A Portfolio For The Small Investor. If you are interested in dividend growth investing as a strategy, then I hope that you will be inspired by this blog, as I was by reviewing such famous blogs like Dividend Mantra. I became inspired to create my own blog documenting my dividend growth investing strategy. This blog will focus on my small portfolio starting from zero.
I recently made a change to the blog and I wanted you all to be aware. I updated the blogroll. Doing so will make visiting your blogs more efficient. In order to understand why, I will briefly discuss what I used to do in the past, and how I’ve updated the blogroll. Let’s take a look.
On my Resources page, I have a list of the blogroll. I sort it alphabetically and try to make it easy on the eyes. Although the blogroll is there as a benefit to the DGI Community, I also use it quite frequently. Specifically, when I have time, I will start from the top, visit each blogger’s page and read their most recent post. Part of the problem is that I don’t know if there’s a recent post until I get to the site. That waists time.
At the time of this writing, there are 47 links on the page. Going through each of those links every week takes time. Sometimes, I can only get through half of that list. That’s probably why my feedback is higher at links closer to ‘A’ than the ones closer to ‘Z.’ There have been Saturdays when I just spend the whole day reading blog posts and commenting where I feel appropriate. I certainly can’t do that all the time. It’s fun, but definitely, time-consuming.
Well, I found a solution to my problem. It’s a solution that existed before, but I just failed to notice it until now.
One of the things that I had on my site was a feed of my favorite bloggers. Those are the bloggers whose blogs I visit almost everytime I want to view someone else’s content. That list was about 8 or so bloggers.
The feed is great because, from my own site, I can see the most recent post. If it’s one I haven’t read and/or it looks interesting, I click the link and it takes me right to that post. Brilliant!
It has a scrolling feature that updates every few seconds. I figure that was a nice touch since it makes the page come alive.
To make things easy on me, I’ve now chosen to include all the blogs on my blogroll into the feed. That way, I no longer have to manually visit each link on my Resources page.
What Does This Mean For You?
If you’re not on my blogroll and would like to be, let me know. Ideally, it would be great if you also include me on yours but that is not a requirement. I do visit the blogs on my blogroll regularly, so ensure your site is up-to-date. Also, keep in mind that there can be additions or deletions at any time at my discretion.
But, a lot of bloggers out there posts really interesting content. It’s hard keeping up with them all, and I figure this is one way to do it. It works for me and hopefully, it can work for you too.
I didn’t want to make this a long post. I just wanted to give you an update as to what’s happening with my blogroll. I plan on updating the Resources page as well, but that’s for sometime in the future.
What do you think of the update to my blogroll? Think it’s a useful feature? Let me know your thoughts by commenting below.
Well, I just have to highlight this. Recently, I provided my Dividend Income Report for June. In that report, I noted that my forward annual dividend was $1033.67. That was the first time it crossed the $1000 mark. That’s a BIG accomplishment for this small investor. Such a big deal in fact that I decided to devote recognition of that milestone to its own blog post. Let’s take a closer look as to why this milestone matters.
I started this blog in November 2016. But, I didn’t really start blogging in earnest until March or so of 2017. Still, when I started, my forward annual dividend income was a whopping $30.13!!! That number started it all. So much so that it represents the logo of the blog.
But $30.13 is a small number. When I started, a friend of mine didn’t think anyone would be interested in a blog with such small numbers. I even tried explaining the concept of dividend growth investing to my mom. But, I could tell I wasn’t winning her over when I showed her the pennies and dollars I was making on the companies I owned. Of course, I knew the number would rise, but wasn’t sure how long it would take.
Well, almost a year later, in November 2017, I wrote a blog post entitled, $600 Annual Dividend Income Milestone Reached. $600 in a year isn’t enough to make me retire, but it’s certainly much higher than the $30.13 a year I started this blog with.
Now, I’ve crossed the 4-digit mark and currently have over $1000 in forward annual dividends. I’m super excited. All I did was set up my accounts once, where money gets moved from my checking account to my brokerage. Then, with the power of automation, I invest in dividend stocks on a monthly basis.
If the price is high, I invest. If the price is low, I invest. I do so on a set schedule. In other words, I practice dollar cost averaging. I actually don’t care what the market is doing on a day-to-day basis because I’m invested for the long term.
Sometimes I might get a bonus from work. I usually put some of that money into my dividend portfolio. The same thing goes with any tax refund I get. I always try to invest when I can, except the occasional spending spree that causes me to be broke.
But, I’m very happy about crossing this threshold. No, I still can’t retire. But, I’ve come a very long way from making $30.13 a year.
As impressive as this milestone is, I’m still only at the very beginning of my journey towards FIRE or Financial Independence, Early Retirement. I learned about that concept this year and wrote about it in January in my post entitled, Savings Rate: The Secret To Early Retirement.
I think it’s important to have mini goals along the way. Retirement for me is still about 15 years away. So, rather than having one big goal of retirement, I’ll have small goals I to try to meet that will help get me to my destination. As I work towards achieving those goals, I will take a minute, every now and again, to recognize those milestones I reach along the way.
In the short term, my next milestone is $1500. I figure having a milestone every $500 is not too bad. Eventually, when the dividend snowball starts to pick up, I will up to the milestones to $1000 increment. Although the milestones will be recognized at the $500 mark, I set the meter to $2000 as my next target to achieve.
Currently, the portfolio is around $30,000. I can’t wait until it reaches $50,000 and then crosses the $100,000 mark. I don’t usually blog about the size of the portfolio, only the size of the dividends. But those are also going to be milestones I blog about.
There you have it. $1000 in forward annual dividends. That’s enough money to buy me a new laptop. But, no frivolous spending any time soon. I’m going to let the power of compounding take effect.
The great thing about the dividend growth strategy is that it’s a simple but effective strategy for beginning investors such as myself. I crossed an important milestone. Now, onto the next!
Have you reached any milestone recently? What are your thoughts? Let me know by commenting below.
So, we just completed 6 months of the year. This is the time when many DGI bloggers are examining their mid-year goals to see how they are doing. I think writing down your goals is important. But so is making sure that you’re doing the things you need to do on a daily basis to make them happen. It’s sometimes difficult to achieve our goals because life happens. But sometimes, we use life circumstances as an excuse when in fact, it is our own willpower and discipline that were key to succeeding. In case you’re having difficulty achieving your goals or if you just need that extra motivation to press on, this post is for you. Hopefully, you’ll be inspired by this month’s quote.
Inspirational Quotes for July
Before I share with you the inspirational quote of the month, let’s review last month’s quote.
My inspirational quote for June was, “Don’t judge each day by the harvest you reap but by the seeds you plant.” – Robert Louis Stevenson.
My inspirational quote for July is, “Discipline is the bridge between goals and accomplishments.” – Jim Rohn. This is something that I definitely need to remember. My recent spending spree which left me broke threatened one of my key goals on debt. That is, I wanted to get out of student loan debt by October of this year. Had I been more disciplined, I probably would have stayed on track.
Many people, myself included, have New Years Resolutions. But, despite having lofty goals, we give up, in part because we are not disciplined. In addition to discipline, it’s important to be consistent, while maintaining some degree of flexibility to handle uncertainties. But undoubtedly, discipline is a key ingredient to achieving our goals.
Inspirational Quotes from the DGI Community
These are the inspirational quotes from the DGI community last month. As always, if you want your quote to appear in the section below, just leave me your quotes in the comment section before publication of the next edition of the inspirational quotes of the month.
Wallet Hacks – “No one gets lucky sitting on the couch.” – Wallet Hacks. You read that right. In leaving a comment, Jim stated this. I don’t think he meant to use it as a quote, but I thought it was such a great saying that I decided to quote him. You know, even with lottery winners, they still had to get up, go out and buy that ticket. The best kind of luck is the one that you make happen. Thanks for the reminder Jim.
Dividend Solutions – “You just can’t beat the person who won’t give up.” – Babe Ruth. I think that’s so true. Imagine all of us who would have succeeded in our resolutions had we not given up. Giving up is easy. Staying the course is harder, but well worth it.
We still have 6 more months to go to reach the finish line for our yearly goals. As we take the time to assess our mid-year goals, let’s do what we can to stay the course. Life will bring us many challenges along the way. Sometimes, we will falter, and that’s ok. But, through it all, remember that discipline is the bridge between your goals and your accomplishments.
What did you think of this month’s inspirational quote? Do you have a favorite quote you would like to share? Let me know by commenting below.
I am so thankful than June is over. As you can no doubt tell from my recent posts, June was very expensive. To say that I overspent my money is somewhat of an understatement. I had such wasteful spending, despite not yet meeting my goal of paying off my student loan. Between casinos, eating out, etc, coupled with the unexpected expenses such as my mom’s surgery, I was wiped out financially. I wrote about it all in my post entitled, I’m Broke. But, in life, it’s important to get up and keep going even when you fall. Still, before we press ahead with all the change that July is sure to bring, let’s take a look at my progress report for June.
Student Loan Repayment
In May, the beginning balance of my student loan was $11,455.94. The minimum payment is $97.61 and the interest rate is 2.625%. My goal is to pay off my student loans by October at a rate of $2000 per month.
In June I was NOT able to achieve my goal. I made a $597 payment towards my student loans. This was $200 more than I did in May, but still a far cry from the $2000 goal I set for myself. The new balance is now $10,878.85, after accounting for a little interest.
I should be getting reimbursement money soon. I did indicate in my most recent progress report that I was going to use it to pay down the student loan. Now, I am not sure. My goal is still to get to $2000 in July somehow, but I’m not sure where that money is going to come from. Since I have a small credit card balance, the reimbursement will be used to get me back to $0.
Finally, to follow my progress towards paying off my student loans, visit my debt tracker for 2018.
Student Loan vs Down Payment
Believe it or not, I’ve been going back and forth in my mind about whether it’s the right strategy to pay off my student loans given the very low-interest rate. The issue came up because I want to buy a house, but I don’t have the money for the down payment. I am unwilling to even consider liquidating any stock in my dividend portfolio! So, I had a little regret that I chose to pay off the student loan rather than focus on saving for a down payment on a house.
Despite my lack of confidence that I’ve chosen the best strategy, I am still committed to seeing it through to the end. Once the student loans are paid off, I’ll use that money to save for a down payment. Estimated time to buy a house will be after April of 2019. That way, I would have owned my previous house for 3 years and will be considered a first-time home buyer.
Below is my savings rate represented graphically. This graph will be updated monthly for the remainder of the year.
My savings rate in June was a little bit higher than it was in May. However, it’s still not where I want it to be. A 50% savings rate would be ideal given that I want to retire in about 16 years. The 38% is a respectable number, so I can’t complain. Also, as a reminder, I count extra payments towards my student loans as part of my savings. Once the loans are paid off, the savings rate as reported on this blog will be more accurate.
Normally, I would post on my personal goals such as my fitness goals and for spending less on food. I’ve abandoned my personal goals for now and am actively thinking about putting my financial goals on pause for a month or two. My reasons for this are as follows.
First, I will be transitioning to my new position at work. Because I will be moving locations, there will be additional costs that I will incur. For example, I have to find a new place to rent. Landlords typically want a security deposit and first and last month’s rent before you move in. In case you forgot, I’m broke. So, I need to ensure I have enough money to be able to make a smooth transition. I have a good job and a good credit score so I’m not worried about getting approved as a tenant. I just need to make sure I come up with the money without borrowing it.
Second, I need to buy a car. Getting qualified for a car loan won’t be a problem, but buying a car means the dreaded monthly car payment! Not to mention, I have to start paying car insurance. I am so not looking forward to that.
But Wait, There’s More
My tenant may be moving out of my property. If that’s the case, there might be a month or two of vacancies where I have to pay the mortgage on my own. It’s not a problem. The worst case scenario is that I stop my monthly contributions to my dividend portfolio in order to make ends meet. I don’t anticipate that being the case though. Even if the vacancy is short-lived, there still might be clean up expenses that I have to take care of. I’m just hoping it’s not too costly.
Before I move on, the issue with my rental house is one worth emphasizing. That expense shouldn’t be a surprise. But, clearly, I didn’t plan well enough for it. Going forward, I’m going to take my mom’s suggestion to heart rather than pay lip service to it. I’m going to establish an account and divert a portion of my rental income into that account SOLELY for the purpose of meeting rental expenses. That’s going to take both discipline and a change in mindset on my part. But, as the saying goes, “nothing changes if nothing changes.” I should be able to start doing that next year.
On the plus side, my income should be increasing. Hopefully, the increase will be enough to offset these new expenses. Even if it isn’t enough, I’m hoping the impact to my current financial situation won’t be too devastating. Ultimately though, I think I’ll be ok. What’s more, there are no plans to sell a single stock in my dividend portfolio. That will likely always be the case.
Hopefully, things will be back to normal in August or September. I’m still looking at paying off my student loans by October, although December is a little bit more realistic. I’m partially glad I overspent so much in June. That’s because it forces me to reevaluate my situation and make improvements along the way. You can expect future blog posts about my efforts to cut back on my overspending including going back to a cash-based budget. Until such time, I will continue to do my part to move forward in the right direction.
What did you think of my progress report for June? How was your progress? Let me know by commenting below.
In the investment world, there are several brokerage firms to choose from. Each has their pros and cons and provide value to their customers. Today, I provide an in-depth look at M1 Finance and will discuss many of its key features. I hope this M1 Finance review will help you decide if M1 Finance is for you. Full disclosure, the links to M1 Finance are referral links. However, my goal in providing this M1 Finance review is to give my honest opinion about the service. The fact that E-Trade acquired Capital One Investing prompted me to try to find a brokerage that meets my needs. M1 Finance does that for me.
Although much of the information below comes from M1 Finance, I also document my experience using this platform, including my experience transferring money from Capital One Investing to M1 Finance. I hope you had your coffee because this is going to be a longer post. I will discuss both the good and the bad with M1 Finance. Here is my M1 Finance review.
If you find this review helpful, sign-up with M1 Finance and we both get $10, or at least leave a comment in the comment section below.
WHY CHOOSE M1 FINANCE?
As previously mentioned, there are a number of brokerage firms. For example, you have Charles Schwab, E-trade, TD Ameritrade and many other traditional brokerages. In addition, you have several Robo-Advisors such as Betterment and Wealthfront and other up and coming brokerages such as Robinhood. In short, there’s no shortage of options for an average investor looking to invest money. So, why choose M1 Finance?
M1 Finance offers many benefits to a long-term investor. In this M1 Finance review, I will discuss several of the highlights. But for a complete understanding of everything that the platform has to offer, I encourage you to check out M1 Finance.
However, for me, the following are the key benefits to M1 Finance:
Low Minimum Starting Balance
I’ll discuss the key benefits below. But, in addition to these benefits, it’s easy to sign up. And, for the most part, M1 Finance is easy to use. You’ll see why I say for the most part later. The platform has both a web version and a mobile app. I’ve never had a problem logging in or with the functionality of the platform.
Let’s take a deeper look at some of the key benefits to M1 Finance.
1. Portfolio Pies
I have to admit that I wasn’t initially a fan of the pie structure. But, it’s starting to grow on me. Think of your portfolio as a pie (or pizza). A pie has several slices. The slices of your portfolio can be made up of stocks or ETFs. According to M1 Finance, they offer 6000+ exchange-listed securities. With M1 Finance, you can have as many slices in your pie as you see fit to achieve your desired level of diversification.
So, for example, with M1 Finance, I have my Dividend Portfolio inside of a pie I named my Dividend Freedom Fund. You can name your pie whatever you want. Each stock I have inside of M1 Finance is part of my Dividend Freedom Fund. Now, that fund is concentrated on the DGI strategy.
Imagine though if I wanted to have another portfolio devoted to stock appreciation? With M1 Finance, you can have as many portfolios as you like each made up of different slices as you see fit. The fact that you can totally customize your portfolio is one of the benefits of M1 Finance.
In addition to pies you create, M1 Finance has what it calls Expert Pies. These are professionally designed pies to achieve a particular goal. As indicated on the platform, some of the goals that these Expert Pies target include:
Income Earners – “Choose a portfolio focused on dividends and income returns.”
Hedge Fund Followers – “Mimic the investment strategies of some of the most successful investors and reputable hedge funds.”
Responsible Investing – “Sound financial options for the socially responsible investor.”
Plan For Retirement – “Invest for your target retirement date in a portfolio that adjust to your goals as you age.”
Whether you choose to use an Expert Pie or create your own, M1 Finance offers you the flexibility and customizability to make it happen.
2. Automatic Investing
Dollar Cost Averaging is a viable strategy for the small investor. The idea is to buy an investment with a fixed dollar amount on a regular schedule. So, let’s say that I want to buy Apple stock and can afford to invest $100 per month. By purchasing Apple stock at $100 each month, I would be practicing dollar cost averaging.
Now, to make the strategy even more powerful is to put it on autopilot. That way, I don’t have to physically go to my checking account every month and transfer $100 to my brokerage. By making it automatic, the investment remains consistent and works like clockwork. It also makes things passive and allows me to focus on other things.
M1 Finance allows for automatic investing. That $100 automatically gets taken from my checking account, deposited into M1 Finance and then used to purchase Apple stock. All I had to do was set the amount I want to be transferred and the frequency with which it happens. I do this once, but the action repeats itself as long as I want.
I use Apple in this example to emphasize that I can purchase individual stocks automatically. Many brokerages allow investors to automatically invest in index funds or mutual funds, but NOT in individual stocks. Capital One Investing used to do it, but they stopped their Sharebuilder plan now that they are being acquired by E-Trade. Robinhood is a good platform, especially because it’s free. But while you can buy individual stocks with Robinhood, you can’t do so automatically. You can with M1 Finance.
As you can see, I take the lazy approach to investing. And M1 Finance allows me to be as lazy as possible by allowing me to automatically invest in individual stocks.
3. Investment Speed
As a long-term investor, I am not too concerned about the volatility of the market today. Like everyone else, I would like to invest at the best price, but timing the market has never been one of my strongest attributes.
When I was with Capital One Investing, one of the more annoying things was having to wait for my money to be invested. Because I was on the Advantage Plan, I could only invest once a month at a cost of $12 monthly for it to make sense. But, because I got paid twice a month, I would send money after each paycheck to Capital One Investing.
So let’s say I wanted to invest $600 a month into my Dividend Portfolio. Because I don’t have the $600 one time, I would send $300 from my mid-month paycheck, and then $300 for my paycheck at the end of the month. Then once my account in Capital One Investing reached $600, Capital One Investing would then use that money to purchase my stocks in a predetermined amount. I would have to wait a whole month before my money gets deposited. Not the end of the world, given my long-term horizon, but quite annoying nonetheless.
With M1 Finance, the money takes about 24 hours (2-3 days tops) to move from my checking account to M1 Finance. Then, once it gets to M1 Finance, the money gets automatically invested the next trading day. My money is no longer sitting idle in my brokerage account. It’s hard at work in the stock market.
Because I’m not a trader, the speed at which my funds get invested is negligible in the long run. But, if given the choice between having the money invested almost immediately versus waiting a month, I’ll take immediate any day.
4. Fractional Shares
This is a key benefit to M1 Finance. There don’t seem to be too many brokerages that allow you to buy fractional shares of individual stocks. That’s not to say you can’t have fractional shares at these brokerages. When you are paid dividends, that may result in the fractional ownership of stocks. However, in order for you to purchase the stock, you have to do so in whole shares and not fractional shares.
At the time of this writing, Google is trading at about $1155 per share. If I wanted to invest in Google using another brokerage, I would likely have to come up with the whole $1155 before I could invest in Google. Not a very accommodating system for the small investor.
However, with M1 Finance, I can invest $100 into Google one time or on a recurring basis. If I had about $577.50 to invest, I could purchase 0.5 shares of Google. I can do that with virtually any stock. The ability to purchase fractional shares of a stock is the best friend of a small investor.
5. Dividend Reinvesting
This is a familiar feature that is present in almost all brokerages. Dividends received are automatically reinvested free of charge. The same applies to M1 Finance.
However, M1 Finance does things a little bit differently. Usually, when a stock pays dividends, those dividends are reinvested into that same stock. This creates a Psuedo-DRIP. What makes M1 Finance different is that dividends aren’t necessarily reinvested into the same stock, but more so back into the overall portfolio.
Firstly, there is a $10 minimum threshold to meet before dividends are reinvested. Now, remember that your pie has slices. The investor sets a target allocation for each slice. More on this in the dynamic rebalancing section. But dividends get reinvested back into the portfolio according to the asset target you’ve selected.
This is either good or bad depending on your objective goals. If you want to get a true DRIP-like feeling, then it might be difficult to achieve that with M1 Finance. You’re still getting the dividends automatically reinvested, it’s just a matter of where the reinvestment goes. Because of the benefits of dynamic rebalancing, I’m counting this as a positive.
6. Dynamic Rebalancing
This is certainly a defining characteristic that sets M1 Finance apart. The firm practices what it calls dynamic rebalancing.
We all know that it’s important to balance your portfolios from time to time. Let’s say I have a portfolio consisting of two stocks: Kimberly Clark (KMB) and Realty Income (O). I want 50% of my funds in KMB and 50% in O. Well, as the stock market rises or falls, KMB might be weighted at 60% of my portfolio and O at 40%.
If I were to rebalance my portfolio the usual way, I would sell 10% of my shares in KMB and use the proceeds to buy O so I can get my portfolio close to the 50% mark that I originally wanted. This would incur a tax liability if the rebalancing occurred in a taxable account.
With dynamic rebalancing, M1 Finance automatically diverts new money I contribute to the portfolio (including the reinvestment of dividends) until I am back to the allocation I originally set. This includes how M1 Finance prioritizes sale of slices from its pie as well. Brilliant!
To make things simple, I simply equalize the stocks in my Dividend Freedom Fund. There is a button for that. So, that means that as I invest, the platform will focus more on the stocks that are underweight and less on the ones that are overweighted.
There is a concern that the platform is only investing in the losers. But I tend to look at it differently. If the goal is to buy low and sell high, by continually purchasing the stocks that are underweighted, in effect, I am buying low. Probably a lousy analogy but it works for me.
M1 Finance does allow you to manually rebalance the portfolio in a traditional sense, with all the tax implications that naturally follow.
7. Tax Efficiency
This M1 Finance review would not be complete without a discussion of taxes.
The first thing I’ll point out is that M1 Finance is a partner with Turbo Tax. This was very important to me because I do my own taxes. Turbo Tax makes taxes simple because I am able to import tax data into Turbo Tax from my brokerages. I remember when I had to manually do my taxes because Computershare was not a partner with Turbo Tax. It’s one of the reasons why I left Computershare back in the day. M1 Finance could have all the best features in the world, but I would not be with them if they weren’t a partner with Turbo Tax. Visit Turbo Tax Partner List to see a list of the current partners. As indicated by the support center, M1 Finance uses the Apex Clearing Corporation to allow data to be imported. For more information, visit the M1 Finance Support Center’s answer to this question.
When an investor requests to sell a security, M1 Finance uses what it calls its tax minimization strategy. That is, the platform prioritizes the sale of securities in the following order:
“Losses that offset future gains”
“Lots that result in long-term gains”
“Lots that result in short-term gains”
Importantly, M1 Finance does not do Tax Loss Harvesting. This is the strategy of selling investments at a loss and reapplying the proceeds back into the market to offset what is paid in taxes on both gains and income. I don’t utilize this strategy, but if you do, it’s important to note that it is not offered at M1 Finance.
8. Customer Service
There are two aspects to M1 Finance’s customer service that I wish to highlight. The first is that I’ve never had a long wait trying to call the customer service number. I called M1 Finance before and after I became a customer. Each time, a representative was quick to answer the phone. Each time, the representative was knowledgeable and helpful. I felt like a valued customer.
The second is how smooth the transition has been from Capital One Investing to M1 Finance. M1 Finance is on a mission to transform the way you invest. Because of the relative newness of M1 Finance, I wanted to give it a try before I jumped right in. I created a portfolio with just two stocks (MCD and KMB). I contributed $200 per month evenly split between the two stocks. Indeed, I earned my first dividends with McDonalds as I indicated in my Dividend Income Report for June. Because I was pleased with the service, and because the Sharebuilder plan I was fond of was going away, I decided to transfer funds from Capital One Investing to M1 Finance. That required help from the customer service department.
I contacted customer service and got pretty good directions. Specifically, I was supposed to send an email to their transfer department with instructions as to how much of my account I wanted to be transferred, and my latest account statement. I sent the email as directed and received a response 11 minutes later. The representative was helpful throughout the process.
Once the transfer was complete, I did have a follow-up question, and I notice it took a bit longer to receive a response. But when I called customer service, they were helpful as usual. Having helpful customer service is always a plus.
9. Low Minimum Starting Balance
Want to open an account with Vanguard? Most funds have a minimum starting balance of $3000. You could do what I did and start with their STAR fund, which is a balanced fund, but that has a minimum of $1000. Sometimes, high minimums needed to open an account deter small investors from beginning investing.
The lowest minimum you can have is $0. That’s perhaps one reason why companies like Robinhood are succeeding. The minimum to open a Robinhood account is zero, zilch, nada.
However, M1 Finance is not zero, but it’s also not too bad. The minimum to open an M1 Finance account is $100. Although it’s not zero, I think it’s low enough where it will not deter small investors from beginning to invest. This is for a taxable account. The minimum to open a retirement account is $500.
Once the account has been opened, investments can be of any amount. For more information, visit their FAQ.
10. It’s Free
I saved the best for last. One of the best things about M1 Finance is that it’s free. There are no commissions to buy or sell shares of stock. This is HUGE! Let’s see why.
When I was with Capital One Investing, I was paying $12 per month just so I could invest into 12 stocks at the effective cost of $1 per stock. That comes out to $144 per year. Now, I know that’s expensive, but being able to automatically invest in individual stocks on a monthly basis was very important to me – and still is.
Capital One Investing is being acquired by E-Trade. Looking at E-Trade’s fee structure, at the time of this writing, E-Trade charges $6.95 PER TRADE! To invest the same way with E-Trade, I would have to spend $83.40 per month or $1000.40 per year just in fees. The most I was investing with Capital One was $600 per month. It just doesn’t make financial sense to pay that much in fees.
Robinhood is also free. But, unlike M1 Finance, there’s no automatic investing of my funds. I would have to manually place trades every month and I didn’t want to have to do that. I’m lazy, remember. With M1 Finance, I get all the benefits of the Sharebuilder plan, and more, without any of the cost. For a more detailed look, visit the company’s self-serving blog post entitled M1 Finance: The Best Sharebuilder Alternative.
Thankfully, June is over! What a crazy month that was for me. What’s more is that 6 months of the year is now gone. Some dividend growth investing (DGI) bloggers did the smart thing and set mid-year goals. Looking at you Dividend Dynasty. Other bloggers, such as myself, are lazy and didn’t set mid-year goals. Still, I’m looking to finish the year strong and hopefully, the second half will be stronger than the first. As we look to celebrate independence day, I am steadily working towards my goal of achieving financial independence through dividend growth investing. But until then, I’ll continue to steadily contribute to my portfolio and track my progress on this blog. Let’s see how I ended the second quarter!
In June, I received a total of $98.51 in dividends broken down as follows:
Johnson & Johnson
Are you kidding me? Just $1.49 shy of the elusive triple-digit figure in one month. Oh well, I guess I have to try again next month. In any case, I’m pretty happy. Nearly $100 in a month doesn’t make me rich. But, that figure will continue to rise. That’s the power of Dividend Growth Investing and compounding.
Also, this is the first month that I received dividends from McDonalds. That $5.17 is almost enough to buy me a Big Mac meal with fries and a drink. Maybe next time, I’ll be able to afford a large drink instead of a small drink. Haha. But not a bad start to my long-term hold of McDonalds.
Below is a graphical representation of my dividends this year as compared to last year.
For clarity, here is the raw data:
As you can see, as compared to last year, my account grew over 483%. Not too shabby, but I’m sure that as the months go by, this huge growth will be much lower and more realistic. But, it’s still nice to see and provides a bit of motivation to keep going.
Forward Annual Dividends
At the time of this writing, my forward annual dividend is $1033.67. This is the first time that my forward annual dividend crossed the 4-digit threshold. I had to adjust my target of $1000 in dividends for the year and increased it to $2000.
The transition to M1 Finance is almost complete. However, I am able to make trades. The forward annual dividend reflects a recent deposit to the account. Updating my internal spreadsheet was a little bit scary because of the way M1 Finance operates their platform. I’ll talk more about this in my M1 Finance review that I’ll be posting later this week, but in a nutshell, M1 Finance invests your money based on the target allocation of stocks in your portfolio. So, to keep things balanced, it diverts cash to the stocks that are underweighted.
This was a bit nerve-racking for me at first because every month, each of my stocks increased in value because I contributed a set amount of money into that particular stock. With M1 Finance, you contribute to the overall portfolio and the portfolio divides the money according to your predetermined asset allocation. So, for my recent contribution, most of the stocks I own in M1 Finance did not receive a contribution because they were overweighted. I was only able to buy shares in the 5 most underweighted stocks.
It’s a different way to invest for sure. Part of me likes it, but part of me misses the old system where I can say how much money I want to be invested in a particular stock automatically. I could manually buy or sell from a position if I wanted to, but that automatic investment feature is not yet available in M1 Finance.
June has been a very important month for this blog. I transitioned from one broker to another, but during that process, I continued to earn dividends along the way. I am about to go on vacation, but my dividends will be working hard for me anyway. Dividend growth investing is a great and passive strategy for the average investor looking to make money in the stock market.
Now that the first half of the year is over, here’s hoping that the remainder of the year is a prosperous one for us all. I hope you have a happy 4th of July.
How was June for you? Did you break any records or reached any milestone. Let me know your thoughts by commenting below.
Predictably, my credit score has declined. Recently, I wrote about the fact that I’m broke. Part of the consequence of not having any money is the fact that I rely on my credit card for everyday expenses. That’s a problem. Usually, I pay off my credit card balance every month. However, in June, I was unable to pay off my balance before the credit card companies reported my balance to the credit bureaus. For the first time in a long time, I carried a balance from one month to the next. As a result, my credit score suffered. Let’s take a look at how.
Credit Score Decline
I use Credit Karma to check my scores on a weekly basis. You heard that right. I check my credit score every week. I know, it’s overkill. But because I have good credit, I watch it like a hawk so that if any problems arise, I can take care of it as soon as possible. I don’t think I need to remind you of all the data breaches that have occurred just in the past two years.
With that said, in looking at my credit scores, I see that Equifax went down by 16 points to 800! But, TransUnion takes the cake. My credit score went down 28 points to 783! Are you kidding me? That’s a lot of points just for carrying a small balance! It’s unclear what my Experian score is. The last time my credit score went down was June 2017.
Well, thankfully I was able to get my credit card balance back to $0. The reimbursement from my work came through and I just put all of that to paying off the credit card. There was no extra and so I just have to go back to being disciplined in July so I don’t have a repeat of the same situation that led me to get broke.
The key question I’m wondering is, “how long it’s going to take to restore my credit?” It seems like the last time, it took about three months to get the credit score back up.
Why Does My Credit Score Matter?
So, why does it matter what my credit score is? Well, we know that having a high credit score is important for many reasons. But for me, it’s very important for two things. The first is that I need to buy a car around July or August. The second is that I want to buy a house.
Ideally, I would buy the house before I purchase the car. The problem is that it’s going to take me too long to find a house. I’m going to need a car, pretty much as soon as I move to California. I am hoping that I will be able to pay cash for a car and not have to borrow funds, but I’m not holding my breath. I won’t have that much money at that time, but even if I take out a loan, I could pay it off very quickly – probably by the end of the year depending on how expensive the car is. So, my plan might be to purchase used and pay it off really quickly. Specifically, I’d take the $2000 I was paying towards my student loans and pay off the car.
I could then spend the next six months in 2019 to try to save for a down payment for a house. I’m looking at the Sacramento area, but haven’t decided yet. I also want to buy the house sooner rather than later, and ideally before year’s end.
In either case, having a high credit score matters in terms of getting the best rate for those loans.
Around October, I will have access to about 10k and that can be used to put towards paying off a car or pay for a downpayment on a house. Think of this money like a bond that will mature at that time. So, the money is guaranteed. I just have to figure out what to do with it. Ideally, I would put it in my Dividend Portfolio, but given my other investment concerns (ie, house and car), this is unlikely. You can expect a future post on this topic.
I hate seeing my credit score drop. This is especially true when I’ve worked so hard to keep them high. I’m really hoping that it will go up as quickly as it dropped, but I guess only time will tell.
Do you know what your credit score is? Do you have a good handle on your credit situation? Let me know your thoughts by commenting below.
I had trouble deciding what to call this post. At first, I was thinking about titles such as “living paycheck to paycheck” or “bad spending habits.” But rather than color my situation with nice language, I’m going to call it for what it is. I’m broke! I don’t have any money and I don’t get paid until the end of the month. Let’s examine my situation further to figure out why I’m broke.
Bad Spending Habits
There is no question that one of the main reasons why I have no money is because I have bad spending habits. Let’s just take this week as an example in terms of where my money went.
The first thing I did was rent a car that is costing me $500 total for the week! I’ve never paid that much money before on a car for one week. I didn’t have any special bells or whistles, but I did get the rental car’s insurance. Why? Because I just didn’t want to deal with the hassle in case something happened. Been there, done that.
Now, did I have to rent the car? Not really. It would have made life much more difficult, but renting the car makes things convening. I’m visiting the U.S. this week and it would be very difficult to get around otherwise.
But, if all I did was rent the car, I would not be broke. However, unfortunately, that is not all I did.
Well, we all know where this is going. I’ve been to Applebees virtually every day this week spending $20 per day. That’s just stupid and a waste of money! Maybe I’m stressed or something and feel the need to waste money to relax. I don’t know, but I do know that this madness has got to stop! I also get the same thing every time I go to Applebees, which is also not good for my health. Variety is the spice of life as they say.
Even though I rent a car, I take Uber rides to locations to go to a club, bar or lounge in case I decide to drink. I don’t want a DUI, but I’m also spending money on transportation costs when I already spent a small fortune renting a car.
Please, somebody, stop me! It’s only for a week though – or a least that’s what I tell myself.
Well, this one surely takes the prize. Let’s pretend that the first day I went to the casino was Monday. My trips to the casino have been so bad that I don’t think I want to remember how many times I’ve gone. But, I’ve lost consistently about $120 a day. So, that’s $120 on Monday, $120 on Tuesday and $120 on Wednesday, and Thursday. I’m posting this on a Friday. For some reason, I think $120 is an appropriate amount. Really, I would have liked to gamble more, but I just didn’t have the funds. I also had to play hide and seek so to speak trying to find money to go to the Casinos. In any case, by my conservative calculations, I’ve lost a minimum of $480 at the casino since Monday. This does not include the $5 I spend each time withdrawing $60 from the ATM inside the casino.
Yea, all bad decisions, I know. But, supposedly, I’m just paying for entertainment! That’s bull! Tuesday was so disappointing. I was up by like $70, but did I walk away? No. I lost it all! I was so upset that my last two bets were big ones and I lost them both. So much for my good luck.
And I don’t want to hear how much I could have made had I decided to put that $480 in the stock market. I guess I could do the math but That would just make me feel worse. Haha.
To fund my gambling habit, I’ve pretty much depleted my “emergency fund.” Thankfully, there was only $300 in that fund. Oh well.
This really put the nail in the coffin. I needed to help my mom out with an eye surgery that’s coming up. She had trouble coming up with the copay so I contributed $900 towards the co-payment. My brother will be contributing some money as well. Sufficed to say that $900 is a lot of money for me, and essentially represented the last money I had. But, there are things more important than money and I will choose my mom over money every time!
Perhaps I should start following Dave Ramsey’s advice more. There’s nothing like the baby steps to help keep your financial life in order. Dave teaches that you should have $1000 in a starter emergency fund as baby step 1. Once you complete that, then you should pay off your debt from smallest to largest in Baby step 2. He has 7 baby steps to follow. But, in baby step 2, in order to pay off your debt, he recommends having a budget and the discipline to stick to it. Sound advice. But it’s advice I don’t follow.
I follow Ramit Sethi’s approach to spending as he documents in his book I Will Teach You To Be Rich. I also detail his approach in several posts including this one I wrote in 2016 about my Conscious Spending Plan. As a quick reminder, the approach suggests that you don’t need a budget. You should ensure that the essential expenses are taken care of and then use the rest to enjoy life. For me, that would mean my monthly contributions to my retirement accounts, Dividend Portfolio, and automatic payments to my mortgage and debt. In the interest of full disclosure, the picture of Ramet Sethi’s book is an affiliate link.
The problem with this week (and this whole month) is that I was unable to make my minimum monthly contributions to my Dividend Portfolio. That’s in part due to the fact that Dividend Portfolio Is Moving to M1 Finance. But, it’s mainly due to the fact that the money that I would have contributed to my essential accounts have instead been used to fund my lavish and bad spending habits.
After I return the rental car, return home overseas, and complete the transition to M1 Finance, I’m hoping things will be back to normal!
Credit Card Debt
So how do I still bye food when I’m broke? The good old credit card. My balance right now is more than half of the $3000 maximum card limit. I hope to pay it off soon, but I’m afraid that my credit score will take a hit now that I will carry a balance from one month to the next.
I have no one to blame but myself. In, fact, I still plan on going to Barcelona this summer, and I have no clue where that money is going to come from since I’ve used up all of my extra funds.
Line In The Sand
Despite all the competing interests for the spending of my money, there are fundamental things that won’t change. I haven’t sold any stocks and have zero plans to do so. If it weren’t for the move to M1 Finance, my monthly contributions would have remained the same. I plan on resuming those contributions asap.
Although I’ve depleted my Digit and Qapital savings as well as my checking and savings accounts, I haven’t touched my retirement accounts or any account associated with my Dividend Portfolio. The key thing now is for me to replenish my reserves. I expect to bring my credit card balance down to $0 once I get reimbursed for some work expenses, but that’s still going to leave me with zero cash. I just need to better control my spending for the remainder of the month (starting next week) and for July.
It’s very clear. If I have extra money, I’m going to spend it. That’s why I ensure that the fundamentals are taken care of before I engage in discretionary spending. It’s foolhardy for me to think that I can save money like most people. Sooner or later, it’s going to be gone. The idea that I’m going to have to put 3-6 months of expenses (outside the market) only as an emergency fund is a hard pill to swallow. But, I also know that Rome wasn’t built in a day. If achieving financial independence or early retirement was easy, everyone would do it.
Still, I’m hoping that this week of mostly absolutely wasteful spending is an anomaly that won’t repeat itself anytime soon.
I’m interested to know your thoughts. Let me know by commenting below.
It’s that time of the month to get inspired! I love quotes. Each month, I post an inspirational quote that inspires me and hopefully inspires the reader as well. I also invite the DGI Community to leave their favorite quotes in the comment section so that we can all inspire each other. We are six months into the year and have another six months to go. We’ve all made our goals and hopefully we can achieve them. But, sometimes, life doesn’t go as planned and it gives us a detour. Sometimes, we just need a little inspiration. Hopefully, you will be inspired by this month’s quote.
Inspirational Quotes for June
Before I share with you the inspirational quote of the month, let’s review last month’s quote.
My inspirational quote for May was, “The greatest weapon against stress is our ability to choose one thought over another.” – William James.
My inspirational quote for June is, “Don’t judge each day by the harvest you reap but by the seeds you plant.” – Robert Louis Stevenson.
I think this is very applicable to DGI Investors. Every month, we post our dividend income for the previous month. But the quote is a reminder that we are in it for the long haul. Some of us, like this blog, are relatively new to DGI and started from scratch. Our numbers might be small now, but by continuing to invest in our portfolio, and planting those seeds, we will reap a greater harvest in the future.
But I also think this quote can apply to other facets of life, other than finance. To have a better future, it’s important to lay the groundwork today, no matter what your goal is. Want those six-pack abs, you’ve got to plant those seeds by going to the gym. Want to have a productive day? Do those things that will make tomorrow better. Whatever your goal, think about this quote and it will help you get there.
Inspirational Quotes From The DGI Community
These are the inspirational quotes from the DGI community last month. As always, if you want your quote to appear in the section below, just leave me your quotes in the comment section before publication of the next edition of the inspirational quotes of the month.
Wallet Hacks – Jim didn’t post a quote per se, but rather an idea, which stems from the Kaizen Way to Self Improvement, “Get 1% better every day.” Jim thought this might have been a cop-out, because it begs the question, why limit yourself to just 1% improvement. But then he realized, you don’t have to limit yourself to just 1%. I do think it’s a worthwhile thought and it’s actually related to this month’s quote about planting seeds. By improving yourself every day, regardless of whatever percentage, you are moving in the right direction.
Dividend Solutions – “Keep the faith. The most amazing things in life tend to happen right at the moment you’re about to give up hope.” – Unknown. Hope is a powerful thing and one that helps us get through tough times. But, this quote also reminds me of Thomas Edison’s quote, “Many of life’s failures are people who did not realize how close they were to success when they gave up.” Good one Dividend Solutions.
Dividend Daze – “Do not anticipate trouble or worry about what may never happen. Keep in the sunlight.” – Benjamin Franklin. I actually have never heard this quote before, but have heard others that are similar. Not to get too biblical, but it reminds me of a quote from the Bible. It says, “Who of you by worrying can add a single hour to your life? Since you cannot do this very little thing, why do you worry about the rest?” – Luke 12: 25-26, NIV. Again, it’s easier said than done, but it’s worth remembering when you’re faced with a situation that causes you to worry.
I hope you were inspired by one of the quotes above. Before you know it, June will be over soon. Let’s finish the month strong! But remember, no matter what your goal, always try to plant those seeds for a better tomorrow.
What do you think about this month’s quote? Do you have a favorite quote you wish to share with others? Let me know by commenting below.
Hi everyone. Well, we knew this day would come. Earlier this year, Capital One Investing announced that they are moving their accounts to E-trade. As you know, much of my holdings are currently with Capital One Investing. Although E-trade is a fine brokerage, there are several reasons why it doesn’t make sense for Dividend Portfolio to switch. I was holding out hope that things might be the same with E-trade as it was when ING took over Sharebuilder and as it was when Capital One Investing took over ING. But alas, it’s not going to be. Here’s why Dividend Portfolio will be moving to a new home, namely M1 Finance.
On June 12, 2018, Capital One Investing sent out an email to its customers informing them of “Information Regarding Upcoming Changes to Investing Programs.” Specifically, they said the following:
“Starting on July 13, there will be some changes to Capital One Investing’s offerings.
PortolioBuilder will no longer be available after July 13, 2018, and the Sharebuilder Investment Plan will not be available after July 17, 2018. These are the last days, respectively, that you can either enter trades for each program.
When the ShareBuilder Investment plan is discontinued, your purchase instructions and corresponding money transfer instructions associated with this program will be canceled. All open orders associated with this program will be canceled on July 18, 2018. If you are enrolled in the Advantage subscription program, including the Costco Advantage program, the last monthly subscription fee was charged on May 1, 2018. You will not be charged a fee for your subscription in June or July, and your subscription benefit will end on July 17, 2018.
Dividend reinvestment will no longer be available after July 17, 2018. Dividends and capital gains paid after that date will be distributed to your account in cash before your account is moved to E*Trade.”
As a reminder, I had the Advantage program with Capital One Investing. That allowed me to purchase 12 stocks each month at a cost of $12, or $144 per year. This was ideal because the cost would otherwise be exceedingly high for me to invest with a regular discount broker who charges about $7 per trade. The Advantage plan effectively reduced my cost to $1 per trade, which I do on a monthly basis.
Sufficed to say, the acquisition by E-trade that will take effect later this year will signify the end of the model that began with ShareBuilder.
The Better Alternative – M1 Finance
Recently, I wrote a post entitled M1 Finance For Dividend Investing. There, I reviewed some of the advantages of the relatively new platform known as M1 Finance. Since that time, there have been new updates to the platform (or Robo advisor). For example, there no longer have to be a minimum of $10 to have the dividends reinvested, and you can direct specific dollar amounts to the investments of your choice. Before, you were limited to target allocations, but that’s no longer the case.
I won’t repeat what I wrote in the post, but to give you a few of the highlights with M1 Finance, you get:
Automatic Investing – have money automatically flow into your account, which automatically gets invested into your stocks (or funds).
Fractional Shares – You can invest a small amount of money into the stock of your choice. If you have $20 to invest and want to buy Apple, you can own $20 worth of Apple stock, regardless of share price.
Automatic Dividend Reinvesting – Once the dividends reach your minimum threshold (can be $0), it automatically gets reinvested back into your portfolio.
Dynamic Rebalancing – New contributions to your portfolio get allocated in a way that achieves your target allocations, without the need to sell stocks. This is perhaps one of my favorite new features with M1 Finance which was not available at Capital One Investing.
Zero Commissions – Much like Robinhood, it costs $0 to buy or sell with M1 Finance. So, no more $12 per month on fees.
I don’t like change, but M1 Finance does seem like a better alternative to Capital One Investing.
It’s now crystal clear that the Advantage Program is going away once the acquisition to E-trade is complete. Therefore, I have decided to transfer my funds from Capital One Investing to M1 Finance. I just requested the transfer and I’m waiting for that process to be complete.
This is my first time moving money from one brokerage to another so I hope everything goes smoothly. I’ll let you know you if it does.
During the transition process, however, I will not be making any of my monthly contributions to my Dividend Portfolio. The whole process takes about 15-20 business days. I’m hoping to resume normal operations in July.
Still, I’m going to try and NOT spend the money I was going to allocate to Capital One Investing. I just canceled the automatic transfers there. I intend to put that money in my savings account until I can get it in my brokerage. The problem is that if I have money available like that, I’m very likely to use it. I know it’s just a matter of discipline, but I also know myself. That’s why I like automation so very much. The money goes where it needs to and all I have to worry about is managing the difference.
Worst case scenario, I spend/waste that monthly contribution for a month and resume the automation once the transfer is complete. We will see.
M1 Finance for me is almost the perfect brokerage. Robinhood is definitely better to trade on. But, for the long-term investor such as myself, M1 Finance is a better alternative. With automatic investing, fractional shares, automatic dividend reinvesting, dynamic rebalancing and zero commissions, it’s ideal for this DGI investor.
So, what do you think of my decision to transfer funds from Capital One Investing to M1 Finance? Do you think there is another viable brokerage that can cater to a DGI Investor? Let me know your thoughts by commenting below.