This is my April 2019 FFJ Portfolio update. The portfolio was created in January 2017 for the purpose of demonstrating how investing in high quality companies with competitive advantages and with a record of consistently increasing dividends can assist investors in reaching their long-term financial goals without the need to speculate or to chase dividend yield.
Another month has gone by and time for a very brief update on the status of the FFJ Portfolio.
I continue to be exceedingly cautious in this environment as visions of the dot.com bubble, in which many investors lost a sizable amount of money investing in unprofitable companies with negative Free Cash Flow, are dancing in my head.
Other than the purchases referenced in my January FFJ Portfolio update and the reinvestment of some dividends I have not made any additional investments. The change in the value of the portfolio, however, has changed quite significantly in 4 months.
Since I have become increasingly cautious I have begun to more actively employ the use of reasonably conservative option strategies. Even if a holding is a core holding but I view it as being far too richly valued I am prepared to take a bearish position. A recent example of this can be found in my most recent Canadian National Railway Company article.
All my option trades can be found in articles which can be accessed here.
For the most part, my option trades have worked out well. In instances where my call was not 100% correct I still managed to come out ahead. I don’t envision this will always be the case but at least with the option strategies I am employing my risk exposure is negligible.
On the dividend income front, I set the following 2019 targets at the beginning of the year:
- Core Accounts - CDN $15K and USD $18K
- Side Accounts - CDN $19K and USD $11K
As at the end of April the holdings within the FFJ Portfolio have generated:
- Core Accounts - CDN $5.3K and USD $5.3K
- Side Accounts - CDN $6.2K and USD $3.6K
Note: K = thousand
I was not expecting the market conditions we have experienced in recent months when I set my targets. Quite frankly, I had envisioned that I would be a bit further ahead than current actual results. I am not, however, prepared to invest in what I perceive to be richly valued companies just so I can hit a dividend income target.
I did not set any option income target at the beginning of the year and am unlikely to set any in the future since I view option income as unpredictable. I can far more accurately forecast dividend income than option income!
In addition, unlike dividend income, I do not count option income as ‘income’ when funds are credited to my investment accounts. Anything can happen with options. What might be an extremely profitable trade can turn into a marginally profitable trade (or a loss) as time elapses; the opposite can also occur. I will only count option income as income once the options have expired/are closed. I am hoping, however, to generate $10K - $20K in option income in 2019.
That’s my roundup for April.
I wish you much success on your journey to financial freedom!
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Disclaimer: I have no knowledge of your individual circumstances and am not providing individualized advice or recommendations. I encourage you not to make any investment decision without conducting your own research and due diligence. You should also consult your financial advisor about your specific situation.
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