Follow the dividend investment decisions of a person who has no background in financial investment and wishes to take control of their financial future.

Experience with New M1 Finance Account and It's Awesome! - 13 Jan 2019 21:30

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Background

Two years ago this month my wife went back to full-time work and after 15 years we became a dual income family once again. My wife did not go back because she was bored or looking for new challenges. On the contrary she loved being a stay at home Mom and kicked ass at it.

Unfortunately, she had to go back to work out of necessity as my paycheck was no longer paying the monthly bills and we were racking up considerable credit card debt to cover the monthly shortfall. Luckily, our expense gap was small enough that she could choose a job that she enjoyed and not worry about a large salary. In the end she was offered two jobs; one in a medical practice as a phlebotomist and medical assistant for $45K/year and the other was working with children as a paraprofessional for $28K/year. The medical job had the better pay but she dreaded going back to an office environment. In the end she chose working with children and the lower salary but much higher job satisfaction and has loved her job since.

With the additional income we focused on one thing, eliminating all of our credit card debt. It took two years but we were finally free and clear of credit card debt last September. Also, with our mortgage getting paid off last summer we no longer need my wife’s additional income but she does love her job and decided to continue working. With her decision to continue working she asked how she can start her own savings since her employer does not offer a 401K so we started her with an M1 Finance Roth IRA account.

The account was opened with a $500 deposit and scheduled a weekly deposit of $10 and will double the contribution rate every year until she hits the IRA maximum of $7000/year.

Experience Opening the Account

This was the easiest account to open and fund. If you have your bank routing number this is a pretty quick process which took us no more than 15 minutes and this included making an investment pie and scheduling the recurring deposits. By the next day her account was credited and her first transaction was executed. This process was extremely painless and we created a pie with 31 individual stocks with a 50% weighting towards dividend growth and 50% towards REITS. After four additional weekly deposits of $10 here is what the portfolio looks like:

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Anyone not familiar with M1 Finance it’s a pretty straight forward process of creating a pie (kind of like your own mutual fund). You then populate the pie with individual stocks or ETF’s (referred to as slices) and assign a percentage value to each one and M1 finance will then take your initial deposit and buy each stock to the percentage you allocated (including fractional shares) and charges no commission to buy. A single pie can hold a maximum of 100 individual stocks or ETFs and you can even nest pies within pies as long as all the pies do not exceed 500 individual stocks or ETFs. Not sure who could ever buy 500 stocks but the option is available.

The Brilliance of an Algorithm

As easy as it was setting up the account what was more impressive was how additional investments are made after the initial trade.

The algorithm that M1 uses is nothing short of brilliant. Most would assume when a subsequent investment is made it goes out and buys all the stocks defined in your pie based on the percentages you set but that is not how it works. The way the algorithm works is that it analyzes your portfolio to determine which slices are above or below their assigned allocation and then executes a buy order that prioritizes slices whose percentage allocation is below what you assigned and gives the least priority to stocks whose value has exceeded your allocation.

Below is an example of this with my wife’s account. The initial investment bought 31 stocks, but the subsequent investments bought 20, 26, and 23 stocks. The Dec 28 buy order of 20 stocks was primarily due to an overall price drop in REITs and focused the bulk of the investment dollars to REIT stocks. With, the trade of 26 stocks the largest amount of money went to Apple (APPL) which reflected the recent stock drop.

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This is such an amazing process and it puts every investment penny to work. We even had had a buy for $0.03 yes 3 cents. Not sure how effective this is but at least we are not paying a commission for it. This process is so different from what I have to go through with my regular account. In that account I wait until I have $600 to $1000 and then decide to buy 1 stock. Typically I have several potential buys but have to go through the process of down selecting to just 1 and even then the investment is not a full $1000 because I cannot buy fractional shares. M1 finance eliminates that decision process by investing in all of the best opportunities at once and invests every penny via fractional shares.

Conclusion

Overall my opinion of M1 Finance is that for the average person or buy & hold investor when used with regularly scheduled investments it is the best wealth building tool second only to a 401K! It accessible to anyone with a computer or cell phone and a checking account. While it takes a $100 to open a brokerage account ($500 for an IRA) you can set recurring deposits at ANY amount.

If you do not make a lot of money you can set the recurring deposit anywhere from $1 to $10 per week and as you make more money you can increase the amount. In theory, you could initially not deposit the $100 minimum and just setup a recurring deposit and when your cash balance hits $100 it will then make the initial investment. This is what makes M1 such a fantastic tool, it brings the ability to invest to everyone regardless of the size of your paycheck!

As great as M1 Finance is there are drawbacks especially for more experienced investors:

  1. Limited asset class – OTC or pink sheet stocks as well as mutual funds and bonds are not available to trade
  2. No covered calls – If you were looking to make some additional income with options you cannot do it with M1.
  3. No limit or stop loss orders – M1 trades only once a day at 9am Central Standard Time and you are subject to whatever prices are at that time

While M1 is a great platform it is far from perfect and there are some improvements that need be made:

  1. Lack of Educational Material – M1 is too flexible for people new to investing and having too many options could be confusing. While there are pre-made pies available there is little material available to help newbies navigate on what to choose.
  2. Research Tools are Too Basic – The research tools to search stocks & ETF’s is near useless in its current state, you would be better off using an external search tool.
  3. No Portfolio Downloads – This seems like it should have been a no brainer but M1 does not allow you to download your portfolio as a spreadsheet or CSV file.
  4. No Community or Blog – A community for members to share and comment would go a long way especially for those new to investing
  5. No Reports for Income – While it does state what yield a pie has it does little to tell you how much income you are generating.

Do you invest with M1? I’d love to hear your experiences. - Comments: 0

New Buys PEP and ABBV - 11 Jan 2019 15:35

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Friday morning I added to my Pepsico (PEP) position picking up a few shares at $107.83/share with a 3.45% dividend yield of which will add $34 to my annual forward dividend income.

I love Pepsi products this time of year as it is the top product for Super Bowl parties everywhere! I can't remember a single party where their chips, dips, or soda wasn't available to munch on. Guess that makes PEP my Super Bowl pick for 2019 :)

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My buying did not end with PEP, I also grabbed a few shares of AbbVie(ABBV) at $87.82/share with a 4.7% dividend yield that will add $47 to my annual forward dividend income.

ABBV is going ex-dividend on Monday so this was a buy with a quick dividend payout and I was lucky that the market discounted the price just before. - Comments: 0

Book Review: The Snowball Effect - 06 Jan 2019 12:15

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Published in 2016 I am a little late getting around to reading this book but I did receive it as a Christmas present (it was on my list for Santa) and was thrilled when I unwrapped it. Now that I have finished reading the book here is my take.

The book is broken up into 7 chapters but the most powerful chapters that deliver the strongest message are the first three chapters. The first chapter focuses on explaining market risks and debunking the myth that stocks always go up. He walks you through each secular bear market starting in 1906 through 2011 and shows the reader through factual data that secular bear markets are more common than secular bull markets. Being a history buff I loved how the author walks the reader through secular bear market and the historical events unfolding that influence each event.

The next two chapters focus on how dividends are an important of the market return and the power of compounding (dividend reinvesting) and like the previous chapter uses actual data to prove his points. The message of these first three chapters is fairly direct; average investors should not focus on market price but invest for dividends and let the power of compounding do its thing to give you the “Snowball Effect”

The following chapters 4 thru 7, while not as powerful as the first three, are still significant. The reason they are not as strong is that they are not intended to deliver a message. Instead these chapters walk you through the various income paying market instruments that can create the snowball effect. Chapter 4 discuses small/micro-cap dividend paying stocks, chapter 5 discuses bonds, and chapter 6 discuses covered calls (options). The final chapter 7 is a summation of his Top 100 dividend paying stocks and how to develop a portfolio and provides an extensive appendix resource listing of various stocks.

Overall I enjoyed this book and highly recommend it to anyone who is about to venture into investing, The only thing I wished the author focused on a bit more was inflation risk and dividend growth. While the author does touch on the subjects as well as their importance, it is my opinion that a couple chapters devoted to just these concepts would have made this a perfect book

If you haven't read this yet then go grab a copy. The first chapter alone was worth the price. - Comments: 0

New Buy T - 05 Jan 2019 01:31

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I'm a little late on reporting this one but I got one last buy in before the end of the year. Last Monday on New Years Eve I picked up a small position in AT&T for $28.46/share and a 7.16% dividend yield which will add $48 to my annual dividend.

I realize T is far from a growth stock and its annual dividend raise isn't even big enough to beat the rate of inflation but when the yield is up above 7% its pretty hard to ignore.

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- Comments: 0

Scheduled Update to Inflation Beaters Index - 05 Jan 2019 00:10

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Just letting everyone know I am working on updating the Inflation Beaters Index. The final 2018 inflation rate does not get published until mid-January. Once the final number is out I'll be hitting the keyboard, updating formulas and adding & deleting new members.

With all that said I am hoping to have a new list and summary of changes by mid-February. In the meantime thanks to everyone for supporting. - Comments: 0

December Dividend Income - 01 Jan 2019 12:29

Tags: monthly_income

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After 31 years of clocking in and out of work and religiously saving 10% annually every year, in good times and bad, I have decided to share my monthly dividend income to show what regular saving and investing can accomplish.

This month I made $2,470 and it was a nice way to wrap up 2018. This is my first month I can do a historical comparison as I just recently started tracking month to month dividend income. Quarter over Quarter my monthly dividend increased $217 or 9.65%. However, this number is slightly inflated as my ETFs make a double distribution payment in December. If we discount the extra ETF income the increase is $86 or 3.83%. Not too shabby and extremely pleased.

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Looking at my 3 year goal metric I improved my percent complete by 0.25% from last month. This was a little less than I had hoped but it was the holidays and I may have spent more than normal. From here on forward over the next 36 months it needs to improve by 0.833% a month. Hopefully things pick up on the income front or I can reduce an annual expense.

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On the expense front I have kept my credit card debt down to zero. With the holidays behind us and all college tuition bills paid my expenses should be fairly stable until July. I did have an unplanned expense as I had to buy a new stove at total cost after taxes and delivery was $556. Two years ago this would have set me back but with my credit card & mortgage debt gone I had the money but it came at the expense of not buying a snow blower I had been saving for.

I realize a snow blower to some is a luxury but two months ago we had an early season snow storm and I had a sore shoulder for three weeks after shoveling. Went to the doctor and discovered I have early onset of arthritis in my right shoulder. It should be fine as long as I limit the stress I put on the shoulder. Luckily, our winter has been mild since that time and we have not had a snow storm since. Looks like I will have to wait until next month to get the snow blower and hopefully mother nature will be accommodating. It is a bit of a gamble as I live in the northeast and the odds are against me.

To wrap things up I’d like to wish everyone a Happy 2019 New Year and hope that all your plans, goals and ambitions for the New Year come true! - Comments: 0

Weekly Portfolio Summary - 29 Dec 2018 13:10

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Portfolio Activity

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An interesting week to say the least. Had a couple of my business development companies pay dividends this week and with the markets down they DRIP’d at some pretty low share prices.

I would not mind stock prices leveling off at these levels so I can capture some more nice DRIP conditions especially since the first month of a quarter is my largest dividend paying month.

Portfolio News - (In Case You Missed These Headlines)

AbbVie (ABBV)

Brookfield Renewable Partners (BEP)

International Business Machines (IBM)

Interesting Blog Posts or Articles

Stocks Get Cheap on Christmas Eve by the Conservative Income Investor
2019: The Year Without A Beer by Cheesy Finance
When You Know You are About to be Laid-Off by Dividend Dozer - Comments: 0

New Buys KHC and VER plus some last minute selling - 28 Dec 2018 11:04

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On Monday I decided to trim back my portfolio and sold three stocks; Versum (VSM), Keurig Dr. Pepper (KDP), and Analog Devices (ADI). All three stocks were acquired from buyouts or spin-offs, however, their position in my portfolio was so small that it was becoming a labor to track all three so I decided to cut them loose. These sells reduced my forward annual income by $66.

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On Wednesday I bought Kraft-Heinz Corp (KHC) at a price of $42.52 with an annual dividend yield of 5.88%. At this price it was just too cheap to ignore so I made the move to capitalize. This buy adds $58 to my annual forward dividend income,

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My second purchase was a small increase in my VEREIT position inside of my ROTH IRA at a price of $7.10/share and a yield of 7.89% which adds $24 to my forward annual dividend. Luckily I bought this a day ahead of the ex-dividend date so it will immediately start contributing next month.

Overall between the sells and buys my forward dividend netted out to an additional $16. Not the greatest jump but and increase none the less. I still have a little cash left over from the selling action so not sure if these are the last buys of 2018. - Comments: 2

Weekly Portfolio Summary - 22 Dec 2018 14:35

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Portfolio Activity

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The last week has been pretty rough for the markets and many a portfolio. But now is a time to relax and enjoy time with family and friends. Thanks to all the readers and have a great holiday!

Portfolio News - (In Case You Missed These Headlines)

AbbVie (ABBV)

Air Products (APD)

Preferred Apartment Communities (APTS)

General Mills (GIS)

Hasbro (HAS)

Merck (MRK)

Newtek Business Services (NEWT)

Pfizer (PFE)

Qualcomm (QCOM)

Ryder System (R)

Sabra Health Care (SBRA)

AT&T (T)

Interesting Blog Posts or Articles

Five lessons I learned while making a documentary film about FIRE by Get Rich Slowly
HOW “NO” HAS CHANGED MY LIFE by Mr Free at 33
This is exactly how much families must earn in each state to afford housing, child care and food
Dear Young Boys: Let’s Talk About Money - Comments: 0

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