant or what I'm aiming for long-term. So, I have every expectation that in 20-30 years' time, when I am contemplating a proper "retirement," the income stream will be sufficient to meet my goal of living off the eggs and leaving the golden goose alone.

Well, we all have our own little quirks and we definitely need to adjust to those. I do know how you feel like, I've always been a bit skeptical about butchering that golden goose. But I've run all sorts of calculations (monte carlo simulation is a good one to play around with) and quite frankly it just makes sense to withdraw a little when you need it. Or constantly, it's up to you. Personally I wouldn't go as far as the 4% but rather stick to 2% or 3% and adjust as necessary.

The s&p 500 div yield is currently around 2%. We mostly tend to leave out the non-divi payers so how about we say that our portfolios are expected to generate around 3% div yield? If you add withdraws of 2%, you basically add 67% more income. And with 2% withdrawal, unless something terrible happens, your portfolio will still, on average, keep growing faster than inflation.

It's a win-win. But again, if it makes you uncomfortable then there is no point doing it. But at least consider it as an option, a lot of things (including you) might change in the next 20-30 years. Wink

I think I will definitely be open to options/alternatives if things don't shake out according to plan once those 20-30 years roll by. All options are on the table if it means avoiding the cat food diet. Big Grin
Reply
#18
(12-13-2018, 01:19 PM)fenders53 Wrote:  Or are crackers properly called biscuits Crimson?  You English folks have really screwed up our language lol.  

Actually I'd go with cracker. I know what proper food is like, I do not enjoy spending 95% of my life standing in the rain and I've also figured out things such as insulation and a tap (or is it a faucet?) which combines the hot and cold water for me. Thus, I'm not English! :p

However one thing that I'm sure of: when you order biscuits in the USA you will most definitely get bread, not biscuits.
Reply
#19
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.
Reply
#20
(12-13-2018, 01:33 PM)crimsonghost747 Wrote:
(12-13-2018, 10:29 AM)Otter Wrote: It's a mental thing for me. The thought of selling the principal gives me extreme anxiety. I get the statistics and understand the 4% rule, but it's just not for me. If I needed to, I could live off of the dividends generated by my DGI portfolio today. It would be a bare subsistence sort of Lean-FIRE existence, and not really pleasant or what I'm aiming for long-term. So, I have every expectation that in 20-30 years' time, when I am contemplating a proper "retirement," the income stream will be sufficient to meet my goal of living off the eggs and leaving the golden goose alone.

Well, we all have our own little quirks and we definitely need to adjust to those. I do know how you feel like, I've always been a bit skeptical about butchering that golden goose. But I've run all sorts of calculations (monte carlo simulation is a good one to play around with) and quite frankly it just makes sense to withdraw a little when you need it. Or constantly, it's up to you. Personally I wouldn't go as far as the 4% but rather stick to 2% or 3% and adjust as necessary.

The s&p 500 div yield is currently around 2%. We mostly tend to leave out the non-divi payers so how about we say that our portfolios are expected to generate around 3% div yield? If you add withdraws of 2%, you basically add 67% more income. And with 2% withdrawal, unless something terrible happens, your portfolio will still, on average, keep growing faster than inflation.

It's a win-win. But again, if it makes you uncomfortable then there is no point doing it. But at least consider it as an option, a lot of things (including you) might change in the next 20-30 years. Wink

(12-13-2018, 02:15 PM)crimsonghost747 Wrote:
(12-13-2018, 01:19 PM)fenders53 Wrote:  Or are crackers properly called biscuits Crimson?  You English folks have really screwed up our language lol.  

Actually I'd go with cracker. I know what proper food is like, I do not enjoy spending 95% of my life standing in the rain and I've also figured out things such as insulation and a tap (or is it a faucet?) which combines the hot and cold water for me. Thus, I'm not English! :p

However one thing that I'm sure of: when you order biscuits in the USA you will most definitely get bread, not biscuits.

Yes we use faucets in "new" England, but we understand what tap water is  Smile And an order of biscuits here will likely be drowned in gravy. The southern half of our citizens demand they die early and happy lol.
Reply
#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.
Reply
#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.
Reply
#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!
Reply
#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.
Reply




Users browsing this thread: 1 Guest(s)