September 2018 securities activity

September was a busy month for me. I recently left a company and rolled over a small (about $20,000) balance to my Fidelity IRA. My goal was to increase the portfolio yield by buying some individual securities. The bulk of my investments in that account are still index funds, so the dividend income from those investments is not that great. Fortunately, I do have capital gains to show for it.

Here is my purchase activity for September:

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Monthly Dividend Income: September 2018

As September was a quarter-end, there was a lot of activity in my accounts. Below is my income summary at the end of September.

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I’m closing in on $10,000 in forward income. As I’m 10 or more years away from retirement, generating the absolute highest income is not my immediate goal. My Rollover IRA is heavily concentrated in investments that pay little or no dividends. That includes Fidelity Select funds in technology and defense. Plus my S&P500 index fund is paying around 1.7%. I’m still hoping for portfolio growth before I retire. At that time I can re-evaluate the need to move investments into higher income producing assets.

For now, my September dividends for my brokerage account are shown below:

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Below is my portfolio composition at the end of September:

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I may be a bit to high on my stock holdings at 83%. At this point in the economic cycle I should probably be at 80% or even down at 75%. I’ll have to think about how I want to address that, but it isn’t critical since I’m holding my portfolio for the long term. I just need to make sure I have some dry powder on hand in the event the market pulls back.

Choosing between taxable and tax-deferred/tax-free accounts

One of the many considerations I have when I make an investment choice is the decision of running that investment through my taxable brokerage account or through my IRA. Of course, there’s only so much money that goes into the IRA each year, but if I have money for an investment this question becomes relevant.

Investor Place has an interesting article on the types of investments to hold in an IRA. It’s an interesting read. Here’s an excerpt:

“Whether you want him to be or not, Uncle Sam is one of your most important partners in your retirement planning. The taxes you pay have a major impact on your effective returns … and in some cases might make the difference between retiring comfortably or just barely getting by. That’s why it pays to know what investments should go in different retirement vehicles, such as a 401k, IRA or Roth IRA.

Not all investment gains are taxed equally. Some are taxed at preferential rates — or allowed to defer taxes indefinitely — while others will cost you so much of your current income, you might mistake them for a vindictive ex-wife”.

Here’s a link to the full article:

Company Focus: Starwood Property Trust (STWD)

I hold STWD in both my taxable and tax-deferred accounts. Starwood Property Trust is a REIT that originates and services commercial mortgages and takes equity positions in properties. The company is one of the largest in the industry with a very experienced management team.

This is meant to be an introduction to the company, not an in-depth analysis. Do your own homework if you decide this could be a good investment for your portfolio.

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Starwood operates through seven verticals. They’re also affiliated with a number of other companies in the real estate industry.

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Starwood’s lending segment focuses on first mortgages and mezzanine loans.

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The company is well diversified by property type with an emphasis on Office, Hotels, Multi-family, and Mixed Use.

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Starwood also invests directly in commercial properties.

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Much of Starwood’s investments are tied to a floating rate, protecting it from a rising interest rate environment.

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As a REIT, Starwood distributes the majority of it’s earnings in dividends. As of this writing, the dividend rate is 8.8%.

Restoring my financial future

My name is Steve, and I got into investing three years ago when my 25-year marriage ended. Between losing most of my home equity in the Great Recession and a good portion of my net worth in my divorce, I decided I would do my best to salvage my financial future by saving what I could for my retirement. This blog will chronicle my journey, and hopefully along the way provide insight to others about restoring a financial future in the aftermath of a divorce.

I actually have three portfolios, two of which I’ll feature on this blog. My first portfolio is a Growth & Income portfolio. It’s a dividend portfolio to be sure, but I’m not focused on maximizing dividend income at this time. From a planning perspective, I have about 10 years until retirement, so my plan is to increase the yield each year until retirement. This will allow me to invest in lower yielding stocks that still provide strong total return. This is a taxable brokerage account and currently yields 3.1%

My second portfolio a High Yield portfolio housed within an IRA account I started after my divorce. It’s much smaller than my taxable account but I add the allowed $6,500 every year (I’m over 50 so I’m allowed to add an extra $1,000). This is my experimental portfolio that is invested in high-yield securities. It’s currently yielding 5.8%.

In case your wondering, my third portfolio is my rollover IRA where I accumulate funds from previous employers’ 401(k)s. It’s invested mostly in mutual funds and ETFs. Eventually I will likely convert those funds to individual dividend stocks, but for now it serves as a sort of hedge against my individual stocks. Those funds are invested in low-cost index funds, a few sector funds, some bond funds and a preferred stock fund (PFF).

My plan is to update my portfolios quarterly so you can see what I’m investing in. Along the way I hope to have a conversation with others about the picks, and what opportunities I might be missing. Ultimately, I hope that I and others can learn more about investing, and recovering financial from a divorce or other life event that knocks us off our feet. There is always hope.