February 2019 Income Fund Update

February 2019 income fund update report graphic

Here’s my February 2019 Income Fund update, following on from last month’s January update. Click on for the details…

Dividend Income

Total income from my Income Fund this month was $105, a 6% increase to the $99 that I received in February 2018.

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

There’s still not much to see but if you look close enough there’s a small red bar for February 2019. Dividends in 2015-2017 were higher because the Income Fund contained bond funds which paid monthly dividends.

Income breakdown

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

The largest contribution came from US stocks funds paying $102.

Interest from the Income Fund cash reserves made up the remainder. 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

Five  stocks paid dividends this month for a total of $102 as detailed below.

Last December my individual stocks paid $97 from six stocks so income increased 6% year on year.  Since last year I’ve added to GIS (October 2018) and AXP (December 2018).

The lower than expected year-on-year increase this year was mostly caused by RTN which paid dividends in January this year instead of February. However, the average organic increase was a little over 4% despite poor performance from GIS which didn’t increase its dividend. AXP had the biggest increase with 10%.

Income from funds

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

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. 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 as usual. International and US stock funds are a little under. Not enough to worry about however.

Purchases & Sales

I added $14,400 of new money to my Income Fund in February.

Fund purchases

Total purchases this month were $4,000 in VHYAX, $1,900 in VTSAX, $6,200 in VTIAX and $2,300 in VTMSX.

I’ve not added to VHYAX for a while, but decided to buy some to increase income and overall yield a little.

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 $1,307 and held in the VMFXX money market account which is where all dividend distributions are paid into. $1,037 of this amount is reserved for one more distribution of $875 to cover the last month of the quarter. The remaining $270 is spare and not yet invested.

Portfolio Performance

My Income Fund increased in value from $468,018 to $496,809 this month. This increase of $28,791 includes $14,400 of new capital, however, and so the overall  capital gain was $14,391.

In terms of market value, the portfolio has now reached an all-time high, beating the previous high of 470,859 from September 2018.

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 $19,000 contribution for 2019.

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 February 2019 was higher than in 2019 due to higher net salary. So the percentage of my living expenses to net income decreased to 56% from last February’s 57%.

Outlook

I was fortunate to receive an annual performance bonus and I decided to invest all of it in my Income Fund rather than put it to other uses such as Savings. So Income contributions are higher than normal this month.

I’m keeping the $875 monthly withdrawal until the first quarter dividends have all been paid in March. In April I’ll recalculate the new withdrawal rate based on the first quarter dividends.

I increased my 401(k) contribution to 14% of my salary. I’ll need to adjust it down to 13% in July or so to avoid exceeding the $19,000 limit for 2019.

Summary

February was another good month and built on January’s gains. I’ve added quite a lot of new capital in the last two months and I hope this will help me reach my income target this year.

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

Quote of the Day

Choose not to be harmed — and you won’t feel harmed. Don’t feel harmed — and you haven’t been.

3 thoughts on “February 2019 Income Fund Update”

  1. Hi Dividend Life,

    The organic growth of 4% is higher than inflation, which is good. Do you have a minimum target for it?

    Our February was ok, around 50% higher than the previous year, mainly due to new money. I do not have control of how much would be due to the organic growth, but I should.

    All the best.

    Cheers!

    1. Hi Jane,
      It’s not something I’d be interested in.
      Aside that the fees and expenses aren’t clearly defined – you need to be an accredited investor, which I’m not. It just seems like P2P lending with bitcoin / blockchain thrown in so that it’s ‘sexy’.
      There are no such things as guaranteed returns so I’d avoid it.
      Best wishes,
      -DL

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