All About Interest

One man's journey to financial independence.

Baby AAI’s Portfolio – Year 1 Update

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Baby AAI is now walking and his portfolio is making some strides as well.   He’s not talking yet and has no idea what a portfolio or equity is yet though.  That’s perfectly ok because there is lots of time for compounding to work and for me to teach him about investing.

I funded Baby AAI’s account with an initial $7500 in a taxable account and have been contributing $100/week since 02/27/17, so we’re almost at the one year mark.

I made a recent transaction last week and swapped out PEP for a little more of HBI.  HBI fell to below his cost basis and I couldn’t resist adding a little more under $20/share.  I can always add PEP back later if I wish.  So far HBI has been up and PEP has been down so it was a good trade so far.  Just to be clear, I don’t plan on doing much “trading”, I plan to mostly buy stocks to hold and let them DRIP. I also added some RDS.B recently.

Below is the current portfolio after a year.  Carter’s is killing it from my initial purchase, up over 38%!  I actually don’t mind some of these positions staying lower for a while so I can get more shares in the near-term from compounding.

 

This is still a really short time frame to compare gains and losses.  The account is currently valued at $13,448.  That’s above my projected amount of $13,225 assuming 7% compounding, see graph below.  This portfolio still has a long time to compound and all shares but RDS.B are currently turned on to DRIP.  In fact I’ve already added fractional shares of DIS, CRI and HBI by DRIPing.

I’m hoping to achieve a 7% CAGR which will put the balance right at $200,000 by the time he’s 18.  That’s by doing nothing else but contributing $100/mo and letting the power of compounding work its magic.  I used a simplified actuarial formula assuming $7500 contributed right away and $5200 ($100/month) contributed at the end of each year.

Here’s a graph of what the value should be at the end of each year, of course the stock market has large swings up and down so this is in a perfect world of 7% compounding each year.

So basically, by the end of the first year, February 27, 2018, the portfolio should be valued at $13,225.00.  I’m currently slightly ahead of schedule.

I can’t wait to watch this portfolio grow!

I’d love suggestions on a next purchase for BabyAAI.

 

 

Update on Baby AAI’s Stock Portfolio

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Baby AAI is only crawling and has little cares in the world besides food, playing and his parents.  However he’s got a portfolio that’s compounding for him already.  Here’s a look at the first stocks I purchased and how I expect that portfolio to perform until his 18th birthday.

I funded Baby AAI’s account with an initial $7500 and have been contributing $100/week since 02/27/17, so 35 weeks.  That’s a total of $11,000 in contributions.

You can see the stocks I have purchased so far are Carters (CRI), Hanes (HBI), Disney (DIS) and Pepsi (PEP).

This is a very short time to start looking at gains and losses.  The account is currently valued at $11,105.22.  That’s just a 1% increase.  However, this portfolio has a long time to compound, all shares are currently turned on to DRIP.  You can see I’ve already been able to purchase fractional shares by DRIPing into CRI, DIS and HBI.

So how do I expect this portfolio to perform.  Well I did the math for you, and I’m hoping to achieve a 7% growth rate which will put the balance right at $200,000 by the time he’s 18.  That’s by doing nothing else but contributing $100/mo and letting the power of compounding work its magic.  I used a simplified actuarial formula assuming $7500 contributed right away and $5200 ($100/month) contributed at the end of each year.

Here’s a graph of what the value should be at the end of the year, of course the stock market has large swings up and down so this is in a perfect world of 7% compounding each year.

So basically, by the end of the first year, February 27, 2018, the portfolio should be valued at $13,225.00.  My total contributions will be just over $100,000.  You will notice that it takes a little over 12 years to reach this $100,000 number and less than 6 year later it doubles.

It will be fun to watch this portfolio grow!  What do you think?

 

 

A Baby’s First Stock

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One of the reasons for a lack of much posting has been the birth of our first child, a healthy baby boy.  And what better way to start him out than to purchase his first shares of stock!

I opened a portfolio and purchased stock in three companies that I think have been beaten down lately and offer not only fair value but decent dividends as well.

The first company is of course, Carter’s, CRI.  Maybe you’ve heard of Carters or Osh Kosh B’Gosh?  If not then you don’t have any kids.  These brands dominate the baby clothing category.  Carters stock is sitting near $85/share down from over $110/share as a 52-week high.  Shares yield nearly 1.8% with a low payout ratio of 27%.  They are a dividend challenger, having paid increased dividends for 5 straight years!  They also just purchases another company called Skip Hop that should add additional profits to the bottom line.  CFRA (formerly S&P Capital IQ) currently rates them a 4-star buy with a 3-year CAGR of 16%.

This next stock is currently a 5-Star screaming buy from Morningstar.  It’s one of only 9 stocks currently ranked 5-stars.  Everyone knows and has purchased this brand, Hanes! Hanes owns Hanes brands obviously which is better known for their underwear and Michael Jordan commercials, they also own Champion, Bali and Playtex to name a few.  The great thing about Hanes is that their brands are everywhere and they don’t need their own retail footprint.  They sell mainly online and through major department stores.  You’ll even find their stuff on Amazon. The stock is rated a 3-star buy from CFRA with a 3-year CAGR of 17%.  HBI currently yields 2.6% with an extremely low payout of 10%.  They are also a dividend challenger, having paid out higher dividends for 5 straight years.

Now this third stock is probably more well known within the DGI community as a popular stock.  It also has a much larger market cap in comparison.  The stock is Disney.  DIS currently yields 1.5% and is a dividend challenger.  They have paid higher dividends for 7 straight years.  Morningstar gives them a 4-star raiting as well as CFRA.

I’ve purchased equal dollar amount in these three stocks and plan to make small contributions to the account on a weekly basis.  I’ll be tracking the performance and adding new position or dollar-cost-averaging in current ones.

I thought what better way to teach a child dividend growth investing than to purchase stock in companies that he uses products from.  The retail sector has taken a beating lately and I figured I’d pick up a couple stocks there that I believe will still be around when my son goes to college.  These stocks have been added to my portfolio tab for tracking purposes.