The most common question or variation of a question I get concerns the amount of time to monitor my portfolio. This includes monitoring existing positions, and researching companies to invest in. As some readers found out at my post on 2015 goals, I strive to optimize my life as much as possible. I believe that synergies are possible between activities I do.
Actually, the best kind of synergy I wish upon my readers is to find someone they are willing to share their lives with and move in with them. That would surely cut your housing expenses if you have to rent one place, rather than two separate ones. Moving in together might also be good for the housing market and for the economy, when you buy a house.
Before I say what I am going to say, I want to reiterate that we all have the same 168 hours in a week. If you break it down further, you have 24 hours in a given day. How you spend your time depends on your personal values and your objectives. I value family time, health, my investments and my job in that particular order. If I have to spend 50 hours at a job, and if I need to spend 60 hours/week on sleep and health, I am only left with 58 hours. I am very lucky that throughout my career I have never had to spend more than 10 – 15 minutes commuting to work. That provides me with a lot of time to spend on family, and some time to spend on investments. I would say it takes me no more than 10 – 15 hours/week to monitor investments in my free time when I am not at work.
However, this time also includes spending time on my site. So there are some efficiencies gained,(but also some sloth gained as well). I also have unaccounted time every week – which is normal if you want to live a normal life. Counting every hour seems wasteful and does not add fun to my life. I prefer setting up processes to live my life better instead. If I have no fun doing what I am doing, I will stop doing it. This includes this site as well. The other thing to consider is that I like reading books, and most books I read are investment or finance related. I am not adding time allocated to reading those books, because I enjoy reading them. I would read books even if I had only $100 in the bank. In fact, when I was a poor student, I still read a lot of books on finance and investing. Those were instrumental in setting up my own unique investment strategy that fits with my goals.
Plus, I discuss economics and business with the significant other quite often. So I am not sure if that time should be classified as family time, or investment time. I will let you decide for yourselves. Plus, when the significant other tricks me into shopping, and I come up with an investment idea or two, does that count as family time, investment time or entertainment?
My job position could be best described as being an experienced business/financial/accountin analyst. As such, I have access to a computer for 8 – 10 hours/day in the office, 5 - 6 - 7 days a week. I somewhat work a lot, but I also get downtime. I get one hour per day where I take my lunch. I would say that on average I can get 2 – 3 hours of downtime per workday. Most of my co-workers spend that time chit-chatting, looking at YouTube videos, exchanging recipes, or doing internet shopping. I choose to allocate that time to monitor new or existing investments. This provides me incentive to get my job done efficiently and correctly early in the day, so that I can allocate the rest to monitoring my investments. This is the part I enjoy about employment – I get cash to spend and to invest. However, I also get some time where I am essentially paid to research my investments. I view this as a win – win – win.
The nice thing about my job is that I have been able to look at companies in a variety of industries throughout my professional career, which has helped me learn about business, and also helped me in deciding whether those businesses have favorable characteristics or not. I once had a job where one of my duties was to read annual reports. Unfortunately, there were other, less pleasurable things to do such as "pleasing the eight layers of bosses" and "being nice to the customers" for roughly 80 - 100 hours/week. So again, I would say I was probably lucky that most of the things I have done have helped me in my investing. The funny thing is that while working all those excruciating work hours, meeting my strict timelines, I still managed to keep up with my portfolio.
If you do the math, you might get scared that I spend something like 20 – 25 hours/week on my investments, reading etc. However, I would say that if I didn’t have my website, I could easily shed 10 – 15 hours/week from the calculation.
I have previously spent as much as a few months without even logging on to see my portfolio. The underlying idea behind my portfolio is that nothing materially different happens every month. The most important thing to look at is annual data points – even quarterly data points are noise for the long term investor. As such, leaving the portfolio alone could actually be a value added activity. As a passive investor, I entrust my capital with the company I invested in, and then wait and collect cash dividends. I do not micromanage them, or worry about noise. I also do not worry about conflicting opinions, because they are usually noise. If the company cuts my dividend, I am out of there however. The thing of course is that since I started my site in 2008, I have only had a handful of companies cut dividends. I spend more time finding use of my new capital, which is where the time is allocated. So to put things in perspective, a dividend cut is a low probability event. The vast majority of holdings will keep raising or maintaining dividends, helping the dividend investor to hold patiently.
So to summarize, while I have tried to somewhat unsuccessfully downplay the amount of time it takes me to manage my dividend portfolio, one could argue that a large portion of my time has been spent living and breathing investing and business. I still believe that someone can essentially create a passive diversified portfolio of 40 - 50 dividend paying stocks, and just live off dividends without spending more than 5 hours/week on it. I am always surprised of the double standards between passive mutual fund investors and passive dividend investors. These double standards are evident when I hear that mutual fund investors holds portfolios of stocks selected by someone else, where the largest stocks account for the majority of the portfolio and ignore them. However, these investors do not do any research – they just blindly entrust their retirement to a program that has worked in the past.
Dividend investors on the other hand can utilize a similar approach to creating a diversified dividend portfolio, and then let their capital compound for decades, with minimal supervision. In the case of Original S&P 500 companies, and the Corporate Leaders Trust, this totally passive hands-off approach really worked wonders for those patient enough to hold stocks for the long-term.
For example, I am pretty confident that a dividend investor, who builds an equally weighted portfolio by buying all the dividend aristocrats or all the dividend champions, and holds patiently without tinkering with the portfolio, will do fine over the next 20 - 30 years. This investor would do fine whether they simply spend their dividends, or whether they choose to reinvest them. Alternatively, I also believe the same to be true if an investor basically builds and equally weighted portfolio using the 30 companies in the Dow Jones Industrials Average today, and never really doing anything afterwards. All of this assumes absolutely no tinkering with the portfolio, holding on to spin-offs, and reinvesting dividends in the accumulation stage but spending them in the retirement phase. An investor will likely improve their odds, by holding this portfolio in a tax-deferred account such as a Roth IRA.
Thank you for reading!
- How long does it take to manage a dividend portfolio?
- How I Manage to Monitor So Many Companies
- Happy Financial Independence Day
- When can you retire on dividends?
- How to retire in 10 years with dividend stocks
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