Saturday, January 18, 2020

2019 Year End Portfolio Summary

As of the end of day on 12/31/2019 the portfolio is sitting at $813,979.31 USD
As I am writing this post on 1/18/2020, after the new year, the portfolio has moved up to $842,509.77 in large part from continued expansion in the US markets. It appears the portfolio is moving ever closer to the $1million goal mark I set out to do 6 years ago in 2013.

I'll start with a market background for the year, and then the portfolio summary.

The year started very poorly, with the SP500 correcting largely from the highs in 2018. A lot of events happened in 2019, a major uncertainty was the trade deal with the US and Chinese and also the tightening Fed policies which put a crunch on liquidity. After the new year, the Fed started enacting more quantitative easing and accommodating monetary policy like stopping the raise of interest rates and increasing the number of assets they were purchasing. Since the year started at basically the bottom, the growth throughout the year was huge. Then late in 2019 and early 2020, the China and US "appear" to have a first phase trade deal agreement. The trade deal uncertainty created a ceiling for US stock markets, with this battle between the US and China easing down, markets increased. However, I am skeptical how real of a progress this first phase trade deal really is. I use the SP500 as a reference as the portfolio holds many large cap stocks and they move rather in tune with the SP500, although a bit more defensive.

In 2019 the SP500 returns was 31%, this is huge. I usually do not focus on percentage returns of my portfolio as my goals are to reach $1M by 30 years old, and increase and manage the risk of my dividend income. Comparing my performance to the SP500 index is not of interest to me as I already have my goals defined, which to me is independent of how the SP500 performs. However, since comparing one's performance against the index is very important to some, and also  interesting I guess, I will show the table below for comparison:
Type 2014 2015 2016 2017 2018 2019 Growth of $10K Annualized Return
Young Dividend Portfolio 14.19% 6.73% 10.24% 20.42% -0.79% 29.51% $20,787.93 12.97%
Vanguard 500 Index Fund 13.51% 1.25% 11.82% 21.67% -4.52% 31.33% $19,606.88 11.88%
In 2019, I lagged the index by a few, but the returns are still respectable at near 30%. This is huge, but I think not sustainable. Since my portfolio does not have a lot of high alpha picks like hot tech or industrials or discretionary stocks, I lagged behind since I hold more conservative defensive companies. When times are good, people want to own the hot stocks and not the conservative dividend paying companies. But even so, dividend companies still performed respectably in 2019.
Since inception, my portfolio has done slightly better, but very similar to the largest 500 companies in the US. However, my portfolio generates more dividend income and the growth of that income is much more consistent. The figures above include dividends reinvested. The calculations for the Young Dividend Portfolio had some approximations as positions are constantly being added throughout the year due to my income flowing in, however, the figures above are quite representative of how my portfolio performance relative to the index. 
I have noticed my portfolio has similar or higher gains than the SP500 but has lower draw downs. The standard deviation for 2019 for example is 8.6% for my portfolio, while the SP500 is 12.9%. The max percentage draw down in 2019 was double for the SP500 when compared to my portfolio. Similarly, you can also notice in 2018, annual returns, my portfolio drop was less than half of the drop of the broader market. This is because my portfolio holds more defensive and non-cyclical businesses that can still survive when there is a recession. I do not own much in industrials, technology, or raw materials for example, which have high alpha. 
When the economy does well, I predict my portfolio will ultimately fall behind, but when times are tough I believe my portfolio will hold up much better than the broad index. I believe my portfolio in the long run will outperform the general market since my declines will be less and the "guaranteedness" of the dividend will help provide dependable returns in good times and bad which acts like a buffer. To illustrate the power of percentages when a correction happens: a 50% drop from 100 to 50 will require a 100% gain to move from 50 back to 100. Hence, I always am in favor of protecting the downside than chasing upside. I believe in another 50% broad market crash, my portfolio will only crash 35% according to backtests of similar characteristic portfolios back in 1998, 2000, and 2008. My goal is to build a portfolio that generates more income, has larger annual dividend increases, has less volatility, while maintaining similar or more total returns, than the broader market. 
The market has recovered for over a decade now since the housing recession. And has produced tremendous returns. However, one issue I have is that earnings have not been keeping up with price increases of stocks. As a result, 2020 is turning out to be a very expensive year to buy stocks, so I have not bought anything in a long time. My cash pile continues to grow. At the moment it is over $20K. I remember back in 2014, I thought prices were expensive relative to 2009 to 2012. However, looking back, prices in 2014 look really good compared to where they are now...

Thursday, January 2, 2020

December 2019 Dividends Received

Time to tally up the last month of the year in 2019. December I received $1768 in dividends.
The cash was reinvested back into the stocks that paid them. This month had a lot of payers, which illustrates the resiliency of the total income flow from any one company having difficulties paying or raising the dividend.

Ticker      Total    Taxable         401k
JNJ $253.82 $248.00 $5.82
HD $196.51 $157.68 $38.83
NEE $181.01 $136.46 $44.55
MMM $149.31 $122.76 $26.55
D $148.96 $96.69 $52.27
WEC $133.11 $116.84 $16.27
KO $132.28 $132.28
BDX $80.02 $80.02
O $73.26 $73.26
V $71.62 $55.04 $16.58
MCD $60.24 $60.24
ROST $54.77 $54.77
MSFT $50.11 $22.27 $27.84
TJX $49.47 $49.47
BA $45.73 $45.73
CHD $44.41 $29.71 $14.70
HON $43.29 $43.29
$1,768.07 $1,451.25 $316.67