There was some discussion on the board three years ago about whether it was possible / easy / difficult to consistently beat the market.
At some point I suggested that it was easy to beat the market by simply choosing a portfolio of quality businesses and holding for the long term.
After a while I thought that, having made this suggestion, I should back it up.
I came up with a portfolio of $25,000 that would aim to beat the market over a 5 year timeframe (post 21799).
To regulars on this board, the idea that it is difficult to beat the market may seem ridiculous. Saul not only beats the market, he thrashes it on a consistent basis. But Saul is very skilled and his approach requires careful analysis and keeping a close watch on your stocks. I believe that there are many ways to beat the market. This portfolio illustrates just one of them.
My last update was in March (post 53886).
The portfolio I proposed was as follows:
Value at % Value at Sept 2016 Change. Sept 2019 Adobe Systems (ADBE) 962.19 159.95 2,501.21 Amazon (AMZN) 2,405.40 123.77 5,382.56 Axos Financial (BOFI/AX) 1,006.65 23.07 1,238.88 Broadridge Financials (BR) 1,024.50 94.21 1,989.68 Casey's Gen. Stores (CASY) 1,054.89 44.21 1,521.26 Chipotle (CMG) 825.46 102.23 1,669.33 Disney (DIS) 1,017.17 49.62 1,521.89 Facebook (FB) 1,018.96 49.12 1,519.47 Google (GOOGL) 1,619.64 51.87 2,459.75 Mastercard (MA) 1,008.20 174.13 2,763.78 Middleby (MIDD) 1,496.28 -7.51 1,383.91 Mitek (MITK) 994.48 23.57 1,228.88 Markel (MKL) 1,845.04 28.48 2,370.51 Universal Display (OLED) 1,000.96 209.98 3,102.78 Starbucks (SBUX) 977.04 75.19 1,711.68 Shake Shak (SHAK) 987.00 195.83 2,919.84 Shopify (SHOP) 991.76 639.38 7,332.88 Transdigm (TDG) 1,724.40 117.92 3,757.81 Tesla (TSLA) 1,032.50 16.52 1,203.07 Under Armour (UA) 1,019.20 -49.85 511.13 Visa (V) 985.80 115.88 2,128.15 Totals $24,997.52 100.89% $50,218.45 S&P Gain 38.75% Difference 62.14%
Although a 101% two and a half year return is rather humble compared to some of the results reported on this board - I’m quite satisfied. Especially so, because I didn’t have a great start. The portfolio trailed the S&P by 2.17% after one month and then 7.22% after two months. But it has gradually made ground from there to be 62% ahead of the S&P today.
(In order to track the portfolio performance accurately including dividends etc. I use a CAPS account.)
This is a long term buy and hold portfolio. I have not made any sales or additions since inception and it is unlikely that I will do so in the foreseeable future unless something extraordinary happens.
My original intention was to keep the portfolio as ‘real money’ in the sense that I would hold long positions in all of the stocks in my own portfolio to at least the value shown. But as I am retired I need to sell stocks for cash periodically, and I have not kept positions in some of the stocks. (I do still hold positions in ADBE, AMZN, AX, FB, GOOGL, MA, MITK, OLED, SHAK, TDG, TSLA, UA - very small, and V.)
A few positions went when I decided to order a Tesla Model 3 (which, unfortunately, is rather more expensive here in Spain than for those of you lucky enough to live in the U.S.A. - an unwise decision financially, but nevertheless one of my best decisions personally, as it has brought me great joy).
I also hold many stocks and options positions that are not in the portfolio, and as a result my own personal performance has been better than this example portfolio (although not as good as Saul and many of you here).
However, my intention was to prove a simple point. For an investor with limited time and knowledge by investing in a diverse collection of quality businesses and holding through thick and thin you are almost certain to beat the market, and beat it well. Of course the caveat is how do you define a quality business - the start of a whole new discussion.
If you are curious about any of my picks, please feel free to fire away and I will answer as best I can.
I will post another update in 6 months.