Last year, I instigated the Quote of the Month project. Each month, I would pick a favorite quote and ask the DGI Community to post their favorite quotes as well. I did that for most of the year and it was fun while it lasted. Now, after some amount of brainstorming, I decided to take on another project in 2019. I call it, the Adopt A Stock project.
Let’s dive in to see how it works.
Adopt A Stock Project
Each month, I will adopt one stock in my portfolio. Then I will make a contribution to that stock. At first I was going to choose an arbitrary amount, like $50 per month. But, to keep things interesting, I’ve decided that I will contribute enough to that stock to purchase at least one share!
Some months will be easier than others. At the time of this writing, the cheapest stock in my portfolio is AT&T, which trades at $31.07 per share. The most expensive stock is 3M Company which trades at $205.71 per share. Regardless of the stock price, however, I will purchase at least one share of that stock, when it comes time to adopt that stock for the month.
Rules For Adopt A Stock Project
To ensure that no stock is left behind, I will adhere to the following rules:
1. Maintain Minimum Contribution to Dividend Portfolio
Recently, I increased the minimum contribution level to my dividend portfolio. That was after I had reduced that contribution level back in November of 2018. However, after realizing that I was wasting a lot of money, I decided to up my contribution level again to what it was before the reduction.
Based on the recently increased contribution level, I will be saving over $1100 per month towards my dividend portfolio. It will be tough, but I can do it!
2. Maintain Savings Goal Towards My Down Payment
I plan on maintaining a robust goal of saving $1500 a month towards the down payment on a house. As mentioned in a previous blog post, I could have focused solely on saving for a down payment and it would probably get me to my goal quicker. But, there was a reason why I chose not to do so. I didn’t want to lose the value of compounding dividends or time with not investing. And so, I decided to both invest and save for a down payment.
As with the increase in contribution level to my dividend portfolio, maintaining this goal will ensure that I have very little capital to waste.
3. No Stock Left Behind
Currently, there are 18 stocks in my portfolio. After I adopt a stock, I won’t go back to that stock until I adopt all remaining stocks in the portfolio.
Let’s take AAPL for example. If I purchase AAPL in March 2019, and I don’t add any more stocks to my portfolio, I won’t adopt AAPL again before September of 2020.
Keep in mind that this is only me “adopting” a stock. My monthly contributions to my dividend portfolio will no doubt invest in AAPL consistent with how M1 Finance works. When I adopt a stock, I will purchase an additional share of that stock in addition to whatever shares were purchased by my monthly contributions to my portfolio.
I’m not sure how I’m going to choose which stock to purchase next. One easy way to do it is by alphabetical order (which is the order they appear in the portfolio). That’s certainly the easiest way to go about it.
4. Pay Myself First
To ensure I don’t run out of money, I intend on doing this as soon as I get paid! That way, I am paying myself first.
To be more specific, I will purchase one stock as soon as I get paid. If I am able to have extra money at the end of the month, I will put it towards that stock. I imagine I will only be able to do this with the cheaper stocks like AT&T, but only time will tell. In any case, in addition to buying one stock as soon as I get paid, I’ll have an additional incentive to save money at the end of the month towards the purchase of additional shares.
After a while, I’m hoping this practice becomes a habit. It’s fun and different, and I hope it sticks.
Why Not Just Increase The Minimum Contribution Level?
Technically, I could just increase the minimum contribution level to my dividend portfolio. I chose not to do that for several reasons:
1. More Flexibility
Don’t get me wrong. I love buying stocks and reporting on the dividends I’ve earned on a monthly basis. But, because of the way M1 Finance works, when I invest, M1 Finance tells my money where to go. I don’t specifically choose which stocks to invest in.
Computershare is different. There, I can invest in individual companies at an amount I set. In fact, I engage in the company’s DRIP program using Computershare as the transfer agent. But, with M1 Finance, the program uses dynamic rebalancing and automatically buys my underweighted stocks. I like it, but it doesn’t ordinarily offer me the flexibility to purchase set amounts into each stock. I have to manually do it.
So, by adopting a stock per month, I get to have more flexibility with M1 Finance.
2. Waste Less Money
In addition to being more fun, a byproduct of this approach is that I will be wasting less money per month. Even with the increase in minimum contribution, I can still squeeze out a little bit extra and put towards my portfolio.
Don’t get me wrong. I will still eat out every day and I will still spend money on entertainment. But, this project will also allow me to add additional investments for my future. I just hope it lasts longer than the quote of the month project. But even if it only lasts six months, that’s six months extra income in my portfolio. Every little bit helps.
Accountability
Accountability is an important part of this process. So, on a monthly basis, I will be reporting on which stock I was able to
It’s unclear if I will make this a stand-alone post or part of my monthly dividend income report. Chances are, it will be part of the monthly dividend income report but we will see.
In any case, the rules are subject to change at any time.
Conclusion
As the Dividend Diplomats like to remind us, Every Dollar Counts. Adopting a stock on a monthly basis will put more money working for me in my dividend portfolio. It’s going to be tough, but the alternative is me using that money to spend on frivoulous things.
We all have different ways to cut back on expenses and to prioritize spending. The adopt a stock project is just one way for me to do just that.
What do you think of this project? Let me know your thoughts by commenting below.
Not a bad concept, but are you concerned about your Dollar Cost Average being impacted at all?
Nah. The dollar cost averaging will occur with the monthly minimum contribution to the overall portfolio. The adopt a stock project is just icing on the case. Even if dollar cost averaging is somehow negatively impacted, at the end of the day, it means more money flowing into my investments which is a good thing. Interesting thought though.
Hey DivPortfolio – interesting concept, but do you have any way of prioritizing which stocks should be in your portfolio? Or are you going with more of a ‘Blindfolded Benny’ approach and just adding any stocks that pay dividends?
As long as you’re putting money into stocks, I guess you can’t go too wrong either way 🙂
Cheers, Frankie
Hey Frankie, the adopt a stock project is geared towards stocks already in my portfolio, so I wouldn’t be adding new stocks so to speak as far as this project is concerned. Regarding the criteria for stocks to be placed in the portfolio in the first place, you’ll notice that most of those stocks are dividend aristocrats. But, placement is based on a combination of financials and my feelings towards the stock.
This is a cool concept DP! I like how you’ve set very specific guidelines and parameters for this as well. This will be a very fun way to expand your portfolio and add great dividend growth stocks to your portfolio. I’m excited to see the results of this pan out (and T and MMM are two of my favorites by the way).
Bert
Thanks Bert. Let’s hope I stick with this project for the long haul.
It sounds like a cool concept. Anything to help you invest more into your portfolio. Hope M1 Finance doesn’t charge you any trade fees. Seems like those would jump up quickly if you are buying 1 share at a time in a small purchase. You should still take valuation into consideration though when deciding which will be in each month. If one is on sale and another is at a high, no point in adopting the one that is at the high. Just a thought. Should be interesting to see how it plays out.
Dividend Daze recently posted…Dividend Update – February 2019
Hey Daze. M1 Finance doesn’t charge trading fees. It’s completely free which is one of the reasons why I like them. Additionally, taking valuation into account makes absolutely perfect sense, but I’m too lazy to do it. Technically, M1 Finance does take valuation, as you described it, into account in that it focuses on building up underweighted shares and selling the overweighted one based on my target allocation. But for the adopt-a-stock project, I’m just going to go in portfolio order and see what happens. That does mean that some months, I will be choosing a stock that I probably wouldn’t have chosen valuation into account, but right now I’m opting for simplicity rather than efficiency. I fully accept that I may not be adopting the best approach in the adopt-a-stock project. Thanks for the suggestion though. It was a good one.
I like the idea DP. It will be a great way to keep you focused reducing expenses and to keep investing. I think a valuation metric would be a good idea and probably something that could be automated and then just buy the #1 on your list, then the #2, #3…. Maybe something like the lowest blended P/E ratio, (average of TTM and forward 1-year) or something like the “Chowder Rule” dividend yield + 5 year estimate for EPS growth and buy the highest on that metric. I think both of those could be pretty simple to implement so then all you have to do is look at the list and then discard the ones that you’ve already purchased.
JC recently posted…Portfolio Recharacterization
I’ll investigate how to do that JC. If anything, it will get me familiar valuations. Any recommended resource I can look at to learn about such things? If not, I’ll be headed straight for Google.
I’m sure there’s a way to pull it all automatically. But if not you can use the CCC list from dripinvesting.org. That has the 5 year EPS/Div estimated growth rate and the Chowder rule. Then just merge that into a spreadsheet and use the vlookup function to just pull the 18 holdings you have.
Ok. Sounds complicated, but I’ll check it out for sure. Thanks.
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