When I was travelling last couple weeks, I got time away from the day-to-day chores of family life. I kind of enjoyed this break….ssshhhh….don’t tell this to my wife 🙂 I used that time to read up on different articles related to my current investments. When the markets went down, I wanted to feel good about my investments!
One of my investments is in VDIGX (Vanguard Dividend Growth funds). I have talked about various dimensions of this fund in this blog.
- My original rationale on picking this fund is documented here. Don Kilbride, the manager of VDIGX, is a recognized name in the industry and has done a wonderful job with VDIGX.
- VTSMX is Vanguard Total Stock Market fund. I compared VDIGX vs VTSMX here. I wrote that both VDIGX and VTSMX have their rightful place in my portfolio.
- I definitely see a recession coming and wrote about it here. As part of that, I did a Risk Analysis of all my investments here. VDIGX had the second lowest Beta Coefficient of all my investments….only VTMFX (a tax managed balanced fund) did better. A low beta coefficient means that my investments will be less volatile than the market i.e. income stability will be much better.
In addition to what I thought about, some other smart people have thoughts on VDIGX too. I read one such article from Morning Star while travelling and I really liked the content enough to post a link here.
This article argues that a fund may not provide the greatest current yield (usually, this implies less risk) but if the fund holds quality holdings, it will provide a more stable income stream and potentially lead to more capital growth in the longer term. Read more directly from Morning Star link above…it is worth it.
PS: There is good marks for VHDYX (Vanguard High Dividend Yield) also…this makes me more happy because I have invested in this also. Wish me luck for continued good success in picking good investments.
10 thoughts on “VDIGX….an investment decision validated.”
While I don’t own any funds I’m not against anyone who does. Some in the DGI community are pretty zealous when it comes to the debate of owning individual stocks or funds. Vanguard is one of the best names in the business and while it’s true a find may not provide the highest yield it does, as you mentioned, offer more stability simply because of the sheer number of investments that are owned. Do whatever helps you sleep at night. For me, I like individual dividend stocks spread among several dozen names for diversification. Thanks for sharing your thoughts.
Thanks for dropping by!
Yes…most of the FI bloggers travel down the path of individual stocks. This path requires effort in two ways: once when entering a purchase decision and second continually monitoring it to determine an exit decision. With the current demands on my time, mutual funds suit my lazy investing style.
Risk diversification is another fundamental reason for me. I saw that the dividend focused funds have pretty much most of the stocks that a FI blogger would purchase and then some. This made my decision easier. But, there is always a gap. For example, the canadian bank focus of your recent investments cannot be obtained easily obtained via funds.
The third reason may sound funny…but here it is anyways. In purchasing stocks on the open market, I have found that the prices can go up more irrationally in a day than in a fund. While investing in a fund, I cannot get the price I see during the market open hours…I need to wait for the NAV price to be set at the end of the day i.e. I cannot buy on a whim. So, the probability of getting trapped in a price war with other emotional buyers is less for funds. Of course, I am hoping that Vanguard, with all its might, has better judgement to not buy when the stock price has increased irrationally.
As you said, it does help me sleep better….but I need to see the dollars on this bet 🙂
After reading your rationale behind the VDIGX, I can follow you. There are some benefits in being a lazy investor. That is why I am into index investing.
There might be better yields out there if you do all yourself, but the downside is the time you need to invest to investigate the stocks you want to buy and the stocks you own.
It is personal finance: we need to do what is best for us! Only you can tell.
Thanks for dropping by!!
Yep…lazy works for the investment..hopefully it works in bringing the dollars also. My overall strategy is to have two players competing in each type of investing strategy like dividend investing, muni bonds, index investing, etc.
For example, for Dividend Investing, I use the following two players:
+ VDIGX: Dividend growth is primary focus, current dividend is secondary
+ VHDYX: Current dividend is primary focus, dividend growth is secondary.
Having two funds is not only risk diversification across managers, it is also risk diversification of investment strategies. I can get this diversification and tapping of many smart minds from Vanguard by using funds…otherwise, I would have to use my brain for that…and I know for sure that I am not financially as smart as folks who have done this their entire life 🙂
Lets see how this strategy works in the long run.
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I do like the idea to have two competing players for each strategy!
The play I take is to have multiple strategies that make up my total portfolio. This way I diversify here as well. I have no clue what strategy is best in the long run. They each have their merits and choosing only one is not something I can do already now.
Congrats on picking a great fund that can ride this market volitalities. I myself have 100% of my 401k in mutual fund 70% in s&p 500 and 30% in few hand pick mutual funds. My work won’t allow et for individual stocks.
As for my taxable account, I’d like to have some control on what I want to keep. I wouldn’t have Phillip Morris if I can help it for instance.
The stock market is definitely need a correction, I feel a 10% drop is good enough for me to deploy more cash. If it goes down more, I’ll buy more. I really like checking your blog as you are very patience by having a large amount of “emergency cash pile”, it makes me feel like I should hoarding some cash too. 🙂
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Thanks for dropping by!
The emergency cash pile is one of the main reasons that I get to sleep everyday 🙂 In my profession, one is very lucky to get a few hours notice on a job loss….one day is a luxury actually. I have been through too many “getting costs in line” exercises and lost too many hours of sleep to not have this fund. It is not sitting idle though…it is generating .9% interest, albeit ordinary (taxable) income though.
By end of year 2015, my forecast says that my monthly dividend income will be $568 per month. Once my dividend income per month reaches $1000 pm, I will be a bit more aggressive and employ a small percentage of the emergency fund….either push that into the market OR into a home purchase. I will probably write a post soon on when I will get to reach $1000 pm dividends..thanks to you for the wise question!!
9% interest? Mr. WRI is sitting on $300k that he’s not investing the inflation will eat right up his savings. Can you share which investment can earn that much?
Please note that it is .9% from Ally Bank (0.99% to be precise) for their Online savings account. If I got 9%, I would quit the stock market for the most part 🙂
Cash is king….especially when other people do not have cash to compete on stocks, real estate, cars, etc. A market drop of 10-20% is definitely a time like that when most people back off. So, Mr. WRI can use his money to purchase things at a big discount!! Best of luck to him and yourself.
hihiih… medical profession, we have to use the leading 0. we can’t have naked number .9, the dot is so small that I misread. I thought you buy corporate bond or something, but even with corporate bond of 9% it must be a risky bond or P2P lending, people has reported high return. But many of them I’ve seen eventually drop out.