Seeking Alpha
Research analyst, portfolio strategy, portfolio management
Profile| Send Message|
( followers)  

Summary

  • I am not sure how scientific this will be, but at least we can all get in the game together.
  • ETFs will be passively managed and stocks will be actively managed.
  • There is something for everyone in the world of investing.

The "teams" are set, and I decided to make just a few rule changes. Since I am the commissioner of this "league", I am allowed to make a few rule changes to make this challenge as realistic as possible, but also as simple as possible, so all of us can have something to complain about. Seriously though, our competition will hopefully offer some valuable insights for various types of dividend-income seeking investors.

We are all after the same end-result, however; a more secure financial future and retirement. The roads that take us there are all individual choices, of course, and depending upon each investor's individual profile will determine what road is best for each of us.

The New Rules Of The Road

Yes, I know that I have already made some rules, but like I said, I am the commissioner and I have decided to change some rules to make this competition a bit more realistic.

  • ETFs are passively managed or "mechanically" managed, so we will not make any changes to any one of them. That being said, even though the passive investor leans towards ETFs, they do buy and sell the ETFs to maximize their potential. I will sell underperformers or overlapping funds, and buy different ones as I see fit, to the best of my ability to enhance returns, just as passive investors might do.
  • Our stock portfolio will be actively managed. This means that I will be adding stocks to this portfolio, as well as selling stocks from it as I see fit. The goal will be the same as for the passive investor, but keep in mind that as active investors, it is only fair that we actively manage our portfolio to maximize its potential.
  • We will attempt to maintain the stock portfolio with the same stocks that are held in the ETF portfolio. Since ETFs make changes without telling us, we will need to wait for the updates as they are announced. Of course, with the stock portfolio, we are in charge and will be able to do everything quickly! (Whoops, did I just tell everyone one of the huge advantages of a stock portfolio? Oh well.)
  • We will update this challenge once per month in one article, showing each portfolio virtually side-by-side, right here on Seeking Alpha and nowhere else.
  • Dividend income received will not be reinvested, because that will be more work for me. Even though I am an active portfolio investor, I like to cut corners as much as the next guy.
  • This entire project is intended to be a learning experience for everyone, so while it might not be the most scientific "study" in the world, the end results will speak for themselves and no nit-picking will be allowed. Well, maybe just a little bit, but let's also have some fun with it!

Here Are Our Starting Line-ups

First, the ETF-Only Portfolio {ETFOP} and our opening day stats:

The ETFOP currently consists of the following ETFs: Vanguard High Dividend Yield Index Fund (VYM), SPDR S&P Dividend ETF (SDY), WisdomTree LargeCap Dividend Fund (DLN), Vanguard Dividend Appreciation ETF (VIG), and Schwab U.S. Dividend Equity ETF (SCHD).

Symbol Shares Yield Dividend Yrly Income Share Price Tot. Cost Tot. Value
VYM 350 2.80% $1.75 613 $62.44 21854 21854
SDY 350 3.92% $2.87 1004 $73.18 25613 25613
DLN 350 2.23% $1.49 522 $66.71 23349 23349
VIG 350 1.84% $1.39 486 $75.44 26399 26399
SCHD 350 2.47% $0.90 315 $36.61 12764 12764
x Totals 2.66% x 2940 x 109979 109979

Obviously, the share price reflects the price we "paid" when we put the portfolio together. You can view the original "purchases" right here, as well as what each ETF consists of with its holdings.

Now for our Buy-The-Dips Portfolio {BTDP} and our opening day stats:

The BTDP consists of the following stocks: AT&T (NYSE:T), Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), Coca-Cola (NYSE:KO), Procter & Gamble (NYSE:PG), General Electric (NYSE:GE), McDonald's (NYSE:MCD), Chevron (NYSE:CVX), Apple (NASDAQ:AAPL) General Motors (NYSE:GM), and Ford (NYSE:F).

As you can see, each column is the same in each portfolio, and the most important one at the end of each month is the last column on the right. That will be our total value in each portfolio. I might decide to put a percentage column in just for the heck of it, but I still want to keep it simple, and some passive investors have issues with percentages (just kidding, folks!).

You can review the actual "birth" of this portfolio right here, as well as any other information you might need about it.

Game On!

As I noted previously, we will update each portfolio at the end of every month and show the results right here on Seeking Alpha exclusively. There is no need to have a separate article for each, but what we will do is write about the individual ETFs and individual stocks to enhance the learning experience, as well as when we decide to buy or sell anything.

Our very first update will be at the end of this month. Don't miss it.

Disclaimer: The opinions of the author are not recommendations to either buy or sell any security. Please remember to do your own research prior to making any investment decisions.

Source: Retirement Strategy: The ETF-Only Portfolio Versus Buy-The-Dips Portfolio, Game On!