My portfolio is growing faster than the market right now. I don't want to get ahead of myself.
Two things that could pull my returns back to the market average, and one thing that will boost my returns.
Earlier this month I began tracking the growth of my portfolio, since the beginning of 2023, against the performance of the S&P 500 in that time period.
And I’ve been beating the S&P 500’s rate of growth.
It’s exciting stuff, really. I’m currently beating the S&P 500 average by more than 3 percent. I’m not at Warren Buffet’s level, who regularly earns yearly portfolio growth of 20 percent, but I’m beating average market returns after less than a year of being an active investor.
I’m satisfied with my efforts and I believe the measure of success I’ve had offers a good building-block for my investing journey moving forward.
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With that said, here are two things I’ve noticed that have potential to pull my portfolio growth back to the market average, and one thing that will boost my returns, over the rest of 2023.
1. I realized I’m actually employing two investing strategies at once. Efficient market investing and value investing.
More than 95 percent of my portfolio is tied-up in mutual funds that are pegged to the performance of different segments of the market. And more than 35 percent of my portfolio is directly tied to the overall performance of the S&P 500.
Over a long period of time, this is a good thing. The S&P 500 has produced average returns of 10 percent over the past 100 years. I would be happy with 10 percent returns.
Beating the market average isn’t my main goal. My main goal is to grow my wealth for the future. But it is a goal.
When I look at my investments, the three main investments that have outperformed the S&P 500 average are my Bitcoin (61.6 percent), my Apple stock (38.0 percent) and my Rocket Companies stock (14.5 percent). These investments comprise less than 4 percent of my total portfolio.
I hold these investments because I believe in them and believe the price they’re valued at today is less than what they’re worth. That’s value investing, and is a strategy I could employ to continue outperforming the S&P 500 market average.
It’s also riskier, so being a newer investor, I’m unlikely to invest more than a small portion of my investment budget into these types of investments.
2. Since most of my portfolio is composed of index funds that I buy and hold onto, I’m not going to change my investment strategy if one of my index funds under-performs for a few months.
As I stated in the previous section, about 95 percent of my portfolio is invested in mutual funds. A little bit over half of that investment is in funds comprised of U.S.-based stocks and the other portion of that investment is in funds comprised of non-U.S.-based stocks.
U.S. stock averages have historically outperformed international stock averages over the past 10 years, but in our interconnected world, the U.S. and international markets deeply impact one-another.
So if my Invesco International Small-Mid Company Fund performs poorly for a couple of months, it may bring my portfolio growth down toward the S&P 500 average.
Again, because beating the market average isn’t my main goal, I will hold onto the fund because I know it will earn me healthy returns in the long run.
3. As a result of many of my investments earning dividends, I am well positioned to continue outperforming the S&P 500 average most years.
As I’ve stated in several of my previous posts, one of the core strategies in my investing is buying and holding investments that earn dividends (payments to stock-holders that companies make out of profits).
Capturing the dividends that my investments earn, and reinvesting them, allows me to increase the value of my portfolio without spending over money. And over years, this strategy has a compounding effect.
The four mutual funds I own — along with four out of the five individual stocks in which I’ve invested — earn dividends, which over time when reinvested produces average returns of 15 percent.
In the short-term, my dreams of raking in the dough from dividend stocks doesn’t appear to be producing results. Yet.
My VYM ETF is earning a return of -3.3 percent. And the dividend stocks I bought last month are earning a return of -13.8 percent. Ooof.
In the long run though, I’m confident that targeting investments that pay a high dividend yield will pay off.
And lest I forget, I hope everyone had a wonderful Mother’s Day yesterday. Don’t forget to give your wife, mother or grandmother a big hug.
In this newsletter, Evan Invests, I explore the world of investing from the perspective of the everyday investor by making small investments every month. Follow along with me as I look to grow my wealth through wise money management and making investments in cryptocurrency, index funds, stocks and more.
Let’s take a quick look at how my portfolio has been performing in the past week.
YTD Invested (Total): $2,450.39
YTD Returns (Total): $4,833.91
YTD Portfolio Growth: 11.0 percent
→ YTD S&P 500 Growth: 7.8 percent
→ YTD BTC Growth: 61.6 percent
My Portfolio Holdings as of 5/12/23
Apple stock
HF Sinclair stock
Rocket Companies stock
Steelcase stock
Verizon stock
Bitcoin
Fidelity 500 Index Fund
Invesco International Small-Mid Company Fund Class R6
Vanguard High Dividend Yield ETF
Vanguard International Dividend Appreciation Index Fund Admiral Shares
Vanguard Mid-Cap Growth Index Fund Admiral Shares
SPDR Portfolio S&P 500 Growth EFT
iShares S&P SmallCap 600 ETF
Vanguard FTSE Emerging Markets Fund
Invesco S&P 500 Momentum ETF
Vanguard FTSE Developed Markets ETF
Invesco S&P 500 Quality ETF
iShares Core S&P 500 ETF
Vanguard Total Bond Market ETF
I’ll report back next week.
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Great stuff, Evan! Very insightful.