Somehow, the time of the month for this exercise always sneaks up on me. We’re now looking at the returns after 4 months.
The purpose of this exercise is to compare a focused approach to investing in quality dividend paying companies to using a fund of cherry picked stocks selected by experts. At the time I started this comparison, Kfund1 was composed of my personal holdings in MCD, MSFT, MRK, WMT, JNJ, and LMT, all of which are also part of the Vanguard Dividend Growth Fund (VDIGX). KFund2 was composed of my personal holdings in PEP, PG, WMT, KO, XOM, CVX, MCD, and MMM, all of which are also part of the Vanguard Dividend Appreciation Index Fund (VDAIX).
Below are the 2 Vanguard dividend funds I have and the change in value they have seen in the past 3 months.
up 6.40% (last month 5.78%)
up 6.75% (last month 6.17%)
Gains seem to have slowed down a tad, but what’s important to note here is that the returns are still up from last month.
Now let’s see how the individual companies that I own did in that time.
up 6.66% (last month 7.20%)
up 7.69% (last month 8.86%)
So my individual holdings actually went down in value compared to last month, which is unfortunate. However, if we’re still just comparing returns, the individual holdings are still ahead. These results do not surprise me as funds are intended to minimize risk. The asset management probably attributed to the continued gains during a down month, but at the cost of overall high-end returns. Like Warren Buffet, I consider myself an optimist when it comes to American business. While we all like to avoid losses, in the long run the market will continue to rise. This is why avoiding risk is not a priority for me while investing in big established businesses with proven performance and a track record of continuously rewarding shareholders.