When I first started this blog in February of 2012, I was a full-fledged dividend growth investor. Well, maybe not quite, but I was pretty close! Sometimes I took gambles and invested in non-dividend growth companies like Exelon (EXC), Transocean (RIG), Apple (AAPL), etc. With EXC, I went for perceived value (low P/E) even though the dividend was frozen. RIG was another sort of value play, even though they had just issued a dividend cut. Lastly, when I invested in AAPL, it was a growth story and this was well before Tim Cook announced a dividend reinstatement.
Investing in Stocks
The results were varied. I was burned by EXC, sold for a loss with RIG, and rode AAPL up to $700 (but was too greedy and didn’t cash out at the top). Would I have been better served just sticking to dividend growth stocks? From this small sample size, yes, probably. However, even with mediocre results, I don’t think I could ever declare myself a TRUE (100%) dividend growth investor.
And I’m fine with that… I like to keep my options open. I try my best to be adaptable. This year, the stock market has been on fire, and it’s been very difficult to locate bargains. Since the value isn’t there, it’s hard for me to get excited with such low returns on most dividend stocks. Earlier this year, I decided to look elsewhere to try and unearth some value.
In May, I took a gamble on Tesla Motors (TSLA) and ended up making over $20,000 in capital gains. I wish I would have bought Google (GOOG) when it first went public in 2004… and I still wish I had a crystal ball too, but I digress. Even though I got lucky with TSLA, I know better than to outright declare myself a growth stock investor. I’m certain I’m not cut out for this type of investing.
I see both sides of the coin. On one hand, if you’re trying to build a passive income stream, of course it makes more sense to allocate a larger percentage of your portfolio to dividend stocks. However, if you have full conviction on a growth stock, then you probably should at least allocate a portion to these investments. Appreciation should never be the main focal point of your investment portfolio, but to miss out on these potent gains would be unfortunate.
Like with most things in life, it’s all about finding the right balance.
Investing in Real Estate
In 2012, my primary focus was on dividend investing. Based off my recent activity this year, I don’t think it’s a secret that I’ve shifted my investment strategies over to real estate. Does that make me a full-fledged real estate investor? Even though real estate now makes up the majority of my investment holdings, I would say no.
No? Does that come as a surprise to you? After all, I own four rental properties and am trying to buy another one early next year. I’ve even made it a goal to acquire ten rental properties by the end of 2015. How can I possibly say I’m not a real estate investor?
Having dabbled in both stocks and real estate, I see the benefits and reasons for investing in both. Right now, it makes more sense to me to invest in rentals primarily because:
- Interest rates are so low.
- I believe in using other people’s money to make me rich.
- I’m finding returns that generate greater than 15% cash-on-cash (not accounting for additional gains due to principal paydown, depreciation/tax breaks, etc.).
- I want to maximize the number of loans I can get before I quit my W-2 job. Lending is strict — no job, no loans!
But real estate also comes with its own set of disadvantages. Properties are highly illiquid, the income isn’t truly passive, and cash flow can be highly unpredictable (due to maintenance, vacancy, and other expenses).
I’m certain there will come a time when I’ll feel like I have enough allocation in rental properties, and will want to re-shift my focus towards dividend stocks again.
Investing in Financial Independence
At the end of the day, I’m not a dividend growth stock investor. I’m not a growth stock investor. And I’m not a real estate investor.
Just what am I?
I am a financial independence investor. My allegiance is to financial freedom and I will invest in whatever options I have available to help me get to the top of the mountain in the shortest amount of time, with the least amount of my own capital.
Markets change. They go up and down. Everything is dynamic… So, I have to be able and willing to adapt.
Lately, I’ve been hearing a lot of buzz about this whole bitcoin thing… I don’t know anything about it yet, but if I’ve learned anything, it’s that I’m not willing to shut the door on potential investment ideas. Then there’s virtual real estate investing, lending club, etc.
The list goes on and on… Ultimately, I think the most important thing is to find a strategy, or strategies that best suit you. It’s not written in the stars anywhere that you can’t invest in multiple platforms. When I was a kid, I owned a Sega Genesis and a Super Nintendo. Remember those Mario vs. Sonic debates? What a waste of time… I enjoyed both titles!
What type of investor are you? Are you comfortable declaring your allegiance to just one form of investing? One to rule them all… Are you also a financial independence investor?