The stress-free investor

Have you ever considered what your life would be like if you never worried about the value of your portfolio…

Or had concerns about the ups and downs of your 401(k)…

Or stressed out about the size of your retirement nest egg?

Imagine how many fewer gray hairs you’d have, how many cases of heartburn you wouldn’t suffer, and all those restless nights that wouldn’t happen.

To a lot of people, a low-stress mindset seems impossible when it comes to their investing accounts. I hear the pushback all the time.

People point out that the markets go up and down every day in ways they can’t control. So how in the world can they not worry about market volatility? Especially in times like these!

If you’re really committed to stressing out, then there’s nothing I can say that will ease your mind. But for anyone who’s even a little bit open to optimism, here’s my answer:

It’s all a matter of perspective.

It’s unavoidably true that stocks go up and down every day. I’ll give hard-core stressers that much. Stock charts are unpredictable and often scary looking, especially in the short term.

But there’s an investing strategy that doesn’t rely on them for success. Share price movement, whether up or down, is inconsequential for the dividend growth investing (DGI) way of doing things.

That’s because the strategy they subscribe to isn’t focused on the size of their nest eggs. It’s grounded in the size and – better yet – reliability and predictability of the passive income stream that a DGI portfolio produces.

And that makes all the difference.

I’m a dividend growth investor myself. I wouldn’t be part of Wide Moat Research if I wasn’t.

That’s what we’re about because we’ve seen it work over and over again.

For me personally, I manage funds across a variety of investing accounts at different brokerages. So I have a single spreadsheet that allows me to track all my holdings in aggregate.

Some of the columns there are dedicated to daily share price changes, including unrealized daily gains or losses. I’ve color-coded them, with green meaning good and red meaning bad as far as the overall size of my portfolio goes.

Believe it or not, I’ve experienced many more green days than red ones. I’ve also watched the overall size of my portfolio compound higher and higher.

That’s a good thing overall, obviously. But there is a downside in that I can now “lose” more money in a single trading session than I used to make in an entire year back when I first started.

Admittedly, this can be disheartening at first glance. However, a second look helps me cheer up.

I simply look down a few rows to the “Projected Annual Income” cell. Despite the short-term volatility going on, the number there tends to be the exact same as it was the day before.

If not higher.

I find my spreadsheet very helpful. But you don’t necessarily need one to keep the same level of calm.

You just need to join the DGI crowd in recognizing that it’s far better to focus on reliable, predictable, staircase-shaped dividend charts than to worry about wayward, jagged share price charts.

Now, no dividend is ever 100% safe. There are no rules or laws that say management teams aren’t allowed to reduce their dividends.

But when it comes to the highest-quality dividend growers, cuts are exceedingly rare.

I’ve owned shares of hundreds of different companies over the years. Yet I can count the number of dividend decreases I’ve experienced on just one hand.

Honestly, I can’t even remember the last time one of my portfolio holdings reduced its payout. It’s been that long.

High-quality income stocks like the ones Wide Moat targets tend to stay strong through pandemics… wars… election cycles… Fed cycles… and the list goes on.

All my dividend stocks have continued increasing their annual payments regardless – and in safe and sustainable ways – because of their fundamental growth and the strength and size of their balance sheets.

Now, I’ve developed a pretty good system when it comes to selecting dividend paying stocks and monitoring their dividend safety over time. However, even someone who bought a broad index of the best dividend growers would have experienced similarly strong results over the years.

Take dividend aristocrats: S&P 500-listed stocks that have raised their annual dividend for 25–49 years in a row. There were 65 of them during the Covid-19 pandemic and subsequent recession. And do you know how many cut their payouts in that Black Swan era?

One.

Moreover, roughly two-thirds continued to raise their payments.

Admittedly, things were a little worse during the Great Financial Crisis. At that time, there were only 60 dividend aristocrats; and 17 cut their dividends.

Then again, most of them were in the financial sector. So a properly diversified DGI portfolio still wouldn’t have experienced much income loss, if any at all. Just as long as its holder didn’t panic-sell, of course.

Dividend naysayers like to point out famous dividend cuts like General Motors (GM), Citigroup (C), Royal Dutch Shell (SHEL), or General Electric (GE). But disciplined fundamental analysis can catch those kinds of cuts before they happen. Our regular readers know we’ve successfully warned against so-called “sucker yields” many times before.

So the result is still a passive, dividend-growth income stream that’s robust and durable throughout any number of potential market situations.

I don’t know about you, but that works fine for me. These dividends make up my passive income stream, which is what I plan to live off in retirement.

That’s the beauty of the dividend growth investing strategy: I never have to sell the assets I’ve worked so hard to accumulate to make ends meet in retirement.

It never made sense to me to work hard and live below my means so I could save and save and save for years on end… only to retire one day and slowly siphon off those savings, hoping and praying they won’t run out before I die.

What’s the point?

Thankfully, I found a better way in DGI. Instead of being a forced stock seller when I need money, I get to sit back and collect reliably increasing dividend payments from the best companies in the world.

Talk about stress free!

I’m not telling you this to brag. I’m telling you because you can benefit from it, too.

I’ve spoken with thousands and thousands of people who’ve adopted this mindset. And we all rest easy with our passive income streams – backed by the black and white fundamental data our holdings produce.

As I said before, this is the core of Wide Moat Research. Though that probably shows most clearly in our Wide Moat Letter.

We launched this service in 2020, right before the shutdowns spiraled out of control. Yet not only did it survive that drama… It ended up thriving.

This newsletter tracks three model portfolios: The SWAN (sleep well at night) Portfolio, the Core Portfolio, and the REIT Portfolio. Brad and I have recommended dozens of stocks for all three over the years – and we’ve never experienced a dividend cut with any of them.

Safety, security, and stress-free living is what The Wide Moat Letter is all about.

And you can be all about it, too.

Best wishes,

Nick Ward
Analyst, Wide Moat Research