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Saturday, December 1, 2007

* Investing Goals

This article appeared in the 1st Carnival of Financial Goals - 2008 Resolutions Edition.

Public goals and progress reports are a long-standing tradition in the world of personal finance blogs. As I conclude my first month of blogging, I have given much thought as to what I would put out in the public domain as my goals and how to report progress on them.

I considered net worth, but rejected it since much of my net worth is tied to employee stock options and my company's stock. Thus, the two main drivers of my net worth are the annual vesting of options and share price movements in my company's stock.

Since the focus of Dividends4Life is on the dividend income portion of my portfolio, it seems only logical that the selected goals and progress report should be tied that. The obvious objective of dividend investing is to generate dividend income, so annual dividend income will be one of the metrics I will report on. As noted in my recent article Yield on Cost: Measuring for Success, I consider Yield on Cost (YOC) an important metric, so it will be the other metric I will report on.

In the table below are my 2008, 2017 and 2027 goals, along with my Nov/2007 actual results.

A couple of important items to note:
  1. YOC will be more sensitive to the yields of what I am buying, versus dividend increases in the early years due to relative size of the purchases versus the portfolio size.
  2. I am being somewhat conservative with the YOC, particularily in 2027. Assuming no additional purchases, my model calculates a YOC for 2027 of 46.75%.
As time goes by and I have more historical data points, I will be in a much better position to more accurately model future projections. For now it is a stake in the ground, and I am ready to pursue it!
Have you set your 2008 goals yet?


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