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Dear Motley Fool Jedi Masters,
I am trying to come up with a streamlined way of comparing estimated investment returns over time. Ultimately, I want to have a good idea at any given time whether or not it makes sense to hold a high flying growth security with expectation of an eventual multibagger with a total value of $1,000,000 in a given amount of time (17 years). OR if I might reasonably expect to compound the value of that money at a higher rate over the same period of time (17 years) by liquidating said security at a given price point, paying the long term cap gains and reallocating into several high conviction dividend payers with an understanding of estimated dividend % appreciation, stock price appreciation, and assumed reinvestment of dividends?

Put a different way, I have a (relative to my portfolio) large position in a growth stock that I have reasonably high conviction in hitting a specific valuation in a given amount of time. I want to figure out if it would behoove me to just hold that position through to fruition (assuming all goes well, famous last words) or if it would be smarter to liquidate that position at a price point shy of the valuation that I think it can reach (in 17 years time) if that price point liquidation (including taxes paid) would allow me to re-allocate funds to several solid dividend payers that would presumably earn an equal or higher return over that same 17 year time period. I am making these assumptions on each of these dividend payers based on company financial fundamentals and my projection of each of their dividend % growth over time and share price growth over time. I would plan on dividend reinvestment with each of the held dividend paying securities.

Does anyone know of a good website or software program that allows for a set dollar amount to be compared/contrasted across several different companies at the same time? Any help would be rad!
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Hi Swing4TheFence88,

I hope your user name is not indicative of your investing style.

You mention one large position. Is it more than 10% of your portfolio? This should include all investing accounts: taxable brokerage, IRA's of all types, 401K, 403B, 457, SEP, SIMPLE, etc accounts.

I ask because 10% is the guideline I use for our portfolio. I let some growth companies go to 15% and even higher.

That all said, I will tell you a story:

When we retired in 2005, our dividend core was 65% of our portfolio and our interest bearing (4.5% APR) annuities were 14%. They produced about 90% of our cash needs.

Currently, they are 13.71% and 4.20% respectively and currently produce 193% of our needed cash.

While they have grown in value and in their output, they are a smaller portion of our portfolio simply because the growth portion has vastly out performed those 2 pieces.

Since retiring, our net of deposits and withdrawals is almost 2X what our portfolio was worth on the day we stopped working. Think about that. If our portfolio was $1,000 in 2005 we have removed almost $2,000 from it and we currently have 6.8X what we retired with in our portfolio.

Will any low growth dividend payer equal the return on something like AMZN, NFLX and GOOG have in the last 15 years or the newer, smaller, faster growing crowd will do in the next 15 years?

No. It just is not going to happen.

I keep these two groups in our portfolio for cash flow stability and in the case I "depart" my DW will be able to just withdraw cash and not have to worry about anything else.


Does that help you?

Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
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No. of Recommendations: 1
Hi GDett2,

Thank you very much for your response and to my post. I appreciate the thoughtful input. I went ahead and read your Fool profile and saw that you got your start in real estate investing. We share that commonality as I had a background in single family homes long before I ever started a stock portfolio. Being a landlord, especially one that does his own repairs, renovations and tenant management gives a person some invaluable insight into the real costs of business and when considering stock investments, this is paramount in my opinion.

Im trying to understand the percentages of your portfolio with respect to the following:

"When we retired in 2005, our dividend core was 65% of our portfolio and our interest bearing (4.5% APR) annuities were 14%. They produced about 90% of our cash needs.
Currently, they are 13.71% and 4.20% respectively and currently produce 193% of our needed cash.
While they have grown in value and in their output, they are a smaller portion of our portfolio simply because the growth portion has vastly out performed those 2 pieces.
Since retiring, our net of deposits and withdrawals is almost 2X what our portfolio was worth on the day we stopped working. Think about that. If our portfolio was $1,000 in 2005 we have removed almost $2,000 from it and we currently have 6.8X what we retired with in our portfolio."

So your portfolio in 2005 started with dividends and annuities consisting of 79% combined of your total portfolio and produced 90% of your cash needs. 15-16 years later they make up roughly 18% combined of your total portfolio but they produce 193% of your cash needs. Are your cash needs significantly less now than they were in 2005? Because that is essentially 114% increase in dividend growth over a 15 year time span. Thats some pretty spectacular dividend growth over that period of time. Or am I misunderstanding?

I can understand that Growth positions have vastly outperformed Dividend positions in your portfolio because they have done so mostly across the board with a few exceptions here and there.

Essentially what I am trying to weigh out is if I want follow through with my biggest Growth position because it started as a (somewhat irresponsible speculation) but I believe in it. I bought $12,000 worth of Jumia Technologies stock with an average price of about $10.00/share in 2019. I think it will be a $100+ Billion market cap one day within the next 15 years. Im also no stranger to volatility and I have a pretty healthy stomach for it. BUT, I am also not blind to the potential that even holding my position through thick and thin, I don't imagine it becoming more than a $1,000,000 position in that time frame. With the dividend stocks I own, I want to see at what price point would it be more beneficial to sell the majority of my JMIA position and re-allocate amongst my highest conviction dividend payers to get an overall higher or at least comparable return over that same period (15-17 years). Right now, I have loosely figured that at around $100-$150/share it is the tipping point where it would make sense to sell, pay my cap gains taxes and reinvest in my desired core holdings. It kills me to travel that thought path because I want to hold my winners and let them win but I am also a prudent person. What are your thoughts? BTW, my JMIA position has grown to be over 40% of my stock portfolio but that is not my net worth, only my stocks. I have no problem with a position this high. I would let it grow to 90% with high conviction but ultimately I'm after the highest return possible.

Again, I greatly appreciate you taking the time to explain your path to success. Congratulations to you and your wife.
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Hi Swing4TheFence88,

I understand the confusion. There is more going on in the background.

Our living expenses have increased over the years since 2005.

I started SSA at 62 in 2012. DW started SSA Spousal on a Restricted filing at her FRA 4 1/2 years later. She started on her benefit last fall.

I took a buyout on my small pension in 2015. I lost my supplemental payments (really tiny) to bankruptcy last year. DW started her pension.

Net result our income increased while inflation increased our expenses along with just, well, increasing our expenses! I do exclude charity from our expense number though. We donate about 20% of our gains through the year as our portfolio hits new highs so it is not a set amount.

The net result is our cash needs do reduce somewhat.

The actual cash flow from our portfolio increased. Using a level base, our dividends have increased every year since retiring.


"I have loosely figured that at around $100-$150/share it is the tipping point where it would make sense to sell, pay my cap gains taxes and reinvest in my desired core holdings."

I hope you don't mean sell-out.

Rather than do that, I suggest your do a little trim, 5% or 10% of the position. Move that either to a dividend payer or a different growth stock. If you don't need the cash flow and you have 5 or more years to go, I would put it in growth.


When you look at position sizes, I would look at investments in securities rather than net worth. In general, pieces of your net worth like rental units are illiquid vs securities so they aren't an "equal" asset.

Does that help you?

Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
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Hi GDett2

Thank you for the clarification. I understand more clearly the growth manifestation of your portfolio now. Did your former employer through which your pension came, go bankrupt? Does their obligation to pay anything more on outstanding pensions get erased at that point? This is something I’m not knowledgeable at all about.

I do like the option of trimming 5-10% as the position of a company has outsized performance to reallocate to other positions. I’m doing my honest best at being diligent with following Foolish investing principles and I find myself getting pulled in different directions by sentiments expressed by investors I highly respect. Do you use any software programs to model out potential strategies for your investments? Up to this point I’ve been a pen and paper, napkin math, in the ballpark is good enough type analyst. The Fool seems to utilize YCharts in a lot of screen sharing on Fool Live.

You’ve been a big help. I appreciate you.

Gabriel
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Hi Swing4TheFence88,

On the pensions: On my qualified pension, I accepted a buy-out in 2015. It would have been turned over in the bankruptcy to "the government" agency, the Pension Benefit Guaranty Corporation (PBGC). ERISA controls that.

For non-qualified pensions, my tiny one, the funds are an asset of the company so they are subject to bankruptcy loss.

In the past, I used various spreadsheets and relied heavily on Quicken Lifetime Planner.

In the past few years, I moved all my daily functions onto my Linux box and disconnected my WinDoze PC from the network. I wrote all my own applications for portfolio management, calendar, retirement planning and whole lot more. The only thing I use on WinDoze is Quicken and a great image program, ThumbsPlus. That is it.


Does that help you?

Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
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