The plus side of lower stock prices, because I always look at the bright side, thus half full!
“Every disadvantage has it’s advantage” to quote a famous Dutch soccer player.
Now the first quarter of 2018 has ended I can draw up the balance sheet for my Vrijheid Fonds. And it is fair to say that the year 2018 has started really bad for me. My Vrijheid Fondsis at a loss of 5% and only 4 companies have a higher stock price than on January 1st.
Okay that is the bad news; the good news is that I can buy more new shares with the same money. I get more stocks for my dividend when I reinvest it. I always look on the bright side of life. This makes it a lot more fun 🙂
The total dividend income of my Vrijheid Fondswill also grow in 2018, while the stock prices will fall. This is a perfect scenario for DGI’s who reinvest their dividends. Especially when you still have lots of years before you reach FI.
What do I do with my dividend?
Frequent visitors of Polliesdividend.com know that I receive passive income from my Vrijheid Fonds every month. My companies pay me dividend with an average weighted yield of around 3,0%. And good stocks also raise their dividend on a yearly basis. And that’s what I like and want as a Dividend Growth Investor. My goal is to create a portfolio, which generate enough passive income to live of.
I have a rule that the cost of buying stocks (the fees my broker charges when I buy new stocks) should be max 1% of the total amount of cash I invest. Therefore my minimum amount with which I buy new stocks will be at least €1,150. As you can see at my dividend income page, the amount of dividend I receive is not enough to buy new stocks every month.
So I let my dividend accumulate in my brokerage account. And when I have enough cash (dividend and fresh capital), I will purchase some stocks. This means that at this moment I have to limit myself to buy new stocks at the end of every quarter. When my snowball will gain momentum, the interval between two purchases will be shorter.
Reinvest or selectively reinvest?
I think it is better (and wiser) to reinvest my dividend every quarter than on a monthly basis. This way I save on fees. The downside of this method is that it will take longer before my snowball is really running (compounding). But when it gets momentum…
I do not reinvest my dividend in the original stock. I selectively reinvest my dividend. Through this way I can determine which stock is the best buy at that precise moment.
Besides my quarterly purchase I have also two drips installed for my two favorite Dutch stocks, Royal Dutch Shell and Unilever. Every quarter I get two new (free) stocks of RDS.AS and one new (free) Stock of UN.AS. Last month I received 4 new RDS.AS shares and 1 UN.AS share.
What my new buy will be this month, I don’t know yet. Still have to do a lot of research.
How do you reinvest your dividends? I like to hear from you.