Monthly Archive: May 2014

One month ago today, I started my new job. So as you can imagine, I didn’t manage to get around to comparing the funds. However, this will be the 3rd month I’m comparing, which is a substantial benchmark for comparison. This means, I will have 1 quarter’s worth of dividends contributing to the returns of these investments.

The purpose of this exercise is to compare a focused approach to investing in quality dividend paying companies to using a fund of cherry picked stocks selected by experts. At the time I started this comparison, Kfund1 was composed of my personal holdings in MCD, MSFT, MRK, WMT, JNJ, and LMT, all of which are also part of the Vanguard Dividend Growth Fund (VDIGX). KFund2 was composed of my personal holdings in PEP, PG, WMT, KO, XOM, CVX, MCD, and MMM, all of which are also part of the Vanguard Dividend Appreciation Index Fund (VDAIX).

Below are the 2 Vanguard dividend funds I have and the change in value they have seen in the past 3 months.

VDIGX
up 5.78%

VDAIX
up 6.17%

Not too shabby. I don’t like comparing results to major indexes, because major indexes don’t reflect the cost of a Doritos Locos Taco from Taco Bell (Yes, I eat these every week). A 10% yearly return is far better than you see in any savings account or treasury bond these days. With over 5% in 1 quarter, breaking 10% for the year seems like a low ball goal.

Now let’s see how the individual companies that I own did in that time.

KFund1
up 7.20%

KFund2
up 8.86%

Unlike my comparison 2 months ago, My investments actually significantly outperformed the funds. I think a big part of this success is due to JNJ, MCD, and MMM, each of which have seen at least 7% gains in the last 3 months.

I’d love to continue reporting on this comparison, but with the house hunt accelerating, I fear I may need to sell some of these positions to make the down payment. We’ll see though. Stay tuned.

As I mentioned earlier, I’ve recently started a new job. It’s a great opportunity for me and I’m very excited to be starting this chapter of my life. The office is in downtown Seattle, so I take the bus every day to get there. I’m enjoying the bus a lot more than driving because it gives me time to play my 3DS, or even just rest and think about things. One thought that has crossed my mind is what my “dream job” would be. Honestly, I think the only perfect job would be one where they pay you to do absolutely nothing. Where you wake up and do whatever you want with the day, and the paychecks keep coming in. Unfortunately, no such job exists… or does it?

It turns out, this is exactly the kind of job a financially independent dividend investor has. Owning dividend stocks does not require you to be at an office at a specific time. Dividends have no dress code or weekly hour requirements. Nobody expects you to log the time you spend on a daily basis when your paychecks are dividend distributions.

There are some downsides to the dividend investor career. They don’t provide benefits like healthcare or dental insurance. There’s certainly no company car, however, there’s also no commute. If you’re the kind of person that feels a sense of fulfillment from working, you’ll be on your own to find ways to still get that feeling. You’ll also

There are also some significant advantages. Dividend income (if qualified) is taxed at a lower rate than normal income and capital gains. This job will give you a substantial raise every year, or least higher than the “standard of living raise,” most companies “generously” give each year. Dividends will also never fire you. Your worst case scenario is that 1 company will reduce or stop their dividend payment, in which case you can sell your stock and invest elsewhere, which is like taking a new job without even updating your resume.

Sadly, you can’t just apply to the job of dividend growth investor, it’s a job you need to work for over several years. It’s truly a grass roots start-up that you grow over time into an engine of freedom.

I love working towards earning this dream job, but in reality, I’m still very much in the start-up phase. Our house hunt is starting to really ramp up, so liquid cash is going to be more favorable than trying to bet on short term gains. This means my stock analyzing and purchasing will probably be paused until we close a deal.