Defined Sight

Personal Development Blog

Investment Reminder – Stay On Offense

Investment Reminder - Stay On Offense

I mentioned in a previous post that I have a tendency to be far too conservative when it comes to investing. I spent the first three years of my working life contributing to what amounted to a bond fund investment in my 401k. Talk about the opposite of what you want to do as a 22 year old! I guess it really was a mix of being conservative and not knowing what the hell I was doing.

Well fast forward to current times and I’m up to my old tricks again. No not investing in bond funds, I’ve learned from that. The crime this time is not allocating enough idle money into some good growth stocks.

The Stock Market Always Seems Expensive

Time and time again, I’ve hesitated to buy individual stocks more frequently because the market seems expensive. The Dow was expensive at 12K, at 15K, 20K……… You can see and are aware of the pattern here most likely. My inactivity proved to be costly. So while I was still plugging away indexing into the 401K, I should have had a better (more aggressive) investment strategy with individual funds. I believe that you can have a mix of index and individual stocks, it doesn’t have to be a one way street.

So here we are in 2017, the markets are at all time highs. Not exactly great conditions to combat my ‘failure to launch’ issue. My focus needs to be on the market gains 30 years from now, not 1 year from now. While I have no idea if the market will be higher at this point next year, I feel pretty comfortable saying that it will be in 2047. Probably by a substantial margin if history is any guide.

There is always something intelligent to do with our money, even during seemingly expensive markets. As Jim Cramer says, “there is always a bull market somewhere”. No matter if you like him or not, there is truth to that statement. Perhaps it is small cap funds or international investments. Doing your homework becomes even more important when attractive valuations are becoming harder and harder to find. Don’t be discouraged, just keep going!

Our Investment Plan Going Forward To Keep The Gas Pedal To The Floor

There is no stopping the 401k contributions for my wife and I. I do monitor the performance and make tweaks here and there but for the most part, autopilot mode. Those are very important allocations for the future, but really not that fun to manage. And that is attractive to some people. I like to take more of an active approach however. And thus the beauty of the side brokerage account. This will be the focus for our sidelined cash.

I view the brokerage account like my own personal mini index fund. Except it contains only the companies that I want to own. While it currently has 8-10 different businesses, my goal is to stuff it with 3-4 of the very best of breed stocks from just about every sector.

My favorite part about most of these stocks in the brokerage account? They pay juicy dividends every quarter that keep growing over time. There are few better joys in life than seeing those payments roll in just for looking pretty. Speaking of those dividends, they are all getting reinvested right back in to buy more shares. The beast must be fed!

One thing I’ve learned through the years is not to chase yield. I’ve actually grown quite fond of that 2.5-3% yield range. I will go more if they are in the energy sector however. Much like having a sweet tooth for candy, big energy is my Snickers.

I am contemplating posting dividend results and updates here. More or less to track progress and to provide motivation to myself and the readers. I do enjoy reading about the investment progress of other bloggers out there. Let me know if this is something you’d like to see.

Conclusion

As much as I enjoyed watching the 2000 Baltimore Ravens defense, they had to score some points to win the games and ultimately the Superbowl. There will be a time to play defense with our money, but that is further down the road. Since the accumulation phase is ongoing, there will be a focus on growth stocks with steady and growing dividends. I feel this will compliment our current retirement funds as they keep their steady climb.

At some point, we will flip the switch and use these dividends to bridge the gap until we can tap into those retirement funds. While we have quite a ways to go before that happens, the time to get refocused is now! Sometimes the best defense is a good offense.

Hello readers- Have you had any problems of being too conservative with your investments? How about too aggressive (speculative)?  We’d love to hear from you!

8 Comments

  1. Good food for thought here! I’ve completely avoided the dividend scene even though I know how lucrative it can be. I think it’s just a fear of not wanting to take my eye off the real estate ball, to stick with the sports metaphor. 🙂

    Nice post – and I’ll continue to give this dividend investing strategy more thought!

    • Mr Defined Sight

      October 11, 2017 at 2:38 pm

      I don’t blame you a bit for going the real estate route. I’ve seen first hand how profitable that can be from just owning and selling a house. As far as dividends go, they have proven to be a great strategy. Check out some of Professor Jeremy Siegel’s in depth writings on the historical returns. Pretty fascinating. I do own non dividend stocks as well. I like to enjoy the best of both worlds. Thanks for stopping by Mr Cubert!

  2. I know you love the oil stocks, but I have had great success in the ‘new’ energy – lithium!

    Specifically the junior miners. No dividends, but great growth prospects!

    It is just an extension of your philosophy here. I consider dividends to be defensive in nature. There is a time to switch to them fully in the future. For now, play the offense and go for the gains!

    • Mr Defined Sight

      October 12, 2017 at 11:18 am

      I probably watched to much “Dallas” as a child to develop my love for the oils. The nice thing about the big energy companies is that they can just buy whatever the newest, most profitable form of energy comes around. Exxon isn’t going anywhere for example. They’ll just buy their way into whatever space they need to be competitive.

      I would agree that dividend stocks can be defensive. AT&T comes to mind. When you pay for that high yield, you sometimes have to sacrifice growth. There are other dividend growers that give you the best of both worlds though. Take Boeing and Apple just as two examples.

  3. Great post, Mr Defined Sight!

    I really liked your point about building your own index fund in your brokerage account. I have the same approach when it comes to building my portfolio. I often look through mutual funds to find top holdings to get investing ideas.

    In regards to your questions, I would say that I’ve been overly conservative at points and picked the wrong investments. But I’ve also taken on too much risk when I was day trading crude oil ETF’s. It took time, but I think I’ve found a better balance. All in all though, I’m more of a conservative investor.

    Also, I hope you start posting your dividend income updates! Thanks for sharing! 🙂
    Graham @ Reverse The Crush recently posted…Increase Income, Save Money, and Blog BetterMy Profile

    • Mr Defined Sight

      October 12, 2017 at 4:31 pm

      Thanks Graham! Very smart on your part in regards to looking at the various index funds to get a template for your own holdings. That way you can get new ideas, choose what you like, and save the pointless fees! I bet you had some interesting day trading adventures. That stuff isn’t for me either. As much as I love stocks, I don’t care for options trading. I’d rather buy companies that I like, that are attractively valued, and keep for a long long time. Everyone is different though! Thanks for stopping by!

  4. You are a young guy and still in accumulation phase, so no need to play defense.

    There are only two places to be in energy right now and they are mid streams and refineries.

    Checkout Enbridge Inc (ENB). It’s one of my favorite energy midstream stocks and it pays a juicy 4.7% yield (subject to exchange rate) with one of the fastest growing dividends (15% increase just this year and 10% going forward). It is also less sensitive to oil prices as the majority of the revenue comes from midstream energy transportation business. It is the biggest energy transport company in North America. I have a good size position in ENB and waiting to add some more.

    My other choice on the energy side is Valero (VLO). Refineries benefit when oil prices tank or remain low as it increases there spread between crude and refined product prices. They are a good hedge for low oil/energy prices besides energy export is picking up. Dividend increases are in double digits. I own VLO and already up over 16% this year.

    On the Lithium side, I would go with an ETF approach such as LIT. Many of these Lithium miners are in South America and there are political issues which makes them too volatile for me. Therefore, I would not be buying individual miners. Besides, they are all expensive. I don’t own LIT yet, but will add if it gets cheap. Pays around 1.5% dividend and I want at least a 2% yield.

    Happy Investing,
    Mr. ATM

    • Mr Defined Sight

      October 13, 2017 at 10:17 am

      Mr. ATM, thank you for the recommendations! ENB has been on my radar although I’m not actively buying energy at the moment. I bought most of my shares when prices were down. They’ve been on a small roll lately but not looking to add more here yet. If oil where to go back down to mid 40’s, I would be tempted again to buy more. I haven’t even looked into the lithium stocks. Not my cup of tea. Thanks for stopping by!

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