Here is a philosophical update of sorts on the evolution of my Roth account (and my own mentality).
As you may (or may not) recall, when I first opened this account I hastily deposited $5000 and split it evenly into two index funds. Okay, I did do a tiny bit of screening and research when I chose the exact funds, but nevertheless it was mostly a knee-jerk move because the only thing I knew I wanted to do at that time was "start a Roth IRA."
But then I began reading and studying what others have done. I quickly decided I wanted to invest in individual dividend stocks rather than index funds. But, once again in hindsight, I didn't put nearly enough thought into it. Instead, early in my reading I found a generic Dow dividend strategy and blindly followed it by spreading my next $1000 deposit among four Dow stocks.
I continued reading, studying and learning. I winced when I realized the above Dow strategy did not delve into company fundamentals at all--it only selected stocks based on yield and price. Worse, that strategy seemed to focus almost entirely on maximizing overall capital gains. I gradually began to realize I want my account to focus on the dividends themselves. I now have a fundamental goal for this account: to offer dependable, growing (and tax-free) monthly income to supplement my 401(k) and whatever other income I may have in retirement. I can completely ignore stock price fluctuations and focus on the profits which my companies will share with me. Just as I was coming to this realization, the market crash began. One of my index funds was still up from its initial purchase, so I quickly sold my entire position in it, then turned around and put all those proceeds into a few individual stocks. The other index fund was left alone.
So far in 2020, I've managed to deposit another $6000 into my account (via numerous smaller deposits). My strategy has continued to evolve over the course of these deposits. I've finally settled into the idea that I want to diversify by owning portions of perhaps 25-30 companies across a variety of sectors. Initially, I will "build out" by investing initial portions in different companies; I've initially decided a "full portion" represents an investment of $1000 in one company. In the future when I feel I've got a stake in a sufficient number of companies, I will then begin to "build up" by adding more money to these companies. Now that I've learned to do a little digging into some basic corporate financials before I make further purchases, my hope is to select healthy companies which will thrive and produce reliable dividends for many years to come. If things go as hoped, I plan to never sell any of my shares. But as we all know, not everything goes as hoped... so when it eventually comes time to start building up, I can assess my holdings and see if I should sell out of any of my companies and replace them with others.
My remaining index fund has finally come back up almost to the break-even point (ie, $2500). Once it crosses that threshold, my plan is to sell out of it entirely and re-invest those funds into more stocks. I will add some of it to a few of my current positions to increase them to "full portion" investments, and the rest will be used to buy a full portion of another as-yet-unowned company.
