| | | Thanks for sharing your monthly updates Steve. I appreciate it.
I would like to comment on something you said.
>>> At an all time high, but imho, those that say "my portfolio is at an all time high" without context, aren't saying much. I'm proof of that. <<<
I think one needs to put things in proper perspective.
In last night's football game between the Giants and the Redskins, the Skins were in a 2 minute drill trying to drive for a needed touchdown. They thought they picked up a first down on one play as the chains on one side of the field moved to show where the next first down marker was. In reality, it was third down. They ran a play that didn't gain much yardage and found out it was then fourth down.
The Skins sideline went crazy. They thought it was first and ten. It wasn't. It was third and short. The coach said it's obvious that if he were told it was third down, the play call sequence would have been different. The goal of making first down would have caused them to call a different play.
Portfolio's are like that. Although most folks try to chase the market return, other portfolio's are more clearly defined with specific goals to achieve and it doesn't matter what a benchmark does or doesn't do.
In your case, your portfolio may be under-performing the NASDAQ in the time frame you're using to measure results, but what if all of your money were placed in the NASDAQ? What type of income stream would you have then? Would the capital gains make up the difference? Do you want to be in a position where you have to depend on capital gains to provide cash for living expenses? Does your income stream beat what the benchmark could have provided?
The answers to these questions determine your play calling sequence.
Since I don't know the answers to your questions, I do know the answers to mine.
I publish the results publicly of one of the portfolio's I manage, Project $3 Million, which you have listed in your header message. Project $3 Million has very specific goals it wants to achieve.
PRIMARY OBJECTIVE:
Income Replacement! ... The objective is to start earning an income stream now to replace the income that will be earned throughout the working years. The goal is to achieve $10,000 per month income in retirement, and not have to sell any assets to do so.
The objective also includes having the income stream continue to grow at a rate above inflation.
A portfolio of $3 Million with a yield of 4% will accomplish the $10,000 per month in income. Hence the title of this portfolio ... Project $3 Million.
MISSION STATEMENT:
To earn an income stream that is reliable, predictable and increasing.
With the goals established and the Mission Statement in hand, the play calling sequence then determines which positions to purchase and how they should be managed. This would be covered under the strategy and determines the tactics one would use.
STRATEGY:
To focus on the safety of the dividend, then to focus on the growth of the dividend, and then to focus on the total return. The formula to be used to put this strategy into effect is what I call "The Success Formula That Never Fails."
High Quality + High Current Yield + High Growth of Yield = High Total Return.
TACTICS:
To contribute $500 per month to the portfolio, look to earn 8.25% annually, compounded over 40 years (to age 65).
With all of this in mind, I ignore the market or benchmarks of any kind. The reason I ignore them is because I know specifically where the portfolio needs to be at the end of every year looking out 40 years.
At the end of 2013, the portfolio needs to have a total market value of $86,059.44 based on where it started in 2008. At the end of 2014 the market value needs to be at $100,643.33. At the end of 2015 the total market value needs to be $115,499.83.
The portfolio value at the close this past Friday (Nov 29) was $109,325.01. The portfolio is ahead of schedule towards the $3 Million, has already achieved the 2014 results and is halfway through the 2015 results.
If the market corrects in 2014 and 2015, I have a buffer, or a margin of safety to help keep the portfolio on track. More importantly, my play calling sequence is set up to play a strong defense. Most of the positions in the portfolio are designed to protect the downside. When you have a strong defense, you only need an adequate offense to win the Super Bowl.
I expect the portfolio to under-perform the market in years like 2013, but I expect the portfolio to beat the market over the long term due to its defensive nature.
The Primary Objective is income replacement. The income stream in 2013 is up 20.6% year to date over the same time frame in 2012. Some of that came from the added funds that were contributed to the portfolio on a bi-weekly basis, but some of it came from dividend increases.
The portfolio held 25 positions and all of them raised the dividend in 2013. The average dividend increase for these positions was 8.3%. My objective is to grow the portfolio at an 8.25% rate. Note how the dividend growth matches that objective.
My play calling sequence was designed to put the pressure on dividend growth, something I have the power to choose, and take the pressure off of share price appreciation, something I have no control over.
Therefore, what the market does or doesn't do, has no relevance to me. What is relevant is that the predetermined objectives are not only being achieved, I am exceeding them, and I'm doing this through using conservative tactics.
project3million.blogspot.com
Your portfolio, although designed differently due to different objectives, is probably far ahead income-wise than it would be if you invested in an Index.
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