Hello
2015. What a nice run we have had since
I started this blog 4 years ago.
If you
did not make money, you were not paying attention. Bonds made money, stocks
made money even real estate made money. These
great results had nothing to do with me.
But as you will see, the strategy I write about did pretty well as
compared with the broader market.
This
is good news for everyone but what should you do in 2015 to build another
portfolio dedicated to creating ever increasing income?
I
will answer that question later but first, I want to emphasize that ordinary
investors who manage the income producing portion of their portfolios, need to
use a simple and disciplined approach.
Simple
Investing Strategies for Young and Old
For
young investors who do not have time to learn how to invest for income, I like
the easy and disciplined approach of dollar cost averaging into low cost ETF’s
like SPY, SDY and VIG. For young and
old investors who want to manage the dividend stock and discount bond portion
of their portfolios with the hope of outperforming SPY, SDY and/or VIG, this
blog is for you.
I
know that a structured and disciplined approach to income investing has a
really good chance of succeeding. I can now
prove that during the past several years of bull markets in stocks and bonds,
stocks I call Dividend Machines have kept up nicely. Just look at the 2011 portfolio up over 60%
and paying more than 4% on the basis. You
know that many hedge funds have not done as well.
2014
Results
I
was very worried that this strategy would lag in 2014 because everyone was
touting dividend stocks and that drives up the price. But, the portfolio is doing o.k. compared
with SDY and VIG. It was up 5.71% the end of the year with more income than can be produced from bonds or low cost ETF’s
Each
of the portfolios is nicely diversified by market capitalization as well as
industry. This is simply the result of
random picking of stocks that had to comply with my four Dividend Machine
criteria and no other talent on my part.
Again,
I was worried that the 2014 portfolio would be too concentrated in one industry
because the pool is so small. I profiled
only 17 stocks in 2014 that I call Dividend Machines. There are a few small caps and a couple of mega
caps and the rest are mid to large caps.
In
2011 I profiled 52 stocks and that portfolio is up over 60%. It is highly diversified. In 2012 the portfolio has 48 stocks and in
2013, 20 stocks. All portfolios ended up
being diversified without even trying to achieve that goal.
2015
Dividend Machine Criteria
I
will follow all these portfolios over time but in 2015 I will continue to write
about stocks I call Dividend Machines.
I will write about covered calls on Dividend stocks that might not quite
qualify as Dividend Machines but pay you to wait and I will write about any
bonds I buy that trade at a discount, with durations less than 7 years and
current yield competitive with stocks.
What
should you do in 2015 to build a portfolio dedicated to ever increasing income? I will invest my first money of 2015 in a
Dividend Machine. This year I will stick
with the same criteria as 2014.
These
criteria have worked in the past so why change.
Change
to Tracking Methodology
This
year I will change the methodology of tracking results in the follow way. When I profile a stock in a closed market, I
will place a buy on close order and report that cost basis for the stock. In order to track my Dividend Machine
Portfolio results and compare it with VIG and SDY, two low cost ETF’s that
concentrate on quality dividend stocks, I will use the ETF closing price on the
day I buy my Dividend Machine to also buy VIG and SDY. Please note that this is for tracking
purposes. I usually buy the Dividend
Machines I profile, but I do not invest the same amount of money in VIG and
SDY.
I
hope we all do as well in 2015 as we did in 2014. My first pick will be coming soon.
TheMoneyMadam
