My $77,000 experiment portfolio -- Sept 2020 Update

At the beginning of 2020, I started a new M1Finance portfolio where I picked several dividend stocks to invest in. The goal is to achieve similar returns to the SP 500 index but beat it in terms of dividends. As of the writing of this article, I’ve contributed $62,000 of my own money into this portfolio. By the end of this year, I will have contributed $77,000 ($25,000 initially and $1k contribution per week). In this article, I’ll share my M1Finance portfolio, how I’m doing against the market, my thoughts on the current stock market, and how I am doing against my FIRE schedule.

FIRE update

As of 9/14/2020, I am +$549,348 ahead of schedule! That means if all of my other assumptions (i.e. pay stays the same, 8% annual return in the stock market) hold true for the next 2.25 years, I’ll have $549,348 more than the expected $4MM. NOTE: About 2 weeks ago, I was actually ~$750K ahead of schedule.

M1Finance Performance Summary

• The portfolio is up +13.99% YTD and I have unrealized gains of +$5,402.04. I’ve earned $709.35 in dividends. And when compared to VTI (total stock market, +13.57%), my portfolio is outperforming it by +0.42%. Not too shabby for a bunch of boring companies!

Transactions

• I haven’t made any changes to my M1Finance pie since June’s update. 

Thoughts on the stock market

• Big tech (“Winners gonna win”) - since my last update, big tech has carried the market. I’ve been lucky to continue to hold large MSFT, FB, AAPL, AMZN, and GOOG holdings. Some people have asked me if I will continue to hold them for the long term even though they don’t fit the type of stocks that I’ve been pushing for (i.e. dividend aristocrats, index funds). The answer is...yes. I will continue to hold them. “Winners gonna win,” says one of my friends. He is absolutely right. The earnings report of all of the successful tech companies have exceeded expectations. Those companies have consistently carried the SP500 over the last several years. However, I do not plan to add to those positions--just holding.

• Markets are baking in a fast recovery as businesses open up again - as we continue to see close to 1 million people file for unemployment every week, the stock market doesn’t seem to care. Despite what the mainstream media likes to sensationalize, the unemployment rate has gone down from 14.7% (April) down to 8.4% (August). The trend looks to be a healthy rebound for the unemployment rate as businesses are allowed to open up again. The biggest risk is another COVID outbreak.

• FOMO - a lot of my friends and FIRE community are feeling like they missed out on a massive opportunity to double-up. Many people sold and are holding all cash. I would be lying if I told you I didn’t sell. I sold about 10% of my net worth, but have since bought back into the market with most of it. I am now sitting on a 2.5% cash position and continuing to dollar cost average into my M1F and Vanguard portfolios. I still don’t think this market is safe, but it’s really hard to go wrong with an index fund.

Finally, apologies for not updating more regularly. There’s been a lot of things happening with the California wildfires, COVID, another kid on the way, new team at work, and spending more time with family. I’ve been working on another article which I hope to publish before October, so stay tuned.