Today I have enabled the 401k Brokerage option with my employer's retirement provider. I have been contributing biweekly into my 401k, and they have all been going into Vanguard index and bond funds. Probably around 20% of my investments are in my 401k so I am happy to say that later this month I will be able to transfer my indexes and bonds into dividend growth stocks.
My yield currently in the 401k is a paltry 1.8% because of the low yields from the total US market. I plan to keep the bluest of aristocrats in my 401k, those that I consider core.
The 401k brokerage is not as cheap as regular brokerages due to the nature of 401ks. The cost of a trade is $14.95 so I have to limit myself to 3 or 4 buys a year. At first this may sound like a lot but as my portfolio grows, this amount becomes insignificant. These buys must be of the highest quality. Buyers remorse can't happen as it is expensive to sell and rebuy.
I will be contributing to my 401k biweekly, and those regular contributions will accumulate inside the Vanguard total market index. After the accumulated contribution reaches a large value, I will move it into a dividend aristocrat that I find is of good value and pay the trade commission.
By investing in dividend aristocrats, it is of low probability that I will sell the company due to deteriorating fundamentals.
Stocks I am considering for the 401k include:
XOM / CVX
GIS
PEP
MO / PM
PG
MKC
JNJ
Spec plays: CHD/UNP/ROST/V
One might say that certain stocks that I listed above are expensive right now. My response is that my 401k is not withdraw-able for 35 years. With this absurdly long time-frame in mind, I can care less if the shares are 10% or 20% over value as long as their business fundamentals are intact. Since my timeframe is long, I am not compelled to buy high yielders like AT&T with low growth. I feel that with this time-frame, as long as a stock has moderate yields (1.5-3.5%) and high dividend growth, the results over the decades will be better than a high yielder with low growth. AT&T and utilities will be added into my other accounts (Roth IRA / Taxable).
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