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A new direction
Published 10 months ago • 3 min read
Presented By: The Early Bird from MarketBeat
Official Affiliate Partner: The Early Bird from MarketBeat
Hello again, investor!
Something has been on my mind, and it's time to change.
Just before Halloween 2024, VisualCapitalist.com published this chart on how many active funds beat the S&P500 since 2001:
Active funds have managers who try to beat the market by picking investments, while passive funds automatically track a market index.
In 23 years, active fund managers have barely beaten the S&P500 13% of the time.
It shows that over 20 years, 94% of active large-cap fund managers fail to beat the market.
If professionals who eat, sleep, and breathe investing with Bloomberg terminals, corporate insider hookups, and connections to industry experts fail to beat the market over many years, what chance do I have?
But here's the thing: I enjoy researching and investing in individual companies.
So what's a guy to do?
Protecting himself from himself is what.
I tallied all our investments, excluding savings accounts, kids' custodial accounts, and 529 college savings, and discovered that 25.8% of our investment assets are individual stocks.
Going forward, I will reduce my individual stocks to less than 15% and likely 10-12 holdings.
I'm going to start by consolidating smaller holdings like AbbVie (ABBV), Clear Secure (YOU), Innovative Industrial Properties (IIPR), Chevron (CVX), and McDonald's (MCD) into the Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard Total Stock Market ETF (VTI).
This will allow me to stay diversified while scratching the itch of holding 10-12 core positions I am highly committed to and can follow more closely.
There is also overlap, with most individual stocks having significant fund exposure. However, when you buy a fund, you are forced to own everything it holds—the good, the bad, and the ugly.
The goal of every investor should not be to "beat the market" but to invest in whatever way that meets your financial goals while allowing you to sleep well at night.
My goal is to have a growing stream of passive income, but a higher net worth is also pretty sweet, too.
Core positions as of this writing are Visa (V), Nexstar Media (NXST), Agree Realty (ADC), Main Street Capital (MAIN), VICI Properties (VICI), Realty Income (O), and Harrow Inc (HROW).
It's no secret that I'd like to own Costco outright. While I'm waiting for the stock price to drop to a more reasonable valuation, stocks like Harrow (HROW) or Starbucks (SBUX) may one day be consolidated into Costco (COST).
The point is to admit that I'm not smart enough to beat the market and limit the amount of individual stock exposure to high-conviction companies that I can follow much more closely.
I've created a spreadsheet without the current market values if you want to see the holdings.
Russ' Holdings 1/11/25
What do you think? Am I making the wise decision here? Hit reply and let me know!
😁THANK YOU to all who responded to the last newsletter!!
On a recent livestream we talked about the new stock picks for Eddy Elfenbein's Crossing Wall Street buy list. He was on the We Study Billionaire's podcast to talk about the method to his madness and was a wonderful listen.
🎦If you missed it, we share why Realty Income (O) won't be paying your rent!
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Each week you'll learn how to be a better dividend investor and follow the journey of a welder with a passion for passive income to $1,000,000 and beyond.
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