Bi-Weekly Funds For Fun Update
Hi Everyone! To be transparent, I will share bi-weekly updates of my “Funds For Fun” portfolio account that I hold on M1 Finance. I treat this account as a super high total return savings account. I use an M1 finance account (Sign up today and get $10 for free!) because it is easy. I set up a draft rule that pulls in the amount of money that I want it to, what day, and the frequency. I will use this fund to help pay a down payment on a car or house, and any other future expenses. Instead of getting a 1-2% yield/return, I hope to get an 8-12% return.
You can check out this Googlesheets link to see which companies I invest in, which ETFs my finance invests in, my Roth 401 allocation, and my “Funds for Fun” portfolio that I am using to pay for future expenses. You can also check this website called Track Your Dividends (I am not a sponsor, but I use and enjoy their product) to freely track the dividends of companies you invest in. You can create multiple portfolios, and see the future value, diversification, and next upcoming payment of your portfolio. This is the main website I use to track my annual income and the future value of my portfolio. Sign up for free and effort start to track your portfolio. This link will send you to my fiancée and I’s holdings, 401k, and Funds For Fun account to see what we invest in and dividend income.
In each update, I will go over my current mindset, any buys or sells, reasons for why I bought or sold certain stocks, the future mindset of the stock market, and visual graphics of my Funds For Fun holdings.
Curious about how I made the “Time Weighted Return” graph? Check out my Patreon page to get access to many financial tools, a cookbook, and more!
Financial Disclaimer: I am not a Certified Financial Advisor (CFA), I am a meteorologist. The blog posts about investing are my opinions and for your entertainment purposes. They should not be considered financial advice. Investing in the stock market is risky and you can lose money. If you want to invest in the stock market or have questions about how or where to invest, please seek a CFA.
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Alex Funds For Fun Portfolio Updates
Current Mindset
In its current environment, the stock market is what I would call the “Wild Wild West”. The stock market is strung by the heart of those who buy and sell daily. It is weak, feeble, and can flip to a red or green day depending on what news is playing on TV or on your phone.
Most of the world is up to its neck in heartbreaking news. All of it is so sad. Just tune in on any news platform and you will see it flooded with stories. An EF-4 tornado ripped through Mississippi and the tragic news of an elementary school shooting in TN. Riots and protests are thick in the air, unrest fills our lungs, and we breathe out a sigh just to get ready for the next round.
We are now facing one of the scariest banking crises since 2008 and 2009. Several banks are filing for bankruptcy or being bought out. A few major banks have disappeared from the stock market completely. Many people in the US are in fear of holding their hard-earned cash in either a checking or savings account with their local banks. Not all banks are FDIC insured. So please check that wherever you bank, it is FDIC insured. If you are not sure, use this link to check your local bank. Not sure what FDIC insurance covers? I got you! Click this link to learn more!
As for me, I will likely stay away from most financial stocks. I like some financial stocks like Visa, Mastercard, insurance stocks, a few REITs, S&P Global, JP Morgan, Morgan Stanley, and most of the well-known banks. However, I only own one financial stock and that is Visa in my Funds For Fund account. I do not expect myself to buy anything except for REITs, insurance stocks, or the ones already mentioned once I get older and want more cash flow. At my current age, I don’t like the risk. I rather buy an ETF that is self-cleansing and has exposure to financial stocks than own individual financial stocks. Like Bill Burr once said, I just don’t trust the banks.
Despite all the chaos, as selfish as it sounds, I keep to myself. I make sure my future wife is happy. Talk to my family as much as possible. Enjoy the outside as it begins to warm in State College, PA. I turn my blinders on to enjoy life and invest to one day reach FIRE. Because, there is so much chaos in the world, trying to comprehend it, would just drive you mad.
In terms of my FFF portfolio, there have been a few changes in terms of allocation and new additions. Which will be discussed below. I have increased my cash flow from $100 to $120 per week since I am almost done paying for the wedding! One goal I am happy to announce is that we have reached the $500 yearly dividend mark when combining my future wife’s account, the Funds For Fund account, and my DGI account. So far, each year, our portfolio pays us over $500 in dividends. We didn’t work for that money. We let our money work for us. The true power of passive income.
The Buys and Sells
The Buys
In the last month, I have had a change in ideology on my portfolio. To fit my goals with the portfolio, I bought Invesco QQQ Trust, S&P Global, MSCI, Inc, and Northrop Grumman Corp.
The Sells
As with what did I sell, to align my investment goals, I sold SCHD and NVDA.
Why I Bought and Sold
Why Did I Buy It?
The Funds For Fun portfolio is all about high growth. So, I need to switch out SCHD for more growth-oriented stocks/ETFs. However, I wanted to go with something that had a wide MOAT, something I could understand, and could outperform the S&P 500. So, that is why I bought QQQ, SPGI, NOC, and MSCI. All four have great 10-year annualized returns and have either outperformed the S&P 500 or are close to doing so in the last 5 years. I like QQQ for two reasons. First, it gives me even more exposure to tech, but also to high growth with lowering risk. How does it lower the risk? ETFs, like QQQ and others, self-cleanse themselves (meaning the allocation and which stocks are in the ETF are changed based on the index weighting and selection methodology each quarter or year) and does the dirty work of picking out growth stocks for me.
I picked SPGI and MSCI for two reasons. Both companies develop indexes. SPGI owns S&P 500. MSCI has developed multiple index segments in which companies use a benchmark for their ETFs. Therefore get a kickback for every time a company based their ETF on either SPGI S&P 50 index or MSCI indexes. They are both integrated into the market, they can’t be replaced. Putting NOC was more of a selfish play. My future wife got a job with them, and I thought it would be fun to put that in FFF! Plus, it is a military defense company. Given that the government gives the DOD billions of dollars, I don’t see NOC going anywhere anytime soon.
Why Did I sell?
I sold NVDA and SCHD for good reasons. I wanted to get out of NVDA and I made good gains in the green. With so many semiconductor chip companies, I did not have a strong thesis of why I should own this stock. With the future outlook on technology in the current economic environment, I did not feel safe owning NVDA. So I sold it and bought great companies.
SCHD was a hard sell for me. Around two months ago, I changed the allocation from 25% to 13%. Then, I had another change of heart. SCHD is really great for dividend growth investing, not a hyper growth portfolio. I love the dividend, but I want a high return. So, I sold it.
Future Mindset of the Stock Market
I am no financial expert, but I do not see our current or future economic environment in the next 6 months producing a bull rally anytime soon. There are so many parameters driving and picking at the stock market, but three factors stand out the most.
- The federal bank’s decision on interest rates will greatly affect the stocks market mood
- The CPI and job report. This will weigh in on the federal bank’s decision on the interest rate
- The fear of a recession or stagflation and the pressure of interest rates on our banking system
Many expect the fed bank to increase interest rates one more time. They could pivot sooner and decrease interest rates. They could do nothing. They could increase interest rates. No one knows. Everyone just has theories. Regardless, their decisions will impact the market.
I think most of it depends on the CPI report in the next three months. If inflation remains sticky, which I 100% believe it will, interest rates will remain high. Leading to the possibility of even more interest rate hikes. The high-interest rates, however, have been throwing rocks at the US and the world’s banking system, poking holes and exposing the issues the banks are having with the interest rates being so high.
Needless to say, we need to get inflation and living costs down. It is just not sustainable. I’ve seen the bread that I used to pay $1.2 now selling for $1.76. That’s roughly a 47% increase.
The Federal Bank will have to make very hard decisions shortly. Their job is to make sure we have the best landing possible so that we do not enter into a recession or stagflation.
In summary, for investors like me, the stock market will look like a seismograph during an earthquake. Some days will be green, some red. There could be a short one-week bull rally which may be followed by a bear environment for the next two weeks. No matter what the market conditions, keep investing in good businesses like Costco, Microsoft, Kroger, S&P Global, etc. Find companies that have strong cash flows to continually increase their dividend. In these conditions, cash is king.
Asset Allocation, Total Income, and Performance Against the SPY
Currently, VGT has the highest allocation at 25% behind the newly acquired QQQ at 12%. I like the agressivness that VGT and QQQ give me, with most of their allocation in technology. Is this risky? Yes! However, I think with the current economic environment, it is good time buy ETFs that are heavily invested in technology. I think either way, if stocks go up or down, I win. If the go up, great! If they go down, I just average down. That is why I love dollar cost averaging into my portfolio because it doesn’t matter when I invest, but how long I am investing.
The rest of the portfolio is at either 5 or 6%. I think these are great companies with wide moats, and feel comfortable having them at high allocation %’s.
With aspiring to get a high return, the annual dividend’s have shrunk completely. This is okay, this portfolio is not for dividends or DGI. Plus, I pay less taxes with a lower dividend %.
Currently, I am beating the SPY by 4.76% since starting the TWR performance calculations in Novemer! I am quite shocked by how well this portfolio has done in the last 5 months of craziness. I look forward to see how it will perform the rest of the year!
