The Motley Fool Discussion Boards

Previous Page

Investment Analysis Clubs / Dividend Growth Investing

URL:  https://boards.fool.com/please-critique-my-simple-minded-29045686.aspx

Subject:  please critique my simple-minded... Date:  1/20/2011  11:05 PM
Author:  lngtrmcptlgns Number:  6607 of 11741

long term investing strategy (before I do something dumb).

I am a beginning investor (who has read and heard enough to formulate a semi-informed strategy).

I have been putting 5% of my wages into my 401K (getting my full company match) for about 10 years, paying off debt (my wife and I just recently paid off our small house and became 100% debt free) and now we want to start putting the max annual amount ($5,000 apiece) into Roth IRAs.

I am a massive believer in Warren Buffett and value investing for the long term. Buy and hold, minimize fees and taxes and all that.

Here is my simple strategy: each year fill one Roth IRA with BRK-B stock and the other with a single proven S&P 500 high dividend-paying stock.

Alternate each year so that over time each Roth gets equal doses of BRK-B and high dividend stock.

I think my strategy minimizes fees ($8 through my Fidelity account) pretty effectively in two ways:

(1) I fill each $5,000 Roth with a single stock purchase each year (so only one $8 fee)

(2) the dividends are automatically re-invested in the stock from which they were paid with no trading fee involved (I get more shares with no fees)

I know that the conventional wisdom is to not put too much of your portfolio into single stocks but Berkshire Hathaway offers a lot of diversity in a single stock. Plus, my 401K investments (Fidelity index funds) give my portfolio a pretty good measure of diversity.

The high-dividend stock pick would be different from year to year and that would create diversity over time.

As needed in retirement, the dividends from the high-dividend stocks would create a tax-free income stream (along with a taxable stream of forced withdrawals from my 401K) while we held the BRK-B stock as long as we could.

I know that ideally one puts tax-inefficient investments into Roth IRAs and I'm not sure how BRK-B (pure capital gains) and high-dividend paying stocks fit into the tax-inefficient investment scale.

So, whaddya think? Please fire away and don't be gentle (I would rather feel stupid now than 25-30 years later!)
Copyright 1996-2019 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us