Here’s my quarterly income update as a companion post to my MMB Portfolio Year-End 2023 performance update. I prefer to track the income produced as an alternative metric to performance. The total income goes up much more gradually and consistently than the number shown on brokerage statements (market price), which helps encourage consistent investing. Here’s a related quote from Jack Bogle (source):

The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies. – Jack Bogle

Here is the historical growth of the S&P 500 total dividend, which tracks roughly the largest 500 stocks in the US, updated as of Q3 2023 (via Yardeni Research):

That is a much smoother ride than the price index. I imagine my portfolio as a factory that churns out dollar bills, or a tree that gives dividend fruit.

More details on dividends. Stock dividends are a portion of profits that businesses have decided to distribute directly to shareholders, as opposed to reinvesting into their business, paying back debt, or buying back shares. The dividends may suffer some short-term drops, but over the long run they have grown faster than inflation.

In the US, the dividend culture is somewhat conservative in that shareholders expect dividends to be stable and only go up. Thus the starting yield is lower, but grows more steadily with smaller cuts during hard times. Here is the historical growth of the trailing 12-month (ttm) dividend paid by the Vanguard Total US Stock ETF (VTI) via StockAnalysis.com.

European corporate culture tends to encourage paying out a higher (sometimes fixed) percentage of earnings as dividends, but that also means the dividends move up and down with earnings. The starting yield is currently higher but may not grow as reliably. Here is the historical growth of the trailing 12-month (ttm) dividend paid by the Vanguard Total International Stock ETF (VXUS).

The dividend yield (dividends divided by price) also serve as a rough valuation metric. When stock prices drop, this percentage metric usually goes up – which makes me feel better in a bear market. When stock prices go up, this percentage metric usually goes down, which keeps me from getting too euphoric during a bull market.

My portfolio income history. I started tracking the income from my portfolio in 2014. Here’s what the annual distributions from my portfolio look like over time:

• $1,000,000 invested in my portfolio as of January 2014 would started out paying ~$24,000 in annual income over the previous 12 months. (2.4% starting yield)
• If I reinvested the dividends/interest every quarter but added no other contributions, as of January 2024 it would have generated ~$50,000 in annual income over the previous 12 months.
• If I spent all the dividends/interest every quarter and added no other contributions, as of January 2024 it would have generated ~$37,000 in annual income over the previous 12 months.

This chart shows how the annual income generated by my portfolio has increased over time and with dividend reinvestment.

Isn’t that a more pleasant way to track your progress?

TTM income yield. To estimate the income from my portfolio, I use the weighted “TTM” or “12-Month Yield” from Morningstar (checked 1/5/24), which is the sum of the trailing 12 months of interest and dividend payments divided by the last month’s ending share price (NAV) plus any capital gains distributed (usually zero for index funds) over the same period.

My ttm portfolio yield is now roughly 2.63%, about the same as last quarter’s value. That means if my portfolio had a value of $1,000,000 today, I would have received $26,300 in dividends and interest over the last 12 months.

What about the 4% rule? For goal planning purposes, I support the simple 4% or 3% rule of thumb, which equates to a target of accumulating roughly 25 to 33 times your annual expenses. I would lean towards a 3% withdrawal rate if you want to retire young (closer to age 50) and a 4% withdrawal rate if retiring at a more traditional age (closer to 65). I truly believe too much time is spent debating this number. It’s just a quick and dirty target to get you started, not a number sent down from the heavens!

During the accumulation stage, your time is better spent focusing on earning potential via better career moves, improving in your skillset, and/or looking for entrepreneurial opportunities where you can have an ownership interest.

As a semi-retired investor that has been partially supported by portfolio income for a while, I find that tracking income makes more tangible sense in my mind and is more useful for those who aren’t looking for a traditional retirement. Our dividends and interest income are not automatically reinvested. They are another “paycheck”, as our other paychecks now vary much more than before. Then, as with a traditional paycheck, we can choose to either spend it or invest it again to compound things more quickly. Even if we spend the dividends, this portfolio paycheck will still grow over time. You could use this money to cut back working hours, pursue a different career path, start a new business, take a sabbatical, perform charity or volunteer work, and so on.

Right now, I am trying to fully appreciate the “my kids still think I’m cool and want to spend time with me” period of my life. It won’t last much longer. Whenever I ask for a hug, I get one! (I’m actually dreading when I have to delete this sentence from my updates!) I am consciously choosing to work when they are at school but also consciously turning down work that doesn’t fit my priorities and goals. This portfolio income helps me do that.

Here’s my year-end 2023 update for my investment holdings (published January 2024), including all of our combined 401k/403b/IRAs and taxable brokerage accounts but excluding our primary residence and side portfolio of self-directed investments. Following the concept of skin in the game, the following is not a recommendation, but a sharing of our real-world, imperfect, low-cost, diversified DIY portfolio.

“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have in their portfolio.” – Nassim Taleb

How I Track My Portfolio
Here’s how I track my portfolio across multiple brokers and account types. There are limited free advanced options after Morningstar discontinued free access to their portfolio tracker. I use both Empower Personal Dashboard (previously known as Personal Capital) and a custom Google Spreadsheet to track my investment holdings:

• The Empower Personal Dashboard real-time portfolio tracking tools (free) automatically logs into my different accounts, adds up my various balances, tracks my performance, and calculates my overall asset allocation daily. Formerly known as Personal Capital.
• Once a quarter, I also update my manual Google Spreadsheet (free to copy, instructions) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation. I also create a new tab each quarter, so I have an archive of my holdings dating back many years.

2023 Year-End Asset Allocation and YTD Performance
Here are updated performance and asset allocation charts, per the “Holdings” and “Allocation” tabs of my Empower Personal Dashboard.

Humble Portfolio Background. I call this my “Humble Portfolio” because it reminds me to accept the repeated findings that the ability to know when stocks or bonds will outperform is exceedingly rare. Charlie Munger believes that only 5% of professional money managers have the skill required to consistently beat the index averages after costs.

Instead, by paying minimal costs including management fees, transaction spreads, and tax drag, you can essentially guarantee yourself above-average net performance over time.

I own broad, low-cost exposure to productive assets that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I have faith in the long-term benefit of owning businesses worldwide, as well as the stability of high-quality US Treasury debt. My stock holdings roughly follow the total world market cap breakdown at roughly 60% US and 40% ex-US. I add just a little “spice” to the broad funds with the inclusion of “small value” factor ETFs for US, Developed International, and Emerging Markets stocks as well as diversified real estate exposure through US REITs.

I strongly believe in the importance of knowing WHY you own something. Every asset class will eventually have a low period, and you must have strong faith during these periods to earn those historically high returns. You have to keep owning and buying more stocks through the stock market crashes. You have to maintain and even buy more rental properties during a housing crunch, etc. A good sign is that if prices drop, you’ll want to buy more of that asset instead of less. I don’t have strong faith in the long-term results of commodities, gold, or bitcoin – so I don’t own them.

I do not spend a lot of time backtesting various model portfolios, as I don’t think picking through the details of the recent past will necessarily create superior future returns. You’ll find that whatever model portfolio is popular at the moment just happens to hold the asset class that has been the hottest recently as well.

Find productive assets that you believe in and understand, and just keep buying them through the ups and downs. Mine may be different than yours.

I have settled into a long-term target ratio of roughly 70% stocks and 30% bonds (or 2:1 ratio) within our investment strategy of buy, hold, and occasionally rebalance. My goal has evolved to more of a “perpetual income portfolio” as opposed to the more common “build up a big stash and hope it lasts until I die” portfolio. My target withdrawal rate is 3% or less. Here is a round-number breakdown of my target asset allocation along with my primary ETF holding for each asset class.

• 30% US Total Market (VTI)
• 5% US Small-Cap Value (VBR)
• 20% International Total Market (VXUS)
• 5% International Small-Cap Value (AVDV)
• 10% US Real Estate (REIT) (VNQ)
• 15% US “Regular” Treasury Bonds or FDIC-insured deposits
• 15% US Treasury Inflation-Protected Bonds (or I Savings Bonds)

Performance details. According to Empower, my portfolio is up about 15.1% for 2024. The S&P 500 is up about 25% YTD, while the US Bond index is up around 6%. My overall return lagged the US broad market due to my international stock holdings and bond holdings, but I am still happy with my risk positioning (also see above regarding ups and downs).

Yet again, there was little action on my part this year. I didn’t sell a single share of anything, and that’s how I like it. I did reinvest some dividends and interest into TIPS, but the timing plus the year-end bull run of the US stock market still left me again with a higher stock percentage. Unless something extreme happens, I plan to use my future cashflows to rebalance back into bonds.

I’ll share about more about the income aspect in a separate post.

Here’s my quarterly income update as of October 2023 for my MMB Portfolio. I prefer to track the income produced as an alternative metric to performance. The total income goes up much more gradually and consistently than the number shown on brokerage statements (price), which helps encourage consistent investing.

Here is the historical growth of the S&P 500 total dividend, which tracks roughly the largest 500 stocks in the US, updated as of Q3 2023 (via Yardeni Research):

That is a much smoother ride than the price index. I imagine my portfolio as a factory that churns out dollar bills, or a tree that gives dividend fruit.

More details on dividends. Stock dividends are a portion of profits that businesses have decided to distribute directly to shareholders, as opposed to reinvesting into their business, paying back debt, or buying back shares. The dividends may suffer some short-term drops, but over the long run they have grown faster than inflation.

In the US, the dividend culture is somewhat conservative in that shareholders expect dividends to be stable and only go up. Thus the starting yield is lower, but grows more steadily with smaller cuts during hard times. Here is the historical growth of the trailing 12-month (ttm) dividend paid by the Vanguard Total US Stock ETF (VTI) via StockAnalysis.com.

European corporate culture tends to encourage paying out a higher (sometimes fixed) percentage of earnings as dividends, but that also means the dividends move up and down with earnings. The starting yield is currently higher but may not grow as reliably. Here is the historical growth of the trailing 12-month (ttm) dividend paid by the Vanguard Total International Stock ETF (VXUS).

The dividend yield (dividends divided by price) also serve as a rough valuation metric. When stock prices drop, this percentage metric usually goes up – which makes me feel better in a bear market. When stock prices go up, this percentage metric usually goes down, which keeps me from getting too euphoric during a bull market. Here’s a related quote from Jack Bogle (source):

The true investor will do better if he forgets about the stock market and pays attention to his dividend returns and to the operating results of his companies. – Jack Bogle

My portfolio income history. I started tracking the income from my portfolio in 2014. Here’s what the annual distributions from my portfolio look like over time:

• $1,000,000 invested in my portfolio as of January 2014 would started out paying ~$24,000 in annual income over the previous 12 months. (2.4% starting yield)
• If I reinvested the dividends/interest every quarter but added no other contributions, as of October 2023 it would have generated ~$47,000 in annual income over the previous 12 months.
• If I spent all the dividends/interest every quarter and added no other contributions, as of October 2023 it would have generated ~$36,000 in annual income over the previous 12 months.

This chart shows how the annual income generated by my portfolio has increased over time and with dividend reinvestment.

I’m using simplified numbers to explain things, but isn’t that a more pleasant way to track your progress?

TTM income yield. To estimate the income from my portfolio, I use the weighted “TTM” or “12-Month Yield” from Morningstar (checked 10/2/23), which is the sum of the trailing 12 months of interest and dividend payments divided by the last month’s ending share price (NAV) plus any capital gains distributed (usually zero for index funds) over the same period.

My ttm portfolio yield is now roughly 2.69%, a bit lower than last quarter’s value. That means if my portfolio had a value of $1,000,000 today, I would have received $26,900 in dividends and interest over the last 12 months.

What about the 4% rule? For goal planning purposes, I support the simple 4% or 3% rule of thumb, which equates to a target of accumulating roughly 25 to 33 times your annual expenses. I would lean towards a 3% withdrawal rate if you want to retire young (closer to age 50) and a 4% withdrawal rate if retiring at a more traditional age (closer to 65). I really believe too much time is spent on this number. It’s just a quick and dirty target, not a number sent down from the heavens!

During the accumulation stage, your time is better spent focusing on earning potential via better career moves, improving in your skillset, and/or looking for entrepreneurial opportunities where you can have an ownership interest.

As a semi-retired investor that has been partially supported by portfolio income for a while, I find that tracking income makes more tangible sense in my mind and is more useful for those who aren’t looking for a traditional retirement. Our dividends and interest income are not automatically reinvested. They are another “paycheck”. Then, as with a traditional paycheck, we can choose to either spend it or invest it again to compound things more quickly. Even if we spend the dividends, this portfolio paycheck will still grow over time. You could use this money to cut back working hours, pursue a different career path, start a new business, take a sabbatical, perform charity or volunteer work, and so on.

Right now, I am trying to fully appreciate the “my kids still think I’m cool and want to spend time with me” period of my life. It won’t last much longer. (I’m actually dreading when I have to delete this sentence from my updates!) I am consciously choosing to work when they are at school but also consciously turning down work that doesn’t fit my priorities and goals. This portfolio income helps me do that.

Here’s my quarterly update on my current investment holdings as of October 2023, including all of our combined 401k/403b/IRAs and taxable brokerage accounts but excluding our primary residence and side portfolio of self-directed investments. Following the concept of skin in the game, the following is not a recommendation, but a sharing of our real-world, imperfect, low-cost, diversified DIY portfolio.

“Never ask anyone for their opinion, forecast, or recommendation. Just ask them what they have in their portfolio.” – Nassim Taleb

How I Track My Portfolio
Here’s how I track my portfolio across multiple brokers and account types. There are limited free advanced options after Morningstar discontinued free access to their portfolio tracker. I use both Empower Personal Dashboard (previously known as Personal Capital) and a custom Google Spreadsheet to track my investment holdings:

• The Empower Personal Dashboard real-time portfolio tracking tools (free) automatically logs into my different accounts, adds up my various balances, tracks my performance, and calculates my overall asset allocation daily.
• Once a quarter, I also update my manual Google Spreadsheet (free to copy, instructions) because it helps me calculate how much I need in each asset class to rebalance back towards my target asset allocation. I also create a new tab each quarter, so I have an archive of my holdings dating back many years.

2023 Q2 Asset Allocation and YTD Performance
Here are updated performance and asset allocation charts, per the “Holdings” and “Allocation” tabs of my Empower Personal Dashboard.

Humble Portfolio Background. I call this my “Humble Portfolio” because it accepts the repeated findings that the ability to buy and sell stocks and exceed the performance of basically doing nothing is exceedingly rare. Charlie Munger believes that only 5% of professional money managers have the skill required to consistently beat the index averages after costs.

Instead, by paying minimal costs including management fees, transaction spreads, and tax drag, you can essentially guarantee yourself above-average net performance over time.

I own broad, low-cost exposure to productive assets that will provide long-term returns above inflation, distribute income via dividends and interest, and finally offer some historical tendencies to balance each other out. I have faith in the long-term benefit of owning businesses worldwide, as well as the stability of high-quality US Treasury debt. My stock holdings roughly follow the total world market cap breakdown at roughly 60% US and 40% ex-US. I add just a little “spice” to the broad funds with the inclusion of “small value” ETFs for US, Developed International, and Emerging Markets stocks as well as additional real estate exposure through US REITs.

I strongly believe in the importance of knowing WHY you own something. Every asset class will eventually have a low period, and you must have strong faith during these periods to truly make your money. You have to keep owning and buying more stocks through the stock market crashes. You have to maintain and even buy more rental properties during a housing crunch, etc. A good sign is that if prices drop, you’ll want to buy more of that asset instead of less. I don’t have strong faith in the long-term results of commodities, gold, or bitcoin – so I don’t own them.

I do not spend a lot of time backtesting various model portfolios, as I don’t think picking through the details of the recent past will necessarily create superior future returns. You’ll find that whatever model portfolio is popular in the moment just happens to hold the asset class that has been the hottest recently as well.

Find productive assets that you believe in and understand, and just keep buying them through the ups and downs. Mine may be different than yours.

I have settled into a long-term target ratio of roughly 70% stocks and 30% bonds (or 2:1 ratio) within our investment strategy of buy, hold, and occasionally rebalance. My goal is more “perpetual income portfolio” as opposed to the more common “build up a big stash and hope it lasts until I die” portfolio. My target withdrawal rate is 3% or less. Here is a round-number breakdown of my target asset allocation.

• 30% US Total Market (ex. VTI)
• 5% US Small-Cap Value (ex. VBR)
• 20% International Total Market (ex. VXUS)
• 5% International Small-Cap Value (ex. AVDV)
• 10% US Real Estate (REIT) (ex. VWO)
• 15% US Treasury Nominal Bonds or FDIC-insured deposits
• 15% US Treasury Inflation-Protected Bonds (or I Savings Bonds)

Details. According to Empower, my portfolio is up about 5.0% YTD to 10/1/2023. The S&P 500 is up 11.7% YTD, while the US Bond index is down around 1%.

The most notable action this quarter has been… inaction. There was only minor rebalancing via new purchases with cashflows (mostly dividends) this quarter. I haven’t bought any new ETF tickers or sold a single share of anything. I am considering increasing my estimated tax payments to the IRS to compensate for the extra interest being earned on my FDIC-insured savings accounts and Treasury bonds.

I’ll share about more about the income aspect in a separate post.