wish I knew more about the investment vehicles you’re invested in…guess I can read up and learn if I want, huh?
I’ve reached the point where I gear the portfolio for growth of income. Since the income is more than I need the balance of the income is re invested in additional shares which create even more income. The portfolio growth comes from stock prices being pushed up by increasing dividends PLUS the additional shares bought by the excess income not needed for expenses (Which include FED and STATE taxes)
Virtually all income received is mostly in some way partially or mostly tax deferred— My biggest taxable event is the transferring of RMD’s from my IRA’s each year which I just completed this week. I sold 6.2% of my GAB shares and transferred the cash to my cash accounts.
I have recently been seriously considering income investment as a diversification to my current portfolio. Partly because of your posts.
It has worked for me, and I believe it could work for anyone.
How well has it worked for me? My wife and I retired on July 1 2003 with no pension and limited SS. Now 13 1/2 years later our portfo is worth more than 12 1/2 times our starting portfolio size on that date even though we have removed over 3 1/2 the original portfolio value for living expenses during those same years. In total the portfolio has increased over 16 Times in the 13 1/2 years and that includes paying hefty taxes alomg the way even with using every tax deferment available to me. I go back to before the ROTH IRA so I have very limited money in them.
My investments follow Warren Buffett’s BRK approach on a much smaller scale. Using Unrealized capital gains by not taking capital gains allows the money to continue to work for you instead of taking gains, giving up income and paying taxes. I recently read where Buffett has between $50B and $60B in unrealized capital gains owning assets and cranking out more unrealized Capital Gains . After a while it becomes like a Perpetual Money Making machine cranking out money day after day. Buffett didn’t start out with Billions–He started out ONE DOLLAR AT A TIME AND JUST GREW IT AS HE WENT ALONG.
Strive to improve your portfolio–Sell your worst stock and immediately improve your portfolio by adding the proceeds to your best stock Do that a few times and your portfolio will only have winners and no losers. That should be a plus from where you are now
Learn the concept and if you like it, get started.
Hi Buyandwin,
Thanks for your input. I love the fact that people with very different strategies are around for the discussion. I appreciate you sharing your portfolio construction with us.
I did look into your holding very quickly and I will certainly look further, but I have a question. You mentioned you made 18% this year. Impressive, especially with high dividend stocks. My question is that when I looked into the stocks you mentioned, I noticed that many of them had decent 2016’s, but if you looked at 2015, the story was significantly different. Have you owned this portfolio for a long time? Do you trade in and out of high dividend players often, or ride the ones you have up and down.
And if you don’t mind, what are the factors you use to pick the high dividend payers. There are a lot of supposed experts who like to call the very high dividends as a “red flag”. I can say that my experience of picking very high dividend payers, usually hasn’t gone well…
My question is that when I looked into the stocks you mentioned, I noticed that many of them had decent 2016’s, but if you looked at 2015, the story was significantly different.
2015 was different End of 2015 portfolio was DOWN 2.6% About 1.7% of that was removed for living expenses.
NOT COUNTED in the 2.6% figure was a POSITIVE 170.7% cash payment in Dec 2015 received from MWE when it merged with MPLX. The taxable cash portion of the merger was about 15% and about 85% was in tax deferred MLP units. The 15% cash payment created a HUGE tax bill for me. The 2016 portfolio results include the large tax bill I paid in April 2016 I Started buying MWE in 2004 and never stopped up to and including 2 days before the merger date. I have continued to buy MPLX after the merger.
I wouldn’t normally expect similar results every year.
Have you owned this portfolio for a long time? Do you trade in and out of high dividend players often, or ride the ones you have up and down
I own ACAS for about 13 years–that was just merged into ARCC Still buying ARCC
UTF–Closed End fund (Bought for diversification) 1 year
ETE–MLP own about 10 years
EVA–MLP own about 2 years
GAB --Closed end fund–Bought for diversification 2 years
HASI-- REIT-2 years
MPLX–MLP received in merger with MWE in Dec 2015(Owned about 13 years)
NRZ --REIT own about 6 months
I trade very infrequently–Trading increases capital gains which create a voluntary taxable event. It’s bad enough when a taxable merger gets shoved down your throat and in addition to paying a big chunk in taxes YOU HAVE TO GIVE UP THE INCOME THAT THE INVESTMENT WAS THROWING OFF TO YOU, and then to add insult you have to use the after tax NET CASH BALANCE to replace the growing income that was arriving in your portfolio every month or every three months.
If you bought a stock at $20 and it goes up to $40 —YOU DO NOT OWN A $40 STOCK- Depending upon your FED and STATE tax bracket --if 30% you own a $34 stock and have a $6 tax obligation if you sell-If you are in the $40% bracket you own a $32 stock and have an $8 tax obligation if you sell. In addition If you sell, you give up all the growing income you had.
There are many times when the income remains steady while the stock price fluctuates and scares the hell out of you.
And if you don’t mind, what are the factors you use to pick the high dividend payers. There are a lot of supposed experts who like to call the very high dividends as a “red flag”. I can say that my experience of picking very high dividend payers, usually hasn’t gone well…
If you noticed I only have 8 securities in my portfolio. I think more than 10 or 12 are too much to keep track of. If I were you I would start looking in your own personal portfolio. You probably have some wonderful stocks in there (WINNERS) and you also might have some junk(LOSERS). Sell the worst stock you have and add the proceeds to the best you got. This will immediately improve your portfolio, and should make you feel better
There are no sacred cows in my portfolio. I buy an initial position and then its up to them They earn every dime I put in them by performing as I expect them to. Those that don’t perform get no additional money and they run the risk of getting sold.
The supposed experts aren’t paying my bills, I have to pay them. I don’t listen to experts-I don’t listen CNBC-I don’t listen to Cramer-I don’t read the WSJ or the NYT. I do what works for me. By not listening to them, my portfolio is up 16 TIMES the original value of 13 1/2 years ago.
I am not picking “very high dividend payers”-- My portfolio income was only 7.17% for the year and that included income added from excess dividends/distributions that were reinvested to increase the return.
I hope this answers some of your questions
Good luck
b&w
Hi Buyandwin,
So you have 16% of your portfolio invested in ARCC. I realize that you have been invested in the company for a long time. How did you go about investing in that BDC? How did you evaluate the management and what they are investing in or did you go by NAV?
The market is set to open in about Three hours. I am a guest here on Saul’s Investing Board. In answer to a request I posted my portfolio and the past performance of it. It has created questions which I am willing to discuss,but many others might not find it appropriate for me to do so here.
I would suggest moving the conversation over to the Real Estate Investment Trust (REIT) Board which is an unmonitored board that I frequent regularly. So Andy If or anyone else is interested in discussing my portfolio further please post there.
My old geezerness is 72 and counting.
I suspect Saul might be a little older than me.
I seem to recall knowing this, but my recollections
are not as reliable as they used to be
Can you please provide link to the Real Estate Investment Trust (REIT) Board? I am having trouble finding the board. I am a subscriber to Motley Fool Stock Advisor, hopefully this will allow me to access the board.
“There are a lot of supposed experts who like to call the very high dividends as a “red flag”. I can say that my experience of picking very high dividend payers, usually hasn’t gone well…”
I think one of the secrets to successfully buying cheap stocks or high yielding stocks is not to fall in love with the low PE or high yield until you have completely looked at the whole picture.
If you are willing to cull out a lot of high yielders or low PE’ers, you can find some real bargains among their ranks.
Care to comment any further on your thoughts along these lines. What do you look for in a high dividend stock that gives you more confidence in its sustainability and allows you to cull out the losers and find the real bargains?
What do you look for in a high dividend stock that gives you more confidence in its sustainability and allows you to cull out the losers and find the real bargains?
When you wrote that-----You were kidding—Weren’t you??
“Sustainability” in a stock? that comes with the sustainability of you as an investor.
You don’t need everyone else’s “supposed bargains”
Look in your own portfolio. CULL OUT THE LOSERS IN YOUR OWN PORTFOLIO. ADD TO THE THE REAL BARGAINS IN YOUR OWN PORTFOLIO–THAT’S THE ONES THAT ARE GOING UP AND HAVE GROWING INCOME. Doing that you will improve the performance of your portfolio. And when something changes-- React to the change after the change. Don’t anticipate the change BECAUSE IT PROBABLY WON’T HAPPEN
Hi Buy and win,
Actually I was repeating the words of a previous post. The response was to a question on how good dividend stocks were chosen over bad ones. Your response tells me very eloquently how to get out of ones I should no longer be in. It doesn’t do much to tell me how to select the ones to buy. There are many stocks that pay a good dividend including MLPs. Do you look for growing earnings, growing cash flow, growing dividends or just high dividends that are supported by earnings.
It’s fine to say that it is different every time, I just have found a difficulty in differentiating the good dividend payers from the bad.
I do like your very different strategy and very similar results to Saul.
