Grow Your Dough Update: Reinforcing the Boring Investment Strategy

As my portfolio continues to decline, I become more interested in a boring investment strategy.

My investing strategy is boring. I prefer to invest in dividend mutual funds and ETFs when I can, and there’s a lot of indexing going on. Sometimes, when I feel really wild, I invest in an individual equity — usually a dividend aristocrat.

For the Grow Your Dough challenge, I decided to take a slightly different approach. I decided to get a little bit outside my normal strategy. Right now my challenge portfolio holds one dividend aristocrat, two international/world dividend funds (one of them is supposed to focus entirely on high yields), an index fund that follows commodity countries, a REIT, and a high-yield bond fund.

I though it might be fun to see if I could add a twist to my boring investment strategy, add a little pizzazz, and see if I could see some solid gains. Here’s what this pizzazz has gotten me:

Holding Performance 1 Holding Performance 2

That’s in the last month. Some of the drops are, of course, due to the fact that the market in general has been struggling. After all, there’s a lot of uncertainty happening.

At any rate my return on the year has been 4.76%. For fun, I went into my Roth IRA account, at Betterment, to see how things were going there. My annual return so far with the rather aggressive 90%/10% stock/bond split is 4.3%. That’s right, exposing myself to high-yield ETFs, real estate, and commodities has done nothing really spectacular for my portfolio.

In fact, much as it pains me to admit this, but I’d actually have been better off?not to put the dividends I’ve earned so far this year to work by reinvesting them. Right now, I have $17.90 in cash in my account. I haven’t bought anything new with it yet, like I normally would. I earned $30.20 in dividends that I already reinvested, so my total dividend earnings this year have amounted to a little more than $48.

This is frustrating to see. Of course, when one looks at performance over the past year, my Grow Your Dough challenge portfolio is doing just as well as the MPT-inspired boring investment strategy happening at Betterment. But it doesn’t?feel like it because I’ve been checking my account at least once a month.

When I’m doing the “set it and forget it” thing with my Roth IRA, I don’t look at my portfolio but maybe twice a year. And my looking at it consists more of checking the balance. Since I’m automatically investing each month, and since over the long haul stocks do reasonably well, I just look at the balance, feel good about the fact that it’s growing, and move on.

Even though my challenge portfolio is really a boring investment strategy as well, it seems more like a problem because I check more often. Plus, the challenge is set up so that we don’t put in?new money. We’re just working with the same $1,000, and trying to make it grow. When the market tanks and I look at my Betterment account, the balance is still growing because I keep adding to it. With the challenge portfolio, there’s not a lot I can do — unless I decide to make more trades, at which point I could see transaction fees eat into my real returns.

Over time, my boring investment strategy is likely to win out, even with this challenge portfolio thing. If I consider the fact that all my investments, even in the slightly less boring challenge portfolio, were chosen on long-term staying power and the principles of indexing, the reality is that I am likely to come out ahead in the long run, especially if I continue to reinvest my dividends.

I’m just sad-faced right now because I was pulling in an annual return of better than 12% at one point this year, and now my portfolio value keeps falling from recent highs. I’m losing track of the long-term and the big picture because I keep checking my account. But, through it all, I’ve become entrenched in the boring investment strategy. As long as I can manage to stop having to pay attention to my portfolio, this approach should serve me well.

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