August 12, 2019: Amending Your Personal Investment Constitution

Time in the market is better than timing the market. Be greedy when others are fearful. It’s not what you make, it’s what you keep. Nobody ever lost money taking a profit.

These are what I would call laws of investing.

Buy low, sell high. Real Estate always goes up. This time is different. If you owe the bank $100, that’s your problem… if you owe the bank $100 million, that’s the bank’s problem.

These are what I would call hypotheses of investing.

When investing, I recommend having laws and hypotheses. Laws are rules that will never change and when things start looking dicey, you must rely on them. The most experienced people in the world have relied on certain laws of investing for decades.

However, you must also have hypotheses because things change.

Just a few years ago, you had to make a phone call to a broker to execute a trade. Now, if you can get a bank account or can transfer cash electronically, you can be in the stock market for free by downloading an application. I share this to try and illustrate how dynamic the stock market is and how technology will without a doubt influence market tendencies. New financial instruments and tools come and go, so there will likely be times when you have to re-test your hypotheses and make sure they still hold water. Additionally, policy also changes and can impact how you should invest. Tax amendments can play a major role in how valuable an investment is.

I have recently made an amendment to my investing constitution. Historically, I have capped any investment at $25,000. I do this by investing roughly $1,000 once a month for 25 months. This technique has worked fine and I was fairly certain it was a law. However, now that I have invested $25,000 into the stocks that I like, I can’t find another monthly REIT that I am comfortable investing in. Further, I still love the stocks I’ve invested in and because of that, I’ve decided to raise my max contribution to $30,000. This buys me roughly a year to evaluate new stocks. Here is the game plan:

PFLT from $25,000 to $30,000 was completed 08.08.2019

AGNC from $25,000 to $30,000 will be from September 2019 to January 2020

GAIN from $24,000 to $30,000 will start in February 2020 and continue to July 2020

The table below represents my estimates for each monthly payment.

Ignore the bold numbers in the August row. When a number is bold in the current month, it means that is the exact amount that will be paid that month. I bold them once the company announces the dividend and timing of payment.

The bold numbers in the September thru May rows represent the months that I will be investing an additional $1,000. You can see that every month I’m buying roughly $10 of monthly income if I invest $1,000. For example, in September, AGNC will pay $227.89 and in October they will pay $239.49.

Cells that are not bold represent the amount the stock will pay me each month if I let the monthly payment come in without investing an additional $1,000. For example, in September GAIN will pay $170.46 and in October it will pay $171.47. The September payment will buy me roughly $1 of additional monthly income.

Capture.PNG

My laws haven’t changed: I’m still going to invest $1,000 of every paycheck into monthly paying dividend stocks until I reach $2,000 of monthly income. However, my hypothesis that I would be able to find additional stocks without any issues has failed. I would rather continue to purchase the five stocks that I have evaluated than add a sixth stock for the heck of it.