I'm not beating the index, but I'd like to dispel the notion that stock picking always leads to horrible performance. In fact, I consciously made the decision to invest in a defensive, dividend paying portfolio, because I had a notion that I was late to the game and the market was overvalued thanks to Fed policy.
The goal of my portfolio was to minimize drawdown by buying good companies at a discount. Another goal was to create a recession proof portfolio which I intended to achieve by buying recession proof businesses (consumer staples, etc.). The final goal was to create a portfolio that would allow for reliable compounding regardless of what goes on in the broader market. The dividend yield of my portfolio is a bit over 4%, which should continue to pay out regardless of what's going on in the economy or markets.
I realized that pursuing these objectives may lead to lower returns compared to the index in the long-run, and that has in fact been the case so far. At the same time, however, I believe this portfolio is lower risk. So far it has functioned as intended: lower risk, and lower reward. It's more conservative.
I understand the push for passive investing, but at the same time I think we do people a disservice by insisting that it's impossible to be a prudent stock picker. There's more than one way to Miami. Honestly, I found the indices to be overvalued, and I'm not surprised that they've come down so much since last year, especially given the state of monetary policy. I know a lot of people are bleeding right now, but me I'm not really concerned. I feel I've positioned myself well for all market and economic environments, and I'm proud of myself for thinking for myself and pursuing something that makes sense to me.
I suspect some people will take this as bragging, and honestly underperforming VTI by 1.3% is not much to write home about. Still, I think it's cool to see that I was able to think for myself and come out in a way that was not only far from being a major failure, but also somewhat successful. Long-term I may vastly underperform VTI, but that's why I hold some of it in my Roth IRA. And like I said, I'm okay with less reward if it means less risk.
Happy to provide details about my portfolio upon request.
For reference, I started on February 2, 2021. Thank you GME. Not everyone who participated in that was an idiot, I'm actually really glad it got me interested in the stock market and in my financial future. Power to the players. =] (Disclosure: not holding any shares, I sold them for a small profit about a year ago)
Leave a Reply