It is days like we had yesterday that will validate your commitment to dividend paying stocks. If Wal-Mart goes from $48.00 to $44.00 (not that it did) the dividend is still $.67 a year and that goes up every year. That is income you will receive year after year without having to get up and go to work in the morning. When there is a "sale" like the one we had yesterday you can get the income stream cheaper.
I don't enjoy seeing the value of my portfolio get hit hard, however when these times occur the most exciting thing I can do is deploy more Washington's to work for me and my family.
I will be posting more, I have just been focused on finishing my MBA. So check back from time to time.
Have a productive day,
Jake Blake
Wednesday, February 28, 2007
Thursday, February 22, 2007
Financial Freedom
I am 4 years away from retirement (although I am not going to retire yet). What I mean is that in about 4 years my portfolio will generate enough income from dividends and interest to cover all of mine and my wife's monthly operating expenses. That has been one of our big focus points for the past 5 years.
Wealthy to me, is when your assets can sustain your lifestyle no matter what and rich is when your assets toss off more income than you require. Once we hit that goal we will continue to build the portfolio, however we will decide then if where we are working really makes us happy. If not, then we can go and do other things for earned income. Imagine not having to work, but if you do work you do something that makes you happy.
We have been keeping a close eye on what I call our monthly operating expense (MOE) and an even closer eye on how much closer we get to covering it every month. Although we have money invested in non-income producing assets (NIPA) the majority of our assets are invested in income producing assets (IPA). The NIPA's will eventually be converted to IPA's, however they currently tend to gain more annually then IPA's where they are at. So once they are large enough they will be converted to high paying bond investments.
This strategy allows me to not be concerned with the market's volatility, because a diversified portfolio of IPA's will continue to pay out the dividend no matter what the stock does (if they cut the dividend, then I cut them from my portfolio - although I should have seen the cut coming if I have been doing my homework). In fact the lower the stock price the cheaper I get to buy the perpetual stream of income. I never think about selling unless the company starts to show forms of weakness. 4 more years and my Monthly Portfolio Income (MPI) will equal my (MOE). From that point forward as my MPI grows, I can grow my MOE or just indulge in bigger and bigger toys from time to time.
Just a follow up...
(MPI < MOE) = Dependant on earned source of income.
(MPI = MOE) = Independently wealthy.
(MPI > MOE) = Rich.
Have a productive day,
Jake Blake
Wealthy to me, is when your assets can sustain your lifestyle no matter what and rich is when your assets toss off more income than you require. Once we hit that goal we will continue to build the portfolio, however we will decide then if where we are working really makes us happy. If not, then we can go and do other things for earned income. Imagine not having to work, but if you do work you do something that makes you happy.
We have been keeping a close eye on what I call our monthly operating expense (MOE) and an even closer eye on how much closer we get to covering it every month. Although we have money invested in non-income producing assets (NIPA) the majority of our assets are invested in income producing assets (IPA). The NIPA's will eventually be converted to IPA's, however they currently tend to gain more annually then IPA's where they are at. So once they are large enough they will be converted to high paying bond investments.
This strategy allows me to not be concerned with the market's volatility, because a diversified portfolio of IPA's will continue to pay out the dividend no matter what the stock does (if they cut the dividend, then I cut them from my portfolio - although I should have seen the cut coming if I have been doing my homework). In fact the lower the stock price the cheaper I get to buy the perpetual stream of income. I never think about selling unless the company starts to show forms of weakness. 4 more years and my Monthly Portfolio Income (MPI) will equal my (MOE). From that point forward as my MPI grows, I can grow my MOE or just indulge in bigger and bigger toys from time to time.
Just a follow up...
(MPI < MOE) = Dependant on earned source of income.
(MPI = MOE) = Independently wealthy.
(MPI > MOE) = Rich.
Have a productive day,
Jake Blake
Friday, February 16, 2007
Pursuit of Financial Freedom
I still remember what it was like to pay off the last of our debt. Talk about a sweet feeling. It was the first real step to becoming financially free.
My wife and I had started building our wealth about a year after we met (going on 5 years now). We were going to open a coffee shop back then. We had built a b-plan, lined up financing, the whole works. Just before we signed the lease we decided to hold off. I'm not sure that was the best decision, however I am sure that we are in a great financial position now, so brewing coffee could have been better or worse but it matters not at this point. What we decided to do was buy our first rental property and we ended up buying two and our primary home all within a year and a half. It was a fast time and we were planning to buy one rental every six months for 5 years. That would have provided us with about $350,000 a year in cash flow. We stopped because the state in which we live raised property taxes to a level that created a negative cash flow each month. So the more we bought, the broker we would have become. We then used 0% financing to fix up what we had and sold out. We still have one rental and our home.
At that point I asked myself why I was focusing on real estate when I know how to make money in the stock market. I then decided to maximize our monthly cash flow into the market (individual positions for the most part). We spent some time paying off all our non-mortgage debt and when that was finished we had put ourselves in a position to invest about $4,500 a month. We thought about paying off our mortgage in the next 2-3 years instead, however after working with the numbers, we will have built much less wealth, also our home will not provide a monthly income when we resign from our main vocations (please see previous post on House vs. Portfolio)
We have worked hard at this while we were young and had the energy so that we can spend our less energetic years not as concerned about our wealth and if we will have enough. I spend my working days working with folks worried about not having enough to survive. When they were young they said things like "live in the moment" or "life is short, what if you die tomorrow" well what if you don't die tomorrow, which is the more likely outcome. Now, for the most part it is too late for them to make up their lost time. Their stories in conjunction with my growing up at the poverty level forced me to decide long ago that I would not get in their boat and guess what... I'm already reaping the benefits at 29 years old, I just look forward to it getting better.
I really enjoy watching our portfolio and wealth grow by leaps and bounds each and every month, that to me is better than buying material things, although we have many toys (work hard play hard right) we just have our priorities in place. We want to create foundations to benefit others less fortunate than us down the road and cash and stock works better than toys when giving to others.
Have a productive day,
Jake Blake
My wife and I had started building our wealth about a year after we met (going on 5 years now). We were going to open a coffee shop back then. We had built a b-plan, lined up financing, the whole works. Just before we signed the lease we decided to hold off. I'm not sure that was the best decision, however I am sure that we are in a great financial position now, so brewing coffee could have been better or worse but it matters not at this point. What we decided to do was buy our first rental property and we ended up buying two and our primary home all within a year and a half. It was a fast time and we were planning to buy one rental every six months for 5 years. That would have provided us with about $350,000 a year in cash flow. We stopped because the state in which we live raised property taxes to a level that created a negative cash flow each month. So the more we bought, the broker we would have become. We then used 0% financing to fix up what we had and sold out. We still have one rental and our home.
At that point I asked myself why I was focusing on real estate when I know how to make money in the stock market. I then decided to maximize our monthly cash flow into the market (individual positions for the most part). We spent some time paying off all our non-mortgage debt and when that was finished we had put ourselves in a position to invest about $4,500 a month. We thought about paying off our mortgage in the next 2-3 years instead, however after working with the numbers, we will have built much less wealth, also our home will not provide a monthly income when we resign from our main vocations (please see previous post on House vs. Portfolio)
We have worked hard at this while we were young and had the energy so that we can spend our less energetic years not as concerned about our wealth and if we will have enough. I spend my working days working with folks worried about not having enough to survive. When they were young they said things like "live in the moment" or "life is short, what if you die tomorrow" well what if you don't die tomorrow, which is the more likely outcome. Now, for the most part it is too late for them to make up their lost time. Their stories in conjunction with my growing up at the poverty level forced me to decide long ago that I would not get in their boat and guess what... I'm already reaping the benefits at 29 years old, I just look forward to it getting better.
I really enjoy watching our portfolio and wealth grow by leaps and bounds each and every month, that to me is better than buying material things, although we have many toys (work hard play hard right) we just have our priorities in place. We want to create foundations to benefit others less fortunate than us down the road and cash and stock works better than toys when giving to others.
Have a productive day,
Jake Blake
Friday, February 9, 2007
INVESTING
"But note this important fact: The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stamped or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off his stock had no market quotation at all, for he would than be spared the mental anguish caused him by other persons' mistakes of judgement".
-Benjamin Graham
This is probably one of the greatest statements with regard to investing that has ever been. I could spend days writing about Ben Graham, however you would be much better off just reading all that you can about him and his investment strategies. In case you don't know, he was Warren Buffett's professor at Columbia Univeristy. Do I need to say anymore?
-Benjamin Graham
This is probably one of the greatest statements with regard to investing that has ever been. I could spend days writing about Ben Graham, however you would be much better off just reading all that you can about him and his investment strategies. In case you don't know, he was Warren Buffett's professor at Columbia Univeristy. Do I need to say anymore?
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