The common wisdom (an oxymoron) is that we had another ugly month. Major downswings, panicked phone calls to your favorite investment advisor. The reality, however, is that the market was up for the month. You all made money.
I have mentioned before that I am not against stocks if we can get them to fit into a disciplined plan. I am particularly ok with high dividend stocks as a replacement for some of the bond funds. The bond funds pay very low interest and have very low risk. I use them to moderate the risk from the stock funds. The 2% interest really hurts, however.
My son and I have identified six (so far) high dividend stocks from very long-established big companies. These companies have typically only had small range between high and low for the year (in other words, not much fluctuation). As an example, Royal Dutch Shell is an international conglomerate that has almost no chance of going out of business. The company has been in existence since about 1810. It also has a 6% dividend. There is still some fluctuation even though it is small. The bond funds of course have no fluctuation. The fluctuation is part of risk. Therefore, the higher return.
My own portfolio was about 60% stocks and 40% bond funds. I have now put in my personal model each of the six stocks at 3% each and reduced the 40% bond funds to 22%. I am taking a little more risk but substantially juicing up my return.
The key here is that I am putting the dividend stocks in my model. If a stock goes substantially off the 3%, I will rebalance. I will either buy or sell an amount to bring the item back to roughly 3%. I am still using this dividend stock as a shock absorber to partially moderate market risk.
If you are interested, we should address these stocks (or others) in our next planning meeting. Or give me a call. I will do some planning right away with you on the phone. The percentages have to be right for your situation. To keep the overall risk the same, I may recommend a reduction in the allocation to stock funds. You also may object to owning a certain stock for personal reasons. We need to talk.
All of you know that my son has worked for me for many years. Eli’s work is increasingly becoming valuable to the practice. The dividend stocks, in fact, were originally his idea. He recently obtained professional investment licensing. Effective January 1, 2019, I am transferring to him 10% ownership of Dollinger Management, Inc.
Thank-you for your business and your trust.
Investment Fee Schedule
|Rate||Assets Under Management|
|1.00%||Between $125,000 and $750,000|
|.85%||Between $750,000 and $1,250,000|
|.80%||Between $1,250,000 and $1,750,000|
|.75%||Between $1,750,000 and $2,500,000|
|.70%||Between $2,500,000 and $3,250,000|
|.65%||Between $3,250,000 and $4,250,000|
A single rate is applied to the whole account. Compared to my old fee structure, under the new fee structure the cost for a $1 million account would be $500 lower per year and the cost for a $1.5 million account would be $1,500 lower per year. I will still waive personal tax return fees for accounts over $1 million. All services stay the same. I am just lowering my upper end fees. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.
As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.
If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.
Questions for the comments
Did my newsletter make sense? Do you agree or disagree with what I said?