My biggest struggle with investment is managing my emotions and the decision fatigue I still get on doing what I know is right. My investment journey is littered with a lot of mistakes and some I still made after I already got informed enough not to make them. I know this wasn’t smart but that’s my reality and I’m determined to turn it around in 2024.
My investment sources are my salary, non-work income and the dividends I earn from my portfolio. I invested regularly all of 2023 except in July when I spent too much with no leftover to invest. So I have the invest regularly part locked down. One way to do this easily is to automate your investment if you have access to it. I do not so I trained my investing muscle to do it monthly with the salary, reinvest the dividends as soon as they are paid and invest non-work income immediately. I intend to keep my cost as low as possible in order to have a high savings rate so investing right is a priority. The right investment is a broad based low cost ETF and it’s key I stick to this all of 2024 and going forward to protect my portfolio.
Currently, my portfolio is evenly split between individual stocks and ETFs and the 2023 performance of the two was a key learning point. My ETFs increased on average +16% while my individual stock holdings delivered a -8%. If I factor the dividends earned from the individual stock holdings, the performance improved to -2%. This is an 18% gap between the two which translates to 18% of lost growth.
What I did wrong with my individual stocks:
- No stop loss – even though my play is buy and hold on these stocks, there were some I acquired not based on fundamentals. For those, I should have sold them when I knew better or at least set up a stop loss which will automatically trigger a sale when the stop loss rate is reached. Some examples are losing 80% of value on Rivian, 30% on VFC after the poor performance plus dividend cuts and 40% on flatexdegiro
- Holding on to stocks that don’t align with my investment strategy – I decided to increase my non-work cash flow with dividend paying stocks and was aiming for a monthly inflow of €1,000 per month. I’m not there yet ☺️. So I started buying a mix of REITs and dividend aristocrats. Prior to this decision, I had stocks I bought just for the sake of it (I know, who does that) that I still held on to. Well, they served me bad by consistently losing value and diluting my portfolio performance. Then I adopted the mindset of I’m just going to wait it out for them to recover. From the look of things, I don’t see any recovery happening soon and I got enough courage to bite the bullet and sell some of them last month.
- Going hard on losing stocks – I was chasing the dip! A never recovering dip which in retrospect now just looks strange. Why? Because at some point, my brain should have rewired itself and let me know this is like a sinkhole but it didn’t and the sinkhole swallowed my money.
I got lucky with some individual stocks e.g. EPR, CCI and VNA at +20% on average but these were not sufficient to stem the bleeding. Clearly, stock picking is not my strength and I’m not equipped for this so I’m done with it. I will only keep my divided strategy stocks as is going forward.
What I did wrong with my ETFs:
- Selling ETFs to invest in dividend stock – Yep, I did that because I wanted to accelerate getting to the target €1,000 dividend income per month.
- Not going 100% – even after I realised the fault in my strategy, I reduced my investment in individual holdings and was splitting the investment 50/50 between ETFs and individual stocks.
- Investing in a mid priced ETF – as part of my dividend plan, I invested in a higher cost ETF at 0.38% vs. the standard one I had at a cost of 0.07%.
What I will do right in 2024:
- Invest 100% in low cost ETF
- Get rid of all the individual stocks that do not deliver on dividend payments and reinvest in low cost ETF. I will realise a significant loss from this but my portfolio will be better off going forward
- Exit the dividend ETF and reinvest in low cost ETF. This will be psychologically difficult for me to do so I need some time to work towards it but it will be done
- When I’m getting distracted, revisit this post and stick to #1 of what I will do right in 2024
Invest regularly and invest right is a no miss for me in 2024. I will start a monthly series to share how I stick to it and how I deal with my emotions and psychology around this. I’m also open to tips on how to get better with this so I look forward to learning from you in the comments.