November 2018 Income Fund Update

June 2018 income fund update report graphic

Here’s a catch-up of my November 2018 Income Fund update, following on from last month’s October update. Click on for the details…

Dividend Income

Total income from my Income Fund this month was $141, a 42% increase to the $99 that I received in November 2017.

The following chart shows the cumulative dividend income this year compared to previous years.

Total dividends received so far this year in 2018 are $9,901 compared to $9,460 in 2017.

So I’m still inching ahead of last year’s result but not much movement in general since only a few individual stocks are paying dividends this month. What’s not visible from the chart is that I’ll have a slightly lower tax bill since nearly all income is at the lower qualified dividend tax rate. But with only one month to go, reaching my 2018 Target of $13,760 looks extremely unlikely because of the lower yield.

Income breakdown

The chart below shows a breakdown of my income this month.

The largest contribution came from individual stocks paying $139.

Interest from the Income Fund cash reserves made up the remaining $2. I keep a little cash aside to smooth out ‘withdrawals’ and the interest rate on this money market account has increased a little.

Dividend income from stocks

Seven individual stocks paid dividends this month for a total of $139 as detailed below.

Last November my individual stocks paid $98 from the seven stocks where UPS from last year was replaced by DAL this year due to the payment schedule. Some partial shares from 2017 were sold when I consolidated all the stocks at Vanguard so the basis decreased a bit. However I also added 12 more shares of GIS in October 2018.

The year on year increase this year was mostly caused by DAL which paid dividends in December in 2017. This year it paid them in November. However dividends increased by a simple average of almost 9% over last year all on their own. DAL and AXP had the biggest increases with 29% and 10% respectively. GIS and T had the lowest increases with 1% and 2%.

Income from funds

No stock funds paid dividends this month. They pay quarterly so won’t show up until December.

Asset Allocation

My Income Fund asset allocation is shown in the chart below.

I hold 100% stocks in my Income Fund which is held entirely in Taxable accounts. I’m favoring buying International stock funds at the moment since they’re a little more underweight.

Cash is virtually zero as I just keep a small amount to manage cash-flow.

Detailed Allocation

The following table shows the details.

Individual stocks are a little over my target. International stocks are a little under. Not enough to worry much about however.

Purchases & Sales

I added $3,650 of new money to my Income Fund in November.

Fund purchases

Total purchases this month were $2,300 in VTIAX.

I really should have bought more as I didn’t invest all the new capital I added to my Income Fund. But the money was transferred late in the month and I wasn’t able to make a purchase before the month end.

Funds sold

None.

Stock purchases

None.

Stock Sales

None.

Distributions

I transferred $875 from Fund Cash into my Living Expense account. This is an automatic payment and represents about 21% 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 (although an argument can be made that tax-deferred money is different). The withdrawal from the income fund simply allows me to invest more of my salary than I otherwise would be able to. Withdrawing money gives me experience in managing cash-flow from the Income Fund because one day I won’t have a salary. There’s no additional tax impact since the money is already in a taxable account.

Fund Cash

Fund Cash is now at $2,606 and held in the VMFXX money market account which is where all dividend distributions are paid into. $1,067 of this amount is reserved for one more distributions of $875 a month for the remaining two months of the fourth quarter. The remaining $1,539 is spare and not yet invested.

Portfolio Performance

My Income Fund increased in value from $446,916 to $461,888 this month. This increase of $14,972 includes $3,650 of new capital so overall, the effective capital gain was $11,322. Although a nice increase, it wasn’t enough to replace the loses from October.

Retirement Accounts

Although most of the financial information I describe is about my Income Fund, I should point out that I consider this one piece of the bigger picture. Ideally I’d like to reach Financial Independence based solely on my taxable accounts which is 100% stocks, but I still have Retirement accounts in case I can’t.

I am maxing out my 401(k) contributions to reach the full $18,500 contribution this year. It’ll be the first year I’ve done this since I arrived in the US in 2000.

Financial Independence

Here’s a chart of my living expenses as a percentage of income. As income from my investments increases, the living expense percentage decreases. However other factors such as changes in net salary or salary deductions affect the results too.

My net income in November 2018 was higher than in 2017 due to higher net salary and investment income. So the percentage of my living expenses to net income reduced to 49.5% from 51.7% (a good thing!).

Outlook

I have slightly higher income for the last couple months of the year, but I didn’t invest all the spare cash that I had this month. So I’ll be able to buy more next month as a result, mostly VTIAX & VTSAX but perhaps I will add to an individual stock holding as well.

Summary

Nothing exciting this month really, which is a good thing when investing. So another step taken towards FI, with many more to go.

How was your latest month? Are you one step closer to Financial Independence?

Quote of the Day

Our ambition should be to rule ourselves, the true kingdom for each one of us; and true progress is to know more, and be more, and to do more.

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