An Update Using Quicken
I recently installed Quicken on my laptop to become familiar with the tool and to see if it could help me with income tax planning and analysis of our investments. I’m still a novice, but I like the way the tool works. I also have found Quicken’s phone technical support to be very helpful.
Top Ten Investments and the Five Percent Rule
One of the things I always look for when I review another friend’s set of investments is their allocation of dollars to any single investment. Most of the time my concern is with overlap of ETFs or mutual funds, but sometimes a heavy investment in a single stock can also be a warning flag. In the accounts I manage for Cindie and me, it isn’t surprising that Pfizer (PFE) is our one investment with more than 5% of our total investment mix. However, upon further reflection, I plan to sell some of the PFE shares using covered calls.
I believe a good general rule is to never have more than 5% of your total investment dollars in any single stock. If you have overlap of companies like Amazon, Microsoft, Facebook, Netflix, and Google in your ETFs and mutual funds, be careful. Most mutual funds and ETFs are cap-weighted. That means some companies can make up 40-50% of the total assets in the ETF.
Why These Top Ten Investments?
The short answer is that I am retired. I want dividend income and a certain amount of dividend growth. But not all of our investments need to be dividend growth.
VYM is one of my favorite ETFs. It has a low expense ratio, good diversification, and a track record of increasing dividends.
PFE is a leader in the health care pharmaceutical industry. ABBV is another healthcare company, but it is more focused in biotechnology. Both pay a decent quarterly dividend and both have a history of increasing their dividend.
STX is a great technology investment for dividend income. It is international because it is located in Ireland. I trade covered call options on STX.
MAIN and ARCC are financial stocks focused on Asset Management and Custody Banks. That is a fancy way of saying they are BDCs (Business Development Companies.) I like the steady income from BDC’s and the fact that they can invest in other companies that are not publicly-traded.
Ford (F) is my favorite in the auto industry. Yes, I watch Tesla and GM, but I consider them to be higher risks. I realize I also have a bias because Cindie and I have driven Ford Escapes for the last twelve years. I have also owned Ford Thunderbirds and even one Explorer. I did not give up on Ford during the downturn even when they cut their dividend. Patience and a long-term view have paid off. Furthermore, I earn quite a bit of extra income trading Ford covered calls and cash covered puts.
O, which is Reality Income Corp, is a marvelous REIT. If you don’t own shares of O, you should dig a little deeper. I like the monthly income and the long-term results that Realty Income has generated.
Truth be told, Cash is not usually in our top ten. However, recent sales of our VLO, MSFT, and CAH shares resulted in a pile of cash for other purposes. I recently bought shares of AOSL and NLOK as a result of the influx of cash.
AMD (Advanced Micro Devices) rounds out our top ten. AMD is a technology stock that does not pay a dividend. I like semiconductor stocks. Be aware, however, that I consider AMD more speculative.
Summary
If you look at the top ten, you will see that I have assets in different business sectors. The top ten, however, do not really paint an accurate picture of our weightings in the different sectors. That is another thing I look for when I evaluate investment statements for others. Do you know where your money is invested? You can and you should know at least these basics.
Know Your Flocks & Herds 