How I Invest My Money
And why the tariff market sell-off doesn't faze me.
Simple Investing
Investing can be as complicated or as simple as you make it. I’d like to explain why I prefer to keep my investing strategy simple and how that simplicity gives me the peace of mind to stay calm during market events.
My strategy is based around a long-term plan, and every individual decision I make is focused on turning that plan into reality.
The goal is to build a growing stream of passive dividend income while maintaining a healthy total return.
I’m still in the accumulation phase of my investing journey, meaning I don’t yet have enough invested capital to offset my active income. That transition won’t happen for a long time, as I’ve chosen to invest the bulk of my capital in tax-advantaged accounts. For this reason, the dividend yield of my portfolio isn’t my primary focus. Instead, I place more emphasis on total return (dividends + capital appreciation).
One benefit of tax-advantaged accounts is the ability to defer tax obligations until you withdraw capital. The aggregate yield across all my accounts currently hovers around 1.3%, which may seem insignificant from a pure dividend investor’s perspective. However, with a little over two decades until I can tap into this capital penalty-free, both my primary plan and backup plan should help me meet my objective.
Based on my projections for retirement income, I estimate that I’ll need roughly $75,000 to $100,000 in annual dividend income to live comfortably. At my current yield, that would require between $5.7 million and $7.7 million in capital. Based on my current portfolio value, I’d need to achieve a 12% compounded annual growth rate (CAGR) to reach the lower end of that range—assuming I don’t invest another dollar.
But that’s the kicker—I’m actively contributing about $30,000 per year to my tax-advantaged accounts. If I continue at this pace, I’ll contribute over $600,000 in the next two decades. Realistically, I expect to contribute even more, as my contributions increase along with my income. This means I likely won’t need to achieve a 12% CAGR to hit my target—and if I do, I could even exceed the higher end of my capital goal.
So, the core of my plan is to invest in high-quality dividend growth stocks with strong long-term total return potential while keeping my yield around 1.3%. I believe this gives me a high likelihood of achieving my long-term dividend income goal.
However, if I fall short, my tax-advantaged accounts give me the flexibility to reallocate capital into higher-yielding stocks. That’s my backup plan. Should I find myself behind in the latter part of the second decade, I’ll adjust my strategy to build positions in higher-yielding stocks to bridge the gap between my actual and target income.
Long-Term Plan, Short-Term Actions
Every week—like clockwork—money is transferred from my paycheck to my brokerage accounts. And every week, I decide where that capital will be deployed.
The stock market constantly moves—up, down, sideways, and sometimes off a cliff. These movements don’t faze me because they’re outside my control. Rather than worrying about what I can't control, I focus on what I can: where my capital is invested. No matter what the market is doing, I look for long-term opportunities.
To help guide my decisions, I use the curated shortlists I share with you. I scan the list of high-quality stocks looking for attractive return potential and, ideally, a favorable valuation. Then, I compare the most promising options against my portfolio and choose a few positions to initiate or top off.
For example, last week I added to my position in Monolithic Power Systems MPWR 0.00%↑ at about $578 per share. My Free Cash Flow model valued the company at $784, indicating over 20% total return potential. Yesterday, following the tariff announcement, the stock dropped 15.57% and now trades at $498.
Rather than dwelling on the 15% drop in my recent investment, I see this as an opportunity to buy more shares at an even lower price. I plan to hold this stock as long as my outlook on the company remains positive—ideally indefinitely. My model now suggests a 25% annual return potential from the current price. If that plays out, I’ll be very pleased five years from now with a 20% CAGR from last week’s buy and 25% from today's.
There are no guarantees in investing, and some of my assumptions may prove incorrect. I fully expect that to happen from time to time. But again, I focus on what I can control—and that’s where I choose to invest.
So, regardless of what the market is doing, I look for opportunities based on my curated list of potentially high-quality stocks. I value them using historical free cash flow trends and project return expectations based on forward dividend yield, mean reversion, and earnings growth.
How Can You Benefit From My Method
As a paid subscriber to the newsletter, you get access to my curated shortlist of high-quality stocks including valuations and return expectations. You can view this list at any time through a link on a page exclusively available to subscribers. The list is dynamic and updates automatically throughout the day to reflect price changes. I also regularly add new stocks.
Paid subscribers can also download an automated Google spreadsheet with my custom valuation model. This model lets you value any stock using my preferred free cash flow method. It also includes valuation perspectives based on dividend yield theory and price-to-earnings ratios. You can update the spreadsheet manually or integrate it with Tickerdata (a paid service) to automate it.
I understand that many of you prefer a more traditional dividend investing approach. Starting this month, I’m also sharing my Top 10 High-Yield Dividend Stock Watchlist, including the full dataset used to compile it. For context, I define high yield as 2.75% or higher—average for many dividend investors but more than double the yield of my portfolio.
Paid subscribers also have access to my custom Dividend Aristocrats and Dividend Kings spreadsheets, which are updated monthly. Both spreadsheets include a macro that lets you run a dividend yield theory valuation on all stocks whenever you want.
And of course, I frequently publish deep dives into the stocks on my lists. You can read the latest analyses here:
Your simple investing approach seems well thought out and your goals are totally achievable. You should have no problem reaching your passive income targets, especially if your companies keep increasing their dividends between now and the date that you want to begin spending them. But even if you aren't quite there income-wise at that time, your fall back plan of reallocating some of your significant accumulated capital into higher yielding companies will get you there.