DGI – Is It Really For Me?

This week I have read a lot about index investing as well as other Financial Independence bloggers. It has made me start thinking that DGI might not be my strategy after all.

One guy said: Hi, I am switching from being a DGI to Indexing. I figured I do not have time to keep track of all my stocks and found indexing to be a much better match for me. I have been selling my individual stocks and buying and index funds through Fidelity.

The thing is, I value Time more than anything, and the DGI strategy takes T I M E. The question is if I’m wasting time on something that an index fund could do just as easily, like a DGI ETF with brokerage at 0.06%.

At least that’s how I see it now. As a DGI, you need to buy stocks at the right prices. Yes I know, some people say you shouldn’t care that much about prices, but the lower price you pay the higher possible return, so it’s a factor worth thinking about. You also need to be updated on the companies somehow at least: debt, Trump’s tweets, earnings, CEO changes and so on.

Diversification plays a big part in the DGI strategy, so that means a lot of companies, 10 or more. Keeping track of them will take time, and I will not get easier as time goes by. A more important job, more traveling, family, a dog, did I say more important job?

EGO?

 

Another part of my current view is that I might just be stupid. Too damn proud. I consider myself a smart guy, not a genius by any measure at all, but my ego is taking a beating. It’s hard to invest time and effort in education in finance and engineering, and then invest in the exact same way as my grandmother would do. It’s just painful…
So, the question is if my ego is playing my mind, and that”s why I do DGI. Well, I like dividends. I also like the fact that you can control the money, and how you spend it. I like the fact that when the market crashes at one point, I will still get paid and can buy stocks at cheaper prices. With an index fund, I would just ride the train from A to B. Of course, if I have a lot of cash at hand I could take advantage of the crash, but let’s say I don”t, then I’m screwed riding the index.

Which Direction?

But again, how in hell should I expect to beat the index? Or is that even what I”m expecting? No, not really. I”m hoping for something between 6% to 8% annual increase. Then an index fund or index portfolio would do just fine. To add an argument, when W. Buffet keeps saying to his family and everyone that they should just save in a low-cost index fund, why shouldn’t I? Again, the ego….
Another aspect of the strategy that I’m not comfortable with, is that it makes you use the internet and the computer more because stocks are so damn fun. I like to travel, and when I travel I go for several months, my record was 1 year. How am I supposed to be able to keep track of my investments if I’m on a volcano in Central Indonesia? In January of 2016, I was in that exact situation. The market fell, but since I was in Indonesia or Vietnam or Cambodia (can’t remember), I just shut my phone off and logged into my account several months later.

Conclusion

I think that deep down, that’s the life I want. Free. No worries and just being happy at the current state. The “problem” is that stocks and investing have become a part of me. A major hobby. I am just not sure if I am happy doing it or just stimulating the mind, in the same way, solving puzzles.


14 Comments

Axa · March 9, 2017 at 2:28 pm

Hi,

Love your blog! Keep on writing. But to the topic at hand: how about just using dividend paying low cost ETFs, like VIG, VIGI, VYM, SCHD, VXUS etc.? That way you only have to check your account every 3th month (when the dividends arrives). That way you get the ease of indexing combined with the fun of dividends. You wont be able to beat the market, but you will be able to travel to your volcano 😉

    Stockles · March 9, 2017 at 3:01 pm

    Hi Axa,

    Thanks! I really appreciate your comment.

    Yes I have thought and actually discussed it with some DGI friends of mine. We are talking about having maybe 75 – 85 % of the portfolio in one or a few of the ETF´s you were talking about. One could then add one or a few companies to give the ETF more weighting of one wanted to be more exposed to for example Apple.

    I like what you about “ease of indexing combined with the fun of dividends”. That´s exactly what I´m looking for. The only “issue” is that I normally find the dividend a bit to low, around 2,5 %. That´s barerly over inflation. With my portfolio now, I´m more around a yield at 4-5 %. That´s something I won´t get if I solely buy VIG, but if combined with single high yielding stocks or high yielding ETF´s, it might work!

      Axa · March 9, 2017 at 4:04 pm

      Yeah, I see your “issue” here. One option might be to add some REIT etfs, like Vanguards VNQ and VNQI. They both yield 4,7-4,9%. Combined you might end up with a dividend at 3-3,5%. I read in your last post you are quite fond off REITS, but maybe not REIT etfs?

Axa · March 14, 2017 at 2:45 pm

Hi again, and thanks for the list. Is this your “buy and hold” list now for the future? How do you think regarding emerging markets? Will you add like chinese and indian companies in the future when they grow big, steady dividend payers, og will you stick to an ETF for this part of the world as the information might not be so easy to find regarding companies? Or is it might enough that starbucks sells coffee and Apple sells iphones in these countries?

    Stockles · March 14, 2017 at 5:48 pm

    Hi Axa,

    This is a list that a friend gave me and is based on best companies that he knows. There are lots of criterias, but it´s supposed to show companies that will last 10-20-30-40 years later. NB: GILD should not be included, neither NESTE (should have been NESTLE)

    The only chinese company I want to buy is Baidu. Other than that, I would not buy any emerging market stocks. Just stick to a index based investment. Will very likely start doing monthly savings in ETF based on India and Vietnam (both countries have great potential. As you might now, I already save in a monthly ETF that focuses on EM.

    Good point about Starbucks. They open a new store every 15 hour in china. That´s insane, but it´s not enough to be “invested in china”. However, I really believe that EM will preform good in the next 50 years, and after travelling there for more than 1 year, I am confident that Visa and Mastercard are great investments. At the moment, people don´t use cards, only money. This will change, and then Visa will start making BIG money.

    PS: DGI is the right strategy for me. I will write a new post next week on the topic.

    See you,

    Stockles

DivHut · March 21, 2017 at 9:35 pm

I like like DGI because it’s a long term strategy that builds up ones passive income stream and that is where my focus rests, income. You have to decide what you want from your portfolio and investment objectives as that’s personal to your situation.

    Stockles · March 21, 2017 at 10:10 pm

    Hi DivHut,

    First I should say that I was in a special mode when writing this #uncertain

    Second, I had a really long conversation with a few DGI friends of my and I now know that DGI is what I want to do. Just needed a quick reminder. I´ll write a blogpost about this very shortly as it per now seems that I am uncertain. I am far from that. The strategy is set in stone and I can´t wait to reach FI someday.

Dividend Portfolio · April 14, 2017 at 8:13 pm

Hey Stockles. Honestly, there’s nothing that says you should stick with one strategy. Perhaps one approach is to include indexes in your portfolio, although that might be slightly double-dipping if the indexes are also invested in the individual stocks you’re invested in.

In any case, DGI is more fun for me. I do indexing with my retirement account, and I rarely look at it. What makes DGI fun is that I am tracking my progress through blogging, which I’ve never done before. I think if I switched to index investing, I probably wouldn’t blog about it.

I know you’re still going to stick with DGI, but just wanted to throw my 2 cents in.

    Stockles · April 15, 2017 at 7:39 am

    Hi Dividend Portfolio,

    I could not agree more. DGI is fun! It has become a hobby, something that makes life even more fun and I would not be without it for any case. In the long run, indexing will save time and maybe even be more profitable. But what I came to understand is that I investing gives me more happiness in life. The difference in profit between indexing and DGI is worth that value.

    Thanks for commenting buddy!

Carl · April 16, 2018 at 4:01 pm

It might be a good idea to a add a few well-chosen closed-end funds (CEFs) to the mix.

    Stockles · April 17, 2018 at 1:46 pm

    Hi Carl,

    Just note that I was in a very bad mood when writing this. I hope you read the part 2.

    If you take a look at my portfolio, you will find Investor AB B. That’s very similar to a closed-end fund 🙂

DGI – Damn Straight It´s Right For Me PART 1 - Stockles · March 25, 2017 at 11:21 am

[…] Well, first I should say that I was in a special mood when writing the blog post about DGI and if it was right for me:  http://www.stockles.com/2017/03/09/dgi-is-it-really-for-me/ […]

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