Performance Against the Index

Welcome to the latest and greatest M1 Finance portfolio update where I share my results and also compare my portfolio’s performance against the index. It’s crazy that I’ve had this portfolio for a few years and I’ve yet to do that.

After all, performance is important when you invest outside of the boring(but very effective) passive strategies.

I think beating the market is hard which is why the majority of my investments are passive but I also enjoy doing the research that comes with individual stock investing. It’s pretty fun plus I have a degree in that area so why not flex those brain muscles.

That’s why I invest up to 20% of my money in active accounts and this is one of the bigger strategies I have. While enjoying something is nice, it’s also important to see how one does which is why comparing performance against the index should be a regular part of any investing plan that includes active investing.

After all, what’s the point of all this work if I’m just doing it and lagging the S&P 500 or another comparable index. It’s important to know where your strategies take you because that’ll allow you to change your path if things aren’t working.

If you read my last portfolio update post, I have two portfolios on M1; one that’s focused on growth stocks and another that’s focused on dividend aristocrats or more plainly dividend growth stocks.

The former(growth) is more active whereas the latter(dividend growth) is more passive as it just follows the dividend aristocrats list.

In this update, I wanted to see how these have done since the last update and also how they’ve performed against the index. As this is the first update since December, this required a bit of digging and crunching numbers to accurately compare the two and adjust for all the purchases that have been made since then(and since the beginning in terms of the S&P 500 calculations). It’s not an easy task but again, it’s something I enjoy doing.

After all, who doesn’t love spreadsheets?

As I mentioned before, I use M1 Finance to manage these two portfolios. You can check out my review of the platform here but I just like the way it makes it very simple to create your own ETF style portfolios and automatically buy under allocated stocks with each contribution.

As of the last update in December, the portfolio total was $61,044 so let’s see where it sits today.

The Portfolio

As of the morning of 9/20/21, the portfolio was up 31.3% to a grand total of $80,196.12! It’s probably a bit lower today since we had a down day yesterday but I did this before that happened to lock in these sweet gains!

The breakout between the two separate portfolios is as follows; the growth portfolio was up to $43,542.46(+34.2%) and the dividend aristocrats portfolio was up to $36,653.66(+28.1%).

You can see the long term trend of the portfolio in the graph below.

While contributions a certainly a part of it, this has been a very favorable market for investors. Both portfolios had VERY positive returns with the growth portfolio being up ~22.3% before contributions and the dividend aristocrats being up ~18.3% before contributions since the last update.

However, this isn’t that amazing considering, the S&P 500 was up about 20.2% including dividends which essentially tracked my portfolio in terms of returns.

While I won’t dive into the details of the portfolios here, I did create a new spreadsheet that keeps track of the portfolios more closely if anyone wants to follow along. After all, I’m not exactly amazingly punctual with the updates. You can look at the spreadsheet here.

You can even see my lack of punctuality in the graph above as well as I did a calculation around July which was meant to be a post and never actually materialized.

Within this spreadsheet, I give links to each portfolio, track portfolio returns and compare performance against the index(S&P 500), track dividends by month and will track any portfolio moves I make in the future.

Note that I will update this often and will do my best to be accurate. However, I’ve already found an error in the way I calculated S&P 500 returns as I accounted incorrectly for certain contributions leading to overstating those numbers in a video I made on my channel.

On that front, I’ve also made a video on my YouTube channel going over the strategy behind the portfolio in a bit more detail and plan to make more regular updates there. You can check out the video below if interested and like and subscribe and all that stuff.

I’ll still certainly make updates about this portfolio on the blog but they’ll be less regular than on the YouTube channel. You can always check out the spreadsheet as well for the latest updates. I don’t generally make too many moves but any changes will be reflected there.

So now that I’ve gotten the portfolio update out of the way, let’s take a look at how this sucker has performed against the index. If you’ve looked at the spreadsheet, you’ve gotten a bit of a spoiler but at least this one will have a slightly more attractive graph(I’m new to using google sheets and making graphs there).

The Portfolio’s Performance Against the Index

It’s not easy to calculate this stuff so there may be some minor errors here(in fact I already found one from when I made the video yesterday and wrote this blog post today) but I believe it’s pretty accurate at this point.

In essence, the idea with any active strategy is to outperform the market because otherwise you might as well just invest in the S&P 500. I do believe most people don’t really take an objective look at their strategies this way but I personally think it’s important to see how things are going to help you can decide whether or not things your strategies are making sense.

However, I also know that this can be misleading if you only look at things in a short time frame as some strategies can take a long time to play out.

For example, for me, I know the dividend aristocrats strategy has been a drag on my portfolio due to the recent outperformance of growth/tech names. That strategy includes companies that have RAISED dividends for 25+ consecutive years so it’s pretty much devoid of tech. Plus historically that strategy also often lags in bull markets.

However, that’s not why it’s in this portfolio. The reason for investing in dividend growth is due to the fact that the strategy also does much better in bear markets and this bull market has gone on for quite a while so maybe we’re due for a bear.

Even if not, that’s why I have the other strategy in place which focuses on growth names I think are fantastic long term bets. Recently, that has proven true as those stocks have been the real stalwart of my portfolio dragging it across the finish line in this competition against the S&P 500.

I only started tracking this data at the start of 2020 so it’s a limited data set but here’s how things look so far.

With a starting point around $22k in January, the end result is almost a $9,000 difference assuming the same contributions. While that doesn’t seem like much, I do think any sort of outperformance in a market like this is pretty awesome. Across a long period of time, keeping such a spread will be hard but also very rewarding if it can be done.

I didn’t start keeping individual returns between the two portfolios until July but I know that the growth portfolio has been the reason why I’ve done so well. Even in that short time frame, a portfolio of just growth over the mix in my portfolio would have netted an extra $4,000 in outperformance.

I’m also positive that the growth portfolio did very well in relation to the S&P 500 or my dividend stocks during the pandemic hit in March of last year as it’s full of stay at home winners.

Overall, I’m happy with how this looks and am eager to see how the strategy performs in the future especially during market downturns.

I actually haven’t had a lot of extra money to put into this portfolio the last few months as shown by my low savings rates in my expense and savings rate reports but I’m hoping that changes and I can start growing this faster via additional contributions.

We’ll see if that holds true in future update. Hope you enjoyed this update and are having a good time out there. Here’s to happy investing and good returns for all!

If you’re investing in individual stocks as a portion of your portfolio, how are things going for you?

Disclosure : I am long all stocks mentioned in this post and reflected in the attached video/spreadsheet. Note investing comes with risk of loss and you should discuss with a qualified investment advisor before investing your own money.