That’s right I am back at it again folks! Just when you thought that everything can be strategized and plotted out on a map, until you come to this site and realize – you can go deeper, simpler, easier and automatic. I am trying to make this investing journey an automated process as much as possible, as then you can allow yourself to focus on going forward, the everyday variables, planning further with the future and enjoying more of the moment now.
A new profound strategy in my mind had begun years ago, Bert and I would always yell at each other to just buy a stock if it fits our Dividend Diplomat stock screener. But, for more than likely 50% of the time, we wouldn’t pull the trigger and instead, cash would sit, earning 0.75% interest. Then, I fully automated my paycheck into retirement accounts – the 401(k) and the H.S.A. Full-on automation, it felt incredible. However, I wanted more of that in my dividend stock investing life. Heck, how am I supposed to hit these goals that I’ve set for 2017 as it relates to forward dividend income?! I will call this my Automated-Dividend-Strategy. With the Automated-Dividend-Strategy in play, one can enjoy the many benefits and also trump the many factors that keep us from being consistently in the market and upset when we don’t make a purchase, the cold-feet-investing syndrome (haha). Here, I will describe it based on the facets that it overcomes and why it makes sense. In a nut shell, this is picking a company that fits your screener, and buying them until either you have the position you want or the metrics change. Here is a deeper look into the strategy:
Research To Set & Forget
Similarly how I said if you max out the IRA for 10 years, that you can set it and forget it, this strategy is similar. You perform the research on a stock you like, such as one of my Stocks to Look Forward to in 2017, and once you know what price range you’d pay, you can set that stock as the one you want to build a position in. For example – in that list, I love Johnson & Johnson (JNJ) and if I thought they were fairly valued anywhere under $113.00 per share, as their P/E is less than 16 (and stays less than 16), with the yield I am looking for – then I should continue to make automatic investments into them on a consistent basis until I have the right amount I’d like! Don’t have $10K coming in every week? I sure as heck don’t. But what you can do is – have your brokerage set to perform a trade every time $1,000 enters your brokerage (very easy to set up through your auto-pay at your employer), to trigger the purchase of the stock you’d like to buy. Of course, you have to be aware if price movements sky rocket or change by a few %, to ensure you switch the plan off, in order to stock pile your fresh capital! Every dollar counts, always remember that, so big price swings can make a difference. Also, I have found that notification alerts on stock price movements come in handy when monitoring a few stocks – I’m lucky that I can set those up and I suggest taking a look at it : )
“Sharebuilding” or Asset Building
An example of how to set up this strategy, can be from one of my latest purchases, which I sadly did not end up employing because I’m an idiot (I should have had this “on” for Procter & Gamble (PG)!); is the asset building automated plan. Luckily my brokerage account is with the former “shareuilder” and it is in fact called the “sharebuilder plan”. What is even funnier – the trading fees, as it is criteria oriented with how you can trade, is $3.95 vs. the other trades of $6.95. Therefore, if this is turned on and the cash is in the account, it will trigger the stock on the most-up-coming Tuesday at the market order. There’s nothing better sometimes then checking at lunch and seeing more shares of a high profitable company in your account that is now giving your more dividends. So this is two fault – it is the plan that is set up for automatic purchases, as well as lower fees. Not too bad.
This strategy takes out the pure emotion that we have when we are making decisions with our… money. Yes, so much emotion is tied to the usage of our money it is crazy. For good reason, I believe, as we worked hard for it and have given up part of our time (most of us) to receive it. Therefore, I could see why there is an emotional bond to it. It gets even more emotional when you have potential bills coming up. However, hopefully you have planned for this and/or have an emergency fund set for it (however, I keep my cash scarcely low!). Therefore, if all of that is taken care of, one should consider my strategy above, as you remove the emotion and it automatically makes the purchase for you, without thinking about it. Boom, more stock and more dividends from a strong fundamentally sound company. Not a bad idea right? Freedom is that much funnier when it is being taken care of partly behind the scenes, isn’t it?
Not an all or nothing strategy
What’s even better about this – is that you don’t have to throw the boat on an investment. Like an at-bat in baseball, this can allow you to swing a few more times as well; so you can do $750-$1,000 at a time, consistently, at a lower trading cost (in my case). Therefore, if the stock of, let’s say Target (TGT) was at a price point you liked – $70 per share and you bought some at $750; but then it gets lower – you now have a better chance of having more capital to buy again if it drops, in this case it’s at $63 and change, so you can buy it again, automatically and lower your cost on average. Remember, I never try to predict the stock market and the direction it’s going!
That will be the strategy of 2017. I want to automate more of the actual “Action” and still maintain or increase my research. As long as a stock is undervalued – why the heck not? If something in life comes up, then you can switch this off and use your capital elsewhere, where needed. What’s nice about this – is you can now focus on today, tomorrow and the next day without wondering if you’ll make any time for making a stock purchase or worrying that you’ll miss buying one of your watchlist stocks. What’s unique, in my situation, is the lower fee cost, as I am not sure I’d do a lot of this at a higher trading cost; as 10 trades at $6.95 = $69.50 and 10 trades at $3.95 is $39.50; quite a bit of difference if you ask me.
However, it’s all relative in this game – as think about the pure act of what we are doing – we are saving money and buying assets that produce cash flow – we are doing something right in the fortunate situation that we are in. What do you think of this situation? Am I too crazy in the head trying to reduce the emotion and time it takes to invest? Am I trying to simplify things in a “too simple” fashion? Do you also have a unique characteristic to your brokerage where you can reduce your fees in a plan such as this? I would love to hear your thoughts related to the topic! Thanks again everyone, best of luck and happy investing! Talk soon.