Q: Should I buy or sell a specific stock?
A: I don’t know. What does you strategy say?
Q: How much have you invested in total?
A: Around 1.100.000 dkk right now and they are now worth more than 1.400.000 dkk
Q: What is your goal?
A: To receive enough dividends to cover my bills.
Q: How much dividend are you getting?
A: I have received around 37.000 dkk during the last 12 months (2019) and around 110.000 dkk since I started.
Q: Have you thought about day trading, shorting or something like that?
A: Yes, but it does not suit my strategy.
Q: What is your strategy?
A: To build a well balanced stock portfolio that contains large cap stocks which pay dividends.
Q: Have you thought about investing in cryptocurrency/Bitcoin?
A: I don’t consider Bitcoins an investment since it is a currency. And I don’t deal with currency trading.
Q: Why dividend stocks? You need to pay dividend tax so you will lose money that way.
A: You are right if non-dividend stocks and dividend stocks would grow equally in price. Historically, the companies that has been able to keep up a good dividend payout has also been growing more in price than non-dividend stocks (look at the historic data of the Aristocrats and S&P500). I believe this will continue in the future.
Q: Any toughs about individual stocks with dividends vs passive index?
A: I believe it is important to have a diversified portfolio since it is hard to know which companies will do great in the future. There is two ways of doing so. You can either buy into a passive index fund or pick a lot of different individual stocks. The white papers I have read suggest picking at least 30 different individual stocks in order to have a diversified portfolio. The downside of doing it yourself is that you need a larger amount of money to get starting, but the uptake is that you don’t need to pay the fee from the index fund.
Q: How do you select your stocks?
I am targeting large cap stocks since I believe they will be around for a long time. Furthermore, I look at numbers like dividend yield, payout ratio, P/E and for how many years they have been rewarding stockholders with dividend. I am trying to look at the company as a whole.
Q: When did you start making your portfolio?
A: I started saving in 2009 and in 2012 I started to play around with stocks. It was in December 2014 where I received my first dividend that I made a dividend strategy.
Q: How do you suggest I start with a dividend portfolio?
A: There are 2 groups of stocks I would recommend you take a look at.
One is the S&P 500 Dividend Aristocrats Index, which is an index consisting of American companies that have been increasing its dividend for at least 25 years. The second group of stocks is Dogs of the Dow, which is the ten shares of the Dow Index with the highest dividend yield.
Q: How do you invest your dividend?
A: I put the dividend aside and use them when I buy stocks again.
Q: Do you care if a company pays 4 times a year or 1 time a year?
A: I don’t care if they pay 4 times or just 1. The money still arrives at my account.
Q: When do you expect that the dividend you receive will be able to cover your bills?
A: My target goal is when I am 50 years old, and I am currently 37 years old. And I have made a small model that tries to estimate when it happens. So far it shows that I am 2 years behind schedule. In this model I have excluded private and public pension.
Q: Do you sell an individual stock if it is a large part of your portfolio?
A: I don’t plan to sell stocks where I have seen large increase of value, since my philosophy is that you should never sell the winners. I have thought about selling some of the stocks where I have lost of bit of money because I can reduce my tax burden that way. But I will wait till I enter the high tax area.
Q: What is your saving strategy?
A: In the beginning (in 2009) I put 4.000 dkk aside each month. Now I put 10.000 dkk aside each month (2020). And when I have more than 20.000 dkk I find a good stock and buy it. Currently my income is 24.000 dkk each month after tax.
Q: What about double tax?
A: I did buy some stocks in Germany and Norway before I was aware of them withholding more than 15 % tax. I don’t plan on buying new stocks in those countries since I don’t want to use my time on getting tax back.
I could try to get the tax back from those previous years, but the amount I would get back is not even the price of a pizza so I would rather use my time one something else.
Q: Do you plan to add more stocks from companies that you already own?
A: Not currently. There is plenty of good stocks out there that I still need to by before I do that.
Q: Have you thought about living in the moment vs FIRE?
A: Yes, I have. I like the motto: Build the life and then save for it. Therefore, I use the money I think I need to live a good life. And then I invest my remaining money. It might take a bit longer this way but then I am enjoying the ride.
Q: What is the plan regarding the realization of the shares
A: Right now the plan is not to realize the shares as I do not need to spend the money. This means that the tax I have to pay can be deferred and therefore I can make money from them.
And with the companies I have where I’ve lost money but would like to keep, I consider selling and buying again so I can deduct them in taxes once I get over the 42%