I like my C's...a diverse cast of characters
COST, CSX, CTBI and CVS
retail, rail, regional banking and big oil...
Costco is my Peter Lynch stock; I shop there, love the experience, like how the company is run. I pay the executive membership fee, have the AmEx card and pay for the membership fee with My Amex kickback, and I only charge at Costco. That tells you that we spend a lot of money there; I suspect we buy about half our food, most of our household products, personal care products, socks, skivvies, bumming around clothes, even dress shirts and slacks there. It's the one shopping date every month that we actually look forward to.
Not electrifying performance, but about 50% increase in the position over 4 years. The dividend isn't much to talk about, but adds a bit, and I DRIP it. It continues to be the darling of the big-box discounters and as long as I like shopping there, I think I'll own the stock
CSX- After Buffet bought Burlington Northern, I started paying more attention to the railroads. My favorite would be Union Pacific, but I can't bear to pay for over-valued stocks, however much they are growing every year, so I compromised and bought CSX; P/E that I can stomach, nice share appreciation, average dividend, good dividend growth...10% total yield in 6 months; we'll see....
CTBI- I've been staving around trying to settle on a regional bank or two over the last several years; something small enough and sober enough to avoid the "money bank" hubris. I have owned a few, currently own two. this one has acceptable price appreciation, nice dividend, fairly shallow dividend growth; said to be minding it's knitting and avoiding stupid stuff like derivative investments...banks worry me a bit, after being seriously stung by B of A and WaMu back in the day. Still, handling other people's money is a good way to take home a piece of it.
CVS- I love big oil; it runs directly counter to my superficial cloak of "green sensibility", but Chevron has delivered big-time for my retirement portfolio. This is as close to a "set it and forget it" stock as I own. Energy production is for big broad-shouldered companies. Someone else can speculate on the wildcat producers. I like the big diversified producers, pipeline companies and the MLPs. They have done some very heavy lifting for me after the big swoon. Chevron is a stock to bequeath to my son...
that does it for C
Wednesday, September 10, 2014
B is for Blood, and Buffet
On with the drill-down;
BAX- a recent purchase; has the usual DGI credentials, decent dividend and I know something about the products. Blood products are big in my business; Baxter has a niche in the pharma world; processes blood, plasma and etc. to make value-added products for hospitals, surgery, chronic illnesses. The secular trends are going to hold this one up until after I'm dead and gone. More old folks, more surgeries, more chronic illness maintenance.
BRK-B
No value oriented investor can bear to be without at least a token membership in the BRK club. The cult of personality is overwhelming. Since the b-shares came out, us common folk are able to be owners. The performance hasn't been half-bad since I purchased...80% in three-and-a-half years, or over 20% per year; just like the historic performance, but....no dividend; one of the few apostates in my portfolio.
that's all there are for B's
BAX- a recent purchase; has the usual DGI credentials, decent dividend and I know something about the products. Blood products are big in my business; Baxter has a niche in the pharma world; processes blood, plasma and etc. to make value-added products for hospitals, surgery, chronic illnesses. The secular trends are going to hold this one up until after I'm dead and gone. More old folks, more surgeries, more chronic illness maintenance.
BRK-B
No value oriented investor can bear to be without at least a token membership in the BRK club. The cult of personality is overwhelming. Since the b-shares came out, us common folk are able to be owners. The performance hasn't been half-bad since I purchased...80% in three-and-a-half years, or over 20% per year; just like the historic performance, but....no dividend; one of the few apostates in my portfolio.
that's all there are for B's
Drilling down a bit
Since I can't see much excitement on the horizon with new money to invest or great bargains popping up all over, perhaps it makes sense to look at some of the stocks I own with an eye towards asking what I like about them and what I know about them.
Starting with the A's....
I bought ABT a while ago, for the standard reasons; big pharma, lots of products I know and some I prescribe, long history of rising dividends, etc. Then they threw a curve ball; Why they split is beyond me. Other companies are at least as, or more diversified. Look at JNJ; they have pharma, medical supplies, other stuff. Anyway, when ABT split to Abbvie and ABT, I felt I should choose, and stick with the DGI benchmarks I had set out. Abbvie had the higher dividend and the blockbuster drug. ABT has a bunch of stuff, but a lower dividend. I went with Abbvie, not knowing exactly whether it would produce a history conducive to a long term hold.
Well, in less than 2 years it's value has nearly doubled and the dividend remains near 3%, my prior buy threshold. I still don't have a clear sense of it's future, but the performance has been scintilating, and the dividend still hovers around my buy threshold. Until I see a reason to sell, I'll hold on. The dividend growth has a short history, but is adequate.
ADP...
a little history here. I used to be a part-owner of a small business...less than $2 million annual revenue. I became the managing partner, and boy did my eyes get opened! Retirement plan rules and regulations, HR stuff, payroll issues; none of which I knew anything about. My manager suggested that we outsource payroll, and we went to Paychex. They did a great job at a very modest price, freeing up hours of my managers time. She had time to pay much more attention to accounts receivable. Our business improved. I bought Paychex. I also learned that Paychex and ADP were the big dogs in this market, focusing on different pieces of the business world. I liked the performance history of ADP and the dividend, so I bought it.
Now I'm a part owner in a large business; probably 100 million/year in revenues. I sit on the benefits committee; I see the health plan administration, the life and disibility insurance, the pension/profit sharing advisor relationship and etc. Our company does payroll for nearly 1000 persons. Now I know what ADP is about. Payroll and benefits management for larger companies; more complex, more regulations, need for robust computer programs, lots of attention to detail. A bigger reason to consider outsourcing to reduce labor costs, leverage expertise, etc.
ADP has done very well for me... nearly 20% per year over 2.5 years, 2.3% dividend with 10% DG over those 2.5 years. There is a huge market and these two companies have barely penetrated it. I think the runway is pretty long going forward.
AWF... it's a fund, and a bond fund no less. This story is a piece of my newsletter history. It's about Neil George. He's a quirky personality in the newsletter world. Used to work for one of the big independent research/newsletter/advisor groups, got dumped, opened his own shop, then disappeared for a while, then reappeared as the "Lifetime Income Report" editor with Agora Financial.
I like reading his stuff. He's all about secure income; "pay me now", so to speak. He educated me about "minibonds" back in the days after the big meltdown of 2008 and I cleaned up on corporate minbonds at 50% on the dollar, big yields, rode them all the way to face value and sold them when there was little appreciation left.
He also recommended some emerging market bond funds. I still own 3 of the 4 he recommended and they have been very steady performers over 6 years. AWF is one of them. I dumped the Pimco product because of leverage; worried about this exposure if there is interest rate margin compression, but those without leverage are paying their 7% or thereabouts steadily. This one has returned about 150% over 6 years with reinvestment of distributions; it continues to clock along at 7% yield. The price fluctuates up and down a bit, but I'm DRIPing, so my cost basis stays down and i see no reason to step off a moving train.
AXPWD- don't ask me about this one...this is purely speculative, indulges my interest in alternative energy, and allows me to follow a very lively blog. I have taken a bath on it, but have intentionally limited my investment to 2% of the portfolio, so I can't get hurt too bad here. It has nothing to do with my conservative prudent DGI strategy, more a throwback to old undisciplined days...
that's the A's....more details next post.
Starting with the A's....
I bought ABT a while ago, for the standard reasons; big pharma, lots of products I know and some I prescribe, long history of rising dividends, etc. Then they threw a curve ball; Why they split is beyond me. Other companies are at least as, or more diversified. Look at JNJ; they have pharma, medical supplies, other stuff. Anyway, when ABT split to Abbvie and ABT, I felt I should choose, and stick with the DGI benchmarks I had set out. Abbvie had the higher dividend and the blockbuster drug. ABT has a bunch of stuff, but a lower dividend. I went with Abbvie, not knowing exactly whether it would produce a history conducive to a long term hold.
Well, in less than 2 years it's value has nearly doubled and the dividend remains near 3%, my prior buy threshold. I still don't have a clear sense of it's future, but the performance has been scintilating, and the dividend still hovers around my buy threshold. Until I see a reason to sell, I'll hold on. The dividend growth has a short history, but is adequate.
ADP...
a little history here. I used to be a part-owner of a small business...less than $2 million annual revenue. I became the managing partner, and boy did my eyes get opened! Retirement plan rules and regulations, HR stuff, payroll issues; none of which I knew anything about. My manager suggested that we outsource payroll, and we went to Paychex. They did a great job at a very modest price, freeing up hours of my managers time. She had time to pay much more attention to accounts receivable. Our business improved. I bought Paychex. I also learned that Paychex and ADP were the big dogs in this market, focusing on different pieces of the business world. I liked the performance history of ADP and the dividend, so I bought it.
Now I'm a part owner in a large business; probably 100 million/year in revenues. I sit on the benefits committee; I see the health plan administration, the life and disibility insurance, the pension/profit sharing advisor relationship and etc. Our company does payroll for nearly 1000 persons. Now I know what ADP is about. Payroll and benefits management for larger companies; more complex, more regulations, need for robust computer programs, lots of attention to detail. A bigger reason to consider outsourcing to reduce labor costs, leverage expertise, etc.
ADP has done very well for me... nearly 20% per year over 2.5 years, 2.3% dividend with 10% DG over those 2.5 years. There is a huge market and these two companies have barely penetrated it. I think the runway is pretty long going forward.
AWF... it's a fund, and a bond fund no less. This story is a piece of my newsletter history. It's about Neil George. He's a quirky personality in the newsletter world. Used to work for one of the big independent research/newsletter/advisor groups, got dumped, opened his own shop, then disappeared for a while, then reappeared as the "Lifetime Income Report" editor with Agora Financial.
I like reading his stuff. He's all about secure income; "pay me now", so to speak. He educated me about "minibonds" back in the days after the big meltdown of 2008 and I cleaned up on corporate minbonds at 50% on the dollar, big yields, rode them all the way to face value and sold them when there was little appreciation left.
He also recommended some emerging market bond funds. I still own 3 of the 4 he recommended and they have been very steady performers over 6 years. AWF is one of them. I dumped the Pimco product because of leverage; worried about this exposure if there is interest rate margin compression, but those without leverage are paying their 7% or thereabouts steadily. This one has returned about 150% over 6 years with reinvestment of distributions; it continues to clock along at 7% yield. The price fluctuates up and down a bit, but I'm DRIPing, so my cost basis stays down and i see no reason to step off a moving train.
AXPWD- don't ask me about this one...this is purely speculative, indulges my interest in alternative energy, and allows me to follow a very lively blog. I have taken a bath on it, but have intentionally limited my investment to 2% of the portfolio, so I can't get hurt too bad here. It has nothing to do with my conservative prudent DGI strategy, more a throwback to old undisciplined days...
that's the A's....more details next post.
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.
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.
Thursday, July 17, 2014
Dog days
We're well past May and the swoon hasn't happened yet. While the popular press chants "overvalued", individual stocks are available at fair value and modest discounts to same. The paparazzi want their correction, and are chanting for it with ever more shrill persistence.
What's an impatient amateur to do? The hardest thing of all is to sit on one's hands. I don't have cash anyway, so all the reading and examining is just entertainment. There just isn't any major repositioning work to do. I'm tempted to to reposition against the Intel run-up, but inertia has set in on my resolve to buy more shares of anything. I could sell some puts, perhaps...will think about it a bit longer.
Pretty soon there'll be a profit sharing distribution and I'll be forced to think a bit harder, so in the mean time I'm taking a holiday from the hyper-vigilence.
What's an impatient amateur to do? The hardest thing of all is to sit on one's hands. I don't have cash anyway, so all the reading and examining is just entertainment. There just isn't any major repositioning work to do. I'm tempted to to reposition against the Intel run-up, but inertia has set in on my resolve to buy more shares of anything. I could sell some puts, perhaps...will think about it a bit longer.
Pretty soon there'll be a profit sharing distribution and I'll be forced to think a bit harder, so in the mean time I'm taking a holiday from the hyper-vigilence.
Monday, May 26, 2014
Rarified air
Can you hear the wind whistling? Have we reached the precipice? Are we staring down the abyss?
Who knows. Equity prices keep creeping up. Earnings seem to be up, in spite of anemic guidance and endless fears of tightening credit, rising interest rates and the like. International hot-spots continue to be hot. It's all a muddle.
One thing is certain; fewer companies in my universe of stock candidates are clearly under-valued, and those that are have warts, for the most part. I own 50 some-odd dividend payers, mostly dividend growers and I scan them repeatedly for valuation problems. I have sold a few clearly over-valued equities, rotated into others at fair value, trying to strengthen the quality of the earnings and dividends. I'm trying to buy more of the stuff people can't do without, and less of what they can avoid buying in a tight spot.
I'm mostly keeping with that 3% dividend threshold, although a I'm letting a select few 2.5% payers into the fold if they have a solid dividend growth history. I'm also scanning for companies I don't own but want to. Most of those that fit that category have serious valuation issues. I'm taking advice to heart from the masters that purchasing at high valuations can destroy a lifetime of position growth potential.
I find that one of the hardest things to do is to sit on cash and I can't sell options in my 401k account, so cash covered puts are out. I've been lurking around the small cap world, looking for some hidden issues that the big shops don't write about constantly. They aren't easy to find.
I have less problem continuing the DRIPs in this environment, because a few commission-free stocks are diluted into a much lower cost-basis and additional shares also contributes to rising dividend payments. If I weren't DRIPing, there'd be an accumulation of cash and no really tempting investments to make.
There are only two ways out of this situation; rising earnings or a market correction. Rising earnings would be good, but one doesn't hear much positive news about the world economic health status. I wonder if this is an artifact of the media, which grasps at every piece of potential bad news and rarely emphasizes anything positive about the world. Earnings don't lie for the most part, and the world interprets flat or softening earnings as reason for doom and gloom. No-one wants a correction, but dividend investors like me would prefer to buy stocks when valuations are down, so that may be the price we pay to put new money to work. It's certainly hard to look at the portfolio value dropping, but if the dividends are preserved or even growing, then one should force oneself to see that as a fundamentally good thing.
I'm not particularly good at selling holdings at higher valuation. I'm not happy with a big cash balance. Although I have dabbled in options, I'd still rather be long than betting on market movements one way or the other. So, in spite of rising anxiety around me and the temptation to "do something", I think I'll just sit tight.
Who knows. Equity prices keep creeping up. Earnings seem to be up, in spite of anemic guidance and endless fears of tightening credit, rising interest rates and the like. International hot-spots continue to be hot. It's all a muddle.
One thing is certain; fewer companies in my universe of stock candidates are clearly under-valued, and those that are have warts, for the most part. I own 50 some-odd dividend payers, mostly dividend growers and I scan them repeatedly for valuation problems. I have sold a few clearly over-valued equities, rotated into others at fair value, trying to strengthen the quality of the earnings and dividends. I'm trying to buy more of the stuff people can't do without, and less of what they can avoid buying in a tight spot.
I'm mostly keeping with that 3% dividend threshold, although a I'm letting a select few 2.5% payers into the fold if they have a solid dividend growth history. I'm also scanning for companies I don't own but want to. Most of those that fit that category have serious valuation issues. I'm taking advice to heart from the masters that purchasing at high valuations can destroy a lifetime of position growth potential.
I find that one of the hardest things to do is to sit on cash and I can't sell options in my 401k account, so cash covered puts are out. I've been lurking around the small cap world, looking for some hidden issues that the big shops don't write about constantly. They aren't easy to find.
I have less problem continuing the DRIPs in this environment, because a few commission-free stocks are diluted into a much lower cost-basis and additional shares also contributes to rising dividend payments. If I weren't DRIPing, there'd be an accumulation of cash and no really tempting investments to make.
There are only two ways out of this situation; rising earnings or a market correction. Rising earnings would be good, but one doesn't hear much positive news about the world economic health status. I wonder if this is an artifact of the media, which grasps at every piece of potential bad news and rarely emphasizes anything positive about the world. Earnings don't lie for the most part, and the world interprets flat or softening earnings as reason for doom and gloom. No-one wants a correction, but dividend investors like me would prefer to buy stocks when valuations are down, so that may be the price we pay to put new money to work. It's certainly hard to look at the portfolio value dropping, but if the dividends are preserved or even growing, then one should force oneself to see that as a fundamentally good thing.
I'm not particularly good at selling holdings at higher valuation. I'm not happy with a big cash balance. Although I have dabbled in options, I'd still rather be long than betting on market movements one way or the other. So, in spite of rising anxiety around me and the temptation to "do something", I think I'll just sit tight.
Thursday, March 6, 2014
New opportunities
2013, a huge year for the stock market. Now the pundits are asking, what could be in store for 2014.
No one knows and many will gladly substitute for that lack of foresight with speculation. I don't waste time on that. Speculation is like playing the lottery. The odds are infinitesimally small that I'll win.
What I can do is save. I'm going to save every dollar I can squirrel away, both in my qualified plan and after taxes in life insurance cash value. Lots of people say that cash value life insurance policies are a poor investment. however, they're happy to endorse term life insurance. I have experienced the tepid returns of cash value policies. I also know that their gains are tax deferred, and I can, and have, borrowed against the cash value. In my tax bracket, putting after tax money into a cash value life policy is a no-brainer. I immediately avoid about 40% taxation on ordinary earnings, 15% on qualified dividends. That makes up for some tepid investment performance. The cost of insurance isn't much different from term life.
Maximizing income deferral is my other strategy. The government allows $52,000 maximum this year. I'll do my best to defer every bit of that much. Across my employed lifetime, The average maximum deferral will probably average about $47,000 and the average earnings duration will be about 16 years. That would suggest that each year of contribution will be worth somewhere around $120,000. That puts the qualified plan maximum (at 7% ROE) of about $3.6 million. I'll be lucky to hit $2 million given my age and prior history. Still, I'm working to defer as much as I am allowed to under the law, and then another 40% beyond that after tax.
I doubt I'll find another investment strategy that suits me better than DGI. I spent 7 years looking, after all. I don't like the logic of any other of the strategies I investigated.
I don't see the pundits offering any clearer view of the future than in prior years, so I'm left with the same old investment theme; try to buy best in class companies at or under fair value, focus on companies that pay above average dividends and grow those dividends. The goal is a rising stream of income. A secondary goal is capital appreciation, but I'm not measuring success against a benchmark.
So, big savings, rising dividends, moderate capital appreciation, lots of diversity. I'm insured against single company meltdowns by portfolio size. I see myself becoming more conservative. I'm not reaching for yield anymore; instead looking for relentless earnings growth, relentless dividend growth, moderate payout ratios, companies that make stuff people need come rain or shine. Not too sexy, but meant to help me SWAN.
I'm pretty happy with the monitoring function. I use FastGRAPHS premium and keep my portfolio loaded. I may start customizing the data fields to make the earnings growth and dividend growth rates a little clearer. I can easily follow the entire portfolio without spending a lot of time.
I'll need to get a little more disciplined about keeping issues in the portfolio that aren't performing to specifications; the sell issue is one of the more difficult disciplines in personal investing.
No one knows and many will gladly substitute for that lack of foresight with speculation. I don't waste time on that. Speculation is like playing the lottery. The odds are infinitesimally small that I'll win.
What I can do is save. I'm going to save every dollar I can squirrel away, both in my qualified plan and after taxes in life insurance cash value. Lots of people say that cash value life insurance policies are a poor investment. however, they're happy to endorse term life insurance. I have experienced the tepid returns of cash value policies. I also know that their gains are tax deferred, and I can, and have, borrowed against the cash value. In my tax bracket, putting after tax money into a cash value life policy is a no-brainer. I immediately avoid about 40% taxation on ordinary earnings, 15% on qualified dividends. That makes up for some tepid investment performance. The cost of insurance isn't much different from term life.
Maximizing income deferral is my other strategy. The government allows $52,000 maximum this year. I'll do my best to defer every bit of that much. Across my employed lifetime, The average maximum deferral will probably average about $47,000 and the average earnings duration will be about 16 years. That would suggest that each year of contribution will be worth somewhere around $120,000. That puts the qualified plan maximum (at 7% ROE) of about $3.6 million. I'll be lucky to hit $2 million given my age and prior history. Still, I'm working to defer as much as I am allowed to under the law, and then another 40% beyond that after tax.
I doubt I'll find another investment strategy that suits me better than DGI. I spent 7 years looking, after all. I don't like the logic of any other of the strategies I investigated.
I don't see the pundits offering any clearer view of the future than in prior years, so I'm left with the same old investment theme; try to buy best in class companies at or under fair value, focus on companies that pay above average dividends and grow those dividends. The goal is a rising stream of income. A secondary goal is capital appreciation, but I'm not measuring success against a benchmark.
So, big savings, rising dividends, moderate capital appreciation, lots of diversity. I'm insured against single company meltdowns by portfolio size. I see myself becoming more conservative. I'm not reaching for yield anymore; instead looking for relentless earnings growth, relentless dividend growth, moderate payout ratios, companies that make stuff people need come rain or shine. Not too sexy, but meant to help me SWAN.
I'm pretty happy with the monitoring function. I use FastGRAPHS premium and keep my portfolio loaded. I may start customizing the data fields to make the earnings growth and dividend growth rates a little clearer. I can easily follow the entire portfolio without spending a lot of time.
I'll need to get a little more disciplined about keeping issues in the portfolio that aren't performing to specifications; the sell issue is one of the more difficult disciplines in personal investing.
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