Ever since JL Collins showed me the wisdom of index funds, I’ve been a big fan. Prior to that, I invested in individual stocks.
Stocks worked out pretty well for me. I’m a tech nerd, so I was heavily biased towards geek stocks. I bought Google when it IPOd in 2004 at a split-adjusted $42.50/share (over $1,200 today). I also bought Apple back in 2007 when the iPhone was first announced. I’ve had some other big wins too:
However, stock picking is hard. I thought I was doing the right thing when I sold Apple a couple of years ago. It has since doubled and has been paying a nice dividend all along. Ooops.
Stock picking also requires a lot of mental bandwidth. If 10% of my net worth is tied up in facebook, you better believe that I’m going to be paying attention to the company. I’d rather be thinking about something else.
So now, almost all new money goes to index funds or real estate. Almost…
Funny Money Portfolios
I still play with stocks, but on a very small scale. I enjoy it for entertainment (my version of TV?) and the challenge of trying to beat the markets. Here is how I’m doing.
Funny Money Portfolio #1: Dead Even
I started this portfolio in June of 2016 with $20,000:
I’ve beaten the S&P almost the whole time:
But after 40 months, I’m tied the index:
Totally not worth it.
Funny Money Portfolio #2
I started another portfolio on January 2nd of 2018. Dividend Growth Investor had challenged me to take the Warren Buffett bet:
Could I beat the S&P 500 over a 10 year period?
Sure, I’m game! I created a mini-portfolio of just 4 stocks:
So far, so good:
However, I’m only 20 months in. There are 100 months more to go. By the end of the challenge, the US government may have declared that Amazon is a monopoly and broken it up. Or maybe walmart.com rises and takes it out. Or maybe, there is a kid at Stanford coding an Amazon killer in her dorm room right now.
One issue with my little stock-picking experiment is that it’s so heavily focused on big tech. The government hasn’t failed to notice how much power companies like Google, Facebook, and Apple have come to wield. Even if they aren’t broken up, I expect big tech to come under a lot of scrutiny soon. When this happens, my portfolio will hurt.
Yet more stuff to worry about.
I have no clue what will happen, but I do know that index investing is easy, simple, and effective.
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