Whenever you do something, you do it for a reason. There is a clear goal at the end of that rainbow and you have a method of how you will achieve that goal. With investing, generally, most don’t have a goal or methods. I didn’t when I first started, no no no, it was just random buys to whatever blog or video I saw on YouTube. Hell, I even did cryptocurrency for a bit.
It took me 3 YouTube channels to help me understand why I invest while changing my methodology and philosophy. Truthfully, the short answer to why I invest is because it is the easiest path to passive income and generational wealth. The long answer is that investing buys me my freedom from the corporate world. Don’t get me wrong, I like my job and the company I work for. However, I don’t want to work forever. There is too much in the world to see and too many activities to do. I want to freely spend time with my wife, Mom and Dad, grandparents, etc, and not worry about how I will make ends meet. I invest to reach financial independence and have the chance to retire early, aka the FIRE movement.
Overall, everyone invests differently. Some max out their Roth 401K and IRA. Others watch the market all day for buying and trading. Some try stock options, cryptocurrency, penny stocks, high-yield stocks, or do monthly buys into the S&P 500. There are various methods, but I have found only one method that works for me. I invest by dollar cost averaging (DCA) weekly into my core and satellite portfolio.
I stumbled across the core and satellite method by watching one of my favorite financial YouTubers Jake from DGI. The core portion of the portfolio, whether this be in your retirement or brokerage account, is investing in 2-5 well-known mutual funds or exchange-traded funds. These are your core, you invest DCA each week/bi-weekly/month into the core, you don’t sell them, and these will create your FU money and generational wealth. A few I personally like and invest in are:
The satellite portion of your portfolio is individual stocks, real estate (REITs), sector mutual or exchange-traded funds, cryptocurrency, gold/silver, or alternative investing. These holdings should be allocated equally or be small allocated percentages in your portfolio.
Without going too deep into the core and satellite method, this ideology along with dollar cost averaging is how I invest. My core is SCHD, DGRO, and DGRW. All three are what’s called dividend growth investing exchange-traded funds. They are focused on increasing their dividend payout year after year. I set this to 66% of my portfolio. The rest of my portfolio is individual stocks like Apple, Microsoft, and Costco. The individual stock holdings are capped at 3%, but most of them are allocated between 2-3%.
| Stock Name | Stock Ticker | Allocation | Type | |
|---|---|---|---|---|
| iShares Core Dividend Growth ETF | DGRO | 28.00% | Core | |
| Schwab U.S. Dividend Equity ETF | SCHD | 28.00% | Core | |
| WisdomTree U.S. Quality Dividend Growth Fund | DGRW | 10.00% | Core | |
| Costco Wholesale Corporation | COST | 3.00% | Satellite | |
| The Kroger Co. | KR | 3.00% | Satellite | |
| Lowe’s Companies, Inc. | LOW | 3.00% | Satellite | |
| Waste Management, Inc. | WM | 3.00% | Satellite | |
| Apple Inc. | AAPL | 2.00% | Satellite | |
| Air Products and Chemicals, Inc. | APD | 2.00% | Satellite | |
| Comcast Corporation | CMCSA | 2.00% | Satellite | |
| Illinois Tool Works Inc. | ITW | 2.00% | Satellite | |
| Johnson & Johnson | JNJ | 2.00% | Satellite | |
| McDonald’s Corporation | MCD | 2.00% | Satellite | |
| Microsoft Corporation | MSFT | 2.00% | Satellite | |
| NextEra Energy, Inc. | NEE | 2.00% | Satellite | |
| PepsiCo, Inc. | PEP | 2.00% | Satellite | |
| Texas Instruments Incorporated | TXN | 2.00% | Satellite | |
| Union Pacific Corporation | UNP | 2.00% | Satellite |
The core and satellite plus DCA is not the only method out there. However, for me, it has greatly reduced my anxiety in investing and has allowed me to continually invest whether the market is up or down. This is where the methodology gets its gold star because whether the market is up or down, you will average into your core and satellite positions. Investing is not timing the market, but the amount of time spent in the market.
Lastly, I just want to quickly touch on the allocation part of the core and satellite method. There are various splits and ways you can set up the allocation for both the core and satellite positions. My rule of thumb, I like more than 60% in my core positions and allocate no more than 6% to my individual satellite positions.
Thank you for reading. Check out my Buy Me A Coffee Page. Hop on a Google Meet with me where I’ll spend up to 2 hours with you to design a stock portfolio to help you achieve your financial goals! I will share my style of investing, how/why I invest in certain stocks or exchange-traded funds, and share ideas. I am doing this for my fellow Gen-Zers and millennials who were not taught shite about finances, savings, budgeting, WTF a 401k or IRA is, etc.
My goal at the end of the meeting is to start your journey and make building portfolios simple but understandable.
You will get a complementary Stock/ETF and Portfolio Calculator and a portfolio tracking sheet through Google Sheets.
Disclaimer, I am not a certified financial advisor, I am a meteorologist who loves investing! This meeting is purely for education and entertainment purposes.