This is What We Trained For

This year should look very different to you investors than the past few. In the past few months we’ve seen a couple big dips in the market, and you may be starting to worry. It’s an emotion we haven’t had to deal with for some time. Until recent weeks, there was little fear involved with entering new investments which made things pretty easy. This is the time that will show your true colors.

I firmly believe in my Buy Smart Never Sell mantra. If you are investing regularly and intelligently through this year, you will do better in the long run than if you panic even the slightest. Am I predicting a crash? No. Am I predicting a rebound? No. I am predicting that nobody knows what the future holds. If you’re making speculative trades that you hope to make 10-20% gains within a year, this is the wrong blog for you anyways!

Here’s why I believe you should stop worrying and continue your strategy, you will win in every scenario that you don’t sell.

Scenario 1: The market rebounds, by not selling you haven’t lost a single thing, and probably made more money, huzzah!

Scenario 2: Bear Market, by not selling, you don’t realize any losses, your dividends are reinvested at a discount speeding up the compounding process, you continue to buy great companies at a discount as well. Maybe it takes a year or 2, but the market WILL eventually come back to where it was and you’ve made even more money by continuing to invest and reinvest.

Scenario 3: It’s just choppy for a year with no major gains or losses, you pick up deals where you can, and presumable this will be followed by scenario 1 or 2.

Scenario 4: Armageddon. All money becomes worthless and you’re no better or worse off than anyone else because society is collapsing and your new worry is finding beans and gathering weapons to fight zombies. Haven’t you always wanted to fight zombies?

The media gets its jollies by preying on your fears, but the truth is you have nothing to fear if you stick to your strategy (except maybe the zombies, especially if they’re the fast kind).

This isn’t to say you won’t get stressed out seeing your portfolio drop double digit percentages. It will be hard to stay strong and do the right thing, but if you do, you’ll be rewarded.

Stay strong investors!

New Purchases

To achieve my goal of investing $15,000 this year, I’ll need to invest at least $1250 each month (on average). So let’s start this year with a bang! I was able to invest $2000 for January. The 3 stocks I was considering were IBM, MMM, and WFC. So I thought I’d share with you my decision making process for this process.

First of all, These 3 companies each match my basic criteria of a solid history of dividend growth, a PE ratio under 20, a payout ratio under 60%, and a yield over 2.5%. All three are also in short term dips (or long term in the case of IBM).

Next, let’s look at past performance and dividend growth history. 10 years ago, $1000 invested in IBM would be worth $2334 today, in MMM would be worth $3288, and in WFC would be worth $2925. IBM’s dividend grew 18% last year, and on average it grows 23% per year. MMM’s dividend grew 19% last year, and on average grows 9% per year. WFC’s dividend grew 7% last year, and on average it grows 4% per year.

In terms of price growth, they each have grown an average of about 8 to 10% each year in the past. However, the price of MMM and IBM went down 7% last year, where WFC grew 4%. Price trends usually don’t affect my long term investment decisions, but it’s interesting to note the similarities.

Right now, the thing that appeals to me most is the dividend growth potential. So I went with IBM and MMM.

I bought 7 shares of IBM at $135.29 adding $36.40 to my yearly dividend income
and 7 shares of MMM at $144.35 adding $28.70 to my yearly dividend income.

This puts me at $485.94/$600.00 for my annual passive income goal for 2016, and $40.50/$100.00 for my average monthly passive income long term goal.

I’m excited to be doing some serious damage on my goals at the start of the year.

Dividend Income – Dec. 2015

I think it’s important to celebrate wins on the path to your ultimate goal, no matter how small. Sharing my dividend income results with you readers gives you some insight to what is possible as you begin your journey.

My ultimate goal is to be able to live off of the passive dividend income from my investments, so I can just stay at home and play video games. Here is the money I made in December 2015 without lifting a finger.

WMT – $6.00
CVX – $9.97
EMR – $7.80
MCD – $10.05
BP – $31.38
LMT – $8.44
KO – $8.46
JNJ – $7.50

Total: $89.60

Compared to the dividends I earned in September ($71.41), I earned almost $20 more due to compounding, dividend raises, and KO’s dividend being paid out in December rather than . What’s even more exciting is that I can compare this to the results from December 2014. One year ago, I only earned $18.98 for the same period. I’ve quadrupled my December dividend income and then some, after a year I don’t even consider to be that successful.

2016 Goals

So, as much as I hate to, I need to keep myself accountable for the goals I set last year. Let me start by saying “GOOD RIDDANCE” to 2015. This was a rough year, so while I didn’t achieve my goals, I still feel like I gave a valiant effort given the circumstances.

2015 Goals Review

1. Achieve 50% savings rate for one month
To be honest, I’m not sure if we did this or not. We might have had a month where our expenses were only 50% of our income, but for the most part, 2015 was a rough year with many unexpected expenses. Believe it or not, December was a really good month for us, so I’m going to call this one a “Maybe” because any success would have been offset by other terrible months.

2. Save $18,000
Not even close. However, we slightly changed this goal half way through the year to be me maxing out my IRA contribution (which I ended the year $1000 short) and paying off my wife’s student loans. We haven’t fully achieved those goals either, so this is still a fail.

3. Try cooking a new healthy dish every month
I experimented a little in the kitchen, but really didn’t achieve this goal to its entirety. I’m beginning to feel a lot like the person that makes their goals and doesn’t follow through on them, but I honestly did put in a reasonable effort throughout the year.

4. Lose 10 pounds by June
I’m pretty sure I didn’t achieve this in June (or since). However, I did successfully establish the healthy habit of working out every morning before work. There is the possibility that I have lost 10 pounds of fat throughout the year, but I’m still pretty heavy. I did a lot of experimenting throughout the year on portion sizes and workouts, and I believe I have the ammunition to make this goal a reality going forward (holidays excluded). So I’m still going to call this a pseudo-success, because while I didn’t lose the weight, I have establish habits and have a plan that I know works going forward.

2016 Goals

Now, it’s time to outline my goals for 2016. I have a good feeling about this year.

1. Save $15,000 in our Joint Account
Last year, I had a lofty savings goal, and life required that I change that. This year, our goal is a little more reasonable. It will still take work to achieve this, but I think this will be a good year. This means saving an average of $1250 per month, which should be quite achievable on our usual budget. A lot of the big stressful expenses of 2015 are behind us, so 2016 should be a good year.

2. Break $600 in annual passive income
If I’m sticking to my valuation standards and achieve the $15,000 goal, this one should be easy. This will mean we’ll have an average of $50 per month in dividends, and that will continue to grow.

3. Try a new brown bag lunch every month
I have been making burritos for lunch for the past year, and in the interest of variety, I’d like to try some different options. This is basically the same goal as last year. I’ll also be cutting portion sizes and making changes to lose some fat in 2016.

4. Reach a zero margin balance in my personal investing account.
I have been doing more speculative trading lately than I should be, and I’ve been risking money I don’t have by using margin debit. My goal for this year is to cut that crap out, and either inject more cash, or sell the speculative trades to bring down my margin debit. This is basically a gambling problem backed by debt, and I’m getting to old for that kind of behavior. It only started being a problem last year, and I’m looking to make that the end of it too.

5. Place in the top 500 in a Diablo 3 Season for one class.
At the end of the last season, I reached rank 846 on the Hardcore Crusader leaderboard. In 2016, I want to finish a season in the top 500 on the hardcore leaderboard for whichever class seems the most fun. The first season will start on January 15, but I’m going to miss a few key weekends, so I’m aiming for the second season of the year, most likely starting in April.

Frugal Advice: Gift Card Deals

This is my favorite time of year. During the holidays, everyone is hawking their gift cards. Including my favorite local eatery: Taco Bell. This year, their deal is a large drink and 2 supreme doritos locos tacos for free when you buy a $20 gift card.

This is one of my favorite techniques. I get to rack up some extra points/miles/cash back on my credit cards, some free food, and a gift card I will absolutely use. That last part is especially fun in January where it looks like I spent a lot less than I did.

‘Tis the season to keep an eye out for deals on the things you enjoy regularly. I am not condoning taking advantage of a deal just for the sake of the deal. If it’s not something you already would have spent money on, you’re falling for their trap. So be smart, but take advantage of the opportunity this season provides.

Gift Idea: Dividend Stock Gift Cards

Are you into investing and have a friend that is on the fence. Maybe this holiday you’d like to help them make their first step into the stock market. I recently found out about a company called “Stockpile” that allows you to buy someone a stock “gift card.” This idea has crossed my mind before, and I think it’s a really cool idea.

For many people, there is a mental barrier to entry in investing (on top of the financial one). It’s actually incredibly easy to open an account with many of the big retail brokers like Fidelity or Etrade. But for an outsider, it can seem like a daunting task. So a stock gift card is a huge incentive to get someone started.

What’s even better is that you have a chance to win a $100 stockpile gift card. A fellow dividend investing site is running a contest with 3 gift cards as prizes. The site is suredividend.com, I haven’t seen a ton of content on the site yet, but I like their 8 Rules of Dividend Investing. If you just want to enter the contest, Click Here.

I’m not affiliated with Stockpile.com, I just think it’s a cool idea. Happy Holidays!

Dividend Income – November 2015

I think it’s important to celebrate wins on the path to your ultimate goal, no matter how small. Sharing my dividend income results with you readers gives you some insight to what is possible as you begin your journey.

My ultimate goal is to be able to live off of the passive dividend income from my investments, so I can just stay at home and play video games. Here is the money I made in November 2015 without lifting a finger.

AAPL– $4.68

Total: $4.68

This is my first dividend from Apple since purchasing back in August. It’s also my first November dividend, so I don’t have a previous quarter to compare to. December should be a really good month!

The Underdogs

The market has been pretty volatile over the last few months. A good number of companies have come back to equilibrium, but there are still a few depressed companies that I have my eyes on. These stocks have had a rough year, and as I’m starting to have more investing opportunities, it’s good to have a plan.

IBM

IBM has seen a few choppy years recently while trending down. However, their dividend growth has been maintained, as well as a healthy payout ratio. At the current valuation, IBM has a PE ratio of 9.2 and a yield of 3.85% which is beautiful. It’s not especially popular with 12 quarters of lower revenue. However, Warren Buffett is stockpiling IBM shares right now, which makes me think he knows something we don’t.

WMT

Walmart recently announced a bleak future for the company’s earnings in 2016 and 2017, in combination with their performance, this means WMT is down 30% for the year. This puts the PE ratio at a very attractive 12.6, and the dividend yield around 3.2%. The earnings growth potential over these next couple years isn’t going to be great, but if the price gets depressed further, the dividends will be reinvested at a discount. I’m liking the idea of stockpiling WMT over the next couple years to make bank when they recover and return to growth.

These are the opportunities I have my eyes on currently. I’m also watching Starbucks (SBUX), Yum Brands (YUM), and Whole Foods Market (WFM). How about you, what companies are on your watch list?

New Purchase: Verizon Communications Inc.

This is a bit of a belated post. A couple weeks ago, I purchased 22 shares of VZ at $46.39

At the time, the PE ratio was 18.4 and the dividend yield was 4.8%. Since then, the price has come down, and it is currently yielding over 5%, so maybe you can capitalize on my lack of patience. This investment adds $49.28 to my yearly dividend income, and $4.10 to my average monthly income.

Putting me at $414.44/$500.00 for the annual passive income goal and $34.54/$100.00 for the monthly passive income goal. These numbers are probably a little off due to dividend reinvestment, but I’m getting really close to my $500 per year goal.

I’ve written before about why I like Verizon. You can check it out here.

Dividend Income – October 2015

I think it’s important to celebrate wins on the path to your ultimate goal, no matter how small. Sharing my dividend income results with you readers gives you some insight to what is possible as you begin your journey.

My ultimate goal is to be able to live off of the passive dividend income from my investments, so I can just stay at home and play video games. Here is the money I made in October 2015 without lifting a finger.

KO – $8.39

Total: $8.39

Compared to the dividends I earned in July ($8.32), I made $0.07 more due to compounding, KO should be raising their dividend payment in the first quarter of next year.

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