Wednesday, May 28, 2014

WHY I HOLD TWICE AS MANY INDIVIDUAL STOCKS AS MUTUAL FUNDS IN MY DIVIDEND PORTFOLIO

When I set out to rebuild my investment portfolio, I decided to add monthly dividend paying mutual funds to speed up compounding and boost monthly cash flows from dividends.  However, I've said before that although I'm a dividend investor I think it's wise to take advantage of all income opportunities the stock market has to offer.  Since I decided to limit my portfolio to around 20 different stocks, I've purchased positions in 7 funds and 14 individual stocks.  

Why twice the number of stocks as mutual funds?  While the majority of dividend income I'm collecting right now comes from funds, only 2 out of 7 funds are in the black as far as gains in share price goes.  Compare that to 11 out of 14 stocks showing gains of anywhere from 5% to over 200% and it becomes clear why I chose to hold twice the number of stocks.  While I collect dividends on all the individual stocks I've counted above, should I decide to sell I can also collect on the capital gains.  At times I've chosen to pull out all my original cash investment and keep the remaining stocks in which I have none of my own money invested.  So I'm able to redeploy the original cash to build my portfolio and boost dividend income.  At other times I've chosen to sell out my entire position and reinvest the money elsewhere when holding the stock for dividends would take several years to collect the amount of money I'd collect in capital gains from the sale.

You never want to limit yourself, take advantage of all the opportunities you've familiarized yourself with to build your investments.

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