July 2018 Income Fund Update

June 2018 income fund update report graphic

I woke up this morning and it was March 2019! How did that happen? Time to get into my hot tub time machine! Here’s my July 2018 Income Fund update, following on from last month’s June update.  Click on for the details…

Dividend Income

Total income from my Income Fund this month was $38, an 88% decrease compared to the $354 I received in July 2017. So that’s quite the decrease really!

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

Total dividends received so far this year in 2018 are $6,415 compared to $6,368 in 2017.

This time last year I held high-yield bonds which paid monthly distributions. In September 2017 I exchanged these for stock funds which pay quarterly at a much lower yield.

I’m only $45 ahead of last year, with five months to go. Reaching my 2018 Target of $13,760 looks extremely unlikely because of the lower dividend yield on my investments. On the plus side, there’s a lower tax burden and likely higher total return over the long-term as the portfolio is 100% stocks.

Income breakdown

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

The largest contribution came from individual stocks paying $35.

Interest from the Income Fund cash reserves made up the remaining $3. 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

Four individual stocks paid dividends this month for a total of $35 as detailed below.

Last July my individual stocks paid $32.98 from the same four stocks as this year. I added five KMB shares in June 2018, but otherwise the holdings were pretty much the same. Some partial shares from 2017 were sold when I consolidated all the stocks at Vanguard.

Dividends increased by a simple average of 9% over last year all on their own. JPM and ADP had the biggest increase with 14% and 12% respectively. KO and KMB had lower 4-5% increases.

Income from funds

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

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. International stocks are a little under. Not enough to worry about however.

Purchases & Sales

I added $2,940 of new money to my Income Fund in July.

Fund purchases

Total purchases this month were $2,720 in VGTSX.

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 $2,104 and held in the VMFXX money market account which is where all dividend distributions are paid into. $1,787 of this amount is reserved for two more distributions of $875 a month. $316 is spare and not yet invested.

Cash decreased by $617.16 since last month due to the $875 withdrawal being partially offset by incoming dividends plus cash saved for a potential stock purchase next month.

Portfolio Performance

My Income Fund increased in value from $440,057 to $459,374 this month. This increase of $19,317 includes $2,940 from new capital so overall, capital growth was $16,377.

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.

Outlook

I’ll be looking to buy more international stocks again next month as they’re currently under my target and I want to switch to the cheaper VTIAX fund. I also want to look at buying some more individual stocks.

Summary

While a bad month for taxable income, it was a great month for capital growth. I don’t see how I’ll reach my 2018 income target now but in the meantime I’m continuing to invest as much money as I can.

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


Quote of the Day

It’s not the daily increase but daily decrease. Hack away at the unessential. – Bruce Lee

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.