Through the end of the second quarter, the S&P 500 has climbed 6.22%. That’s a nice increase, and the stock market’s performance has provided me impressive gains on paper in my overall portfolio. The bulk of my investments are split between tax-efficient bonds and a stock market index in my non-retirement accounts, and despite losses on paper in January and March, between dividends and market gains, I am satisfied with my financial situation.
But I am at the point right now — between projects — where I may decide to start drawing upon the income from my investments for expenses occasionally. I’ve mentioned this before. My plan has been to leave my investments untouched as much as possible, and I’ve been able to do that so far except for taxes and a few other expenses related to selling my business. I’ve relied on other income from working — mostly writing, coaching, and to a lesser extent speaking — to meet my needs for living day-to-day. But this has brought upon the need to be a little more frugal than I had been while I was receiving income from my business.
While the bulk of my investments have been performing well, it’s a little harder to look at my investments in the “Grow Your Dough Throwdown” As readers know, at the beginning of 2014, I and a number of other financial writers and bloggers invested $1,000 to track our progress throughout the year. Each participant was able to choose where and how the money would be invested, and I chose ShareBuilder and the buy-what-you-use philosophy. I invested in five stocks (or their analogues) based on products I use every day: Microsoft, Canon, Honda, Samsung, and Google.
So because I chose ShareBuilder, and I purchased six different investments, I paid a transaction fee of $6.95 six times. That’s an automatic loss of $41.70 before even taking a losing January into account. And while the stock market has shows this great return through the first half of the year, my investments have still not broken even when considering the transaction fee a loss (which it should be).
Continue reading this article to see the investment results as of June 30.
I aimed to invest $200 in each of Microsoft, Honda’s ADR, the iShares MSCI South Korea Capped Index Fund whose largest holding is Samsung, Canon’s ADR, and the iShares U.S. Technology ETF whose largest holding is Google. At the time, Google’s stock price had not split, and ShareBuilder requires stock purchases to be full shares. After buying full shares in each of these, getting as close to $200 in each as possible, I used the funds remaining of the $1,000 — I actually used about $1,008 in total — to purchase the iShares MSCI USA stock index, which should be similar to the S&P 500 in terms of performance.
My investing strategy has involved ignoring day-to-day company news. The financial news cycle is generally full of too much noise, and both good and bad news on a daily basis has little effect on the long-term health of a company and the stock’s long-term performance. But this “contest” lasts only a year. I should really start looking at each company’s plans for the year, their approaches to management, their employment, and some of the industry forces that might affect their stock prices. But, because I won’t be trading anything — more trades mean more expenses and bigger hurdles to overcome — I’ll be holding all of what is in this portfolio until the end of the year.
I have a feeling that any profits I see by the end of the year will go to pay for the privilege of selling the investments.
Here’s a sample of what I know about each of these companies.
Microsoft. Microsoft had a presence on my family’s first IBM-compatible computer, sometime in the 1980s. Regardless of its ability to compete in some areas, like Internet search and hardware, it’s an enduring company, from MS-DOS to Windows to Office. I did hesitate to use Windows 3.1 when it was released, but I eventually gave in when Microsoft released Windows 95. Microsoft has the lasting power to be around in some form well into the future.
Honda. The 2004 Honda Civic I own today, purchased new ten years ago last month, is the second Honda I’ve owned. For the spending-conscious and responsible driver, there’s nothing that beats a Honda in terms of value and reliability. I’ve hardly put any maintenance money into the Civic beyond oil changes, a new set of tires to replace the low-performance stock tires, and regularly scheduled maintenance according to the schedule in the manual. A few months ago, the started died, and that required a tow by AAA, but that’s the only problem I’ve faced in ten years.
Samsung. This Korean company manufactures my mobile phone (the Note 3) and the tablet. I’ve been impressed with the company’s technology. For the most part, I’ve replaced my phones after two to two-and-a-half years, and I like to have the top-of-the-line models. This wasn’t always the case; there was a time where it made more sense for me to go for the cheapest available devices. I avoided phones with built-in-cameras. I avoided texting (and I still think it’s a horrible method of communication). But I’ve grown to have at least a little dependency on today’s smartphones.
Canon. I started taking photography seriously several years ago, and it started with my first digital SLR camera. The choices at that time were between Canon and Nikon; a friend of mine recommended Canon because he preferred that brand, and once you begin acquiring lenses and camera bodies, you are locked into one brand or the other unless you want to sell the equipment at a loss to switch. Since then, Nikon appears to have offered higher-quality technology, but it’s close enough that people on the internet will argue endlessly about which brand is better, and any differences are negligible anyway.
I’ve “invested” so much in Canon photography through purchases that I might as well take advantage of other people like me who spend lots of money on equipment by becoming a part owner in the company (though the ADR proxy). Canon is traded on the Tokyo Stock Exchange, which is unavailable to Americans, so I invest through the company’s American Depository Receipts.
Google. What can I say about Google? I thought I was getting all I needed when I searched the Internet using AltaVista. Then Google came and changed everything. It was fast, and it covered everything online. And I found what I wanted sometimes without knowing exactly what I wanted. The search results seemed to be intuitive.
And then Google made it possible for small business owners to increase their profits. That includes everything from allowing small companies to compete with large companies to get the best listings among search results to allowing website owners to profit from running advertising without having to build a list and contact potential advertisers. So much money flows through Google. The company is sticking around, always finding ways to stay relevant.
Note that I didn’t write anything about the management of these companies. I didn’t try to speculate on what new products the companies would be offering. I — and no other individual investor — could possibly (legally) have any information about a company that the rest of the investing public doesn’t know about. There are no inside stock tips. Even though this contest is meant to last just this year, I’m taking a long-term approach to choosing the stocks. I could have done more research about each of these companies, but this particular investing approach simply looks towards companies that are used on a daily basis.
I consume products offered by these companies. If I consume these products and there’s no reason to think I’m nothing more than an average consumer, it stands that the average consumer has a good chance of consuming these products. In the case of Canon or perhaps Samsung, it may be more than just an average consumer — an average photography consumer or an average smartphone consumer. By investing in these companies, I’m recognizing that there are a lot of people like me out there, buying products from or taking advantage of the services provided by these companies.
And the hope is that part of the money spent consuming these products will come back to me in the form of shareholder profits.
Published or updated July 7, 2014.