Young Budgeteer Investing: Week 4 Trades, More Passive Roth IRA, Tracking

Hey guys,

Welcome back to round 4 of this investing thing. I think this week one of the biggest things that hit me while looking into my Roth IRA, Between that and a few other investment accounts like my work 401K. My company has spent a lot of focus in the past few weeks highlighting us on our benefits at the company and the potential payout for staying there for 10, 20, 30, or 40 years. It definitely made me feel a little bit better about my finances in the short term and the potential into the future.

What does this have to do with this Portfolio and investing ideas? Well, when you have less need to go into riskier items, you can forego a bit of the returns in the market to in order to have more preservation and control over what you are getting back consistently.

So while my regular portfolio is going to keep all of the companies that I have been investing in, I made a decision to move my Roth IRA funds from 14 securities down to just 5 that I had as a trial run for the past month or so. This has given me a good idea of how these funds work and some stability in the growth. It also making tracking annual income for that portfolio to be much easier.

As well, with a Roth IRA, I will only be able to contribute about $6,000 a year effectively capping the amount that I can build the portfolio which will push me to go other routes to build my passive income. This will mean (as far as choices I would start to funnel funds into) I could up my 401K contribution amount. I could pay down our house, possibly refinancing it to lower our monthly payment. I could also save up for a rental property. All not terrible possibilities.

But at some point once you can max your Roth IRA, you will have to funnel your funds into another investment vehicle in order to continue growing your retirement possibilities. Pretty much that is my next move in the coming year.

Roth Portfolio Breakdown

Roth Portfolio

I will go into each of these “Slices” / Securities and why I think they are a great way to start investing as well a great way to have passive income build in a simple understandable way. I am trying to keep about a 60%/40% split between equities/bonds.

SPHD: Invesco S&P 500 High Dividend Yield Low Volatility ETF : 40%

If I had one investment to put into, this would be the one. I will only share a few technical numbers but I think the underlying principle of what stocks this fund holds is enough to convince any person to feel safe investing in them.

This fund includes ~50 companies from the S&P 500 that have the highest. It starts with the 75 from the S&P 500 with the highest dividend yields and then cuts out the 25 that they deem have the highest volatility leaving you with 50 companies that both perform well, pay good dividends, and are risk adverse. It is not to say that they can’t be stopped or beaten up but consistency, good pay and low volatility seems like a decent choice of whether its your job paying you or a dividend fund you employ dollars to.

They have currently about a 4.13% dividend yield which is a current payment of $0.1547 per share and they pay monthly so annually around $1.80. Great for compounding and as soon as I get this one high enough, when they pay out each month, it will be enough to reinvest each month ($10 on M1 Finance). That is pretty sweet!

LQD: iShares iBoxx $ Investment Grade Corporate Bond ETF : 25%

What a name. Okay, so let’s put out a definition of what iShares is.

iShares is a family of exchange-traded funds managed by BlackRock. The first iShares ETFs were known as World Equity Benchmark Shares but have since been rebranded. Most iShares funds track a bond or stock market index, although some are actively managed.

So basically this company, just like Invesco, just created an Exchange Traded Fund to follow a group of Investment Grade Bonds, bonds that are held by pretty stable companies and therefore are pretty safe bets.

They have a dividend yield of about 3.29% and an annual payout of $4.22 which paid monthly is about $0.35 cents per share. At the current price of $127, they are a pretty solid investment to pad the bond section.

BNDX: Vanguard Total International Bond ETF : 15%

This rounds off my bonds. Again, I am working to keep this really simple. This is a Bond ETF put together by Vanguard that tracks a group of international bonds. This one has $24B under management so that means that they have a pretty good idea about what they are doing.

They have a dividend yield of about 2.87% and an annual payout of $1.67 which paid monthly is about $0.0499 cents per share. Cheaper to pick up shares at $58 but this one is a defensive bond that takes in international companies and that is enough for me.

VYM: Vanguard High Dividend Yield ETF : 10%

This is also known as the Whitehall Dividend Yield ETF, unless they changed the name recently. This is Vanguard’s take as pulling in High Dividend Yield Companies so as to attract investors.

It has a payout of $2.80 and a Dividend Yield of 3.04% but instead of paying out each month, it pays out quarterly but still the same amount as is if paid each month. Each share gets paid $0.7864 which adds up quick and is a nice addition to my portfolio, and was actually one of my first investments.

I assume they will announce in the next week that they are paying out for the month of December. That should be a good chunk for me. Currently I only have about 4.6 shares, but that means $3.59 unless they announce an increase in which I will get even more!

VNQ: Vanguard Real Estate ETF : 10%

That makes 100% of my portfolio! Now this one is pretty self-explanatory. Vanguard put together a group of REITs that they feel will attract investors such as American Tower Corp, Simon Property Group, and Welltower Inc.

They bring with those nice REITs a nice payout. 3.43% dividend yield, an annual payout of $3.14, which quarterly is about $0.744. I am also waiting on them to announce their dividend for this month and might see an increase here as well. They go along with VYM pretty similarly but hold no similar stocks in their funds. $0.74 X my ~4.6 will be another $3.42. Add that to VYM and the other monthly payers that happen near the end of the month and I’ll hit that $10 reinvest minimum!

Now, you might be wondering…

What Happened With My Portfolio When I Made These Sells? Aren’t I afraid of tax-implications?

This is one of the greatest tricks to use when you are just getting into investing is to use a Roth IRA.

Usually when you sell stocks in a normal taxable account like Stash Invest or any account that isn’t a Retirement or Tax-advantaged account, you will get taxed on the gains on that stock.

Example: I bought 5 Ford shares a couple of years ago at about $10.25. I sold those later at a price of ~$13.

During that time, Ford also paid me dividends for each stock. $0.15 X 5 = $0.75.

So essentially I made $0.75 from dividends and $13.75 in market growth.

Now, I don’t remember if I held the stock long enough to be taxed at a lower amount but this is the part about a Roth IRA. It doesn’t matter in the Roth IRA. Any gains or dividends that I made in the Roth IRA during a sell of a share or through payouts is completely tax-free!!! That’s right.

So while I made 10 sells of shares in today’s trading window that netted me a little bit of a gain (especially with a 5% gain and huge dividends from Johnson & Johnson), I won’t pay any tax on any of that gain. And all of the gains and sold shares went back into those other 5 stocks I mentioned above.

Again, I am keeping my taxable at the same percentages that I had for these companies so I am not selling out of these companies completely. I am just moving my Roth IRA into a more simple grouping that allows me to focus my time and energy in other places which is eventually my overarching goal with this entire investing strategy.

Tracking Annual Projected Income and Monthly Income Actuals

I thought these would be an interesting group of sheets to share that I have started since I started investing. I have changed them up a lot of times and I have taken ideas from a handful of YouTubers and other investing sites that I follow and watch.

For now, the two that make the most sense to share screenshots of are my monthly income tracker and my expected forward annual income breakdown and totals.

The Forward Income Breakdown and Totals shows me what I can expect to be paid in a typical year. This just takes in what the annual payout and multiplies it by my shares and charts it.

Income Tracker

All I have to do at this point and update my share amounts each time I buy and then it will let me know my expected income in the next 12 months! Obviously $150 a year isn’t much but in the terms of $12.50 I’ve essentially paid for a small gym membership, or I could cover a ticket to the movies. It’s a start for sure and each paycheck will start to add more and more.

For example: by 11/28, I had $125 and then I added $700 on 12/12 and added $25 to my forward income. I am still paying off a small car loan which eats some of my fun income but adding $25 every 2 weeks isn’t bad. By the way, $700 put in, making $25 a year is about a 3.57% yield. And that doesn’t include any growth that my portfolio could have. I don’t know any High Yield Savings Account that is giving you that much.

The Monthly Income Tracker allows me to track what actually comes in each month. I just take in all of my gains for the month in my monthly statement and I put it into a line chart to see my monthly income growth. This follows a lot of people who show their income from these dividend companies. The goal of the whole of my portfolios is to cover my monthly expenses without sacrificing the capital in it through selling.

Currently, I am following Joseph Carlson and using a simple excel created graph he made. Major credit to him and his YouTube Channel. If you want to see a portfolio that is a bit bigger than mine and see these effects a year or so ahead of mine, check out his channel. He is great to listen to and tends to add some good laughs in his channel as well. Eventually I will make my own version and make a few changes that relate to my investing type.

Monthly Income

This looks pretty dismal, doesn’t it? Well, for a long time I was tracking dividend income from three portfolios (Stash, Fidelity, and my High Yield Savings Account, HYSA) and I didn’t really have a lot of money in any of them. So when I moved to M1 Finance, I made a goal to deposit more each month starting in August.

And what happens is that dividend paying companies, you usually have to have a stock for about 2 months before they announce their dividend, give a date for when you need to hold the stock by, and then pay you out on another day. So my chart is just a few months behind seeing my Forward Income. I assume that December will be a nice record paying month for my portfolio (as it is for a lot of people) and then it will continue to trend upward from there!

In any case, these next few weeks will be exciting! As always thank you so much for reading, if you made it to the end of this article, I appreciate you taking your time and hopefully those give you some tips on your own journey. You can catch me on Twitter or Instagram at @ youngbudgeteer. Until next time.

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