But doesn’t dividend investing take too much time?
Dividend growth investing does require a time commitment. The time is spent scanning the market for opportunities, analyzing companies through reading annual reports, analyst reports, and filings. The time is also spent reviewing your portfolio regularly as well. However, once you have a certain level of understanding behind the companies you own, updating that knowledge should not take as much time.
In general, you can spend about 10 hours/week easily on average, with a lot of it spent in the February – April period when most annual reports are sent out. If you are unable to dedicate time to managing your individual portfolio, you can outsource it by focusing on stock or bond funds. However, depending on your choices, you might end up paying a steep price every year for this privilege.
What about bonds/real estate/gold?
I believe that a portfolio should be well-rounded with different asset classes that do well under various conditions. I would like to have a 20% – 25% allocation to U.S. treasuries when I retire, which would protect my nest egg for a Depression like scenario like the US experienced in 1929 – 1933 or Japan between 1989 – 2013.
I am not capable of managing real estate myself, but instead focus on Real Estate Investment Trusts.
I do not own gold/silver except for a few coins for numismatic purposes ( I also used to collect stamps at one point). I do not see much value in it in a typical investment portfolio. I like to own assets that have a productive capacity such as stocks or real estate for example. However, gold has been the asset to own if you were part of a minority that is being persecuted and you need to leave (Jewish community in Poland in 1939).
What are your favorite resources to research dividend investing?
I read annual reports, where I obtain most of my data. I use the Securities and Exchange commission website for this at SEC.gov. I also use Yahoo! Finance to keep tabs on my many holdings, in a personalized watch list. I also have a few favorite authors on dividend investing:
Why spend all that time on dividend investing, when no one can outperform index funds?
As a dividend investor my goal is not to outperform the S&P 500, although I do compare increases in my dividend income to increases in S&P 500 dividends. The S&P 500 is a list of stocks which is arbitrarily selected by a committee in Standard & Poor’s according to who knows what criteria – it is not even a list of the 500 largest companies in the US. The 40 largest companies in the index account for almost half of its weighting. The committee in charge of maintaining S&P 500 included Berkshire Hathaway only a few years ago.
During height of the dot-come bubble in 1999 – 2000 they added a lot of so called “new economy stocks”, right before they crashed and burned. My goal is to generate a growing stream of dividend income every year, and to achieve that I focus on companies which I believe are undervalued today, have solid competitive advantages that I understand, and will likely increase earnings and dividends over time. I have a friend who owns an auto repair shop. I never ask him how his business is doing relative to the S&P 500, or else he would think that some of the screws in my head might be failing.