Tuesday, January 19, 2016

Eight Years Dividend Growth Investor

Today marks the eight year of Dividend Growth Investor website. I wanted to thank all of you who follow my humble site. I didn’t really expect that I will still be going strong for 8 years in a row. I also never expected that this site will become so popular, with 100,000 – 150,000 monthly views. There is only one other dividend growth site that has been around for as long as I have. The landscape is much different than what we are seeing today – we have over 100 blogs on dividend investing, and probably 100 authors writing on other site aggregators.

When I started the site, I had no grand plans for world domination. I simply used this site as a way to write down my thoughts about investing, formulate my investment goals and objectives, as well as the steps needed to achieve them. Writing the articles and the stock analyses has been helpful in my stock selection process and in building out my portfolio. This site also helped me to focus on my investing, as I obtained instant feedback either way. It was also helpful to earn some side income from this site, for efforts I would have done anyways for my investing.

This site also shows my evolution as an investor. Back in late 2007 and early 2008, I had most of my assets in Certificates of Deposit. In hindsight, the best position to be in was to be mostly in cash and equivalents right before the global financial crisis hit and stock prices cratered. However, this was mostly due to sheer luck.


The next five - six years were characterized by me buying up individual dividend growth stocks in taxable accounts and my dividend income hitting five figures. This was probably sheer luck as well, since most investments I made almost immediately started paying dividends and started generating unrealized capital gains as well. This provided the positive reinforcement to keep investing everything in stocks.

The past three years have been characterized by increased focus on reducing taxes and streamlining my finances. As I am able to leverage more tax-deferred vehicles than before, this leaves very little to be invested in taxable accounts. Unfortunately, this means that most of my new investing dollars on a go forward basis will be in vehicles where I am limited as to the selection of investments. I realized in late 2015 that my 401 (k) allows for after-tax contributions that can be converted into a Roth. This leaves me with a potential to defer as much as up to $53,000/year in a 401 (k). Having the opportunity to Rothify a large portion of my net worth is an important opportunity for me.

The past year was characterized by me looking back at the past, and deciding to start building my fixed income allocation once again. In my case I am building out a CD ladder in taxable accounts, and a ladder of TIPs bonds and Treasury/Agency STRIPs in my tax-deferred accounts.

My dividend growth portfolio still accounts for approximately 85% of my net worth currently, but I do expect it to drop over time as a percentage of networth ( due to contributions going to tax-deferred accounts). I have toyed around with the idea of early retirement, but have decided to keep working for as long as enjoyable. This is why it makes sense to keep investments in tax-deferred accounts. Once I do retire however, I see Dividend Growth Investing as the way to best draw down from a portfolio of investments. Since I am fresh in my early 30s however, I may take a few decades to get there, assuming I still have fun.

On the other hand, I am no longer having the same drive I had eight years ago. My life is much more interesting, and I have more diverse sets of interests that demand a higher level of priority than this site and even investing in general. This is why I have hinted that I may not write this site past its tenth year anniversary.

Do not be worried however that I will abruptly go from telling you how much I love writing about investing to abandoning it altogether - I actually have plenty of articles in draft format to fill in the void for the next 1 – 2 years.

That being said, I still have a lot to say about dividend growth investing strategy. At the very least, analyzing every one of my stock holdings and writing an analysis twice per week will likely take an year in itself.

In general, I have learned a lot of investing lessons in the past. The investing lessons I have learned after 8 years of writing about dividend investing on this site include:

1) Determine your investment goals and objectives
2) Develop your own methodology to achieve your goals
3) Continue executing your plan
4) Ignore everyone one, avoid looking for stock tips, and ignore all the noise out there
5) Contrary to 4), keep testing, learning and experimenting
6) Make sure you diversify your portfolio holdings to reduce risk – a lot of stocks, and bonds. Consider owning your own home.
7) Do not chase yield or fall in love with a stock
8) Develop a healthy sense of skepticism towards companies and investors

The investing lesson I learned this year is to maintain a healthy dose of skepticism towards companies and investors. For example, I blindly believed the dividend growth projections of a company called Kinder Morgan (KMI), and ignored all warning signs in the process. This was a mistake I will try not to repeat again. The question I ask myself going forward deals with: What is the incentive of the company or management to forecast the items they are forecasting? The other question to ask yourself is "What could go wrong?". The third question is " Does the company have a margin of safety in case something goes wrong"?

Also if something sounds too good to be true, then it probably is. This lesson in skepticism in investing translates into everyday life as well - and vice versa.

The lesson for you as readers is to take everything you read on the internet and company filing with a grain of salt. Always ask yourself about the motivations of the other party.
You should also be skeptical about people who claim that certain stocks are a must own, yet they do not own them or have just a token amount at risk. The guiding principle is to trust, but verify - and unless you see audited financial statements or a publicly available track record available, be skeptical about the financial prowess of someone who claims to be a financial wizard.
If you ask yourself about the motivation of the other person or party, you will be able to understand things much more clearly. Developing a dose of healthy skepticism will be very beneficial to you as an investor.

Thank you for reading Dividend Growth Investor in the past 8 years!

Relevant Articles:

How to retire in 10 years with dividend stocks
Life after Financial Independence
7 Years Dividend Growth Investor
Entering Wealth Preservation Mode
Living off dividends in 2016 – My New Goal

21 comments:

  1. Congratulations.......love your approach and advice......ADKDave

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  2. Happy birthday! :)

    Thank you for keeping at this, I've learned a lot about dividend investing because of your blog and your writing style. Keep at it!

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  3. Thank you... for providing great info and insights into dividend investing... much appre4ciated!
    On to the next eight years.

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  4. Thank you for sharing your thoughts for the past 8 years, we look forward to continue hearing from you for many more years even if your time allocation prevents you to write as often as in the past.

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  5. Your blog has been one of my biggest motivators in learning about DGI and writing about it. Congrats on this milestone of 8yrs of blogging and I look forward to many more years of reading your great posts. Thanks for all you do.

    Best wishes
    R2R

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  6. DGI-Thanks for writing about dividend growth investing. Best wishes for success in the future.

    Philip

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  7. Congratulations and thank you very much for your blog. You've been an inspiration to many (most) of those 100+ dividend investing bloggers out there. I know you've inspired me a lot!

    Take care and I look forward to reading your posts for the next couple of years (and beyond, hopefully!).

    Cheers
    FerdiS, DivGro

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  8. I eat, sleep and breath this blog. Thank you so much for sharing your knowledge all these years!

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  9. 8 years, eh? Congratulations! I wonder how many blogs die long before 8 years. My only wish is that you keep writing through the next bear market. :)

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  10. Even with KMI's warnings I wouldn't have sold until the div cut. However if your allocation was unbalanced (KMI heavy) it might be good to look at a portfolio of stocks and rebalance. That is contrary to buy and hold but it reduces one's risk. Congrats on another year of great articles.
    DFG

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  11. Hey DGI.
    Congrats on the 8 years bud. Thanks for sharing your website with us and it's always enjoyable coming here. Life's great and your hard work is paying off. I support you in whatever you do and so do as you please. Life's too short to care what others think.
    Thanks for the wisdom.

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  12. Gratz on EIGHT! You give very strong advice with number 7 above. Do not chase yield. I sometimes wonder if you could backtest all Dividend Achievers or similar index if buying the low to moderate yields would routinely outperform the high yielders. My guess is yes on a total return basis.

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  13. Congrats on the 8yr mark! Pretty amazing numbers to go along with it, your writing is what brings me here over and over. I hope you don't give it up completely one day even though I can see how it could be considered a chore at times trying to find new topics to discuss.

    Personally I don't have any fixed income but I have been looking into some tax free municipal bond funds for some steady monthly income. I really have no desire to create a bond or cd ladder so something like a bond fund might be a bit of a compromise for me.

    CD

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  14. Congratulations on 8 great years of good advice. Has it really been that long? It seems like just yesterday I was watching the Dow lose 1000 points a day (at least it felt that way).

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  15. THANK YOU for sharing your experiences in becoming a DGI..... its all about the compounding effect... it reaps large rewards in the long run.

    Cheers and look forward to your articles......well written and thought out.....

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  16. DGI thanks for the advice and congratulations! i have been reading about your philosophy change and increasing your investments in tax deferred accounts (401k). i have been pondering that as well as my plan at work has lots of options and flexibility. the company matches 6% and contributes 4% additionally for a total of 10%. i can invest in the provided funds or i can put it into an investment account where i can buy individual securities. i can also choose between ROTH, pretax or after tax. the only snag is that i can not distinguish between ROTH and pretax contributions when i make purchases or sale. it is all based on percentages. if i buy $5k worth of CMI, the purchase would be the same percentage as my contributions (50% ROTH and 50% pretax). there is no way to designate and buy all of a security with ROTH or pretax. my only problem with this is that i like to see exactly how money is invested but the plan administrator has assured me that the computer will keep track of it. i know that's not much information but would you trust the computer to keep track of what contributions/gains you needed to pay taxes on in 20 years? thanks

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    1. If the computer "keeps track", they should be able to export a report periodically (once per year say) that makes it clear to you. My 401k (Fidelity) does the same thing -- they hide the balance breakdown per Roth and Traditional in their website and reports, and when you buy/sell, it comes out of each position in proportion, but they do show the breakdown in transaction records. Thus, I export a yearly transaction history and track the Roth/Traditional breakdown that way.

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  17. Congrats, DGI! Eight years is an impressive milestone and shows you've got the determination that's needed to see a dividend growth investing journey towards financial independence through.

    Cheers and best of luck in the upcoming eight years!
    NMW

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  18. Thank you for all your effort in research and writing!

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  19. Excellent work and congrats :) Best wishes for investing and blogging for the next 8!
    Cheers,
    Mark

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  20. Happy Birthday!

    Keep up the great work!

    Thank you for sharing 8 years of dividend investing wisdom.

    Kanwal

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Questions or comments? You can reach out to me at my website address name at gmail dot com.

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