Year End Wrap-up, Rebalancing and Review

It is that time of year to step back and reflect on many things. One of the most predominant thoughts I have is how lucky I am to be in this situation in life-personal, family, health, career and financial is all good. This blog has allowed me to centralize and organize my financial and investing philosophies and methods. Here is an attempt to begin to record what those thoughts are.


I am 50 years old with a wife and 2 kids. I want to invest so that I receive income and growth in the portfolio. Growth will become less important and income will become more important as the years go by. I am still in the accumulation phase of investing but will transition to more of a distribution phase later. In order to measure the progress, I will be posting the portfolio holdings, current values and exact income produced soon. To use a baseball analogy, I am too old to really risk thousands 'swinging for the fences' and buying startups and penny stocks. I just would rather put my bat on the ball and just put the ball in play. A grounder to the infield will work! Hell, I would be satisfied with a foul tip. So I believe in getting small, steady, reliable gains in the form of dividends and also some low risk covered calls or puts. I do have one or two growth plays-these are the riskiest equities I own-ARNA, F, and in and out of GLW. To sum it up;

I want to invest in low risk companies with a track record of safe and growing dividends. Criteria that are required include:
1. PE ratio of 15 or less upon purchase
2. Minimum 3% dividend yield (unless it is a growth play)
3. Minimum 5% 5 yr dividend growth rate (unless it is a utility or a telecom)
4. At least 20% off its 52 week high
5. Market cap $500M minimum
6. Payout ratio 75% maximum

I receive approximately $1500 a year in dividends from my portfolio. My goal is to grow the income to at least $4k by the time I am 55. At 55 I would like to semi-retire. For a better description of my plans and interests, see my profile.


What else do I need to do? Learn. I desperately need to learn more valuation techniques and I need to seriously learn options. I am seriously considering starting an investing library. I read constantly but a methodical approach would work better than scattered reading. Time is the biggest constraint-there are not enough hours in the day to learn and produce all that is desired so choices have to be made.


That's it! Simple. The best it gets. Happy holidays, Merry Christmas and a profitable New Year to everyone. Oh yeah, health and happiness too!

Fiscal cliff approaching

With the fiscal cliff approaching, there appears to be 2 possibilities to think about.

1. No agreement is reached and we lose the Bush era tax cuts.
2. An agreement is reached that involves tax hikes and/or government spending cuts.

Both options have negative consequences for the stock market. In a downward headed market, generally we want to keep cash on hand and use covered calls on stocks we wouldn't mind selling anyway. Even in a major pullback, absolutely do not sell core dividend paying blue chips-ride it out. The tax consequences are not known yet but on small portfolios < 100k it won't make a huge difference. Stocks to watch-LINE, LNCO, GLW, F, COP, PSX, CVX, INTC, ARNA.