I’m behind on posting updates on my Income Fund, so here’s a look back to last year’s October Income Fund update, following on from my September update.
The following chart shows the cumulative dividend income this year compared to previous years.
I’m still far ahead of 2016’s yearly total for this time last year, but there’s still a little way to go to my 2017 target of $9,925.
The drastic decrease this month is because of my changed asset allocation – most of my holdings now only pay out in the third month of each quarter.
The chart below shows a breakdown of my income this month.
I made significant changes to my Income Fund last month, selling all of the bond funds I held in my Taxable account. The bond funds paid monthly distributions and provided a significant income “floor” of ~$200. But no longer.
Individual stocks contributed $35 or 96% since only a few of my stocks paid dividends this month.
Finally, interest from the Income Fund cash reserves made up the remaining $2; I keep a little cash aside to smooth out ‘withdrawals’.
Dividend income from stocks
Four stocks paid dividends this month as detailed below for a total of $35.
Last October my individual stocks paid $33 from five stocks. Since then, I’ve sold out of CB and put the proceeds into VHDYX instead. On the plus side, I still managed to earn more dividend income from stocks than the same month in 2016. This speaks more to the small number of CB shares that I owned, which paid about $1.6 in dividends.
Dividends this month increased by a simple average of 7% over the last year all on their own. JPM had the biggest increase with 11%.
Income from funds
I didn’t receive any income from Vanguard funds in my portfolio this month.
VHDYX, VTSAX and VIHAX pay out on a quarterly schedule (March, June, September and December). VIHAX being an international fund has a tendency to pay higher dividends in June and December as some international companies pay on an annual or bi-annual basis. Distributions from both funds are usually qualified which means they are taxed at the lower 15% dividend rate.
My Income Fund asset allocation as of October 2017 is shown below.
I’m now holding 100% stocks in my Income Fund which is held entirely in Taxable accounts. This is a much more tax efficient than before when I was holding bonds.
Cash is virtually zero as I just have a small amount left to manage cash-flow.
The following table shows the details plus the new asset allocation for my Income Fund.
International stocks (via VIHAX) are a little over my target and US Total Stock is a little under. I’m not that worried about getting them exactly in line; I’m just putting a bit more money to the under-target assets each month.
Changing allocation ratio via new capital takes a lot of time because of the size of my contributions vs the total value, so I’m not in a particular hurry to meet these targets. I won’t be selling any assets to re-balance faster unless there’s really a big opportunity for tax-loss harvesting.
Fund Purchases & Sales
I added $2,860 of new money to my Income Fund in October. $2,300 of this was the standard contribution I make from my salary. I’m confident this amount is at least always left over after paying for Savings and Living Expenses. I also added a further $560 which was left over from my salary after paying living expenses and savings.
Total purchases this month were $1,860 in VIHAX and $1,000 in VTSAX. To be honest, I don’t remember now why I bought VIHAX since it’s over my target allocation. I was probably reaching for the higher dividend yields in the international sector after seeing the low income this month.
On 10/2 I bought 12 shares of INTC for $459.32 and another 15 shares of DAL for $727.25. The totals include a $2 trading fee. I like both companies and they both had relatively low P/E values at the time of purchase compared to the rest of my portfolio. The purchases were made from Fund Cash resulting from September’s higher dividend payments.
I transferred $825 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 20% of my Living Expenses that my Fund pays every month.
Money is fungible, so a dollar in one account is no different than a dollar in another account. The distribution from the income fund allows me to invest $825 more of my salary than I otherwise would be able to. Withdrawing money gives me experience in managing cash-flow from the Income Fund. One day I won’t have a salary after all.
Fund Cash is now at $1,723 and held in the VMFXX money market account which is where all dividend distributions are paid into. $1,650 of this is reserved for future distributions of $825 a month.
Cash has decreased by $1,883 since last month due to stock purchases and my $825 withdrawal.
My Income Fund increased in value from $391,316 to $399,501 this month, a new record high. This increase includes $2,860 of new capital.
I’m keeping monthly ‘withdrawals’ at $825 a month for October through December. These withdrawals pay some of my monthly bills allowing more of paycheck to be invested.
Beating my 2017 goal of $9,925 income this year is guaranteed since I’m so close, although income in November will again be very small because there will be no more monthly bond income.
October was good but uneventful. Which, when investing, is a really good thing.
How was your latest month? Are you one step closer to Financial Independence?
Quote of the Day
What I am looking for is not out there, it is in me.