nuts and bolts

I was recently reminded that I haven't written a cogent business plan for my retirement portfolio. I have a general understanding of what I want the porfolio to do, but no specific goals and benchmarks. I think I'll start writing an outline and then fill in the details;


1) Over-all goals for the portfolio

a) Produce a stream of cash from dividends that is adequate to support me and my family.
b) Produce a stream of cash that grows at or greater than the rate of inflation
c) Produce capital growth that grows at or above the rate of inflation

2) Contribution phase
 I am 52 years of age as I type.
a) I will contribute another 4 years at maximal rate, at a minimum
b) I will contribute another 10 years at some rate, as will my wife

3) Accumulation phase

a) I will continue to accumulate assets for another 15 years, until age 67 at least, from internal returns from the portfolio.
b) I will continue to work and support my maintenance in some fashion until age 67 and possibly longer

4) Distribution phase

a) We will live on dividend distributions, rental income and social security, if it still exists, in retirement.
b) The portfolio will continue to grow in value at or above the rate of inflation by capital appreciation, as well as dividend re-investment above and beyond our maintenance needs and minimal distribution requirements.

5) Portfolio design

a) Individual stocks;

business model easily understood.
current dividend >/= 3% ( exceptions for extraordinary company with rapid DGR)
CAGR revenue plus CAGR dividend >/= 10%
member of Dividend Champion, Contender lists (David Fish)

b) sector diversification;
roughly equal distribution into 10 major sectors

energy
utilities
telecom
consumer staples
consumer discretionary
basic materials
technology
healthcare
financials
industrials

OK to overweight sectors according to preference on a year-to-year basis

Individual stocks will be held at roughly equal percentage in the portfolio.
The full allocation for each position will be 2%, with target of 50 holdings
I may choose to purchase half a position or less at a time based on available cash.

c) management of dividends
default position is automatic dividend reinvestment
I will consider a move towards complete or partial targeted reinvestment in order to grow under-valued positions

d) management of new cash inflows
first priority will be given to addition of shares to undervalued holdings
second priority will be given to addition of shares to partial positions

e) rebalancing;  on a yearly and ad-hoc basis, rebalance to bring holdings close to the 2% target

f) criteria for selling;
 earnings stop growing
failure to raise dividend
dividend cut
company spin off, company will be purchased

this represents a pretty good start....