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

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