I’m Making A BIG CHANGE To My Portfolio
They say your portfolio is like a bar of soap – the more you handle it, the smaller it gets.
I'm a firm believer in that analogy, and try my best not to tinker with things too much. Yet, every now and then, change becomes inevitable.
Until recently, my focal point had been my taxable brokerage account, with the lion's share of my contributions going there rather than my Roth IRA, creating quite an imbalance between the two accounts.
Source: My Portfolio Tracking Spreadsheet | Diversification By Account
The common wisdom says that you should max out your Roth IRA first (which has a $7,000 annual contribution limit for those under 50 years old as of 2024) before investing in a taxable brokerage account.
The reason? Once you hit the ripe age of 59.5, you can withdraw profits and dividends from your Roth IRA tax-free — a pretty sweet deal, I must say. I mean, who wouldn't want to pour the most amount possible into a tax-free haven?
While that reasoning makes complete sense, I've been swimming against the current up until this point, and chose to prioritize my taxable account over my Roth IRA because I’ve always envisioned reaching my "retirement" well before hitting the big 6-0.
My rationale for favoring the taxable account over the Roth IRA was rooted in my want for flexibility. The taxable brokerage account offers me the freedom to invest as much as I please and withdraw at will, sans penalties.
Yet, as I’m getting older, and am thinking about all of this stuff more, I'm starting to see the flaws in this approach. Perhaps, for my specific situation, this want for flexibility has led me down a path of shortsightedness when it comes to allocating the contributions in my portfolio.
Having said that, I’m going to change things up, and starting now, am going to reduce my weekly taxable contributions in order to max out my Roth IRA. Here are the changes I’m making:
This adjustment will not only result in a larger portfolio and more dividend income in the future, but it will also create a better balance between my taxable brokerage account and my Roth IRA by the time I reach 60 years old.
In this video here, I’m showing you exactly what all of that will look like. I think you’ll be pretty amazed at just how big of a difference this one change will make 30 years down the road.
At any rate, I want to hear from you: do you invest in a Roth IRA or any other type of retirement account? Write to me here and let me know.
And a big thank you to the 21 readers who responded to last week's newsletter! There were some really great responses, and I've shared a few of them at the bottom of this email in the new "Hot Takes" section. 👇
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IN MY PORTFOLIO 📈
Follow my portfolio on getquin, and track all of my purchases, dividends, and updates in real-time.
ICYMI 🎥
How To Build A Dividend Stock Portfolio For BRAND NEW Investors
If you're just getting started with investing, then this is the video for you.
By the end of this video, you will learn everything you need to start building a dividend portfolio from scratch. We'll cover how to buy dividend stocks, which dividend stocks and dividend ETFs to invest in, and what to expect once those dividends start coming in.
CAREFULLY CURATED 🔍
📺 Lasting Lessons From Charlie Munger - Even though Charlie Munger is no longer with us, we can still learn a tremendous amount from his teachings, many of which are compiled in this video. Thank goodness the internet affords us the ability to access videos like this! I think I've watched it four or fives times already.
🎧 The History of Visa - For the 11th largest market cap company in the world, Visa’s history and strategy is almost shockingly unknown. A huge portion of the world’s population uses their products on a daily basis, but very few know the amazing story behind how that came to be. This episode of the Acquired podcast changes that, and is one you'll definitely want to listen to, especially if you're a Visa shareholder.
📚 10 Dividend Growth Stocks For December - A diverse and well-structured dividend portfolio should consist of a variety of companies, and this article shares 10 great picks for December with strong dividend growth, attractive valuations, competitive advantages, positive growth outlooks, and solid financial health.
SINCE YOU ASKED 💬
"What's a good app to track dividend payments?"
- @imvox2019 | YouTube
If you're looking for a way to track incoming dividend payments, I think getquin and The Dividend Tracker are two great options.
I actually think getquin is hands-down the best portfolio tracking platform I've ever used. It offers some incredible features that you won't be able to find anywhere else.
With that said, the Payout Calendar tool on The Dividend Tracker is rock solid. I use The Dividend Tracker specifically for that more than anything else.
Have a question? Ask me here to see it featured in an upcoming newsletter.
HOT TAKES 🔥
Last week, I asked readers about which companies they thought might be outside of their circle of competence. Here are some of the responses:
James said: Something I invested in this year was SCHD and then O. I understand the core principle of what the companies do as far as money wise but the background understanding is where I am still a little lost. Like how does SCHD work? When do fees accrue for holding it and such? Now from working with friends and doing research I have gained knowledge on this, but it’s still something I’m investing in that I do not fully understand.
Patrick said: JEPI is over my head. As much as I try to understand selling covered calls, I just haven't yet. I'll hold onto it for its hedge in down markets and its low expense ratio and regular dividend payments. However, if someone asks me to explain it, I'll point them to your video on it and then change the subject.
Pat said: MPW would be the one that got me. I’m 68 and have been in real estate since I was 16 years old when I purchased my first piece. I did not look close enough to understand their financials. If there is something I want to get into but don’t understand it, I find an ETF that has it and let them do the work. I like and understand energy, the food business, and insurance business, so that where I stay.
Jack said: I am an electrical engineer and do like tech but there are definitely tech and medical companies that are hard to figure out what they really do and a lot are in growth mode, not profitable yet, and pricy. I believe its ok to take a chance on a potential flyer but you need to do some reading and research and make it a small portion with money that you can stand to lose if things go bad. One good thing with good dividend stocks like P&G, Starbucks, Costco, Home Depot, etc., these companies are much easier to understand, information is easier to find and many more analysts follow these as well.
DREAMING OF MORE DIVIDENDS? 💰
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