Check out this article by Dividend Mantra: http://www.dividendmantra.com/2013/08/why-i-hold-100-of-my-equity-investments.html
It’s titled “Why I Hold 100% Of My Investments In A Taxable Account.” This, my friends, is how you think through a decision. Jason explains what the conventional wisdom is with retirement asset allocation, and then goes on to explain why it makes sense for his own financial planning to deviate from that. That is exactly how you should approach problems in life—you figure out what the generally accepted “good” practice is for a given situation, and then you apply the facts of your own life to see if it fits. Jason’s Dividend Mantra blog is one of the best homages to good judgment and critical thinking that is out there today.
Pete at Mr. Money Mustache, who is soon going to get his own post dedication on this site, recently put out an article titled “The Black Hole Second Home.”
You can read it here: http://www.mrmoneymustache.com/2013/08/18/reader-case-study-the-black-hole-second-home/
Pete has a knack for hitting you over the head with numbers and explaining why a given decision is either a no-brainer “yes” or “no”. In this case, he takes a question from a reader that has a vacation home in Jackson Hole that is losing money. You can probably already guess what Pete wants her to do with it. For those of you who like to think about how human psychology interferes with rational decisionmaking, pay attention to the psychology of the person in Pete’s case study—she has resisted selling her home because she is hoping the market will somehow be better next year.
While that can turn out to be true, it can also be the source of a lot of extended misery in your life because it allows you to fool yourself into thinking that irrational behavior will somehow magically become rational over time. When I am doing something stupid in my own life, I try to cut it out as quickly as I can once I fully recognize it. In fact, the biggest mistakes in my life occur when I create an artificial reality to fool myself out of acknowledging the truth of what is wrong. Pay close to how the protagonist in the case study has yet to sell the money pit vacation home because the value *might* improve next year.
Today’s post on Control Your Cash is great: http://www.controlyourcash.com/2013/08/21/the-most-expensive-meal-in-the-world/
This article calculates the time and financial costs of gardening, and explains the futility of doing things that appear superficially cheap. That’s why I run a blog on investing rather than frugality—I have no motivation to point out ways to save $1.50. But I do have a motivation to find ways that will generate $1,000 in passive income five years from now, and life is more fun when you devote your energy to expanding the pie rather than cutting, cutting, cutting. And plus, your financial situation is largely determined by the costs of your car, house, healthcare, any recurring bills over $100, and the stupid stuff that creeps into your budget ($75 bar tabs). I really like reading Greg’s stuff at Control Your Cash because he understands that a successful financial life isn’t about spending twenty minutes plotting ways to save $0.25 on light bulb usage.
And lastly, check out Dividend Growth Investor’s recent piece on the predictive power of rising dividends: http://www.dividendgrowthinvestor.com/2013/08/the-predictive-value-of-rising-dividends.html
That article cuts to the heart of what dividend investing is all about. Right now, if you buy Coca-Cola, you will get a $0.28 check four times per year for every share that you buy. Nothing is certain, but the odds are, that dividend check will be higher next year (at least, JFK’s assassination, the Vietnam War, the fall of the Soviet Union, 9/11, and the rise of global terrorism hasn’t stopped Coca-Cola from raising its dividend every twelve months). That’s what makes this fun—we know Exxon, Colgate, Coca-Cola, Procter & Gamble, and Johnson & Johnson will be sending out more cash to its shareholders this time next year than it is today. On the other hand, I have no idea whether Coca-Cola will trade above its current price of $38 this time next year or not. Stock prices always fluctuate, but the dividends in a diversified portfolio of excellent companies only go one direction—up.
Originally posted 2013-08-21 23:38:08.