Here's an interesting question. Let's say you're not a skilled or experienced investor. You don't know all the lingo and still look up words to read balance sheet. But you don't want to pay somebody a good portion of your paycheck to invest for you. Can you still have a good retirement/dividend income by buying the largest cap stocks with a long history of dividend growth at arbitrary prices?
Reason for this question:
My workplace has a 401k plan but does not allow for individual stock purchases. Rather, it uses a variety of equity etfs, bond etfs, and treasuries. One good thing about owning these etfs is the ability to see their buys and sells. I've noticed that my dividend etf buys large cap dividend stocks with a long history of dividend growth (KO, MCD, PEP) monthly if not weekly. It will even buy these companies at all time high even though analysts, SA commentators, and multiple investing websites call them overvalued. During market corrections my ETF will flood the market with buys. They rarely if ever sell. My etf is not alone. Many other large etfs like Vanguard, State Street, and Charles Schwab are doing the same.
Approximately a year ago I decided to copy these etfs techniques in my Loyal3 account. At first I used only KO, PEP, K, KHC, and UL. Over time I did my research on new corporations and added eleven (11) more stocks for a total of sixteen (16).
Here were my rules
1) buy $20 worth of every sixteen dividend stocks listed below on the 15th of every month no matter the price.
2) reinvest the dividends into the stock on the following months. For example, UL pays $6 for X month. On month X+1, I will invest $26 into UL.
3) invest large sums of money into my core consumer staples during market dips. For example, $1000 into KO when it reached $38.00 and another $1000 into UL when it reached $40.00.
4) Unless there was a SEC violation. DO NOT SELL. EVEN IF THERE IS A DIVIDEND CUT.
My Loyal3 portfolio is now composed of KO, DIS, K, KHC, SBUX, PEP, MDLZ, NKE, YUM, AAPL, MCD, UL, WMT, DPS, VFC, and HSY. Here is a summary as of March 19, 2016.
|Ticker||Number of shares||Contribution||Gain/loss||Percentage G/L||Dividend per year|
Like my etf, I blindly bought the market at all time highs, lows, and everywhere in between. Even after blindly investing, I now own a mix of steady dividend stocks, value dividend stocks, higher dividend growers, and blended investments.
Besides MDLZ, DIS, and AAPL, I am in the positive with thirteen of my stocks. I have a capital gain of over 9% and my portfolio produces $380.81 a year or 3%. In a fifteen (15) month time period i have received 12% return on my investment (9% cap+3% dividends).
According to Yahoo, the SPY (that thing every investor loves) has a -6.2 1-year total return. https://finance.yahoo.com/q/pm?s=SPY
Which means by blinding buying stocks and following the four criteria, I have almost beaten the SPY 3x over from January 1, 2015 to March 19, 2016. This is even a better return than my dividend etf.
All this experiment shows is blindly buying large caps could potentially lead you to have enough money for retirement. Sure I could have gotten more cap gains if I bought at the lowest point; but, just by copying etfs strategies I have created a monster portfolio that trumps the SPY.
I have no idea how this portfolio will last in a bear or recession but I will keep this experiment going as long as I can. Spin offs will get the same treatment $20 a month.
Either this strategy is the best ever or I'm the craziest person on the market. You know the drill. Do not take my advice for anything. I'm just some guy on the interweb.