If a tree falls in the forest...

The other day I was surprised when someone sent me an email suggesting my comments here might be of general interest to the lay-investor public on a very active website.  This surprised and amused me, as I can't see any evidence that anybody but anybody has visited this site where I periodically talk to myself about my journey to investing enlightenment.

At least there is the illusion of enlightenment, as I can now view my performance over 7 years in comparison with broad indices, if that means anything. Actually, I'm much more motivated by internal metrics, like watching a rising stream of dividend income, watching the relentless acceleration of dividend reinvestment on the portfolio value and recognizing the near certainty that one month's swoon in value is followed by the next month's recovery. Even the great swoon of 2008 and 2009 was followed by an equally dramatic recovery, so I am comforted that disaster is not too likely to strike as long as I don't panic and bail out at the nadir of a market correction. I think I'm fairly well inoculated against that tendency by now, particularly since the dividends don't appear to track in a similar manner for most of the companies I own.

So where are we?  While the broad market is both at a near historic high in both price and valuation, there are still substantial number of prudent investment opportunities at average historic price/earnings ratios, with solid and rising earnings to support their valuations. These fall within the collection of companies known as dividend champions, challengers and contenders. They fall within various market capitalization strata, tending towards the large and mid-cap, which is quite fine with me as I am a fan of low volatility and market cap appears to be positively correlated with a low volatility index.  For those companies that I already own, reinvesting dividends at a time when valuations are high does not change my average acquisition cost very much, so if I am "losing points" to a more activist redeployment of dividends to the lowest valuation issues in my portfolio, I am making the over-all rebalancing easier, as each position stays closer to it's target weight within the portfolio than would happen if I collected dividends to re-invest in a single issue.

It turns out that there are a number of variations on the general theme of dividend growth investing and provided one is broadly following the principles, the outcome should be favorable even if not mind-blowing in it's total return prowess. As new money comes into the portfolio, there is always the opportunity to fill out smaller positions that I previously bought as partial positions, at the current time when screaming bargains are very difficult to uncover.

I'm pretty happy with an overall growth of the portfolio in the 10-12% range;  3% new money, 3% through dividend reinvestment and another 4-6% capital appreciation. I'm actually beating that by a significant margin over the last 7 years, so as long as I keep my eyes on my own work, I don't fall victim to too much performance envy vis-a-vis someone else's claimed return on investment.

So, if noone but me benefits from my conversation with myself, is it significant?   Well, I'm not following a strictly disciplined analysis of each issue on a calendar schedule.  I do want to stay within the bounds of some principles I have learned. So, reciting the rules seems helpful. Seeing how to apply them in different market conditions is part of my objective in the conversation. I have chosen not to accumulate cash in this rich market, because fair valued stocks remain available. Will this be a bad choice? Only time will tell. What modest amount of new money trickles in is easily deployed in balancing activities.