10-08-2019, 05:36 PM
(10-08-2019, 01:47 AM)Dividendwayfarer Wrote: Question to those who have been growing their portfolios for quite some time. Do you guys change your investment strategy (e.g., move money into index fund/Bond) or pretty much stay the same course by adding existing or new positions.
The reason I ask is I am going to get some home equity after selling my home due to a relocation. I probably stay as a renter for a while. The new fund will push my portfolio over 0.5M. Even it may be just temporary before jumping back into real estate market, I am getting a little bit nervous to see what market movement does to my portfolio. And I still do most trades under 1k (old habit dies hard).
Curisous to know what you guys think. Yes the thought of buying thousands shares of MO to declare victory does cross my mind.
In my 401k I do move stuff around. There I'm limited to funds, which pair trash with quality. Those funds simply follow the market (or some sector of it) around, and I get charged fees for the privilege. My 401k has been mostly in a Target-Date (Retired) fund that is 90% fixed-income 10% equity since October of last year. Very small percentage in emerging market and energy ETFs with low fees. Total return in the past 12 months has been 4.72%, which is essentially identical to SPY since October, 2018 (market is only up big on YTD figures because of the December mini-crash). I'll start transitioning more of the 401k stuff to equity funds when the market is down 20% from its top (S&P 500 close to 2400).
For all my non-401k holdings, my criteria for buy and hold doesn't change:
1. Large or Midcap (size matters if you are looking for stability);
2. P/E or P/AFFO (REITs) 15 or Less (ideal), or below 10yr Average (ok - 10yrs will typically take into account an entire business cycle without data that's too old to be reliable);
3. Chowder Number of 8+ for Utilities/Telcos, and 12+ for all other stocks (a good yardstick for total return in the DGI investing space);
4. 25+ years of dividend growth (ideal), or 10+ (ok), subject to exceptions for quality blue chips like BA (has paused dividend growth, but not cut it);
5. Investment-Grade Credit Rating (BBB+ or better is what I prefer);
6. Dividend Payout Ratio <75% (I will bend this rule for special cases like tobacco companies, which typically have stable cash flows and expenditures); and
7. No obvious outward signs of systemic risk to the company/its business model.
There's always a bear market somewhere with stuff that is on sale. T in the $20s while the rest of the market was booming is a recent example. It's just that more stuff is on sale when the entire market nosedives like in 2008/2009.
I don't always make a purchase that satisfies all of my criteria, but I do try to stick to them. Having them as a handy yardstick is helpful.
As for managing overall portfolio risk, I have rules of thumb for that, too. No holding should generate more than 5% of total dividend income, and holdings should be diversified across all GICS sectors. Satisfying that second rule of thumb took some time. Different sectors go on sale at different times for different reasons. Sometimes it seems like I will spend months buying the same stuff, until those sectors suddenly become favored again, leaving me with different options as other sectors/stocks fall out of favor.
My goal was to basically build my own personal index fund, which pays dividends, and which bears no fees. Current yield is 3.6% and 5yr average dividend growth rate for the entire portfolio is currently 7.2%. Chowder number of 10.8 for the entire portfolio, which seems about fair from an anticipated total return perspective, given that ~16% of the portfolio is in Utes/Telcos.