If you think you don’t play RPG’s, you’re wrong. Almost every game has some sort of way to “level up.” In Call of Duty, you gain experience to go up in rank, which unlocks new guns. In Grand Theft Auto, your character gets better at driving the more he drives. These concepts are easy to grasp on to because living things grow and improve over time. Unfortunately, it’s a lot easier to level up in a video game than in real life, but every person has the urge to grow and improve. It always takes effort and determination to level up, and your stock portfolio is no different.
Every stock you buy levels up your portfolio. The fun thing about stocks is that they can be like the statistics of your character that increase as you level up. The massive dividend aristocrats, like JNJ and MCD, are your character’s Stamina. Increasing your Stamina allows your character to take some hits and keep on fighting. In the same way, having these juggernauts in your portfolio can help you weather the market dips.
If you’re looking to do some damage at a little more of a risk, you might want to increase your character’s Critical Hit Chance. In stocks, I would consider REITs, like O or ARCP, to be the Critical Hit Chance stat. They have a higher dividend yield, but can suffer more price fluctuation, especially in a changing political climate.
As your portfolio levels up, it will have more health points (account value) and damage output (dividends). It takes effort to level up your portfolio, but as its level increases and the dividends start rolling in, your portfolio will start to level up on its own. Before you know it, your portfolio will be a higher level than you thought you could ever achieve. Back in 2004, when I first started playing World of Warcraft, I never thought I’d reach the level cap of 60. In the past I had never reached the level cap of any game, especially not an MMORPG. I did it though, and back then it took, on average, over 10 days of in-game time to reach level 60, and probably took me close to 20.
Your portfolio has no level cap, but maybe there’s a level you’re trying to reach like retirement, covering your household expenses, or to pay for your game addiction, like me. It may feel like that level is so far off that you’ll never reach it, but you will someday, as long as you keep at it. As sure as you can get from level 1 to level 2, you will eventually reach level 60.
How about you guys, what is your portfolio’s level cap? Do you remember what it was like being level 1? Maybe, you’re level 1 right now, what’s your plan to get to level 2?
Let me know in the comments!