02-07-2017, 11:29 AM
(This post was last modified: 02-07-2017, 11:31 AM by crimsonghost747.)
(02-07-2017, 09:05 AM)Roadmap2Retire Wrote: I dont think I understand your thought process. Your portfolio is dragging behind the S&P500, but you choose to ignore it because you dont like to compare and contrast your investing methodology with others. Especially when the alternate (index fund via ETFs) provides with a lower cost, and lower risk (via instant diversification). If you are investing for the fun, I get it....researching companies and making stock picks that end up as winners gives us a huge rush that is not possible via index funds.
Also, when you say that you could have made much larger returns by putting in all your money in one company, that contradicts your statement that you are taking lower risk. You are taking a *much larger* amount of risk.
(well at between $0.3 and $0.5 per trade, I never worry or care about the costs. But this is just me, I know this doesn't apply to most)
I think the part you are missing is that you assume that the S&P500 is a safer bet than my portfolio. But why do you define the S&P500 to have lower risk? Just because it has more companies in it doesn't mean that it's less risky.
The S&P500 is, in my opinion, riskier than my portfolio. That is to say that if there would be a large scale dip, I *think* that my portfolio would lose less of it's value. I did check for January 2016 (I'd say that was the last smaller dip) and I was +1% (excluding dividends) whereas the s&p500 was -5%. And I'd imagine many of us having similar results as some of the DGI companies certainly went up in price because of the stability they offer. Of course the only way to know for sure is to wait until the next dip inevitably happens. But like I said, I imagine my portfolio to be safer and as such I'm ready to accept a lower profit.
Then there is the dividend part. I haven't made any exact calculations but my portfolio is currently yielding over 4%. And seeing as this is a DGI forum: I expect 14 of my holdings to increase their dividend this year, 4 of them to keep the same, 1 of them to cut dividend and the remaining two are not paying a dividend at all. From a dividend point of view, I think this far surpasses what the S&P500 has to offer. Not to mention the fact that I receive dividends in 3 different currencies, (EUR, USD, CAD) something I find to be pretty crucial piece of diversification for me as I don't use USD for my daily bills. (and the idea is to, someday, pay all those bills with dividends)
So there is a bit about why I've chosen to build my own portfolio instead of grabbing the S&P500. And about why my portfolio is a much better fit for my goals than the s&p500 is. Unfortunately I can't predict the future nor do I consider myself to be any sort of stock market genius... and therefore I can't have everything. So yes, I'm fine with the fact that my portfolio has had a weaker performance than the s&p500 in these past years. As I said in the earlier post, profit correlates with risk. And I find my portfolio to have the right ratio for me... even if that means less overall profit.
As for the part about one company beating the index, that was a hypothetical thought just to prove a point: it's relatively easy to beat an index as long as you are willing to take more risk than the index.