Monday, August 13, 2012

The Chowder Index

The objective of Project $3 Million is to earn an income stream that is reliable, predictable and increasing. In other words, we're looking for income replacement, an income during retirement that will exceed the income earned during the working years. It is then, from a financial point of view, that we can consider retirement ... truly the Golden Years.

Along the way there are many things that may sidetrack one into deviating from their objective. Worry about the economy, worry about market conditions, worry about share prices, worry about capital gains or losses, and most of all, worry about how one compares their results to the market.

Most people will compare their returns to an index fund, usually the S&P 500. I don't find this comparison of any use in helping us achieve our objectives. How does knowing if our portfolio beat the market, help us when our objective is income replacement?

If the market is down 12% on the year, and I'm down 2%, I may have beat the market but I still lost, if I'm comparing my results to the market. How did that help me achieve my objective of income replacement.

With this in mind, I created my own index. It's the only index I compare my results to because it gets right to the point. It tells me whether I'm truly achieving my objective of building an income stream that is reliable, predictable and increasing.

The Chowder Index simply works this way:

The income in any given quarter must beat the corresponding quarter of a year ago. In other words, the income in Quarter One, 2012 needs to be more than the income in Quarter One, 2011.

The total income for year 2012 better be more than the total income for year 2011, and all of these comparisons must be achieved regardless of market conditions.

Project $3 Million got underway in the fourth quarter of 2008. Here is how the Chowder Index has performed.

Dividend comparison: Quarter over Quarter --

Quarter 1 ... 2009 / $108.00
................... 2010 / $264.95
................... 2011 / $542.81
................... 2012 / $621.20


Quarter 2 ... 2009 / $102.00
................... 2010 / $357.17
................... 2011 / $575.40
................... 2012 / $676.54

Quarter 3 ... 2009 / $132.55
................... 2010 / $518.24
................... 2011 / $583.40

Quarter 4 ... 2009 / $341.83
................... 2010 / $552.97
................... 2011 / $702.41

Dividend comparison: Year over Year --

2009 ... $684.38
2010 ... $1,693.33 ... up 147.4%
2011 ... $2,404.02 ... up 41.9%



Thursday, August 2, 2012

New Buy Correction

I don't know how I typed $81.53 for the buy price, it was $89.52. I wrote it down correctly in my log, but somehow typed it incorrectly here.

New Buy

An amount of $200 hit the account today, bringing the cash portion up to $1,006.73. A purchase in MCD was made.

Bought 11 shares MCD @81.5299, we'll call it $81.53 for our tracking purposes outside the account.

The total number of shares in MCD is now 34.54 and the market value is $3,092.37.

We consider $3,000 a full position and MCD is now a full position.

The next purchase is scheduled for October. We'll be looking to bring one of the following positions up to a full weighting:

ADP, GIS, KMB, NUE or SO ... depending on which one presents the best value at that time.

Wednesday, August 1, 2012

Project $3 Million - July 2012 Results

This portfolio belongs to a 27 year old.

PRIMARY OBJECTIVE:

Income replacement. ... The goal is to build an income stream that is ... reliable ... predictable ... and increasing. The income goal is $10,000 per month in retirement. A portfolio of $3 Million with a yield of 4% will accomplish that objective. Hence the title of this portfolio ... Project $3 Million.

STRATEGY:

To contribute $500 per month to the portfolio, look to earn 8.25% annually, compounded over 40 years (to age 65). The beginning value at the time of establishing these goals was $42,205.42.

This link shows the compounding effect to be used in achieving the $3 Million.

http://www.planningtips.com/cgi-bin/savings.pl?amt=42205.00&dep=500&cmp=annually&int=8.25&yrs=40&Calculate.x=50&Calculate.y=12

STATUS:

To stay on schedule for the $3 Million, the portfolio balance at the end of 2012 needs to be $74,355.59.

The portfolio balance on July 31 was $81,215.52. ... This portfolio is ahead of schedule!

YEAR END PORTFOLIO VALUES:

2009 ... $42,205.42
2010 ... $54, 949.87
2011 ... $73,303.61
2012 ... $81,215.52 (year to date)

Total Dividends For July ... $168.11 ... Total Dividends Year To Date ... $1,465.85

Monthly Dividends - Year Over Year:

July 2009 ... $25.15
July 2010 ... $222.46
July 2011 ... $112.86
July 2012 ... $168.11

JULY DIVIDENDS RECEIVED:
=================================================

TAXABLE ACCOUNT: (Dividends Reinvested)

Coca-Cola ... (KO) ... $27.23 ... bought 0.344 shares
Automatic Data ... (ADP) ... $14.91 ... bought 0.267 shares
Kimberly Clark ... (KMB) ... $19.05 ... bought 0.227 shares
Altria ... (MO) ... $41.23 ... bought 1.168 shares
Philip Morris ... (PM) ... $24.60 ... bought 0.273 shares
Sysco ... (SYY) ... $29.62 ... bought 1.012 shares
==================================================
Total ... $156.64

Symbol ... Shares ... Mkt Value ... Gain/Loss

ABT ... 55.15 ... $3,657.00 ... up 35.25% ... *Abbott Laboratories
ADP ... 38.011 ... $2,149.52 ... up 27.82% ... Automatic Data Processing
BP  ..... 62.221 ... $2,482.62 ... dn <20.70%> ... *BP, plc
CL ...... 24.529 ... $2,633.43 ... up 35.44% ... *Colgate-Palmolive
CVX ... 22.395 ... $2,454.04 ... up 41.06% ... *Chevron Corp
DEO ... 29.082 ... $3,108.87 ... up 56.53% ... *Diagio, plc
EPD .... 59.464 ... $3,151.59 ... up 39.31% ... *Enterprise Products Partners
FTR .... 19.58 ...... $76.75 ... Shares received in a spinoff from VZ ... ~Frontier Comm.
GIS .... 50.679 .... $1,961.28 ... up 14.39% ... *General Mills
JNJ .... 45.592 .... $2,948.22 .... up 11.61% ... *Johnson & Johnson
KMB ... 25.972 ... $2,257.23 ... up 30.92% ... *Kimberly-Clark Corp
KMP ... 34.47 ..... $2,758.63 ... up 10.49% ... *Kinder Morgan Partners
KO ..... 53.743 ... $4,342.43 .... up 70.43% ... *The Coca-Cola Company
LMT ... 34.345 ... $3,065.98 .... up 11.56% ... Lockheed Martin Corp
MCD ... 23.54 .... $2,103.53 .... up 24.80% ... McDonald's Corp
MMP ... 39.313 .. $3,075.46 ... up 46.57% .... *Magellan Midstream Partners
MO ... 101.724 ... $3,659.01 ... up 73.92% ... Altria Group, Inc.
NUE ... 54.129 .... $2,121.86 ... dn <3.32%> ... Nucor Corp
PEP .... 32.745 .... $2,381.54 ... up 17.63% ... *Pepsico, Inc.
PM ..... 32.224 .... $2,946.56 ... up 27.02% ... Philip Morris International, Inc.
SO ...... 44.341 ... $2,135.02 ... up 30.44% ... *Southern Company
SYY ... 110.734 .. $3,254.47 ... dn <1.73%> ... Sysco Corp
Cash ................. $806.73
==========================================================
Account Value: ........ $59,531.78

* means increased dividend in 2012
~ means decreased dividend in 2012

ANNOUNCED DIVIDEND INCREASES IN JULY:

Enterprise Products Partners (EPD) - up 1.2% (third increase this year)
Kinder Morgan Partners (KMP) - up 2.5% (second increase this year)
Magellan Midstream Partners (MMP) - up 12.2% (third increase this year)

Announced Dividend Decreases - NONE
------------------------------------------------------------------------------------------

ROTH IRA: (Dividends Reinvested)

Realty Income ... (O) ... $11.47 ... bought 0.272 shares
============================================================
Total ..... $11.47

Symbol ... Shares ... Mkt Value ... Gain/Loss

D .......... 68.431 ... $3,716.49 ... up 16.01% ... *Dominion Resources
HCN .... 41.084 ... $2,556.66 ... up 12.25% ... *Health Care REIT, Inc.
O ......... 78.742 .... $3,244.17 ... up 14.76% ... *Realty Income Corp
PG ....... 33.853 .... $2,184.87 ... up 2.57% ...... *Procter & Gamble Co.
VZ ...... 112.761 ... $5,090.03 ... up 21.02% .... Verizon Communications
Cash ..................... $34.75
=============================================================
Account Value: ...... $16,826.97

* means increased dividend in 2012
~ means decreased dividend in 2012

ANNOUNCED DIVIDEND INCREASES IN JULY:

Realty Income Corp (O) - up 0.2% (third increase this year)

Announced Dividend Decreases - NONE
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THRIFT SAVINGS PLAN (TSP) - Federal version of the 401K

There is no company match in this account. Only 5% of income is being contributed. Index Funds and Life Cycle Funds are the only options to choose from.

Fund ....... Shares ....... Value ....... Percentage of Portfolio

C Fund (S&P 500) ........ 98.9512 ... $1,707.51 ...35.16%
F Fund (Fixed Income) ... 15.1891 ... $242.10 ..... 4.98%
I Fund (International) ...... 74.2970 ... $1,361.26 .. 28.03%
S Fund (Small Cap) ........ 69.3933 ... $1,545.90 ... 31.83%
=============================================================
Account Value: ...... $4,856.77

Contribution Allocations:

C Fund ... 10%
F Fund ... 10%
I Fund ... 45%
S Fund ... 35%