Trying to Beat the Market?

[Kerim]

I read another article this morning about how stock-picking is a sucker's game. And I've got several very smart co-workers who think I'm nuts for doing anything other than indexing. Even full-time professional money managers can't beat the indexes, so you're insane to buy individual stocks, the logic goes.

Maybe what underlies all of this is the notion that I am picking individual stocks in hope of "beating the market." But that's not at all how I think of my goals. From a share-price appreciation standpoint, I actually think my portfolio of 30 or so giant global companies is going to perform pretty similarly to the big indexes. I'm not trying to outperform those indexes in that sense. Really I'm building my own little index fund, with a focus on reliable dividend-payers and dividend-growers.

Just venting, I guess. Thoughts?

[Rasec]

Same here, I'm building my own ETF, I don't plan to beat the market, just to go along with it, and get my dividends paid and reinvested, having fun along the way. With 35 positions across different sectors I have right now, it really looks like an ETF or mutual fund.

At the same time, I'm indexing in my 401k but I don't like not being in control there. 

This is my own book vs the SP500 in the lat 6 months, looks just like any other ETF (without the commissions).



The underperformance back in Q4 was mostly driven by COP and KMI, the recent over performance is due to Apple, ADM and O bought at the right times

[DividendGarden]

(03-30-2016, 03:27 PM)Kerim Wrote: I read another article this morning about how stock-picking is a sucker's game. And I've got several very smart co-workers who think I'm nuts for doing anything other than indexing. Even full-time professional money managers can't beat the indexes, so you're insane to buy individual stocks, the logic goes.

Maybe what underlies all of this is the notion that I am picking individual stocks in hope of "beating the market." But that's not at all how I think of my goals. From a share-price appreciation standpoint, I actually think my portfolio of 30 or so giant global companies is going to perform pretty similarly to the big indexes. I'm not trying to outperform those indexes in that sense. Really I'm building my own little index fund, with a focus on reliable dividend-payers and dividend-growers.

Just venting, I guess. Thoughts?

At least they're recommending index funds and not mutual funds.  

I'm in the same boat as you.  My portfolio really is an index fund of it's own, but no annual commissions being deducted, no (or ultra-low) turnover.

[NilesMike]

If one is buying quality dividend growth stocks when they are at the upper end of their historical yield ranges it is nearly impossible to not out perform the S&P.

[navyasw02]

I do it so I can know exactly to the dollar what I'm buying and I can have absolute certainty that it meets my investing objectives. Things fluctuate all the time in ETFs and you have no control over weighting of stocks. Additionally, I pay less in fees every year and have way more fun.

[crimsonghost747]

I don't exactly aim to beat the market either. I aim to get a decent dividend income which will hopefully cover the majority of my expenses one day... and I want to get it so that I sleep 100% comfortably every night. Well okay I don't do that but that's because of issues with women, not because of my portfolio!

[EricL]

(03-30-2016, 09:08 PM)NilesMike Wrote: If one is buying quality dividend growth stocks when they are at the upper end of their historical yield ranges it is nearly impossible to not out perform the S&P.

I agree, especially over the long run.

In a quickly advancing market like seen coming out of the recession, you may lag for a few years as higher growth and recovery stocks will see higher gains. However, in today's market with higher volatility and lower growth, the higher dividend yields and lower beta from quality names will likely outperform.

[DividendGarden]

(03-31-2016, 08:31 AM)EricL Wrote:

(03-30-2016, 09:08 PM)NilesMike Wrote: If one is buying quality dividend growth stocks when they are at the upper end of their historical yield ranges it is nearly impossible to not out perform the S&P.

I agree, especially over the long run.

In a quickly advancing market like seen coming out of the recession, you may lag for a few years as higher growth and recovery stocks will see higher gains. However, in today's market with higher volatility and lower growth, the higher dividend yields and lower beta from quality names will likely outperform.

Definitely agree.  I think most people here will outperform (or at least match) the S&P over the long term.  We identify quality companies that consistently increase dividends, and wait for them to be "on sale".  When you buy quality at lower valuations (which is what higher yields usually infer), it's hard to not outperform.

[cannew]

Most investors don't understand DG investing because their objective and performance measurements are focused on the short term which is what Matching the Market does. Investing for income and income growth doesn't make sense to them, but for us it's the ultimate goal.