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Friday, December 20, 2019

Goals for 2020

I like setting challenging but achievable goals. Challenging goals demand extra effort and focus. They require commitment, patience, and constant monitoring. Sometimes, when progress is not sufficient, they require a course correction.

It is not beneficial to set goals that are too easy to achieve. Such goals don't require special effort and are uninspiring! Furthermore, achieving easy goals won't give you a special sense of accomplishment.

In this article, I'm presenting my goals for 2020.

Assumptions and Commitments

Before presenting my 2020 goals, let me state some assumptions and commitments.
  • A: Recurring capital deposits of $2,000 per month ($24,000 in 2020) 
We had some extraordinary financial commitments in 2019, so I didn't deposit any fresh capital on a regular basis. I'm happy to restart these recurring deposits and I'll also make bonus deposits when possible.
  • B: Reinvest dividends, on average at least $2,250 per month (at least $27,000 in 2020)
DivGro's PADI now stands at $25,882, which equates to a projected monthly income of about $2,156. Given that dividends will increase throughout the year, I think averaging $2,250 per month in 2019 is doable. 
  • C: Deposit premium article income from Seeking Alpha (goal is $5,200 in 2020)
I'm unsure if I'll achieve my goal of earning $5,200 in premium article income from Seeking Alpha in 2019. It continues to be hard to reliably generate income in this way, so I'll just set the same income goal for 2020. 
  • D: Retain and invest options income (goal is $24,000 for 2020)
Through November 2019, I earned options income totaling about $29,000. This easily beats my 2019 goal of earning $21,000 from options trading. Nevertheless, I'm going for a modest increase of about 14%. Options income depends largely on what the market does and, of course, on volatility. 
  • E: Assume initial yield on cost (YoC) averaging 3.0% 
I've been focusing on buying higher-quality dividend growth stocks, which often offer more modest yields. I believe I'll be able to average an initial YoC of 3.0%, though.
  • F: Assume an annual dividend growth rate of 7.0%
I think an effective dividend growth rate of 7.0% is reasonable for 2020. This is a little higher than the 6.5% I assumed for 2019, so we'll see how it goes!

2020 Goals

To determine achievable yet challenging goals, let's first look at what I can expect to invest in 2020.

Fresh capital should include $24,000 from recurring deposits, $24,000, from options income, and $5,200 from Seeking Alpha income, for a total of $53,200. Let's assume bonus deposits totaling $6,800. So cash contributions should total $60,000 in 2020. (A, C, D)

Adding dividend income of $27,000 means I should expect to have about $87,000 available for new investments next year. (B)

At an initial YoC of 3.0%, new investments of $87,000 will produce about $2,610 in additional dividends. (E)

1. Increase projected annual dividend income to $30,000

DivGro's PADI of $25,882 should grow to at least $27,693 due to dividend increases. If I add dividend income of $2,610 from new investments, then DivGro's PADI should grow to about $30,300 in 2020 (E, F)

I'm likely going to miss my PADI goal for 2019, so let's make this one just a little easier this time by rounding down to $30,000.

Since I'll be starting at about $25,882, this goal would represent an increase of about 16%.

2. Earn $27,000 in dividend income.

Currently, DivGro's PADI stands at $25,882. Accounting for dividend growth ($1,811) and additional dividends ($2,610) in 2020 is tricky because dividends from new investments will have a lag of at least one quarter. (B)

To account for the lag, I'm adding only 25% of the $4,421 for 2020, or $1,105. This sets a challenging dividend income goal of $26,987. I'll round this up to $27,000.

If I achieve my 2019 goal of earning $25,200 in dividend income, the $27,000 for 2020 would represent an increase of about 7%.

3. Collect $24,000 in options income.

For 2020, I'm setting a new options income goal of $24,000, an increase of about 14% over my 2019 goal of $21,000. Options income remains tricky and largely depends on what the market does and, of course, on volatility. (D)

4. Earn income of $5,200 writing premium articles. 

Year to date I've collected about $4,800 for publishing premium articles on Seeking Alpha. There's a chance I won't achieve my goal of $5,200 for 2019, which would be disappointing.

Seeking Alpha's compensation scheme now adjusts monthly and depends on collected revenues. While the new scheme makes sense from a business perspective, it makes setting an income goal tricky. That's why I'm setting a conservative "repeat performance" goal for 2020. (C)

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  1. I often encourage those I mentor to have a written investment plan with a clear goal statement that is measurable. I like your goals because they are clearly defined, seem to be stretching you to focus on them and have targets you can measure. At age 69 I still do the same and encourage others to do the same in my own blog.

    1. Hi, WayneW -- thanks for your comment! and kind words. It sounds like you're a great mentor!

      In addition to writing down challenging but achievable goals that are measurable, I think it is important to share them with an "accountability" partner. In my case, my blog serves that purpose.


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