All stock investors wonder if picking your own
portfolio of income stocks provides any better results than just buying an
inexpensive ETF.
This post compares my 2011 Dividend Machine model portfolio with a very popular, well respected and inexpensive dividend appreciation fund.
This post compares my 2011 Dividend Machine model portfolio with a very popular, well respected and inexpensive dividend appreciation fund.
I am not a fan of pooled investments, yet I can
understand the dilemma. It certainly is
easier to buy shares of an ETF on a regular basis than it is to find stocks on
your own.
After all, mutual funds have
experts they pay a lot of money to pick stocks.
Surely their results must be better than what you can do?
ETF’s are even easier because they simply own a
basket of stocks that are designed to replicate the holdings in indexes like the
S&P 500 (SPY).
2011
Dividend Machines versus Vanguard Dividend Appreciation Fund.
Vanguard is the best of breed for low cost mutual
funds and ETF’s. So I decided to
measure my 2011 Dividend Machine Portfolio against the Vanguard ETF that has
the most similar goal.
Vanguard’s dividend appreciation fund, symbol VIG, is geared to
mimic the dividend aristocrats for income and growth. This fund is very low cost and seemed to be the one to use to measure my work.
On a theoretical basis, each time I added a stock to
the 2011 Dividend Machine Portfolio, I simultaneously bought VIG shares. Therefore, the cost basis is exactly the
same. If I bought $1,000 worth of a
stock for the Dividend Machine Portfolio, I also bought $1,000 worth of shares
in the VIG ETF.
At the end of the 2011 Dividend Year, I bought 52
stocks for about $207,000 and 3836.361829 shares of VIG.
As
of the close on Friday February 7, 2014, the 2011 Dividend Machine Portfolio
value was $292,400 and the VIG value was $275,758. The cost of each portfolio was
negligible.
The
table below shows how well these two investments have fared in terms of
portfolio value.
Mutual Funds and ETF’s may be easier but over the last 3 years, Dividend Machines were better.
The
Money Madam
