Friday, August 29, 2014

Some Thoughts on Portfolio Performance

Several weeks back, I started looking at performance of the Chump IRA vs. the S&P on a week to week basis, to see if I could learn anything interesting.  I read lots of articles where authors state that they have different goals, and that they don't use the the S&P benchmark, or any other, to measure their performance.  The argument goes something like this,  "My goals are different, therefore I don't benchmark.  As long as the portfolio is on track doing its job, I leave it alone, and I'm happy."  Certainly, I'm over simplifying, but this is the gist.

To this investor I say "NONSENSE!"

**Unless you are retired, and need a nice yield from your portfolio to supplement your income**, you should be growing your "pile" of assets as fast as you can, as much as you can.  Track your performance, learn and improve, and failing improvement, put all your money into a low cost Vanguard ETF like VOO (S&P 500).  It's just that simple.  If you are consistently trailing the S&P over every period you measure, stop, and redeploy.

The whole point of this blog is to see if I can beat the S&P 500 over different periods of time.  If I continually fall short, I will liquidate, and put the money in ETFs until I retire.  End of story.

This comment may seem like heresy to some of my dividend growth investment friends, but it isn't.  I love dividend growth stocks, and I'm invested almost exclusively in them.  However, I've also been beating the S&P 500, collecting more yield for reinvestment, and enjoying a lower than 1.0 volatility (beta) in the portfolio.  I do this by picking undervalued stocks in which to invest.

Here is my YTD total performance for the past several weeks vs. the S&P:

I'm kind of angry this week, because the S&P caught me, and stands slightly above the Chump IRA at 9.87% vs. Chump at 9.80% for YTD total return.  As you can see from the graphic, I went into week 31 with a nice 300 basis point lead, then fell short of my benchmark in every week since.  I know that this can change quickly, and I had some bad luck the past couple of weeks, especially with WAG, but this graph serves as a warning, so I'm going to try and learn a few things, take a deep dive into my holdings, and come back with a strategy to re-build my lead! So there!



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