How to build retirement wealth

If you are a new reader here, perhaps it’s time for an introduction. I like sharing my opinions on how I am building retirement wealth. I also like to document how my own investments are doing. Some of these ideas might sound outrageous or in contradiction to what you’ve heard from your financial planner, financial adviser, or some popular radio hosts.

But the concepts I lay out in my articles are backed up by historical evidence. In fact, I look at history to try and determine the best ways to build wealth. Do you know how you always hear “past returns are no guarantee of future returns”? While true that there is no guarantee, trying to shirk the past and it’s strong evidence is reckless and frankly won’t lead to a good retirement.

So what are the investment vehicles I employ?

  • No mutual funds.
  • No 401K or IRA wrappers.
  • Direct ownership of stocks (not mutual funds).
  • Leveraged real estate
  • Over funded cash value life insurance (also known as permanent life insurance)
  • Build wealth using various forms of arbitrage

These may the types of vehicles I use, but it also includes the concept of actively managed wealth building. Some of these vehicles may be considered passive forms of income, but it takes an active approach to do it right. The concept of simply dumping money into a mutual fund inside your 401K and assuming it will grow to serve you in retirement just doesn’t work.

No mutual funds

The Dalbar report has been monitoring mutual funds and tax deferred savings plans for 20 years. According to the 2013 report, mutual fund investors have significantly underperformed the S&P 500 over the past 3, 5, 10 and 20 years. In 2012, they reported the average performance of investors in equity funds was 4.25%. They further indicate that this is mostly tied to investor behavior rather than fund performance.

The performance numbers are clear: people investing in mutual funds average poorly. Dalbar goes on to make a judgment that it’s the consumer’s fault. This might or might not be a valid judgment. But is that relevant? If people don’t do well, and haven’t been for 20 years, do I really want to plan my retirement under the assumption that I can beat the average? I’m sure it’s what most others think. Dave Ramsey is happy to quote the FDIC in saying that 97.3% of people don’t follow through on their promise to pay off a 30-year mortgage in just 15 years with extra payments.

So why would we expect people to follow through on their attempt to not buy when things rise and sell when a market correction hits? I prefer to build my wealth building plans using the averages.

No 401K or IRA wrappers

401K and other government wrappers come with an incredible entanglement of regulations, restrictions, and other tricks to basically keep your hands off the money. The concept is to get you to put away money and keep your hands off of it until you reach retirement age. But many investment houses take advantage of this situation in the sense that mutual funds and other vehicles available tend to have the highest expense ratios.

People will eagerly point out things like IRAs as giving you more control, but the government has strong limits on how much you can put into an IRA. Suffice it to say, the limits on IRAs aren’t enough to build a retirement plan.

And do you really think the government designed the 401K to help you set aside money and save on taxes? The government wants you to put away money today without paying any taxes, so that you will grow the money into something bigger, and then start paying full blown income taxes when you reach retirement. Yikes!

It’s true that I have a Roth IRA and a 401K, but that is money I put in before I realized it wasn’t working. As you’ll see below, most of that money has been re-applied and is already making way more than what it used to. The only money I have left is trapped in my current company’s 401K and I can’t get to it. The Roth IRA I have is small as well and would serve little benefit if I extracted it.

Direct ownership of stocks

This one really stuns some people that I meet. I don’t like the dismal performance of mutual funds combined with their fees. Instead, I prefer owning stocks directly. If you look at all the studies done over the years, there is one stock market strategy that has proved fruitful: buying and holding dividend-paying stocks.

If you look at people like Warren Buffett, they have created billions by acquiring strong companies when they were on sale. Warren Buffett has also bought cash flowing stocks and companies, and reinvested their proceeds in other strong companies. This has created a compounding affect that has let him beat the S&P500 for years by great margins. The book value of Berkshire Hathaway has averaged it’s growth by 28% during the boom years, and by as much as 18% during bad recessionary times.

It’s not hard to find solid companies. In fact, there are many blog sites dedicated to this, such as Dividend Mantra and Dividend Growth Investor. The companies they invest in are not fly-by-night shady outfits. Instead, they mention thinks like Coca-Cola (KO), Walmart (WMT), and other names you’ll recognize. Companies like Coca-Cola have created millionaires for decades. You can find a list of companies that have paid consistent dividends, increasing them year after year, for over 25 years. It’s not that hard. It turns out, these are some of the best investments regarding inflation. A company that has managed to increase payouts to its shareholders through thick and thin is pretty solid.

Leveraged real estate

After the 2008 housing melt down, many people won’t entertain investing in real estate. The problem is that newspapers were reporting the worst scenarios regarding foreclosures. The truth is, 99% of mortgages are current and paid for. The number of people that suffered rate hikes on risky loans while having insufficient money to keep up were a fraction of a percent.

Real estate has shown a more consistent growth rate than mutual funds. And real estate is one of the easiest investments for middle class people to get into. Using prudent leverage, an average 4-5% growth can turn into 20-25% growth in your investment capital. That certainly beats the 4.25% average growth of mutual funds. Again, this is what happens if you use the averages. You can make more and take on riskier, higher paying options, but why take a risk? You’re already ahead of what mutual funds in 401K wrappers have to offer.

Since real estate was a no brainer, I cashed out my 13-year-old 401K from my old company, paid 37% in taxes and penalties that year, and used it to buy two duplexes with 20% and 25% down. I couldn’t be happier.

The rentals I own are paying me a nice monthly profit as the tenants pay off the mortgages for me. I keep a fair amount of cash in reserve to handle vacancies. And seeing my property yield monthly cash helps me to focus on that instead of pure growth in value.

Over funded cash value life insurance

This is one that stirs a lot of discussion. People have been preached to that cash value life insurance is a rip off and to never, ever, ever buy it! Phrases like “buy term and invest the difference” as well as “don’t mix insurance with investments” flies all over the place.

The thing is, many of the people that preach this opinion have an incomplete knowledge of how it works and how it was designed to function.

To be clear, I’m talking about EIULs, or equity indexed universal life insurance. And the critical component is over funding the policy to the limit set by the IRS. Essentially, buy a policy where you get the minimum amount of death benefit for a given amount of money. That causes your cash value to build faster. If you get the maximum amount of death benefit, then your cash value grows very slowly and it becomes an ineffective tool in storing wealth.

EIULs that are over funded give you the option down the road to borrow from the cash value. Essentially, you borrow money (without paying it back) and when you die, the loan is paid off with the death benefit. Whatever is left over is passed on to your beneficiaries.

EIULs have the benefit on not investing in the stock market, but instead in European options on the market. This is how they institute caps such that your principle is guaranteed to growth somewhere between 0% and 15% of the index it is linked to. If the index goes negative, your cash value stays the same. But if the market goes positive, so does your cash value.

You may not be aware, but that facet is incredibly powerful when it comes to wealth preservation. So many people have seen huge booms in their mutual fund holdings, but the overall performance is knocked back to that Dalbar average of 4.25% due to losses. If your account shrinks by 30% in one year, and then grows by 30% the following year, are back to where you started? Nope. $10,000 would drop to $7,000 and then grow back to $9,100. But if you had an EIUL, that $10,000 would stay put, and then grow to $11,500 (0% loss followed by a 15% gain based on the caps).

EIULs are very expensive for the first ten years; a fact many people like to point out such as Suze Orman and Dave Ramsey. But after ten years, the fees drop to almost nothing. After twenty years, the fees will probably average between 0.5-1.5%/year. Sure beats the 2-4% average cost of mutual funds. And then you get to start taking out tax free loans (compared to mutual fund payments at income tax rates), there is even less to fret about in retirement.

Once I understood the entire picture of what EIULs could and couldn’t do, it was a simple decision to stop investing money in my company 401K and reroute that money into an EIUL.

Build wealth using various forms of arbitrage

Something people are unaware of is how banks make money. Banks borrow money from the Federal Reserve at rates like 3.25% and then turn around and lend it out at 4.25%, pocketing the 1% difference. You can use the same concept.

I took out a HELOC against my home for (PRIME-0.25%) with a floor of 4%, so right now, it costs me 4% to get this money. Then I bought a position in Vanguard Natural Resources, an MLP that has been paying 9% distributions on a monthly basis. As I pay off the HELOC, I am essentially pocketing the 5% difference.

This is also referred to as equity harvesting. All that equity in my house was earning 0%. I am getting the cheapest form of money available, a mortgage, and using it to collect cash flowing assets. After I pay off the HELOC, I can redirect the money towards paying off investment mortgages, buying other dividend aristocrat stocks for even more passive income cash flows, or increase my position in Vanguard Natural Resources. And at that point, I can also renew the HELOC to get more investment capital.

When people ask “would you take out a $50,000 loan on your house and invest it?” my answer is a resounding “yes!”

Stay tuned

I hope you enjoyed this introduction to the concepts of build wealth at the Wealth Building Society. Wealth building isn’t hard, but when you boil things down to sound bites used by radio entertainers, some of the worst advice gets out there. Are the people that are telling you to only take out 15 year mortgages and pay them off as fast possible retiring on mutual funds? Are these people maxing out 401K and IRAs, or are they building wealth through writing books, running TV and radio shows, and piping their business equity pay offs into rental property?

Analyzing cash flows against invested capital

Back in college, I took a course in engineering economics. I still have the textbook upstairs. I remember learning how to draw cash flow diagrams to solve problems.

Essentially, you draw one large arrow anytime you are either investing a big chunk of change or cashing on a big sale. The arrow stems downwards if its an investment, because you are effectively losing the money in present.

This is followed by a series of short arrows usually on a yearly basis, to represent the return on your investment. If you made an investment, you would have a big negative arrow. The tiny positive arrows represent your payback, i.e. yield. Essentially, at some point in the future, the small positives add up and exceed the big negative.

And that’s the thing. Everything you do with money is essentially either plunking down a fistful of cash for small paybacks, or doing the opposite by making lots of small payments to receive something of big value later on. Anything you do must be weighed on whether the rate of payback is in your favor.

Case study – cost analysis of solar power cells

Something that I was always interested in was installing an array of solar cells on the roof of my house in order to offset the monthly electric bill. People all over the internet are eager to share their story of how they installed a solar array and knocked their bill to but a fraction or even to zero.

I wanted to do the same. But before I moved a penny, I started researching what it would cost me. And I wanted to know when I would have saved enough to pay it all off. The answer shocked me and caused me to scrap the whole idea.

Solar power cells essentially go at the rate of $4 per Watt. Spend $4000, and you get an array that will yield 1kW of power. I looked at my current power bill at the time and noticed that the rate about about $0.10 per kW-hour. Another nugget of knowledge is that back then, I lived in Florida. I visited a web site and figured that in Florida, you get an effective five hours of sunlight each day.

The calculation is quite simple.

  1. A 1kW solar array at $4000/kW divided by $0.01/kW-hour at existing rates = 40,000 hours to break even
  2. 40,000 hours divided 5 hours/day = 8000 days
  3. 8000 days / 365 days/year = 21.9 years

To break even with existing cost of electricity, I need almost 22 years. This is where a big negative arrow of $4000 needs 22 tiny arrows of about $182 in cost savings. I have read that panels are insured for up to 25 years, but that is cutting it close. What if the panel lives up to its 25 year lifespan? Will it have been worth it to have invested $4000 in today’s dollars to have netted $547? Over 25 years, that renders an annualized growth of 0.5%. That is way less than the inflation’s 3% rate.

It would be more cost effective to take $4000, buy some shares of VNR stock, and use the monthly dividends to pay the power bill. The solar cell would save me $0.50/day or $15/month. $4000 of VNR stock would yield about $28/month and probably grow in value and increased dividend payments down the road.

That is when I shelved the whole idea of buying solar power cells as the means to save on power bills. If you want to do it to help reduce pollution, but all means pursue it. But don’t take it on as a great money saver. It isn’t.

FYI: This doesn’t include installation costs which sometimes doubles the entire procedure. And even if you factor in a 30% credit on the entire installation, it still comes out costing more than $4000/kW.

Bottom line

This article isn’t about the cost of solar power cells. It is how everything you do with money needs to investigated on whether it produces the yield you think it does. It’s critical you find the break even point. Some things, like loans, break even when you have paid it all off. In that case, the emphasis is on the rate you are paying. Is there some other way you could invest the money and come up with a better rate, i.e. usage of your money.

I have a HELOC costing me 4%. I also have an investment that yields almost 9%. When it has completely paid off the HELOC, the yield will continue all the way into retirement, and hopefully, as a legacy to my wife and children. In the end, I will end up with more harvested money than if I had simply taken all that cash and paid off the HELOC immediately. I might have paid interest along the way, but eventually my stock will produce enough cash to have even paid for all that interest and still be producing money.

Reading "Dividend Mantra"

I recently discovered a new website that is chock full of good investor information. It has been added to my blog roll: Dividend Mantra.

What’s so good about this web site? It chronicles one man who has been pursuing dividend-based financial freedom since 2010.

  • The author once had a big chunk of money from inheritance. He blew it all. Thankfully, he learned a great lesson, albeit the hard way.
  • His plan is financial freedom by the age of 40, meaning he plans to have enough dividend income to pay his expenses by that age.
  • Be doesn’t hide from all risk nor buy products that allege to shield one from all risk. Instead, he weighs things suitably.
  • The man discloses how much get gets from his job, his portfolio, what he spends, and what he invests. Haven’t seen that yet. It’s all there to see.

I’ll be keeping my eye on his blog. The irony is that while I feel I discovered him, he already has over 1 million hits, so it would be an even higher honor if he would discover me. 🙂

Apple and Chevron increase dividends

Apple

Apple recently made it’s earnings announcements. It sold 37.1 million iPhones this year,which is an increase compared to last year’s 35.1 million iPhones. They also sold 19.5 million iPads, up from 11.8 million. Some people are complaining about Apple because they’re growth rate isn’t as big now as it was a year ago. But make no mistake, they are still growing. Apply has had years of long term, steady growth, which is one of the reasons I bought this stock.

They have raised their dividend payments from $2.65/share up to $3.05/share. They are also planning to buyback more stock.

There is no doubt that the price of Apple’s stuck has suffered. It peaked a few months ago around $700 and now is in the low $400s. But my plan to invest in Apple stock isn’t based on the short term but instead the long term. I expect that twenty years from now, Apple stock will have grown in tremendous value. Not because of stock market fundamentals, but because the business has been a source of growth and innovation for decades. It’s true that I bought some Apple stock when it was closer to the high, but I haven’t sold it in panic. Instead, I bought more Apple stock when it was just a tad above $400. We’ll see how that pans out in the long run.

Chevron

Chevron has also issued an earnings report. It has increased earnings from $3.15/share a year ago to $3.18/share this year. Considering that estimates were around $3.09/share, Chevron has done a good job beating them as it continues to show steady growth.

Chevron has been growing it’s dividend rate steadily over the past twenty-five years. In this announcement, they indicated they are increasing from $0.90/share to $1.00/share, which is an 11.1% increase. That is great! It’s one of the key reasons I invested in it.

Bottom Line

While I use real estate as my primary wealth building tactic, I am also keeping my eye on the handful of stocks I have invested in as well to form a second source of income.

Is your net worth built to survive inflation?

Two big factors that can impact your net worth are taxes and inflation. In this posting, I want to discuss inflation.

Essentially, the government pumps out a certain amount of money periodically. The Big Idea behind this is to smooth things out by having a steady increase in money supply. You can debate whether this works or not in some other forum. I only want to discuss how this impacts your net worth.

If your money is invested in fixed instruments like treasury bonds, CDs, or fixed interest bank accounts, then inflation can be very hard on your net worth. A pile of cash can lose its purchasing power when it grows at 1% (or less) while inflation grows at 3-4%. Inflation is a complicated concept. There are a couple of ways to look it up. One is the base rate that the Federal Reserve lends money to banks. Since banks make money by adding a little profit on top of this, all other interest rates are above this. Given that you can borrow money today at rates like 3.5%, you can imagine how low the Federal Reserve rate is.

Another is called the Consumer Price Index (CPI). The CPI is essentially a basket of goods whose purchase price is tracked periodically. As the prices rise, an estimated rate of increase is derived, i.e. inflation. But going back 20-30 years, we find that this basket of goods has been altered on multiple occasions. For example, in recent years, beef and oil have been removed from the CPI. Official inflation metrics may report somewhere in the neighborhood of 4%, but the price of beef has risen much faster than that in recent years.

Suffice it to say, the subject of inflation can be talked about to death. But it’s real and here to stay. Which means we must deal with it when it comes to retirement investments. Take a real example. Imagine you own a home and need to replace the roof. If you do it right now, there is a certain cost. What if you need replace the roof again 25 years from now when you are retired? The price will have certainly risen. Other home maintenance costs will slowly rise as well. Fixed income instruments don’t lend themselves well to handling this rise in home repair costs. Other things that increase in cost is groceries, medicine, and gasoline. All these things are good you will need in the future when you are retired. Simply paying off your home mortgage won’t shield you adequately from needing to deal with this.

Assets that weather the storms of inflation

Some tools we use for investment purposes are ravaged by inflation while other things tend to compensate. One asset that can handle inflation is rental property. In times of inflation, rents tend to rise along with the value of the property itself. They may not grow at the same rate, but generally, rents rise. Now in past articles, I have presented numbers on the value of real estate based on NO rent increases. That was to make sure things were sound without depending on these increases. Sometimes rent doesn’t increase when inflation grows. Or at least it might not rise immediately. But in the long run, and real estate is a long term investment, rents rise and that’s a good thing.

Do you know what else weathers inflation pretty well? Dividend aristocrats. These are long term companies that have been paying increasing dividends over decades, some more than 50 years. These are from companies that are producing quality goods that are able to raise the prices of their goods in line with inflation. By owning positions in some of these companies, you can keep receiving increasing dividend payments that tend to compensate for inflation.

The strategy to building up an inflation-proof plan

Okay, that headline is misleading. Nothing is inflation-proof. Maybe inflation-resistant. Every time this country has suffered high levels of inflation, the reasons have varied. Some people think we are poised to enter a high level of inflation, or even hyperinflation. I’m not sure I agree with that. Those opinions have to be counterbalanced by whether the ones making the boldest predictions are selling.

To get this conversation on track, the question should be, what strategy must I use to handle future inflation?

  1. Develop a good reserve fund. This is where I agree with the many pundits who are talking about building up a 6-12 month reserve of liquid cash, like in a savings account. 
  2. Eventually, owning a home with a fixed-rate loan is a good thing. While property taxes and homeowner’s insurance may rise, a fixed payment of debt will tend to shrink as inflation grows. This also helps you avoid rising cost of rents. It’s no reason to buy a home RIGHT NOW before having your cash reserve built up, but eventually, a fixed house payment will help reduce the risk of being on the wrong side of rising rents (your own rent!)
  3. Start acquiring cash flowing rental properties and dividend paying stocks. As dividend payments come in, reinvest them periodically, and as extra rent comes in, use it to pay off investment debt.
  4. Plan to increase your inputs in various investing vehicles each year to compensate for lost power of the dollar.
This list, while seemingly detailed, is very non-specific on when to do each, or how much time it should take, etc. That’s because everyone is different. You can send me a note if you want to chat a la email, skype or on the phone to talk about things in more detail. There are no promises to be made when it comes to dealing with inflation, but certain approaches are better than others. The bottom line is that investing in real estate and cash yielding stocks are good tools that have a long history of helping to compensate for inflation. Both of these things are better than gambling on mutual funds being able to match or exceed inflation through the pure appreciation of mutual funds.

Are your stocks paying a special dividend to avoid taxes?

I hope you enjoyed my recent series of articles on net worth. I’ll definitely revisit the topic in the future. But right now, I wanted to address something else that has been happening recently.

An interesting phenomenon is happening. Many companies are paying special dividends as the year comes to a close. In fact, I just saw an article where the Washington Post Co. is planning to pay it’s entire 2013 dividends on December 27, 2012. Some but not all companies are paying an extra dividend.

The companies that are doing this are trying to hedge the risk of Congress not reaching a deal over the so-called “fiscal cliff” and thus seeing tax rates go up on January 1st. This especially extends to taxes on dividends. Right now, unsheltered dividend income is taxed at 15%. If nothing happens, then it will go back to up to the owner’s regular income tax rates next year.

What does this mean for a long term dividend investor?

I’m definitely one of them, even if stocks aren’t a majority of my investment portfolio. How am I prepared for these new tax rates? Well, I have rebuilt my investment portfolio to be tax smart.

  • Most of my stocks are inside a Roth IRA, meaning any dividends I receive are not taxed.
  • I have units of an MLP in a non-tax sheltered account. MLP dividends are mostly tax free and don’t benefit from IRA shelters.
  • Real estate depreciation doesn’t appear to be on the table, and most of my depreciation only shields rental income.
  • And I haven’t heard anyone talk about adjusting tax laws in regards to EIUL policies, so that is secure for now.

This means I have things structured so that most of my wealth building won’t be impacted heavily by these daily headlines.

I used to invest in mutual funds wrapped in a 401K and also had some stocks, but I didn’t really know what I was doing, because I didn’t take an active role in researching things. If you pulled me over and asked me what my long term wealth plans were, it wasn’t more than, “throw money into my 401K.” On rare occasion I looked at the stocks that I owned and made changes, but not many.

Now I monitor things much more closely. I only have five stocks, which means I can keep track of them. None of them appear to paying a special dividend, but I’m watching for any announcements.

Bottom line

Essentially, my biggest exposure is going to be any rising income tax rates and social security tax rates on my active income from my job. If you read The Millionaire Next Door, one key thing that is pointed out is that most millionaires don’t earn a $1 million/year, but instead have a net worth exceeding $1 million. Most of these millionaires aren’t high income earners like doctors and lawyers. This lets them duck the high marginal tax rates while building business equity, real estate holdings, and strong stock portfolios.

So what changes do I have in mind if taxes go up next year? Not many. I would normally be concerned if one of my stocks decided to stop paying dividends. One of my key criteria in stock selection is to pick one that not only has a history of paying dividends but also of increasing the dividends every year. If one of my stocks decided to pay all of its 2013 dividends in the next couple of weeks, I will keep an eye on it, to see if they resume regular payments in 2014. If they put on the brakes, then I will do more research at that time to see whether to keep it, or close my position and hunt for a replacement.

While Apple has started paying dividends, I don’t treat it the same way. I bought it for appreciation. Berkshire Hathaway doesn’t pay any dividends so it isn’t subject to the new dividend tax rates either. Both of these positions are based on the long historical growth they have exhibited, and the fact that they aren’t my at the top of my wealth building plan. Is your wealth building plan setup to take some knocks? Send me a message and we can talk about it.

Apple (AAPL) and General Dynamics (GD) declare dividends

Apple (AAPL)

Earlier this month, Apple made a dividend payment of $2.65 per share, generating a 1.7% or $10.60 annual dividend yield. This is a part of their plan to distribute $2.5 billion (that’s billion with a “B”) to shareholders every 3 months. If you didn’t catch that, they are paying out $2.5 billion EVERY QUARTER.

They have indicated they also plan to use some of their cash to initiate buying back stock. As with any company, this has historically caused stock prices to rise, with less shares being available. Companies in strong financial positions can do this to increase the price as well as increase the interest others have in the stock, both positive things to do when the company is strong. They also indicate they will have plenty of cash after all this to still continue product development and valuable acquisitions.

Over the next three years, their combination of dividend payouts and stock buybacks is estimated to total $45 billion in cash.

It’s important to note that when I purchased Apple stock, I had not planned on buying it as a dividend performing stock, but instead hoping it would continue it’s long path of growth. If I was seeking dividends, I wouldn’t have bought such an expensive stock that had such a low yield. I say this because I don’t want anyone to think I am endorsing Apple as a strong dividend paying stock.

I admit it’s a bit of a gamble, but I run on the assumption that people will want to keep buying their products. Things like the iPod, the iPhone, and the iPad have been incredibly successful and altered the market of consumer devices. In the software development circles that I run, the Apple Macintosh laptop and desktop computers are very popular, at least amongst software developers. I started watching Apple stock months ago, and only wish I would have started sooner. Given all that and their historical growth, I believe their stock price will continue to grow surely and steadily. The fact that they passed Exxon last year as the biggest company ever ($607 billion market value) helps out as well.

General Dynamics (GD)

On August 9th, General Dynamics paid out a regular quarterly dividend of $0.51 per share, resulting in a $2.04 or 3.2% dividend yield. This is good news, because they are keeping up with their previous dividend payouts. I happen to have already received a payout relatively soon after I bought my first position and I first posted about GD, so it was nice to receive more cash to eventually invest in more shares. I am planning to accumulate more dividend holdings before deciding which of my current stocks to invest it in.

To buy or not to buy…

As dividend payouts build up in my account, I have a decision to face: invest immediately to get more of the action, or wait a few quarters and do this once-a-year. If I invested every dividend payout as they occurred, that might put the money back into action faster, but I would be forced to possibly pay more broker fees. For now, it seems better to save up all the dividends and consider doing that once a year, and definitely when prices are at their best levels.

This is another benefit of long term dividend stock investing: there is no rush so I’m not forced into buying at a bad price. I can wait a year, two years, or even more, until I’m comfortable with the price and yield to continue my position. Though I do hope it won’t be two years before I see one of my holdings showing a good position to increase.

Finally, if you plan to purchase any stocks of your own, don’t just buy what I’m buying. Perform your own analysis, understand the company and its products, and make an informed choice.

Disclosure: Long AAPL, Long GD