FISH | Financial Independence Seeking Happiness: Dividends

Spendthrift Or Save Bore

Contender 2 Budget, Dividends, frugality, Habits, Happiness 20:47

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<tr><td class="tr-caption" style="text-align: center;">Corfe Castle - A bad investment?</td></tr>
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<h2>
Bad advice on Spending, Saving and Investing</h2>
I have been reading a few posts recently going along the lines: 
 
1. If you have a dividend stock portfolio you need 3 years in cash to cover the ups and downs - why? 
2. The classic: draw down 4% a year of your portfolio and you will be fine - always? 
3. Index funds have always done the job (Warren Buffet has just said so) - aren't they fairly new in the scheme of things? 
4. Live in a trailer on the street next to your job (or work for Google and live in the car park) and save $$$$$$ - sounds cosy! 
5. Invest in non ethical ventures such as ATM machines, pay day loans etc. - "If I don't provide the service someone else will" - what is the real cost? 
 
Ideas and advice are easy to give out (yours included) however this practise can be either misplaced irresponsible or downright dangerous. Getting something that REALLY WORKS requires the individual to take control and responsibility for their decisions. Mindlessly following can be leading oneself straight off the cliff. 
 
What if you follow the passive investing approach in a country with a collapsing financial system? What if your money is tied up and you cant get hold of it when you really need it? What if it is the wrong time to sell the investment? Have you REALLY diversified? 
 
Just because certain investments have worked out well over the last 60 years why should they continue to do so? Yes they have opened door to early retirement to more people than ever but is this just an aberration? I believe it is worthwhile asking these difficult questions in order not to mislead FI seekers. 
 
For instance just look at the financial repression we are under. Interest rates at 1% anyone? Who would have thought that and how much would you need in an annuity to live off at that rate of return? No wonder a record number of people are having to postpone retirement. 
 
To be sure of early retirement what is really needed is a rock solid diversification - more saved at a lower return. secondly it needs to provide you a lot more income than you spend so you can continue to save.* 
<h2>
Spend and Save </h2>
Today lets have a look at what really drives peoples ability to be FI - their self control over spending, saving, personal expectations and desires.. 
 
In particular what HAS to be spent and what NEEDS to be spent to be HAPPY. Why save everything to be FI and be miserable - absolutely pointless - have a re-think of your goals. 
 
Likewise if you have a desire to spend, spend, spend to be happy :) this is not the blog for you check out the Hiltons and Beckhams. 
 
Saving has been portrayed as boring, missing out, repressive. 
 
Saving is generally hard to do in large amounts - consider the challenge to save $100 per month compared to how easy it is to spend $1000 on a credit card. 
 
It really is a mind game - small amounts snowball, over time compound interest generates wealth. Unfortunately saving too slowly that happy time for (rest, personal pursuits and personal work choice) will be a long way off. 
 
Something has to give. 
<h2>
How much should I spend to not be a misery guts?</h2>
It is easy to really hack your spending. Several posts on this site have covered the steps our TRiBe 
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<tr><td class="tr-caption" style="text-align: center;">Worth Visiting</td></tr>
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has taken to annihilate our WASTEFUL spending in a way that did not detrimentally affect our comfort and happiness. 
<ol>
<li>Transport - Simple - buying a car that is too big or too fuel in-efficient does not make sense. You just need to get from A-B. Why do it expensively? At the end of they day you might as well take the notes from your pocket and set fire to them - a massive waste of resources for you and the nation.</li>
<li>Heating - going freezing cold is probably a bad idea and likewise being too hot is a waste (see transport). Spending loads of money on a fossil fuel means you are reliant on someone else providing it. Perhaps you should invest your hard-earned money in changing the fossil-fuel heating to wood (or a heat pump for instance) and insulating your home. Again what is too much? 10% of your income spent on heating/ cooling is probably fine so forget about it and move on. </li>
<li>Food - going cheap probably = poor diet and = future health costs > buy fresh food and don't waste food. </li>
<li>Fun Pot - Upgrading a gadget, a coffee, beer or cake or visit to the zoo- make sure there is a % of your income to LIVE in THE.PReSeNT - that is our happy time - NOW.</li>
</ol>
<h2>
How much should I save to gain my freedom?</h2>
<ol>
<li>Too much - you will not have much of a life - scrimping and saving at a time when you are in the prime of your life. That proverbial bus with your name on it could be around the corner. What about finding that perfect partner, travelling and experiencing different cultures. Invest in expanding your knowledge and learning lots of new things who knows where it will take you (literally).</li>
<li>Do not forgo Ambition - Don't be afraid to take financial risks when you are young. At a young age the amounts involved are likely to be trivial (put things in perspective what is $10K lost on a business compared to the opportunity of $$$$ when you are young and have nothing to really loose except face? Go on and take a risk on a better job, don't be afraid to move to a different country, have a go at starting your own business. Be fearless. Soon you will have a substantial income instead of a mediocre income to save substantial sums.</li>
<li>Start Cash Flow Investing as soon as possible. Try starting with readily available assets such as rental / commercial property, REITS or dividend stocks where small amounts of money can be easily deployed. Alternatively invest in YOU perhaps some training or equipment that you can use to gain money e.g. an embossing machine, lawnmower for a gardening business, programming course etc.</li>
<li>Saving can mean other things as well such as</li>
<ol>
<li>Reductions: always asking for a discounts and deals, surf the net for discount codes</li>
<li>Choose not to incur an expense: can I walk,and have a meal and movie at home instead of cinema. Lots of little compromises really add up - think before you spend or sign up for any contract.</li>
</ol>
</ol>
<h3>
A reasonable budget for a FI enthusiast?</h3>
<ul>
<li>Food (10%)</li>
<li>Transport (5%)</li>
<li>Utilities (5%)</li>
<li>Mortgage (30%)</li>
<li>Other (5%) - fun stuff and unexpected costs</li>
<li>Savings (35%)</li>
</ul>
Why not pull together your spending and group them into categories and percentages. Do they seem reasonable to you? Are you missing out on something? If I moves some spending from A>B will i be happier or will i reach my goals earlier? 
<ul>
</ul>
<h2>
When have I saved enough?</h2>
In the TRiBeS experience what we thought we needed versus what we actually need are VERY difficult to reconcile. What will you new life look like and how much will it cost? 
 
I guess the question for us was how much can we continue to save once we have stopped working. It would be idiotic to retire on just enough. Shit happens all the time in the world. A safety buffer is always needed and is very sensible. 
 
For example we have seen some of our dividend income reduce due to the commodity crash. It will return in THE.FuTuRe but now we have less money coming in. Perhaps commodities could reverse and inflation will begin to outstrip our income for a while or taxes rise faster than our ability to pay them - who really knows? 
 
Our pre-financial independence saving rate was North of 50% (of a large corporate salary). Now we are aiming at saving 20% of a substantially smaller income. 
 
Additionally we are putting aside a further 20% of our income for "fun stuff". Our kids need experiences to grow, mindlessly penny pinching would be at the detriment to their futures. We need to arrange trips to interesting and fun places and plan challenging activities for them. 
<h2>
Making the right personal choices </h2>
So there you have it the pursuit of financial independence and happiness on the opinion of this author is REALLY about gaining personal wisdom.  
 
This mainly takes the form of financial (tracking your finances and making informed, thoughtful, good decisions) and emotional intelligence (growing up and learning to be being responsible, not panicking and jumping to conclusions). 
 
Wisdom is knowing, not being told or shown, what makes you happy - are we there yet? 
 
Peace, prosperity and happiness 
 
CoNTeNDeR 
 
*The alternative is becoming very good at following capital across the 
globe. You would need the ability to move capital from country to 
country and between asset classes - not easy to time or identify where 
it will go next and well beyond a person with average means. 
 
Welcome New Readers! Please take a look around.<a href="http://getintheringwithme.blogspot.com/p/about-me.html" target="_blank">Click here</a> to find out more about THE.TriBe and the blog is or perhaps browse the <a href="http://getintheringwithme.blogspot.com/p/all-posts-get-in-ring.html" target="_blank">all posts list</a>, Please feel free to play with the <a href="http://getintheringwithme.blogspot.com/p/muff-tools-and-check-lists.html" target="_blank">planning tools and checklists</a>. If you liked this post can you please spare a few seconds to share it?

Spendthrift Or Save Bore

Corfe Castle - A bad investment? Bad advice on Spending, Saving and Investing I have been reading a few posts recently going along the...

Madness of Housing

Contender 1 Budget, Compound Interest, Dividends, downshifting, Gold, Investing, Mortgage 21:41

<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-P65TtbALi_M/U98z4qkN3fI/AAAAAAAADV0/VMHcj65ioFM/s1600/Allocation.PNG" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img alt="Plan your finances over a lifetime" border="0" height="195" src="http://4.bp.blogspot.com/-P65TtbALi_M/U98z4qkN3fI/AAAAAAAADV0/VMHcj65ioFM/s1600/Allocation.PNG" title="Financial Independence Timeline Planner" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">How much should we allocate to housing? - Evaluation with the Financial Independence Timeline Planner</td></tr>
</tbody></table>
<ul>
</ul>
 
 
 
 
 
 
 
 
 
 
 
<ul>
<li>Buy or rent your way to financial independence - a tricky choice</li>
<li>Why we rented for so long and why we are now settling down</li>
<li>Creating an asset allocation plan</li>
<li>What does this mean to our asset allocation </li>
<li> What would we ultimately like our asset allocation to look like</li>
<li>What about your dream - have a play with the updated Financial Timeline Planner</li>
</ul>
<h2>
Why is housing so expensive?</h2>
<table cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-gKrMl_4BEvo/U96FASff0YI/AAAAAAAADVk/qaZp7ALeGi4/s1600/P1030980.JPG" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img alt="Will it cost the earth" border="0" height="240" src="http://2.bp.blogspot.com/-gKrMl_4BEvo/U96FASff0YI/AAAAAAAADVk/qaZp7ALeGi4/s1600/P1030980.JPG" title="A Dream Home?" width="320" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Your Dream Home? - Maison de Graves, Podensac France</td></tr>
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Housing has been touched upon several times on this blog as it is a very emotive subject. Most likely it will be the biggest purchase and decision you will ever have. Just to make it difficult there is almost infinite choice combined with personal circumstances, desires and needs. 
 
<a class="titlex" href="http://getintheringwithme.blogspot.fr/2013/10/french-living-quelle-difference.html">French Living – Quelle Difference?</a> 
<a class="titlex" href="http://getintheringwithme.blogspot.fr/2012/08/round-5-157s-mortgage-or-rent-and-save.html">Early Retirement with a Mortgage?</a> 
<a class="titlex" href="http://getintheringwithme.blogspot.fr/2013/06/you-cant-take-it-with-you.html">You Can't Take It With You</a> 
<a class="titlex" href="http://getintheringwithme.blogspot.fr/2013/12/maintaining-wealth-ii-we-are-all.html">Maintaining Wealth II - We are all Investors Now</a>   
 
As for the Tribe our choice has been sitting on the fence saving all these years. Or last rental property 
was a three bed terraced house in London paying £1,400 per month for the privilege. 
taking the 25 times rule for the value of the property we come to a value of £420,000 ($700,0000) 
 
This house is now selling for £650,000 a 50% premium to the rental income - go figure. 
 
Now a a normal mortgage of 3.5X combined salary £650,000/3.5 = £185,000 annual household income. You need to be in (at least) the top ten percent of earners to afford this in the UK: 
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<a href="http://static.guim.co.uk/sys-images/Money/Pix/gallery/2014/3/25/1395752138824/income-figures-treasury-009.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="" border="0" height="240" src="http://static.guim.co.uk/sys-images/Money/Pix/gallery/2014/3/25/1395752138824/income-figures-treasury-009.jpg" title="UK Income Deciles from HMRC" width="400" /></a></div>
Clearly a comfortable Financial Independence in a large city is a costly affair nowadays. 
<blockquote class="tr_bq">
The rule, “thou shalt not spend more than 30% of thy after tax income on
 housing,” has become impossible for the average person. I think we are 
becoming a “mac n cheese” nation. If the squeeze continues on the middle
 and lower classes, I'm afraid we are going to see a revolt of the 
masses. I'm also afraid that we will see blood in the streets. As a 
result the safest place to be will be on a small farm away from large 
populations. - Richard Russel </blockquote>
Should we have spent more than 30% of our net worth on what we considered expensive property - NO 
<h2>
What are we doing?</h2>
Our TRiBe decided we needed to live somewhere cheaper (south of France) where we have been renting for the past year whilst we have looked to finally buy. After a lot of searching around we have purchased a renovation project. Here is why: 
<ol>
<li>In our early years we moved around with work so buying a home at that time was not appropriate. Stamp duty adds up with multiple purchases. The paying off of university and car debt whilst building of savings (for some reason that felt right at the time) were prioritised.  </li>
<li>Renting allowed us to super charge our savings rate due to the following</li>
<ol>
<li>No renovation costs</li>
<li>Rent was lower than the interest ONLY payments on a similar mortgage </li>
<li>No buildings insurance</li>
<li>"Deposit" and "Stamp Duty" invested instead of "Spent"</li>
<li>Freedom to rightsize and right locate the property as our family grew in size and jobs changed <div style="text-align: center;">
 High property prices in the city meant than an interest only mortgage on a property was more expensive than renting  </div>
</li>
</ol>
<li>Our goal has been to gain financial independence through living frugally. We now live in an area where it makes sense to buy because of the following: </li>
<ol>
<li>Rents are higher than a mortgage</li>
<li>Owning the property outright eliminates interest rate issues and rental price increases</li>
<li>We do not need or want to be mobile - we are happy where we live and have a very good school for our children</li>
<li>We are able to buy some land (and water rights) with the property to grow some of our own food. We have the possibility to raise a small cash crop.</li>
<li>It is in a warm climate so heating costs can be brought down through solar installations and good insulation. </li>
<li>We are "giving up / diversifying assets" some income generating assets for a "family home" and "overall lower living costs". We believe this makes us more Anti-fragile (See book by Nicolas Taleb) <div style="text-align: center;">
We can currently reduce our current living costs through owing our property (at the expense of investment income). We are settling for less income but a more varied asset allocation.</div>
</li>
</ol>
</ol>
<h2>
How much should you allocate to housing or just rent?</h2>
My takeaway from 37 years without owning a property (admittedly some of those were in diapers) is that you need to really understand what will suit you and your family at that point in TIME. Just search for asset allocation on the web and you will be told this way or that way is best such as: 
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<tr><td class="tr-caption" style="text-align: center;">Example from <a href="http://www.marketwatch.com/story/a-portfolio-for-all-seasons-2013-07-19" target="_blank">MarketWatch</a></td><td class="tr-caption" style="text-align: center;"> </td><td class="tr-caption" style="text-align: center;"> </td></tr>
</tbody></table>
What is REALLY best is being in the right asset at the right time whilst hedging risk. 
 
DIVERSIFY and PRIORITISE/GAMBLE. If only it was that easy and we knew what The.FuTuRe was up to! Unfortunately we cannot all be a Warren Buffet or a Geroge Soros but what we can do is make sure we are knowledgeable, why we are accumulating it and the associated risks. 
 
A well researched strategy, a good set of rules that you adhere to (such as stop losses and booking gains) and try at all times not to become attached or emotional about investment will go some way to being successful.  
<h2>
Our asset allocation</h2>
<h3 style="text-align: center;">
Before the purchase of the property</h3>
Income Portfolio (29%)   -  Dividend Value Growth Stocks to pay for living costs 
Growth Portfolio (9%)     -  High growth hence risky investments 
Protect Portfolio (26%)    -  Cash and Commodities 
Pensions - Final salary (36%) - Cannot touch until 55 years old (allocation too high)!!! 
<div style="text-align: left;">
 </div>
<div style="text-align: left;">
To put some perspective on this we are living frugally (with 2 kids!) Our current living costs are £1,500 per month (£540 of which is rent). Our estimated living costs after property purchase £1,050 per month (higher costs for insurance of the property and taxes etc.) and we want to reduce this further. 
 
On the flip side we would be better off income wise but worse off diversified by carrying on renting</div>
<h3 style="text-align: center;">
 
After Home Sweet Home purchase</h3>
Income Portfolio (24%)   -  Dividend Value Growth Stocks to pay for living costs 
Growth Portfolio (2%)     -  High growth hence risky investments 
Protect Portfolio (6%)    -  Cash and Commodities 
Pensions - Final salary (36%) - Too high and cannot touch! 
Property / Miscellaneous stuff (32%) - All cost but significant possibility of capital appreciation 
 
...... The pensions are in the stock market and could be considered part growth and income with some fixed income bonds. Ultimately we are aiming for our investment portfolio to mimic the Permanent Portfolio outlined by Harry Browne - 25% Cash, 25% Bonds, 25% Stocks and 25% Commodities so will be focusing on re-building our cash position after the house is done. 
<h2>
Dream </h2>
What would you like to own and when, how do you see The.FuTuRe settled in one place or moving about. Do you want to own a house or your own business..... Will this give you a framework for a goal / challenge and perhaps a straw man plan. These dreams are your long term goal. The are the basis for your final and current personal asset allocation. Work backwards from your goal to work out how to get there. 
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://sites.google.com/site/lifeplanltd/home/TimeLine_Financial_Permanent.xls?attredirects=0&d=1" style="margin-left: auto; margin-right: auto;" target="_blank"><img alt="Click Here To Download" border="0" height="122" src="http://4.bp.blogspot.com/-P65TtbALi_M/U98z4qkN3fI/AAAAAAAADV0/VMHcj65ioFM/s1600/Allocation.PNG" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><a href="https://sites.google.com/site/lifeplanltd/home/TimeLine_Financial_Permanent.xls?attredirects=0&d=1" target="_blank">Click Here to Download the Financial Independence Timeline Planner</a></td></tr>
</tbody></table>
 
Peace, prosperity and happiness 
 
CoNTeNDeR 
 
Welcome New Readers! Please take a look around.<a href="http://getintheringwithme.blogspot.com/p/about-me.html" target="_blank">Click here</a> to find out more about THE.TriBe and the blog is or perhaps browse the <a href="http://getintheringwithme.blogspot.com/p/all-posts-get-in-ring.html" target="_blank">all posts list</a>, Please feel free to play with the <a href="http://getintheringwithme.blogspot.com/p/muff-tools-and-check-lists.html" target="_blank">planning tools and checklists</a>. If you liked this post can you please spare a few seconds to share it?

Madness of Housing

How much should we allocate to housing? - Evaluation with the Financial Independence Timeline Planner Buy or rent your way...

Defensive Investing

Contender 0 Critical Thinking, Dividends, downshifting, financial independence, frugality, Planning, Saving 17:41

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</div>
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<tr><td style="text-align: center;"><a href="http://1.bp.blogspot.com/-xqIQyPGOqT8/U4DWjIJEESI/AAAAAAAADPE/oXvAb1KEkVs/s1600/DVGI.PNG" imageanchor="1" style="clear: left; margin-bottom: 1em; margin-left: auto; margin-right: auto;"><img border="0" height="181" src="http://1.bp.blogspot.com/-xqIQyPGOqT8/U4DWjIJEESI/AAAAAAAADPE/oXvAb1KEkVs/s1600/DVGI.PNG" width="320"></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Everyone needs a system to select shares</td></tr>
</tbody></table>
In this post I am going to talk about  investment timing decisions in particular: 
 
1. A new financial independence striver   
2. Someone who has already amassed significant investments   
3. Changes to the TRiBeS investment approach   
4. The latest DVGI (Dividend Value Growth Investments) screener results for the UK and US (at the end of the post) 
  
<ul>
<li>No one can accurately predict THE.FuTuRe</li>
<li>Human beings are emotional and sometimes delusional</li>
<li>Timing is important </li>
</ul>
So what is the link between these statements and financial independence planning? Well over the past five years the stock market has done very well. At the same time THE.PaST tells us it corrects around every 5 - 8 years. Does it continue to rise over the next few years or do we get a correction. There are numerous opinions out there on the web. 
 
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<tr><td style="text-align: center;"><a href="http://dshort.com/inflation/inflation-recessions-sp500.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="290" src="http://dshort.com/inflation/inflation-recessions-sp500.gif" width="400"></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">source: dshort.com</td></tr>
</tbody></table>
But this time is different right? There is no need to be cautios as the Fed has our backs covered. So go ahead and go all in now. 
 
Hold on a second....If you are starting to invest in the stock market at this juncture is this wise? 
 
If you are fully invested and enjoyed the good run should you be cautious and check out some of your chips? 
 
Or are you confident of further gains and are adding to your positions? 
 
Here is a quote from a seasoned trader Dan Norcini on holding onto a loosing position which I think is pertinent if you flip it on its head and consider it from a winning position as well: 
<blockquote class="tr_bq">
"They may pride themselves and 
encourage their followers to, "Stay the course". That is great if you 
are a sailor on the ocean and are being buffeted by some high waves and 
gusty winds but at some point the winds and the waves will force even 
the most stalwart of mariners to take a detour out of their way if they 
wish to avoid getting slammed into the rocks or going down. It is called
 "prudence". 
    
 Those who "stay the course" and keep
 pushing ahead out of sheer stubbornness often pay the price with their 
lives. Same goes for trading or investing - at some point one has to 
"take a detour" to skirt the danger so as to arrive safely at the final 
destination. 
    
 Spitting into the eye of a hurricane
 just gets your face wet and does nothing to force the hurricane to 
change directions. It is going to go wherever the hell it wants to go 
and it could care less what you want. This is how markets are - they go 
where they want, when they want. If you are smart, you learn to either 
go with them or get out of the way" 
 
<a href="http://traderdannorcini.blogspot.fr/2014/05/euro-weakness-remains.html" target="_blank">Trader Dan Norcini</a></blockquote>
 
Time to sell growth and cyclical stocks? 
 
Are we now in a position with the markets we we could be lured into the trap outlined by Dan above. Could the market change direction and we hold on for dear life waiting for the tide to change. 
 
I have first hand experience of working on a cyclical business - semi conductors. A new super chip would be designed the factories built then the chip sold for the next few years until the next super chip is designed and the whole cycle starts again. The business knew this happened therefore it set itself up for, and planned ahead, for these cycles. It did this through sub contracting, temporary contracts and stock management. 
 
Coming back to point can we manage our investments in this manner or are we doomed to failure? Are we doomed to re-produce past mistakes such as the Tech Bubble. 
 
Growth stocks have been back in vogue and are trading at very high price to earnings ratios. Well known names such as Facebook, Amazon, Twitter have soared based on future growth and revenue expectations / forecast. Are they really going to deliver unlike the companies in the last Tech bubble? Should we downsize our investments now? 
 
Lets consider some different circumstances:

Defensive Investing

Everyone needs a system to select shares In this post I am going to talk about investment timing decisions in particular: 1. A new...

Financial Independence through Dividend Value Stock Investing

Contender 4 #financialindependence, Compound Interest, Dividends, downshifting, DRIP, Finance, financial independence, Inflation, Investing, Schiller PE10, stock screen 07:35

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<a href="http://1.bp.blogspot.com/-bG9sVWwZteo/UpsEz-bQlNI/AAAAAAAADDg/cqhiNCjLCVI/s1600/InvestmentChoice.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="216" src="http://1.bp.blogspot.com/-bG9sVWwZteo/UpsEz-bQlNI/AAAAAAAADDg/cqhiNCjLCVI/s1600/InvestmentChoice.png" width="320"></a></div>
#FinancialIndependence requires setting up multiple income streams to replace your income from your labour. 
 
#Downshifting may mean that you still work but rely on a smaller income from some work and possibly some investments. 
 
Today the focus is on dividend value stock investing to provide a passive income. 
 
Buying shares in a company has several advantages 
 
1. You have access to many companies in many different businesses 
2. Companies can grow their earnings and dividends rapidly 
3. Companies can be out of favour and cheap to buy 
4. Companies are strictly regulated and lots of information is available about them 
5. Companies can have a competitive advantage \ high barriers to entry 
<div style="text-align: center;">
<blockquote class="tr_bq">
"One of the biggest mistakes investors make 
is to focus on stock picking for 
capital gains. 
 
The reality is that if you're not looking at 
 
dividends when you buy a company... you're 
likely not going to make much 
AT ALL. 
 
Did you know that without dividends, stocks 
have actually 
UNDERPERFORMED bonds 
for the last 113 years? 
 
This is not hype, a 
study by the London Business 
School found that without dividends, stocks 
return 
a measly 1.9% per year... LESS than Treasuries!" Gains, Pains and Capital</blockquote>
</div>
To help identify companies that are of interest to invest in  I have been spending some time massively improving the stock screening tool  to find some cheap #dividend stocks out there. Here is a look at the new screen (The UK all share list as of the 6th April is available towards the end of the post): 
 
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://4.bp.blogspot.com/-fknRAl-mKIs/U0GmFuePKwI/AAAAAAAADKY/HKWEUpF0tgk/s1600/10YrScreen.JPG" style="margin-left: auto; margin-right: auto;"><img border="0" height="198" src="https://4.bp.blogspot.com/-fknRAl-mKIs/U0GmFuePKwI/AAAAAAAADKY/HKWEUpF0tgk/s1600/10YrScreen.JPG" width="640"></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Sample from a stock screener created with 10 years worth of data</td></tr>
</tbody></table>
It has been made very visual with its colour coded formatting. 10 years worth of financial data is used for graphs and calculations. More of the major indices have been added. It has been made easier to use. Easy to personalise with your own portfolio of stocks. Backed by a large powerful data set and statistical data analysis. 
<ul>
<a href="http://3.bp.blogspot.com/-015Syx6eRSc/U0GvCif2E9I/AAAAAAAADLA/tOvZUhgXZ-U/s1600/PG.JPG" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="140" src="http://3.bp.blogspot.com/-015Syx6eRSc/U0GvCif2E9I/AAAAAAAADLA/tOvZUhgXZ-U/s1600/PG.JPG" width="320"></a>
<li>Contains major market data (US, UK, EU) </li>
<li>Current data can be evaluated on the fly for the Value Screener and Dividend Value Screener by clicking the magic button</li>
<li>Stocks can be interrogated individually with 10 years worth of data in the graphical evaluation tool</li>
<li>10 years of financial performance is used to create the 10yr Value Dividend Screener to check the quality of the stock - has it made a regular growing profit and paid a regular increasing dividend?</li>
<li>"My Portfolio" can be setup to show the screener results for your stocks <table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: right; margin-left: 1em; text-align: right;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-veTsh8oYouc/U0Gn0Be_9KI/AAAAAAAADKs/NNmn74wV3pw/s1600/Portfolio.JPG" style="margin-left: auto; margin-right: auto;"><img border="0" height="116" src="http://2.bp.blogspot.com/-veTsh8oYouc/U0Gn0Be_9KI/AAAAAAAADKs/NNmn74wV3pw/s1600/Portfolio.JPG" width="320"></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"> </td></tr>
</tbody></table>
</li>
</ul>
<div style="text-align: center;">
<blockquote class="tr_bq">
<a href="http://1.bp.blogspot.com/-yiVVmxlWgbk/UoD61sptWiI/AAAAAAAAC7g/QGkoCllmaow/s1600/ValueStocks.JPG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a>Markets no longer perform true market functions. In markets today, the dead hands of the academic and the rentier have replaced the invisible hand of the merchant or the entrepreneur. James Rickards  </blockquote>
</div>
Why Look at History 
 
The Value Stock Screener and Dividend Value Stock Screener allow the user to click a magic button to download the latest data from the web. The tool then allows individual stock evaluation. The screen looks for undervalued stocks based on the methodology of "The Little Book That Beats the Market". 
 
1. Stocks with a very high Return on Capital - are they a well run business? 
2. Stocks with  high earnings yield (i.e low PE) are they currently cheap 
 
Why a spreadsheet - there are loads of options on the web? So why use this tool instead of one of the numerous screeners out there? Well in my opinion spreadsheets are more personal with the data, you can add your own comments and keep them for reference. Websites have flexibility in the type of graphs and how the data is shown on the screen.  
 
This is great at looking at THE.PReSeNT but this is not the full picture. The stock may be cheap for a very good reason and can get cheaper. 
 
In order to avoid this trap further research is required. 
 
One part of the research is looking at THE.PaST and secondly can we be confident about THE.FuTuRe performance? How good is the stock really? Is the company solid, has solid earnings growth and good dividend cover? This needed to be added. 
 
Introducing 10 Year Dividend Value Screening 
 
Dividend champion investing is not new and numerous lists of stocks that have consistent dividend growth can be found across the web. What is more difficult to attain is weather you are paying too much for a champion share? 
 
<div style="text-align: center;">
We need to gain in capital and dividends overtime. That way buying lowly valued stocks that become expensive can be sold and re-invested to gain MORE income. </div>
 
 
The new screener has the ability to analyse 10 years worth of financial data for selected Markets (NASDAQ, NYSE, DJIA FTSE 100, FTSE 250, DAX, EURSTOX50). 
 
 Its purpose is to ask the following questions: 
<ol>
<li>Is the current PE ratio expensive for the share in comparison to its historical PE10 (10 year average PE      PE10 = 10 year average share price / 10 years average EPS </li>
<li>Is the company growing its EPS (Earnings per share) consistently?      What is the average EPS growth rate over 10 years?      How many years has the company made a profit?</li>
<li>Is the company growing its dividend?     What is the average dividend growth rate over 10 years?     How many years has a dividend been paid?</li>
<li>How much debt does the company currently have?</li>
<li>What overall score is the company on Quality, Income and Value? </li>
</ol>
All of this information is used to create a score and rank versus other companies. 
<ol></ol>
10yr Data Screen Benefits 
 
The screen can be looked at stand alone via Google spreadsheets however the excel spreadsheet has some distinct advantages 
<ol>
<a href="http://3.bp.blogspot.com/-015Syx6eRSc/U0GvCif2E9I/AAAAAAAADK8/rQszfF5Mk24/s1600/PG.JPG" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"></a>
<li>Enter your portfolio and watch stocks to see what the screen results are. Here is a screen shot with some well known companies:<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="http://2.bp.blogspot.com/-veTsh8oYouc/U0Gn0Be_9KI/AAAAAAAADKs/NNmn74wV3pw/s1600/Portfolio.JPG" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="235" src="http://2.bp.blogspot.com/-veTsh8oYouc/U0Gn0Be_9KI/AAAAAAAADKs/NNmn74wV3pw/s1600/Portfolio.JPG" width="640"></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">A manually entered portfolio showing 10YR data quality results and current value result</td></tr>
</tbody></table>
</li>
<li>Query the data by bringing up a graphical interface. Here is a screenshot of Proctor and Gamble: <a href="http://3.bp.blogspot.com/-015Syx6eRSc/U0GvCif2E9I/AAAAAAAADK8/rQszfF5Mk24/s1600/PG.JPG" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="281" src="http://3.bp.blogspot.com/-015Syx6eRSc/U0GvCif2E9I/AAAAAAAADK8/rQszfF5Mk24/s1600/PG.JPG" width="640"></a></li>
<li>Record reasons for investing in the stock in the spreadsheet for future use <div class="separator" style="clear: both; text-align: center;">
<a href="http://3.bp.blogspot.com/--qqO3cwCODY/U0GwZg6_wzI/AAAAAAAADLI/If2C8tZVasg/s1600/Comment.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="42" src="http://3.bp.blogspot.com/--qqO3cwCODY/U0GwZg6_wzI/AAAAAAAADLI/If2C8tZVasg/s1600/Comment.JPG" width="640"></a></div>
</li>
</ol>
<ul>
</ul>
Please read on for the 10 Yr Data Screen for the United Kingdoms FTSE All Share index (Yahoo! ^FTAS):

Financial Independence through Dividend Value Stock Investing

#FinancialIndependence requires setting up multiple income streams to replace your income from your labour. #Downshifting may mean that...

Learning from THE.PaST

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Learning from THE.PaST

A cold start to the year? THE.FuTuRe : "CHUMP you still there? Learn from me and THE.NoW forget THE.PaST he is a has been, now l...

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The Ride of a Lifetime

Our Fire - A warm fuzzy feeling what about 2013? *CHUMP - Fool, loser, muppet, victim of THE.FuTuRe, loner, weirdo, odd, strange, picked...

Maintaining Wealth II - We are all Investors Now

Contender 0 Black Swan, Critical Thinking, Dividends, Finance, Financial Armageddon, Gold, Inflation, Investing, Saving 16:03

<a href="http://3.bp.blogspot.com/-bG9sVWwZteo/UpsEz-bQlNI/AAAAAAAADDc/swNrFYBwmhY/s1600/InvestmentChoice.png" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="216" src="http://3.bp.blogspot.com/-bG9sVWwZteo/UpsEz-bQlNI/AAAAAAAADDc/swNrFYBwmhY/s320/InvestmentChoice.png" width="320"></a> 
TiMe: "Dring, Dring, TiMe to wake up sheeple" 
 
THE.FuTuRE: "Shussssh! They are sleep walking towards a cliff. We are providing wonderful <strike>distractions</strike> entertainment for them. Just look at all of their happy faces. Everything is great. There is no need to think just enjoy! Until I am ready to claim my pound of flesh MurrrGH HA HA HA" 
 
CoNTeNDeR: "Oi you evil B****** we the people will not stand for your bull****. We are waking up in our droves, turning off the entertainment and thinking about what you are up to. Financial freedom from your tyranny.  We are  lemmings no more and are turning away from the cliff - watch out below FuTuRE" 
 
In <a href="http://getintheringwithme.blogspot.com/2013/12/maintaining-wealth-i-bitcoins-and-real.html" target="_blank">Part 1</a> of this post we had a look at Paper Money, E-currency, Commodities, Real Estate and bonds. Today we are looking at Stocks, Land and investing in oneself as additional wealth preservation options worth considering. 
 
Stocks - Growing Profits? 
 
What
 value can you give to a company, let alone picking the winners in the 
stock market? This issue has flummoxed investors for years. 
 
Owning
 part of a company gives you an interest in that company's profits. 
Provided the profits keep rolling in due to a competitive advantage, the
 company should have some longevity. 
 
Perhaps looking 
for companies that have a distinct brand, product or advantage such as 
extremely difficult barrier to entry are the place to be. Those 
companies will grow in value along with their sales and / or return some
 of that profit back to shareholders through buybacks or dividends. 
 
Companies generate wealth - can you pick the right ones? THE.ConTeNDeR is trying see the <a href="http://getintheringwithme.blogspot.fr/2013/11/screener-for-value-and-dividend-stocks.html">Screener for Value and Dividend Stocks Here</a> 
 
For a seasoned professionals take on stocks for the long term, check out some articles by <a href="http://www.investmentu.com/2013/October/a-near-perfect-portfolio.html" target="_blank">Alex green from InvestmentU</a> and I am a fan of his book <a href="http://www.amazon.co.uk/gp/product/0470598204/ref=as_li_qf_sp_asin_tl?ie=UTF8&camp=1634&creative=6738&creativeASIN=0470598204&linkCode=as2&tag=thecontfinain-21" id="static_txt_preview" target="_blank">The Secret of Shelter Island: Money and What Matters</a> 
Warren Buffet even has a <a href="http://www.ivillage.com/warren-buffett-teaches-money-lessons-kids-cartoon/6-a-533797" target="_blank">cartoon series for kids on investing</a>. 
 
Tribe's opinion - Stocks allow the building of a diversified set of businesses. If stocks were not available it would probably be difficult to invest in diverse ideas such as graphene, new drugs and technology companies such as Google. Core holding. 
 
Arable Land 
 
An interesting investment class in THE.CoNTeNDeR's
 opinion. Precious renewable resources can be harvested from arable land
 year after year making it a very profitable investment class.  
 
Invest
 in woodland and you get free winter fuel and can sell the excess. 
Farmland can be planted for delicious fresh vegetables to be sold down 
the market. 
 
THE.ConTeNDeR likes the idea of some
 arable land next to his house. From a purely financial independence 
perspective 'free' heating, vegetables and eggs would reduce our living 
costs substantially. 
 
The <a href="http://www.transitionnetwork.org/" target="_blank">Transition network</a>
 are keen on this concept to help preserve the planet and combat 
resource depletion. They do a good bit on supporting communities as 
well. 
 
Tribe's opinion - We really think owing a bit of land even if it is used by someone else is a good idea and something we are looking at for THE.FuTuRe

Maintaining Wealth II - We are all Investors Now

TiMe : "Dring, Dring, TiMe to wake up sheeple" THE.FuTuRE : "Shussssh! They are sleep walking towards a cliff. We are pro...

Maintaining Wealth I - Bitcoins and Real Estate

Contender 2 Black Swan, Critical Thinking, Dividends, Finance, Financial Armageddon, Gold, Inflation, Investing, Saving 20:18

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THE.FuTuRE: "Contender you wuss, what is all this talk about income, growth and protection investments. I will take it all from you eventually. I have time on my side" 
 
TiMe: "Tick Tock, Tick Tock" 
 
CoNTeNDeR: "Precisely FuTuRe I have no idea what you are really up to. Heck I had a guess at the outlook for the year and how did that come out.....so I need a bit of diversification because of all of your conniving, plotting and outright corruption!" 
 
We are living in very interesting times especially with regards building and maintaining wealth. 
 
In this post we cover the TRiBe's options for investments in currency, commodities real estate and bonds with examples and opinions on some of the pro's and con's? 
<blockquote class="tr_bq">
 "You have much more opportunity 
to earn money than you do to 'not spend' money, and yet most people spend hours 
upon hours clipping coupons and perusing daily deal sites instead of 
brainstorming how to earn more money and solve 
people's problems." - Susan Fujii</blockquote>
In the second post we will be looking at other investment classes such as stocks and yourself followed by the TRiBe is current thinking. 
 
Paper Money Supply - Blind Faith? 
 
Since 1970 when Nixon took the world off the gold standard there has been no anchor to excessive money / currency creation. Governments have control over the supply of their currencies and they can determine the ultimate value of the currency in circulation depending on the amount in circulation. 
 
Previously if people wanted to save their labour and future buying power through the means of a currency, they could chose a checking account. It earned interest that was enough to offset any excessive increase in the currency supply. This is certainly not the case at the moment, interest rates are artificially low and people are being 'guided' to riskier investments for a return. 
 
One may ask but why is the currency supply increasing above the increase in productive capacity of the economy. Unfortunately this is easy to attribute to governments' fiscal irresponsibility. Excessive overspending is used to buy votes from the electorate. 
 
Alternatively if a country has strong institutions, low spending and fiscal responsibility - holding that countries currency is less of a concern. 
 
Fiat Money is covered by <a href="http://www.amazon.co.uk/gp/product/B005GSYZRA/ref=as_li_qf_sp_asin_tl?ie=UTF8&camp=1634&creative=6738&creativeASIN=B005GSYZRA&linkCode=as2&tag=thecontfinain-21" id="static_txt_preview" target="_blank">Currency Wars: The Making of the Next Global Crisis</a> by James Rickards, and <a href="http://www.amazon.co.uk/gp/product/0718192141/ref=as_li_qf_sp_asin_tl?ie=UTF8&camp=1634&creative=6738&creativeASIN=0718192141&linkCode=as2&tag=thecontfinain-21" id="static_txt_preview" target="_blank">Paper Promises: Money, Debt and the New World Order</a> by Phillip Coggan. There is also a good video to watch by Warren Buffet highlights how <a href="http://www.youtube.com/watch?v=5DvuyvuHmJI" target="_blank">countries get into trouble in the first place</a>. 
 
See the video series <a href="http://www.youtube.com/watch?v=DyV0OfU3-FU" target="_blank">Hidden Secrets of Money</a> by Mike Maloney 
 
Tribes opinion - it is so easy to transact in paper money and in the governments interest to keep them in place we will always keep some in our portfolio. 
 
Electronic Currencies - How Many? 
 
We now have alternative currencies such as Bitcoin and Litecoin hitting the news wires for their massive gain in relative value to reference currencies such as the US dollar. 
 
Firstly there are many people in favour to the inbuilt scarcity of the digital coins. Secondly they are not issued by any government and they are scattered globally that make them uniquely difficult to manipulate. 
 
One thing that is a red flag to THE.ConTENdER is what stops an unlimited amount of new versions of electronic currencies being created? 
 
Will the herd just jump from e-currency to e-currency chasing gains - see a list of them <a href="http://en.wikipedia.org/wiki/List_of_cryptocurrencies" target="_blank">here (10 listed)</a>? THE.CoNTeNDeR thinks this is highly likely until the number of e-currency options goes to infinity or faith in them is destroyed. Their value will go the same way as fiat currencies trending towards their intrinsic production value of close to zero. 
 
What may save them is if the herd all commit to ONE e-currency. 
 
One thing preventing this e-currency utopia is ... human nature. We are opportunistic and after an easy meal / fast buck. Our prehistoric past moulded us that way. When we were being chased by sabre toothed tigers whilst eeking out an existence coming across a free lunch in the form of a dead Mammoth. 
 
Will everyone commit to one e-currency? I would like to think it could happen but who can tame  human nature. Will we have to live in a dystopian future where we all take the happy pill to keep us controlled? 
 
Zero hedge recently <a href="http://www.zerohedge.com/news/2013-11-27/presenting-bitkillers-these-are-richest-holders-bitcoin" target="_blank">reported that 100 people hold 20% </a>of the bitcoin currency - a new type of Ponzi scheme in the making? Create a new e-currency holding a large percentage of the issue then cash in and move on as the perceived value burns. Who is left holding the proverbial handbag - the new entrants - good luck or what a good SUCKER!- THE.FuTuRe would be impressed! 
 
See this <a href="http://www.youtube.com/watch?v=T_hBhymFfm8" target="_blank">utube documentary on bitcoin</a> 
 
Tribes opinion - Speculative and almost impossible to value - mine some coins by all means* but only purchase if you have some spare gambling money :) 
 
* THE.CoNTeNDeR has had a go at mining. The setup is a pain, it is geeky, based on lots of technical know how. To mine alot of coins and to really exceed requires specialise mining rigs - a currency for the people - you must be joking! 
 
Next up commodities

Maintaining Wealth I - Bitcoins and Real Estate

THE.FuTuRE : "Contender you wuss, what is all this talk about income, growth and protection investments. I will take it all from you ...

Financial Independence in a FUBAR Economy

Contender Black Swan, book, Dividends, downshifting, Early Retirement, financial freedom, financial independence, Investing 11:14

Financial Independence in a FUBAR Economy

Original Photo by: Kheng Guan Toh Welcome Fight Fans well THE.CONTENDER has got himself into a pickle. He is unsure of his next move. ...

Dividend Surprise Part 2

Contender 0 Compound Interest, Dividends, DRIP, Early Retirement, Finance, financial freedom, financial independence 08:49

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<tr><td class="tr-caption" style="text-align: center;">Risky business be careful!</td></tr>
</tbody></table>
After taking a parting blow to the head from CHEAP.SHOT his sparring buddy THE.CONTENDER was dazed and disorientated. Is the right thing to be doing, he asked himself? This fighting THE.FUTURE stuff is quite risky. Is he risking it all on black? 
 
CHEAP.SHOT: "CONTENDER! CONTENDER! are you alright? Sorry mate I thought we were still sparring. I did not hear PLAN.AHEAD calling us over" 
 
PLAN.AHEAD took THE.CONTENDER to one side: "Look what happened, you dropped your guard. You thought you were safe and in control. This is a risky business and you need to have your wits about you at ALL times" 
 
In part 1 of this post (found here) we had a look at the pros and cons of dividend investing. Here in Part 2 we are going to have a look at the risks of investing in dividend stocks, our strategy and tracking progress. 
 
Personal Financial Goals 
 
As we are well into our financial freedom plans we have been fortunate to accumulate enough savings and investments to be very close to our desired goal. This is to buy a "nice" property in France and enough passive income to cover living costs. Currently this nest-egg is 2/3 in cash and funds and 1/3 is in dividend stocks. Ultimately we need our investments setup in the following manner: 
<ul>
<li>45% in cash to buy a property outright </li>
<li>45% in dividend stocks. We are aware the nominal value will rise and fall with the market and company performance but the income that we need will hopefully grow over time. </li>
<li>10% in our protection portfolio for emergencies cash and cash alternatives such as precious metals.</li>
</ul>
So what do I think are the risks that lie ahead for this approach if we follow this route? 
<ul>
</ul>
Mitigating Currency Risk 
 
US
 shares carry a premium (more costly / lower yield) to them but the dollar is the reserve currency 
of the world. Likewise UK and Continental European stocks carry Pound 
Sterling and Euro risk (get the money printing presses ready, Mr Carney - New Bank of England Governor) 
 
We are going to be living in France and paying for everything in Euros so what do we think are our options to reduce currency risk? 
 
a)
 Ideally we want to have much more income than outgoings if possible. This is the 
ideal situation as we can continue to invest and grow our income and 
it will provide a buffer in hard times. Likelihood low - we want to spend as much as possible on a home. 
 
b) Investments will be made in countries with strong currency fundamentals and good 
trade agreements that avoid double or punitive taxation. Global low cost
 funds can help to mitigate currency risk instead of trying to work out 
the "best" country to invest in. In our case we cannot invest in funds in the short term due to higher French taxation. Our income will be paid in multiple currencies before being converted to Euros. 
 
c) PROTECTION - our cash will be spread across different currencies and cash equivalents. Primarily this will be covered by income from multiple countries in the form of dividends, pounds, euros and some precious metals fund. 
 
d) We will monitor all investments and country risk monthly and change the mix of the portfolio as required. Our monthly dividend tracker and risk evaluator is outlined below. 
 
There are several countries and currencies that are of interest to our little tribe Canada, China, Chile, Singapore and to a lesser extent Brazil, countries located in Eastern Europe and Australia. 
 
Canada and Chile are of interest for example as they both have growing populations, an abundance of natural
 resources, are business friendly and have a lot of undeveloped land for agriculture and natural resources. 
 
For more on risk management and the low cost fund approach to investing have a look at the videos on the <a href="http://www.bogleheads.org/wiki/Video:Bogleheads%C2%AE_investment_philosophy" target="_blank">Bogleheads wiki</a>. 
 
<div style="text-align: center;">
Please read on to have a look at the tribes own strategy and progress</div>

Dividend Surprise Part 2

Risky business be careful! After taking a parting blow to the head from CHEAP.SHOT his sparring buddy THE.CONTENDER was dazed and di...

Dividend Surprise Part 1

Contender 3 Compound Interest, Dividends, DRIP, Early Retirement, Finance, financial freedom, financial independence 12:46

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THE FUTURE: "Jobs are being created, resources are abundant and technology is amazing - go out and enjoy yourself - I will look after you!"   
PLAN.AHEAD: "That is all good mate but I want options. I want freedom to do as I wish. If I spend all my money today I will have none for tomorrow" 
CONTENDER: "What about dividend investing, will this work?"  
PLAN.AHEAD: "Contender, the stock market is a casino mate! you have less chance in it than in the ring with THE.FUTURE!" 
Over the past 12 months a lot of work has been carried out to develop a strategy for a sustainable dividend income for our Tribe.  
 
Part 1 of this post is going to look at the pros and cons of dividends versus capital appreciation of stocks. Part 2 is going to look at risks of investing in dividend stocks, our strategy and tracking progress. 
 
The Tribes Dividend Journey 
 
We have been investing heavily for the past 7 years in three portfolios GROWTH, INCOME and PROTECTION (covered here). It is only in the last year we have been heavily interested in increasing the share of the INCOME portfolio. In particular we are buying individual company shares for their dividends. 
 
To get to the target we are gradually selling our tracker funds from the GROWTH 
(Primarily global, European and emerging markets) and adding capital 
from dividends and adding income from Mrs C's [delete] income into individual shares. The PROTECT portfolio is staying static. 
 
In the current climate of a historically high priced stock market (P/E ratios are at towards the top of their historical trading ranges) and what THE.CONTENDER considers a stagflation environment this poses several concerns about the timing of owning MORE shares. 
 
We currently live in a very different financial landscape with lots of printed money circling the globe. This is very supportive of stocks so there is no reason to believe the stock market will capitulate just yet. 
 
<ul>
<li>Our exercise is moving money out of one group of shares (funds) to another group (individual dividend stocks) </li>
<li>We are adding some extra earned income so we are in effect nearly neutral on purchases.</li>
<li>Our objective is all about GROWING INCOME over CAPITAL APPRECIATION. </li>
<li>We are comfortable in owning a large amount of stocks but... we want to be more DEFENSIVE with the choice of these shares. </li>
<li>We are buying shares in these sectors that we consider DEFENSIVE: utilities, energy and pharmaceutical.</li>
<li>We consider their goods and services as a "need" instead of "want". </li>
<li>We understand dividends can be variable such as energy companies that are beholden to the underlying price the the commodity they are selling.</li>
<li>We hold some fixed income assets (preference shares and cash accounts) </li>
</ul>
While it may seem a little Kamikaze to keep holding so much wealth in stocks at the moment we are buying them for their income, not overall value (appreciation is desired ;). 
 
Perhaps lots of cash is better? Unfortunately like anything in life it is all about risk aversion. Cash loses value to inflation but is safe. At our point in our lives we are do [which one?] not need to be overly safe. If a problem happens we will do what it takes to get back on track. 
 
We are aiming for 80% INCOME and 20% in GROWTH and PROTECTION after the purchase of a property in FRANCE and the semi early retirement situation we are looking for. 
 
Starting a portfolio 
<blockquote class="tr_bq">
"An investment in knowledge pays the best interest." - Benjamin Franklin   </blockquote>
We have read about dividend investing from several sites and blogs such as the <a href="http://dividendmonk.com/" target="_blank">dividend monk</a>, <a href="http://seekingalpha.com/" target="_blank">seekingalpha</a>, <a href="http://monevator.com/" target="_blank">monevator </a>and several early financial independence blogs such as <a href="http://www.bravenewlife.com/" target="_blank">brave new life</a>, <a href="http://retireby40.org/" target="_blank">retire by 40</a> and <a href="http://jlcollinsnh.wordpress.com/" target="_blank">jlcollinsnh</a>. 
 
We have a list of our our current holdings and the current dividend income they provide per month. We have added "what if" we bought x shares in each company to work out what the portfolio could look like to generate our desired final income (more detail will be provided in part 2 of the post). 
 
All of the stocks are researched  (Mr C spends lots of time on this) and evaluated. Decision of what to buy each month are made by having a look at share valuations and performance. We are currently concerned about buying some of the shares we have identified that have had large run ups at the start of the year (typically 10-20%). 
 
We are currently targeting the "laggards" - shares that are behind the market gains. Is this a good approach? Laggards are usually laggards for a reason? Well perhaps that is because their sector is out of favor and might be the next "performer". There is a "risk on" appetite in the market so some defensive sectors have been laggards / sold off in favor of stocks with perhaps more growth prospects. 
 
Please read on for: Are companies paying dividends the right choice? High paying dividend stock considerations. Dividend champion investing.

Dividend Surprise Part 1

THE FUTURE : "Jobs are being created, resources are abundant and technology is amazing - go out and enjoy yourself - I will look afte...

THE PAST

Contender 0 Black Swan, Blog, Dividends, Early Retirement, financial freedom, financial independence, Investing 20:12

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<tr><td class="tr-caption" style="text-align: center;">La Romieu Gers France</td></tr>
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THE.PAST: "Well you did not see that coming did ya man!" 
THE.CONTENDER: "We planned enough of it mate!" 
 
This is the first of 3 posts, a look at THE.PAST, the year that was 2012.  
<ol>
<li>THE.CONTENDER Tribe 2012 road to Financial Independence and this year's highlights. </li>
<li>What happened in the financial world and the impact on the THE.CONTENDER investment portfolio.</li>
<li>What we learnt as a family over the year. What did you learn about yourself?</li>
</ol>
 
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THE.PAST</div>
<blockquote class="tr_bq">
“Those who do not learn from history are doomed to repeat it” George Santayana </blockquote>
Tribe road to financial Freedom and France in 2012 
<ol>
<li>Mr C takes over the parental duties while Mrs C goes back to work </li>
<li>Our eldest child left creche and started nursery school </li>
<li>Spending was cut dramatically with no impact to our standard of living, as described in <a href="http://getintheringwithme.blogspot.co.uk/2012/09/father-muff-financial-frugality-case.html">Father C a Financial Frugality Case Study of Bringing up Baby</a></li>
<li>Standard of living actually increased as we had one adult at home, which is positive for the children and less stressful for the parents (no more rushing around to pick up kids, having to book days off when they are sick and finding child care solutions)</li>
<li>Both children have grown up immensely this year and are showing real progress - the eldest with reading and writing (just turned 4) and the youngest is a real little person now she is mobile. </li>
<li>Saving exceeded expectations but investments were flat (see below)</li>
<li>Investment knowledge has increased see <a href="http://getintheringwithme.blogspot.co.uk/2012/07/round-5-156s-investment-challenges.html">Investment Challenges</a> and <a href="http://getintheringwithme.blogspot.co.uk/2012/08/risk-versus-reward-round-5-2m-59s.html">Risk Versus Reward </a>and <a href="http://getintheringwithme.blogspot.co.uk/2012/12/financial-independence-planner-stock.html">Financial Independence Planner & Stock Screener</a></li>
<li>The Tribe has improved its knowledge and use of alternative health practices, see <a href="http://getintheringwithme.blogspot.co.uk/2012/09/keeping-muff-healthy-round-6-1m-37s.html">Keeping the Tribe healthy</a> </li>
<li>Wonderful holiday in the south of France researching where to live (photo above from the Gers region of France).</li>
<li>Started this blog! see <a href="http://getintheringwithme.blogspot.co.uk/2012/10/10-blogging-mistakes-muff-styleee.html">10 blogging mistakes - CONTENDER styleee!</a></li>
</ol>
Financial Impact of 2012 
 
First for all those Boggle heads out there our investments came out at a slightly positive 1.5% gain compared to an approximate 7% gain for the US market. 
 
We did exceed our savings plan but took a hit when Mr C left work and hence lost his share options. 
 
Overall this is disappointing but there is always a silver lining! First let's have a look at what happened across the world and why the THE.CONTENDER investment portfolio turned out flat. 
 
By World Region 
 
UK: Austerity is doing its job, shame about the un-realistic growth figures (as usual) along came the double dip recession. Odd thing is that the "austerity" still means that the national debt is increasing year on year...... Nothing to see here, move on, all is well! (quick, appoint another ex Goldman Sachs employee as the Governor of the Bank of England as Merv has stopped printing to cover up the mess that the UK finances are in). 
 
Olympics - good job and pulled the UK out of recession due to the ticket sales alone..... Record haul of medals and Sir Bradley Wiggins won Gold following on from his Tour de France success.  And UK sports personality of the year to boot. GO WIGGO! 
 
Rain - funny that and in the UK of all places - IT HASN'T STOPPED!!! Why invest in wind power we need hydro dams! 
 
Tribe Investments 
<ul>
<li>Stocks generally positive for the year. Income stocks did OK (oil and gas, utilities, telecoms and pharmaceuticals)</li>
<li>Funds generally negative due to exposure to precious metal miners which have had a second poor year of performance in a row compared to the underlying metals which were both positive for the year. </li>
</ul>

THE PAST

La Romieu Gers France THE.PAST: "Well you did not see that coming did ya man!" THE.CONTENDER : "We planned enough of it...

Risk Versus Reward

Contender 0 Black Swan, Compound Interest, Critical Thinking, Dividends, Finance, financial independence, Inflation, Investing, Risk 19:56

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Is THE.CONTENDER risking a knockout blow? 
 
 
THE.CONTENDER thought he would write a post on perceived Risk versus Reward when investing. THE.CONTENDER compared the THE.CONTENDER strategy against a couple of very successful savvy bloggers. THE.CONTENDER 's investment plan can be summarised in one simple statement "save as much as possible, in stocks that have a high risk \ reward profile early in life then choose lower risk stocks later". That was the easy part. The next part was devising a strategy to max out the strategy for early financial freedom. The THE.CONTENDER approach is covered in more detail in "<a href="http://getintheringwithme.blogspot.co.uk/2012/07/round-5-156s-investment-challenges.html" target="_blank">Investment Challenges</a>". Here are links to a few articles from the bloggers THE.CONTENDER was talking about earlier: 
 
<div class="pagetitle">
 <a href="http://jlcollinsnh.wordpress.com/" target="_blank">jlcollinsnh</a> </div>
<ol>
<li><a href="http://jlcollinsnh.wordpress.com/2012/05/12/stocks-part-vi-portfolio-ideas-to-build-and-keep-your-wealth/" target="_blank">Stocks part vi portfolio ideas to build and keep your wealth</a> </li>
<li><a href="http://jlcollinsnh.wordpress.com/2012/05/12/stocks-part-vi-portfolio-ideas-to-build-and-keep-your-wealth/" target="_blank">How I failed my daughter and a simple path to wealth</a></li>
</ol>
<a href="http://www.mrmoneymustache.com/" target="_blank">Mr Money Mustache</a> 
 
<ol>
<li><a href="http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/" target="_blank">How to make money in the stock market</a> </li>
<li><a href="http://www.mrmoneymustache.com/2011/06/07/where-should-i-invest-my-short-term-stash/" target="_blank">Where should I invest my short term stash?</a> </li>
<li><a href="http://www.mrmoneymustache.com/2011/09/15/a-brief-history-of-the-stash-how-we-saved-from-zero-to-retirement-in-ten-years/" target="_blank">A Brief History of the ‘Stash: How we Saved from Zero to Retirement in Nine Year</a></li>
</ol>
(Other early financial freedom bloggers: <a href="http://gooddaytolive.wordpress.com/" target="_blank">A Good Day to Live</a>, <a href="http://www.bravenewlife.com/" target="_blank">Brave New Life</a> and <a href="http://earlyretirementextreme.com/" target="_blank">Early Retirement Extreme</a>) 
 
<a href="http://getintheringwithme.blogspot.co.uk/p/muff-tools-and-check-lists.html" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;" target="_blank"><img alt="" border="0" height="161" src="http://4.bp.blogspot.com/-XS3uu0Cxdzg/UFjZ0dd1PhI/AAAAAAAABxs/R4HUgNcjQso/s200/Muff+Tool+Kit+v6.jpg" title="PLANNING TOOLS AND CHECKLISTS" width="200"></a>First, both of these guys have made it, are financially free and are still able to save and invest each month. Both guys built significant savings through very hard work and dedication in their employment and investing decisions. Hats off to both of them. This blog highly recommends working through their sites for insights on finance and life. 
 
Next, let's start a comparison of the different strategies:

Risk Versus Reward

Is THE.CONTENDER risking a knockout blow? THE.CONTENDER thought he would write a post on perceived Risk versus Reward when investing...

Investment Challenges

Contender 0 Dividends, DRIP, Ethical, Inflation, Risk, Saving 15:02

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<h2>
One Black Eye Too Many?</h2>
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Today I would like to discuss some CIT (Contender Investment Themes) and challenges faced today. Investing at the time of writing is a mine field. We are in one of the most volatile financial periods in recent years. An economic crisis is ongoing in the western world while concerns about sustainable growth in emerging markets are frequent in the financial press. 
 
<h3>
Managing Inflation</h3>
 
Inflation is most often described as prices are going up because materials and labor etc are getting more expensive.... Really as I see it this is a fallacy - money is actually loosing its purchasing power as there is more of it. 
 
Like everything in life we have supply and demand balances. The more abundant something is the less it is worth to the consumer. The same is true of the current version of "money" we have in the world. We are creating vast amounts of money - mainly electronically. The more there is, the value of each unit decreases over time. In the UK I have seen the cost of a loaf of bread increase by 2.5 times over 20 years but if anything we have more global grain supply now. 
 
Inflation is a real concern in the MIT list. It affects our investment choices, pension allocation and impacts our ability to build and protect our savings. Inflation is like a stealth tax - legal theft. 
 
It is of utmost importance to plan for a significant rate of inflation and make sure you have assets that compensate for any increase in prices \ decrease in the value of the fiat currency in the future. Examples of investments that could grow at the same rate if not faster than inflation: 
 
1. Companies with strong brands, advanced distribution and manufacturing networks \ economies of scale can raise prices in line or above inflation (such as consumer goods companies) 
2. Energy and raw material producers 
3. Stable currencies and precious metals (scarcity value) 
4. Agriculture (we are not creating any more land on the planet) 
 
A note on CASH and GOVERNMENT BONDS. Cash and bonds are deemed safe investments. Bonds will pay some interest and you can buy inflation protected products. In MIT I consider these investments \ savings as dry powder for opportunities when there is "blood on the canvass": 
<blockquote class="tr_bq">
"I am not so much concerned with the return on capital as I am with the return of capital." - Will Rodgers </blockquote>
<h3>
 </h3>

Investment Challenges

One Black Eye Too Many? Today I would like to discuss some CIT ( C ontender I nvestment T hemes) and challenges faced today. Invest...

Welcome to FISH !
You have come here looking for answers. How to get out of debt? How to save and invest? How to retire early and how you want to live in retirement.

Well this is the right place for you as out tribe has been through all of these steps. We no longer work for a corporate employer and have saved enough to retire early. How we did this is shared here on this site for you.

Our little tribe found out these secrets to financial independence in our late 20’s. Since then we have taken early retirement, in our late 30's, in just 7 years. We now live in the South West of France with our two young children.

Along the way I decided to share everything I learnt. My articles and tips on aggressive saving and compound investing are there to help you meet your financial goals fast. I discuss ways to help you decide what you want by building a life plan. This helps to work out how to get where you want to be whilst avoiding the pitfalls along the way.

My expertise was built up working in blue chip corporate jobs, extensive reading and putting it into practice. I have condensed this knowledge into simple strategies to help you meet your goals and not those of the bank or the place you work.

There are free planning tools on this site that help you make a life plan. A plan for your future. The tools calculate how to reach your financial goals in a timeline that suits you. The tools help set out your life goals, make them happen and how to exceed them.

There are tips on how to simplifying your life to remove day to day headaches. These include ways to pay off debt fast buy eliminating wasteful spending habits. How to reduce your monthly bills through choices that actually improve your health and wellbeing. Identifying things you don’t need that sap your time and wallet.

There are little sustainability projects to reduce your dependence on shops and utilities whilst saving money to spend on things you want.

All of these little steps will show you how save 50%+ of your salary so you can meet your goal whatever it is. This huge saving rate can be compounded for very early retirement. I am sure you will find something here for you.

Darren Lee (A.K.A the Contender as in my blog)

FISH | Financial Independence Seeking Happiness