Inside my Investment Journey

Summary

• How Everything Started

• From ETFs to Equity Giants

• Assessing Performance

• Time in the Market Beats Timing the Market

• My Investment Goals

• My Current Portfolio and Future Plans

• Useful Links

Welcome back, fellow rookie investors!

Today, we'll dive into my portfolio and explore the reasons behind my investment choices in various companies and ETFs. My short yet emotionally intense financial journey has seen several twists, and in today's episode, my objective is to demonstrate that there are different ways to invest; it all boils down to how much risk an investor is prepared to accept.

How Everything Started

Three years ago, my interest in gaining financial independence and preparing for the future motivated me to start investing in the stock market. Like many other beginners, or as I like to say, Rookies, I started my journey into the financial markets with a passive investment in an S&P 500 ETF. Every few months, I would transfer a substantial sum to my brokerage account and invest it in the VUSA ETF, which mirrors the performance of the S&P 500. It seemed like a pretty safe and straightforward way to play the growth in the market without too much active involvement. At the end, in just over 2 year, I achieved a return on investment of around 20%, even with the COVID-19 pandemic downturn.

I was somewhat okay with this strategy for a while. Watching my investments grow over time was somewhat reassuring; it gave me a little sense of financial security. A couple of months ago, something changed, though. I started to take a deep interest in how the market works and was on the path to becoming more actively involved with my investments.

From ETFs to Equity Giants

At the start of 2024, the S&P 500 reached unprecedented heights, showcasing remarkable success across numerous American corporations. Companies like Nvidia, AMD, and others saw substantial growth in a short time, motivating me to try and exceed the returns of the S&P 500.

At this point, I made the decision to explore 10 to 15 reputable companies known for their consistent performance over the years. I maintained these holdings throughout the end of 2023, and the initial months of 2024, during which some of the companies yielded some modest gains. However, alongside these modest gains, there were also a few that experienced losses.

Assessing Performance

Researching individual stocks requires dedication, particularly when aiming to gain a deep understanding of each company. Some of the stocks that comprised my portfolio were Visa, Apple, Nvidia, Coca-Cola & Microsoft.

Every evening, before heading to bed, I dedicated time to reading up on these companies. I used the Financial Times to check for any breaking news about the companies, and on the other hand, I relied on Seeking Alpha, my preferred stock research tool, to read analyst articles. Over time, though, I realized that despite the extensive research, I wasn't truly satisfied with the amount of time it consumed and the results I was getting.

Time in the Market Beats Timing the Market

Sometimes, in the rush of investing, it's easy to forget why you started in the first place, and that's exactly what was happening to me. As the stock prices went up, I was tempted to time the market and trade short-term. However, I quickly saw that this approach contradicted my original principles and ideas.

As many famous investors say, one of the most effective strategies is to buy and hold indefinitely. This approach has been famously employed, among many others, by Warren Buffett, which we discussed in last week's episode. If you haven't checked it out yet, I highly recommend reading it before you continue here.

Eventually, I reached a point where I decided to sell the majority of my individual stocks and revert to investing in various ETFs.

My Investment Goals

The primary reason I began investing at such a young age was to ensure a substantial nest egg for my retirement while also generating a constant and steady additional income. As I will discuss in the next chapter, my strategy involves holding one dividend stock and concentrating the rest of my investments in ETFs, which hopefully will provide a solid growth trajectory over time.

I have often thought about whether to adopt a dividend-focused strategy, reinvesting those dividends back into the companies through a DRIP (Dividend Reinvestment Plan), or to concentrate on growth stocks. Growth stocks, such as Apple or Nvidia, typically reinvest their profits back into the company to fuel further growth, rather than distributing them as dividends.

My Current Portfolio and Future Plans

After careful consideration, I chose to sell all of my individual stock positions except for one: Realty Income. Realty Income is a Real Estate Investment Trust (REIT) that owns over 13,000 properties globally, with the majority located in the US. It's also among the few REITs that provide a monthly dividend income, a practice it has maintained and increased for over 50 years.

Given the current high interest rates, I believe that Realty Income is priced attractively and has potential for growth once the Federal Reserve decides to lower rates, which I hope will happen later this year, or in early 2025. In the meantime, I enjoy receiving a substantial monthly dividend. For now, I plan to retain Realty Income as my sole individual stock holding.

On the other hand, I have decided to continue investing in the VUSA ETF, which has delivered phenomenal performance over the past few years. I am optimistic about the future of the American economy and confident that, over the long term, this investment will yield a substantial return.

The third and final holding that I am planning to invest in soon and hold for the long term is the Nasdaq 100 ETF, specifically the one with the CNDX ticker. I believe that the American technology sector will experience significant growth in the coming years due to various factors, including the rapid advancements in the AI industry. Additionally, when we look back at the last decade, the Nasdaq 100 has consistently outperformed the S&P 500, which is quite remarkable. For those who may not be familiar, the Nasdaq 100 includes some of the largest technology companies in the world, such as Nvidia, Microsoft, Apple, Amazon, Meta, and many others.

In conclusion, I believe that adopting a mix of both dividend and growth stock strategies creates a balanced and diversified portfolio. Of course, choosing one approach over the other is perfectly fine as everyone has their own preferences and tolerance for risk. While the Nasdaq 100 has delivered higher returns, it could potentially be more vulnerable in events similar to the dotcom crisis (1997-2001), given its heavy concentration in the technology sector. Currently, this mixed strategy is what I am focusing on, but who knows, my approach may change in the future as new circumstances arise.

Next week, we're jumping into the world of the The Magnificent 7. If you have any questions, feel free to reach out to me on Instagram or via Email. Keep smiling, keep learning, and I'll catch you next time!

Trevor

Disclaimer: This post is NOT financial advice. It is intended for educational purposes only. Investing involves risks, and there is a possibility of losing capital. Always conduct thorough research and consider consulting with a financial advisor before making any investment decisions. Your financial well-being is important, so please invest responsibly.

Useful Links

Be sure to check the following website, where you'll find various links to the apps and websites I use daily. All these resources are free to use, and by utilizing my links, you'll not only support Dividend Rookie but also elevate your financial game to new heights!

Check it out HERE!

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