My desperate attempts to save my investing portfolio for Grow Your Dough resulted in the opposite effect.
This year, I participated with a number of other personal finance bloggers in the Grow Your Dough Throwdown. It was a lot of fun, and my interest in a totally boring portfolio was realized. During October and November, as I became increasingly desperate to avoid losing ground, I made more trades. By the time I got to the end of the year, I had over-traded to the point at which my portfolio was “down” to $1,038.42. That's where I end this year. Here are some of the things I did to screw up my investing portfolio during this challenge (at one point I was in third or fourth place):
Moving Away From My Originally Constructed Investing Portfolio
The first thing I did, after carefully constructing a dividend portfolio geared for long-term success, was to move away from that portfolio. Disappointed in what was happening with AT&T, I sold the stock after a couple of months (without properly regarding the dividend income) and decided to purchase a divided-paying ETF based on commodities.
Even after changing things up a little bit, that wasn't enough for me. I had to keep trading in an effort to chase some gains. Last month, in a desperate attempt to at least keep my portfolio from “losing” more, I sold everything I had of my two worst performers and consolidated by purchasing more shares of the best performers to that point. This is what my portfolio looked like when I gave up, turned everything to cash, and vowed to do better in Grow Your Dough 2.o for 2015:
Between losing out because of transaction fees and the fact that market has been dismal the last few weeks, it really hasn't done much. My two global/international stock ETFs (overlap much?) are losers in terms of one-year performance while the real estate fund and the individual stock are both doing pretty well. It just goes to show that the long-term is far more important than the short-term when making these decisions.
But the real disappointment stems from my original off-plan trade. Selling AT&T in a fit of I don't know what meant that I could have done better this year. Sure, AT&T is down from when I bought it, but what I bought with those proceeds, CCXE, is down even more. And, while CCXE paid slightly higher dividends, it wasn't enough to make up for the difference in capital losses.
Anyway, if I had stuck to my original portfolio choices, and saved up dividends to buy more shares of what I already had, instead of, at one point, adding LVL which didn't do much in terms of diversity for my portfolio, I would have been better off. I could have bought another share of SYY with all the dividends I used to by losing shares of LVL.
Trading and Transaction Fees
One of the issues with the trading was the way transaction fees cut into my portfolio's real returns. Originally, I had 10 free trades from Kapitall. After my initial trades, and after selling some shares, and buying other shares, I used up my free trades. By the time I got to my last desperate attempt, I was paying $7.95 per trade. If I hadn't had to pay that fee, that would have meant more money in my account when I cashed out. I probably could have seen $60 or $70 more if I hadn't made trades, due to the capital situation + the money saved in fees. That would have made my investing portfolio more profitable.
Ok, So My Investing Portfolio Didn't REALLY Lose
I'm belly-aching a lot about how I ruined my investing portfolio, but the reality is that I didn't lose out. The reason I'm so bummed is due to the fact that at the end of May, my portfolio's value was $1,113.9, and at one point my portfolio's value was at right around $1,135. So, when compared to my highest point of the year, it's disappointing to realize that I've “lost” almost $100.
But here's the thing: I'm still ahead. I didn't do anything mind-shatteringly stupid. If I stuck with all of my ETFs, and my one dividend aristocrat, for another 20 or 30 years, chances are that I'd do just fine with my portfolio and come out ahead. Even with all the trading and the switching things up, I still managed to end in the black. Which is more than I can say for some of my fellow participants.
So, rather than freaking out about “winning” and worrying that my portfolio dropped from it's highest point of the year, the real focus should be where it's always should have been — the big picture.
We're doing another Grow Your Dough challenge in 2015, which I'm looking forward to. We'll only be starting with $500 this time, and we'll be doing it all through Motif, but I'm looking forward to the challenge. I plan to better stick to my principles this time, too.