The history of the money in this portfolio actually dates back to March of 2003, which was the same month that the most recent Iraq war began. The S&P 500 index is actually up about 50% since then, which represents a compound annual growth rate of 8.6%. At that time I socked away the first $500 to start what was then a mutual fund portfolio. I had earned the money working at my first full time job, right out of university. I likely had several other avenues where the money might have been better spent (paying off student debt, saving for a house, or replacing some 'student' furniture), but I wanted to get into the market in some way for the future so I opened the account. As I've mentioned before it's too bad I waited until I graduated from university to put some money away and begin to learn about investing. Five years later, this portfolio has morphed into a group of investments that my wife and I add to very regularly and value dearly for our future financial success.
Today marks the end of the first half of 2008, a good time to update our portfolio. I really can't believe it has been over 2 years since I started the portfolio as it is in its current form. Seems like yesterday, and in the grand scheme of time that should be invested in stocks it is really insignificant. This portfolio and most of the stock within it will be held for at least 15 years or more. Now to the Review...
2008 Returns To Date
The headline number here is -15.3%. That's right our portfolio is down a whopping 15.3% since the start of 2008. This compares poorly with the -12.8% return of the S&P 500 index, as well as the -8.6% return of the XDV (an ETF that tracks Canadian dividend paying stocks). Brutal numbers here...
Dividends and Yield
Our portfolio is now yielding a whopping 4.8%. This essentially means that we are being paid an amount equal to 4.8% of our capital annually. We're currently being paid $1,993.03 in dividends and distributions per year. Alternatively $5.46 per day is a fun way that I like to represent this. This is about 125% more than we were being paid last year at this point. I like to refer back to dividends and yield instead of paper portfolio value, when the market gets tough, as it has been lately. My favourite graph, our income from investments graph keeps on moving up despite the current markets.
Asset Allocation
Click on the pie chart below for current details.
Looking ahead I'm going to keep trudging along through this difficult market. Hopefully I will have some money available later on in the year to take advantage of the plethora of cheap stocks out there. The fact that the markets have been so ugly is actually a positive as I expect to invest a lot of money in 2009, and I'll be able to buy more dividends for every dollar I invest if the market declines persist. Very shortly our income from investments will reach $2,000 per year, which will be a nice milestone. For more on my mentality with this portfolio, check out my investment philosophy.
8 comments:
Don't feel lonely, MG. My portfolio is down about 15% as well. Looking at this like an opportunity.
How do you calculate portfolio dividend yield? Dividend amounts over book value or market value of the portfolio?
Since you have only been at this for 2 years what makes you think that your long term investment strategy will work? IE what if it drops 15% again next year. How do you know you are doing an "good" job.
I ask because I'm in your position back in 2003. Just starting to get some money.
With significant inflation looming and a continued bloodbath in the US housing sector, financials will likely prove to be the worst place to have your money over the next five years. Stock prices will continue to decay and dividends will have to be cut heavily.
Even with the drop in prices over the last few weeks, we could see a lot more price declines and maybe even a major bank go belly up in the coming months. This is far from over and we may not see a healthy recovery until 2012-2015.
If we continue to see weakness in the US dollar, we could see gold hit $2,000/oz and oil rise over $200/bbl as cash tries to find a place to hedge against inflation. Sounds crazy, but then again, $1,000 gold and $100 oil sounded crazy a year ago.
jake, i'm glad I'm not the only one suffering...
dave, always dividends over market value. If I refer to book, I'll refer to it as yield on cost.
muneconomist, I have faith that over the long term the companies that I own will earn more money on average as the years go by. This will cause them to raise dividends and their stock prices will rise along with their earnings long term. I can always benchmark my performance against the indices to see if I'm doing a good job. My strategy hinges on dividend growth and it's general affect on share price growth and cash flow long term.
thanks for the sunny outlook sarlock. I'll be a buyer of financials each year over the next 5 years as long as valuations stay reasonable.
not to be snide, but perhaps this is an opportunity to reexamine what 'risk' means?
anon, I'm quite familiar with the term and where it fits into my financial strategy. Should I assume you are the same 'anonymous' as in our prior discussion on risk? Too risky to pick a name? ....kidding
I think those of our generation, mg, are well positioned to take advantage of the situation should a significant market collapse occur. We are entering the most productive (financially) period of our lives and will be able to capitalize on the cheap investment opportunities that open up while those of the older generation, who were planning to retire within 10 years or less, will panic to see their portfolios experience a heavy decay.
I'd much rather get a market crash done with now and buy on the upstroke than to invest for the next 5-8 years and *then* have it come crashing down. :)
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