Comment on what I will do with my dividend machine
portfolio in view of the U.S. Election.
No matter what happens
with the election, we income investors have the same investment choices. You must ask yourself, Can I make more income
on my principal if I sell my dividend stocks and invest in something else? Should I sell my dividend machines and move into
bonds? Should I sell my dividend stocks and hold cash. You cannot predict how any market will
perform even after you know the election results. You can only examine the opportunities
available to you at the time. Let’s look
at some scenarios.
If you are concerned
that dividend machines will go down as a result of the election and you must have
the income to meet your bills, you cannot sell your dividend machines until you
can create equal to or more income from another investment. Bonds will not replace your income and they
are in their own bubble. For this
portion of a portfolio, you have to stomach the principal ups and downs in
exchange for steady income. I too am
nervous but I have every confidence that this part of my portfolio will
continue to pay me income and increase my income steadily. But will I lose money?
Capital preservation is
always to goal of the seller. Sometimes
you want to protect what is left and sometimes you want to maintain your
gain. This is market timing and trying
to time the market is fools play. Yet, selling to protect principal has merit.
How does this apply to a dividend machine portfolio? Most investors who have the discipline to
create a portfolio of dividend machines also may have enough cash flow
flexibility that they can sell their dividend machines and hold cash. They protect their principal and any gains
they have while they examine the investment opportunities available in the
future. This type of investor can forgo
income long enough to examine their options and is flexible enough to move back
in if necessary. Who knows we could have
runaway inflation in a blink of an eye making bonds a consideration. The tax changes or fiscal cliffs could cause
a selloff of dividend companies and the person who sold and waited in cash will
get to buy dividend machines on sale.
The answer to what to
do with the dividend machine portion of a portfolio in view of the election is
to decide which kind of investor you are:
income or capital preservation.
As for what I am doing… a little bit of each. I do that all the time and the election
results have little to do with my investment decisions.
Very Truly Yours,
TheMoneyMadam
