Saturday, January 18, 2020

A Portfolio Which Returned Over 20% Over 5 Years

It is always nice when a portfolio makes market returns. Better still when the subject of the portfolio is a life long hobby.
A graph of a rising stock and a pile of silver coins, cash, making money in the stock market
A Rising Stock Price

This portfolio should see more growth with the ending of the trade war.

What Stocks Are In This Portfolio?

The stock portfolio which increased over 20% is full of railroads and last mile delivery services.

To take a look at the portfolio now available at M1 Finance CLICK HERE.   

 The majority of the components are North American railroads. Companies such as Kansas City Southern (KSU), Union Pacific (UNP) and as well as the major Canadian Railroad businesses. I also added United Parcel Service and Fed Ex, for that "Last mile delivery."

Despite all of the problems over trade wars, initially with Mexico and Canada then moving on to Peoples Republic of China, my railroads have done well.

A little over a decade ago I was buying CSX at $20, it now trades at over $70. Union Pacific a decade ago traded around $140, and today trades at about the same level but in the early 2010's the company split its stock 2 for 1 and traded for a while for less than $100. I bought at those levels and am still a buyer now.

This portfolio also produces a near 3% dividend yield.  Not bad for companies which were in their fast paced growth phase over 150 years ago. Loving them as I do, trains are great for the environment. They can move lots of items, trade goods, commodities and finished goods long distances for low costs and quickly.

Why do I see Railroads as the investment of the Year?

       In recent weeks we have seen the new U.S., Mexico and Canada Trade Agreement move towards ratification and the signing of the first part of a China and U.S. trade agreement.

In my opinion railroads will be major beneficiaries of these agreements.

Canadian rail companies will see movement of items such as lumber and oil to the U.S. Mexico will see continued expansion of goods such as automobiles,  That is good especially for Kansas City Southern, which has access to hubs in both the United States and Mexico.

Union Pacific is the major railroad company serving the West coast ports, with exports of food stuffs and commodities such as Soy Beans expanding to fill demand in China and a possible up tick in imports of consumer goods through the ports of San Diego, Seattle, and Long Beach profits should be secure.

Norfolk Southern and CSX should be secure too, Britain will look for more trade with the United States following Brexit at the end of January and the East coast ports should see recovery as trade with the European Union begins to grow again, following the end of the trade war with the E.U. and as Europe begins to come out of its recession, I think in the last quarter of 2020 or early 2021.

Again you can see the M1 Pie which I created at Train Sets and Last Mile.

Disclaimer: The above link is an affiliate link. If you use this link you can open an account with M1 Finance. If you do open and fund an account with M1 Finance using this link, I may receive cash or stock in kind for introducing you to the M1 Finance platform.

The material in this post is created as a statement of my own views, it is not intended to be taken as financial advice. You should discuss you financial situation with a qualified person such as your accountant, legal advisor or financial advisor.

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Wednesday, January 15, 2020

Investing For Income

Why Invest For Income?

For me. investing is all about creating cash flow and income.
If I did not receive a return on my assets without having to do more work, then I would not bother with investing.

It is all well to invest in Google, Tesla or Amazon. They may be good stocks, at least two of them are, and I do own some Google and Amazon stock.
stacks of $100 bills, cash flow from dividends can soon build wealth
Cash Flow is King

But non of these stocks pay a dividend. Did I say that I love dividends?

Well most of my portfolio is made up of stock paying a dividend some monthly, some quarterly, some every six months or so and some only pay once per year. But I love that cash flow that comes with a dividend.

I hate wondering if I need to think about selling a stock. Has it made enough money for me? Is it distorting my portfolio? Is it time to rebalance? Questions? Questions? Questions?

With a dividend stock I can buy more with a dividend re-investment plan (DRIP). I can take cash and re-distribute that cash into other stock, or I can take the cash and spend it.

Love it!

How do I choose a dividend stock?

First I look for a stock that is making a positive cash flow, and has done so over several quarters or years.

Then I look at the current yield of the stock. All dividend stocks show a yield in respect to their current share price. I like a 1.5 to 3.2 percent current yield.

You do not want to get carried away with a dividend yield. Too high can mean that a stock is too low in price, so may have other issues or it may be funding its dividend by borrowing.

The 1% to 3% area is a sweet spot. Giving a company a chance to grow its dividend and not stretching its income too much and there by giving it cash to grow its bottom line.

Most dividends are just a few cents per share, most of my stock pays in the region of 40 cents per share, but do not concern yourself with that. Buy ten shares paying 40 cents and you earn $4 or 100 shares and a dividend of $40 will be winging its way into your pocket or portfolio.  Compunding is the key here.

Lots of 1 cents make up a dividend income of $1,000 in time. I earn several thousand dollars from my income in dividends per year. Enough to make a car payment every month, or keep me in Starbucks coffee every day. But at the moment I prefer just to re-invest the cash back into more stock.

I generally do not concern myself with daily fluctuations of the stock market. If I need another $10 in a particular month I add to a stock paying in that month or one paying the $10 over the year.

As time passes you find that your dividend yield over cost is what matters, not the current yield.

For instance You buy a stock yielding 2% it increases its dividend annually, the stock price rises, but the yield on a daily basis falls. The stock you bought initially will still be paying you 2% and subsequent purchases will change your overall percentage yield over time, the stock always pays you the yield at the time of purchase. Buying over the long term and holding means that you have little bundles of stock paying 2%, 1.8%, 6%, 0.9% and so on so your yield on cost could grow.

At present I have one portfolio paying a 4.32% yield on cost where the average yield is only 2.65%. Just because some of the stock was bought back in 2008 when stock price were low and yields jumped for many stocks during the Financial Crisis.

Sunday, January 12, 2020

Investing Goals. Why Have Them?

What is Your Why?

So, when setting a goal for your investments you need to ask yourself "What is your why?"

When setting your goals it helps to know your why
Know your why and set a goal

Why do you need to ask this?

Would you leave your house on a journey before deciding where you want to go? Are you going to the store? Are you taking a trip around the world?

You need to know where you are going to, just so that you will know when you get there.

So make a plan. Set up a series of way points. So you can check your purpose and success at various times. 

I have wandered, Now I have Goals.

Ten years ago I set up a Roth IRA, It is just the thing to do when you live in the United States and plan to retire. My only plan back then was to build a portfolio that would build up my net worth. It did just that. I have a nice little portfolio. 

Then about three years ago, I noticed a problem with the income stream of my Roth IRA. I had four months of great cash flow. March, June, September and December. The other eight months were pretty poor, from several hundred dollars in the quarter months, to one or two dollars in the other months of the year.

I think this is a common problem with U.S. portfolios, so many companies that pay dividends pay out in those quarters, not many pay out in the other eight months,

What is my Why?

So I had to ask myself was I happy with the situation? The answer was no. I did not want the majority of my income coming in those quarter months. I wanted smoother cash flow.

I needed new goals.

I decided to build my dividend  income in January, February, April, May etc. to just $100 per month.

That was three years ago. I added more stock from companies that paid dividends in those months, Apple, Starbucks or Disney. 

I also added stock in monthly dividend payers, the likes of Realty Income and other real estate investment trusts and a mutual fund or two.

Of course monthly income also caused my quarterly months incomes to rise too, but my aim was not to match the quarter month income. Just to increase my income cash flow in the non quarter months.

This week-end, looking at my Roth IRA income for 2020, I see my income for those eight non quarter months is now set to be over $100 per month.

Goal Achieved!

Now I will expand my goal to make my non monthly dividend income to reach $200. 

That should not take as long. With dividend re-investment plans and new cash going into the account.

Plus I hope a little in capital gains.

Why have investing goals? Simple, for me. To help you get to place that you want to be.

Happy New Year. I wish you health, wealth and happiness.

Please share this post with your friends and family if you liked it. Thank you.

Thursday, January 9, 2020

Is it Possible to Build Your Own Annuity?

Is it possible to build your own annuity?

In short Yes  it is possible to create a portfolio that will in part mimic an annuity.

a cash generating annuity can pay regular bills
Cash From Your Own Annuity

How I would build an annuity.

How do you go about building an annuity like portfolio?

First know the aim of the annuity. Is it to pay a regular bill, a mortgage, car payment, or school fees?

When you know what the annuity is for then you can look for the stocks, mutual funds and Exchange Traded Funds that will provide you with income.

This annuity is for regular amounts of income while you live.

You can include a Life assurance policy for the cost of funeral expenses, your beneficiaries will receive the portfolio of investments after your death.

So if you are looking for a fixed amount of income, say you have a $300 per month car payment. It is easy to build a portfolio of dividend and cash paying stocks and bonds that you can use to pay either part or all of your car payment, mortgage, or school fees.

I use this method to pay for my current college fees. A class costs me $160 per semester.

I invested $50,000 over the last ten years. It pays me just over $2,000 per year in dividends.

It comes out at about $100 in January and February, $400 in March, June and the other quarter months.

I take out $600 per year for fees and textbooks. This little annuity keeps on growing too as the market grows and as dividends increase. 

Last year it grew by 18.7%, 4% Dividend growth and just under 15% stock price growth.
To read

I am also building a $10,000 Portfolio for income beginning in October 2019. To read how that is proceeding go to my blog post at Financial Independence for the Blind.

ad more about building an annuity CLICK HERE.


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Monday, January 6, 2020

Fearing a Stock Market Crash in 2020

Welcome to the Investor in 2020.

Many people today are asking if there will be a stock market crash in 2020?

Will there be a Stock Market Crash in 2020?

Every year it seems the internet is all a buzz with the question of whether there will be a stock market crash this year. I have seen these headlines in financial papers and on financial  news programs for forty years now.
Should we fear a crash in the stock market in 2020, a large bronze bull statue on Wall Street, close to the New York Stock exchange
Bull or Bear in 2020?

The answer is a simple, no-one knows for certain. 

Last year   the markets went up, by around 30%. My own accounts went up between 25% and 14.8%. The 25% rise was in a single mutual fund stock portfolio which I had invested a large amount of cash on December 24, 2018, so hitting the market on it's lowest day of 2018. Gaining a large bounce in the first two months of 2019, over 12% in those first two months alone.

My 14.8% rise was in my long term holding Roth IRA. There are a lot of long term stock holdings in that account so they have had a long time to rise over the last 12 years since I opened the account.  Overall my long term return since 2007 is 133% overall.

Personally I say not too fear a stock market crash in 2020, here are my reasons why:

  •  Your time horizon for investing should be a long period. At least ten years for me.
  • Crashes in the stock market are relatively rare.
  • Crashes, corrections and dips in the market are good times to increase ones portfolio.
  • Fear feeds fear, sometimes fear of a crash may cause a crash or correction for no reason. Thereby creating potentially profitable periods.
  • Volatility in the stock market is normal. Creating potential profits.
  • Being a contrarian, people showing fear tells me that there is still not an overall feeling of euphoria, which can actually portain a period of downward pressure on the stock market
I do not say to ignore the fear.

Acknowledge the possibility of a downturn in the markets. But maintain a level head.

  • Buy stock in companies which make a positive cash flow and make profits.
  • I like to take a dividend stock over a loss making growth stock.
  • When in doubt, consider an Exchange Traded Fund or Low Cost Mutual Fund.
  • Create a strategy, make yourself flexible and modify the plan and strategy to the circumstances.
  • Never invest money that you will need this week or this year.

Read More advice CLICK HERE.

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