Now, where did that year go?
Like clockwork that takes a while to hit me, it’s the end of the year. Why does that surprise me? In some ways I am surprised, in other ways, not.
There is not a difference between the day before a new year and the day after. The arbitrariness of our calendars is just a man-made phenomenon. The day will begin as any other and end as any other. The sun will rise in the East and set in the West, of this I guarantee. All else varies.
Taking Stock (no pun intended)
I check my net worth after the end of each quarter; So in about a week’s time, I will gather together the info from places where I have an account, and then add them up. To make things easier, I don’t include my home or my car in the calculation of net worth. (Home prices vary tremendously based on condition, and I really can’t be bothered to choose a fictitious number. I plan to stay where I am for numerous more years, and keep the car for years as well, so what difference does a guess to valuation even mean when prices vary significantly?)
I add up the value of my checking account, IRAs, stock values, and so on. Then I enter them in a spreadsheet. This allows me to compare with past quarters and years. What use is that? I have found that seeing I have some assets calms me. It allows me breathing room, in that I know I have money that I can use when and if I need or want. What could be more reassuring? (Well, I could think of a few…)
The real number I count on to measure where I am is what my monthly dividend income is. I keep track of my stock portfolio using my (free to download) Account Balance spreadsheet. I track the income from each stock, noting the (in most cases) quarterly dividend. Multiplied by 4 and divided by 12 (or quarterly divided by 3) produces the average monthly figure. I also track my expenses–monthly, quarterly, annually, and so on, to determine my average monthly expenses. This I compare with my total average monthly income.
Over time, with dividend reinvestment and additional purchases, my stock portfolio grows. The increase in stock prices plus dividend reinvestments over the years has now put my portfolio at about twice the value of the money I have invested. (The power of long term investing is clear.) Over the course now of somewhat more than twenty years, things have grown well. Most of the money I debated with myself at the time whether I should invest has proven quite worthwhile. Prices go up and down, companies wax and wane. Some of the companies I invested in have done well, some have turned out to be clunkers. Some companies will slump and later get sold or acquired, some will grow and have spin offs that themselves will grow and produce their own dividends. There’s no getting around reality. Not everything is a winner. And I don’t need to win every time. My goal is steady growing income–which is why I focus on my average monthly income. No thiefs of joy here.
I would guess that most people buy stock in the hope or expectation that the price will increase and they can later sell. In such a case, dividends probably are not a big factor. But for some of us, we do not focus on when to sell. We focus on obtaining growing dividends. There are several ways to do get growing dividends.
Firstly, some companies have a tradition of increasing dividends, often each year. Now, it is important to understand that dividends are not guaranteed. (They are not bonds.) But with a strong tradition, most companies are reluctant to break that expectation.
Secondly, by continuing to buy additional shares of a company’s stock over time, the result is increasing dividends.
Thirdly, participating in dividend reinvestment means letting one’s dividends buy more shares. In this situation, you don’t get the dividends in cash. By accumulating more shares, you automatically get increased dividends.
How is the end of your year looking? You can let me know here.
The illustration is the title page from the 1541 volume on human anatomy “Andreae Vesalii Brvxellensis, Scholae medicorum Patauinae professoris, De humani corporis fabrica libri septem”, roughly translated as “Andreae Vesalii Brvxellensis, scholar and professor of Padua, on human anatomy.” Courtesy The Getty Research Institute.
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