Dig in. That is my unsolicited advice. Get in the game. Be engaged. Fail. Figure out how things work. How they really work. I apply this philosophy to many aspects of my life. I believe I was fortunate, early on, to be introduced to the scientific method. It informs my worldview. It allows me to see the world as it really is, feelings be damned.
I don’t have a background in finance and I don’t like math. But I think I got one thing right early on: invest as frequently as possible in the total stock market for maximum growth. I don’t believe I’ll ever beat that strategy. Most of the money I earn will remain committed to that strategy until it’s time to retire.
As I grew older, I got the idea that I wanted to build a safety net beyond my emergency savings. I wanted a separate income source and liquidity so that, should I lose my job, I could pick up part time work until a better opportunity came along. That’s where the idea of Beer Money Dividends was born. So I dug in. I got in the game. I became engaged.
In developing this income portfolio I have come up with a few guidelines in selecting assets. Initially, I wanted a roughly equal amount to be paid out in dividends for every month of the year. I still think this goal is okay, though it is definitely not the best the strategy. The best strategy is solid, undervalued companies that simply pay when they pay (or don’t pay dividends and grow instead). In any case, I don’t trust myself to fully analyze companies and so the next logical step is diversification.
So, while I have selected a variety of companies and ETFs, they are heavy in financial and real estate sectors. My next goal is to find solid companies with steady growth and steady dividends that cover every month out of the year, but that also cover every sector within the market. These are the 11 official GICS sectors:
1. Energy
2. Materials
3. Industrials
4. Utilities
5. Healthcare
6. Financials
7. Consumer Discretionary
8. Consumer Staples
9. Information Technology
10. Communication Services
11. Real Estate
I mostly browse through dividend champions, aristocrats, and kings looking for deals. Moving forward I suspect I will close some positions that aren’t working and focus on the stronger assets. I haven’t earned enough with this portfolio to worry about taxes yet, but I imagine that will come into play soon as well. There’s also the fees associated with assets like ETFs that can cause a significant drag on overall return. I’m not there yet, but it’s in the back of my mind and I’m aware of it. I’m also acutely aware that I cannot compete with hedge funds or day traders or anyone on Wall Street, but I can play my own game, emphasize my own strengths, and focus on improving.
Lastly, I think it’s important to write these guidelines down. I didn’t realize how much this site would play into my investing strategy, but it does. It keeps me focused and allows me to go back and review my thought process. I’m digging in, I’m in the game, and I’m engaged.