I plan on running two investment experiments — $30/day towards a growth-focused portfolio and $150/week towards a value-focused portfolio.
In recent months, books such as Bogle’s The Little Book of Common Sense Investing and Benjamin Graham’s The Intelligent Investor have had a profound impact on me.
The crazy stock markets during the pandemic and my international relocations between the United States and Canada meant, in recent years I stopped thinking too much about investments.
It also helped that the interest on High Yield Savings Accounts (HYSA) has been hovering around ~5% APY, which is very respectable.
However, after revisiting both the books I mentioned above, I have a renewed interest in investments. That’s why, in 2024, I plan on running both these experiments.
Don’t worry, none of these are risky experiments where I am throwing money down the drain (trust me, I have done some of that with crypto lol). Both of the strategies are based on sound reasoning and focus on long-term growth rather than some get-rich-quick online scheme.
Before we dive deep into these experiments, a quick disclaimer: This is not financial advice. I am just writing this to share my journey with all of you. So please consult with a financial professional before you try any of these out.
With that out of the way, let’s get started.
A couple of weeks ago, I came across this quote on YouTube that I deeply resonated with:
Automate your finances as much as possible, and use the freed-up time to increase your income and cash flow.
I don’t enjoy staring at my investments or bank accounts. Instead, I enjoy programming, building productive teams, reading, traveling, writing, creating YouTube videos, and spending time with friends and family.
So, it makes sense to automate my investments as much as possible. It should all just work without requiring my active participation.
Most investing apps nowadays — Robinhood, Fidelity, Vanguard, WeBull, Wealthfront, etc — give consumers all the tools they need to set up recurring investments. That’s exactly what I did.
Growth. Value. Dividend.
These are some very common concepts in stock market investment. Without boring you with the official definitions, I will give you my perspective on these:
Growth Stock — Companies that might not have a very long track record of success, but they are expected to increase their revenue and profits in the coming years. Their stock price tends to be more volatile.
Value Stock — Companies that have stood the test of time and have shown that they can be counted on to bring a steady stream of incrementally growth revenue. Their stock price tends to be less volatile.
Dividend — Many companies share a part of their revenue with their investors every month in the form of dividends. Typically, these dividends are automatically reinvested back into the stock market.
There are multiple perspectives on these concepts. Through my research, I have found people on both sides of the spectrum — for example, some swear by dividend investments, whereas others think it’s some kind of a scam.
However, I hope the above definition will help you understand my reasoning behind both experiments.
Every day I will invest $15 into VOO (Vanguard S&P 500 ETF) and $15 into VTI (Vanguard Total Stock Market ETF).
Both of these ETFs do a good job representing the best companies in the US stock market. The former focuses on the top 500 US companies while the latter includes all publicly traded companies.
Let’s take a moment to look at a few of the top 10 holdings for each of these.
We will start with VOO:
Microsoft — 7%
NVIDIA — 5%
Meta — 2.5%
Apple — 5%
Amazon — 4%
Google — 4%
Now, let’s look at VTI:
Microsoft — 6%
NVIDIA — 4%
Meta — 2%
Apple — 5%
Google — 2%
Yes, the 2 are incredibly similar when it comes to their top holdings. That means, anything happening to these companies will have an outsized effect on my portfolios. If it wasn’t obvious already, both these ETFs consist of 30% technology stocks.
Unfortunately, technology stocks, at least in my experience, have been more prone to volatility. Even though these companies are expected to grow a lot in the future, the volatility is the tradeoff you accept if you want to get that potential gain.
That’s why, for this portfolio, I am investing daily rather than weekly. I am hoping that by spreading my purchases across, I can benefit more than hurt from this volatility.
Every week I will invest $50 into VIG (Vanguard Dividend Appreciation Fund), $50 into VTV (Vanguard Value ETF), and $50 into VYM (Vanguard High Dividend Yield).
Across these 3 ETFs some of the top holdings are — JPMorgan Chase, Exxon Mobil, J&J, Broadcom, Bank of America, Berkshire Hathaway, Home Depot, Mastercard, and Microsoft.
Unlike the previous portfolio, this portfolio spans across sections such as financials, healthcare, energy, and industrials.
Most of these companies have been around much longer than other tech companies, they have a track record of good performance, and some of them give quite a good amount of dividend every month.
Historically, these companies have been less prone to volatility, unlike many companies in the previous portfolio.
Because of this lower volatility, I will invest weekly rather than daily. The dividends received from this portfolio will be reinvested back into the stock market.
If you have made it this far, I hope you found this valuable.
If you want to stay up-to-date with the progress of this experiment, stick around because I plan on posting monthly or quarterly updates.
Here are a few ways you can do so: follow me on Medium, subscribe to my website, or follow me on YouTube.