Financial Independence Progress Report for October 2017

It is one of those slow dividend months again….not much action (which is good) but not much money coming in either ūüėź So, lets directly jump into the numbers for¬†October 2017. This time, I will post a bit early as I will be heading out for a work related assignment and will not have the time until well into next month.

Emergency Fund $60K Done
College Fund (80K) 58.61% 59.62%
Passive Income (2016 vs 2017) $551.80 (10/2016) $528.04 (10/2017)
Retirement Fund 78.74% 79.39%
Roof for our Family($750K) 00.00%
Medical Fund (via HSA) 5.86% 5.70%
Life Insurance Done (term life insurance policy)

Main Takeaways this month

  • Passive Income Stream
    • My passive Income for October 2017 is approximately 4% lower¬†than October 2016. The only reason for this decrease is that I re-positioned my investments to provide more dividends in the months of Mar, June, Sep and December instead of my older investments that used to have a dividend stream in Jan, April,¬† July and October.
    • My total dividends at this point in time are actually up compared to last year
      • At this time in 2016, average dividends per month was $603.4.
      • As of now in 2017, average dividends per month is $709.60.
      • So, appx a 17% increase in average dividends per month.
    • I also captured some capital gains from one of my US mutual funds. The stock markets are reaching new levels every day and the only thought that comes to mind is: greater the rise, the greater fall. So, I am staying invested in the US market, but capturing some gains as well.
  • Additional Investments
    • Investments in tax-deferred account (IRA)
      • In July, I sold portions of some funds to capture accumulated capital gains and created a cash fund inside my IRA.
      • In August and September, I deployed some of the cash in the cash fund into two international mutual funds to avoid the super expensive valuations of US stocks.¬†In October, I continued more of the same and invested in the same funds again.
        • VTIAX:¬†Vanguard Total International Stock Fund
          • Lower expense ratio
          • Covers the entire international market (large, medium and small caps)
        • VIHAX:¬†Vanguard International High Dividend Fund
          • Higher expense ration
          • Covers a portion of the international market only (mainly large caps)
      • The curious reader may ask: why not just invest everything in the cheaper VTIAX?¬†I am following my old rule of risk diversification….in the same class of mutual funds (international market), I always have two funds compete for your money. So, both VTIAX and VIHAX will now compete with each other to make more money for me ūüôā
    • In addition, I noticed now that in my IRA, the percentages of US and International stocks are almost even. I will pile up on US stocks over time in the following ways:
      • Periodic 401K investments are always dollar cost averaging into US stocks (70% of money goes into US funds)
      • In the next recession, I will invest some of the leftover cash fund into mainly US stocks and pick them up at cheaper valuations.

Financial Independence Progress Report for May 2017

May is a one of the super-special months in the year. Why? Because it comes before June….one of the two biggest dividend months in the year ūüôā Other than that, May was a dull month. And I have missed my update for April 2017….I do remember writing it…but I guess I forgot to publish it…I found it in my Drafts folder. So, it is going to be a 2-month update for some categories!

Let us look at the numbers for May 2017.

Emergency Fund $60K 84.135% 84.73%
College Fund (80K) 51.35% 53.24%
Passive Income (2016 vs 2017) $371.51(05/2017) $470.72 (05/2017)
Retirement Fund 71.45% 74.27%
Roof for our Family($750K) 00.00%
Medical Fund (via HSA) 2.6% 2.6%
Life Insurance Done (term life insurance policy)

Main Takeaways this month

  • Passive Income Stream
    • Passive Income for May 2017 ($470.72) is appx 26% higher¬†than May 2016¬†($371.51).
    • I have stolen as much money I can from all my other goals to fund my passive income streams…especially from our home down payment fund. This has resulted in¬†double digit year-over-year gains. But, next year, I will not see this kind of gains…I will enjoy them while they last hey!
  • Additional Investments
    • International exposure
      • Just like prior¬†months, I have continued to increase my exposure outside the US market. Dividend investors are not supposed to look at the stock price…but US stocks seem so¬†overvalued that I just can’t bring myself to add to it.
      • On the other hand, I want my passive income streams to come from many countries all over the world to spread¬†the risk of a single part of the world going through a bad phase.¬†So, I added some more funds to¬†my existing investments in Emerging markets (via VEIEX) and Euro-Pacific Developed Markets (via VTMGX).
  • Build a tiny cash fund again
    • I am accumulating some money in a money market fund. I want to have a small cash fund accumulated to take advantage of any market¬†dip(s) in the US market.
  • Capture gains in my IRA/401K
    • Seeing the insane manner in which the US market stocks are going up, I¬†can’t shake the feeling that we are at the top. I see all the signs of a big drop except the market is going up and up. It is tapering now and I feel that a major dip is quite near.
    • My IRA lost a lot of its value (total return) in the 2008 downturn and I had to wait almost 6 years for it to come back up. I was a financial fool at that time and did not even attempt¬†any corrective actions….I could have moved to preserve some of my gains…but did not know any better.
    • For the upcoming¬†downturn, I do not want to lose the gains in my IRA. So, I cashed out¬†most of the gains¬†accumulated in¬†my IRA over the last few years and have parked them in cash inside my IRA. When the next dip happens, I will put them back to work. Until then, I am okay with losing 2-3% in¬†dividends versus losing 10-20% of the stock price.