My portfolio is a mix of individual stocks and ETFs which I acquired over time. I started my investment journey with ETFs and at some point I assumed I was smarter than I truly am leading me to dabble in stock picking. I dabbled in as a complete novice and made all the dumb mistakes and currently trying not to make more.
Let’s zoom into one holding that has consistently battered me and I’m heavily red on it. I bought a substantial (to me) units of VFC three years ago as part of my dividend stock holding. When I made the purchase, VFC was a Dividend aristocrat, consistently paid dividends at a good % return for over 25 years so it looked like a good buy as at then. To be fully transparent, I also did not do enough research into the company. I just thought ohhhh….they have strong brands, I buy some of the brands and they should definitely continue on this amazing dividend trajectory. How wrong was I? Months after I bought VFC, the unexpected drama started with a 41% dividend cut which led to the stock price tumbling and it didn’t get better. The stock continued to get beat and the most recent announcement in Oct 2023 earnings was another 99.7% drop in dividend payout and of cos there was more tumbling.
What will I do differently if I could reverse time:
- Control my greed – by staying away from the shiny stocks with high unsustainable returns
- Buy only the top ten from DJIA – although I’m not sure how reliable this is now as WBA is now towing the VFC route
- Set a stop loss order – I didn’t do this and I’m now a sitting duck on some holdings that I don’t know if they will ever recover but not strong enough to let them go. I’m still working through my emotional struggle on losses and letting go. To be honest, I’m not doing well at this point in time
- Have no emotional attachment to any holding. I am investing for a purpose which is to fund my lifestyle so why am I concerned about the company beyond it delivering on my expectation
- Lastly, invest in ETF and stick to that as a strategy
I am gradually rebalancing my portfolio and I’m sticking to Vaneck dividend ETF and Vanguard’s S&P 500 ETF. With these two ETFs, I have a broad based holding and material drop in one stock is not enough to lead to heavy financial losses. I strongly advocate for ETFs and I get weird looks from people who tell me they are doing so well on the stock picking. My response is usually, are your individual holdings broad based enough to withstand the impact of 50% decline on your #1 stock? If not, you should be sticking to ETFs as it’s always a good choice due to it’s by design self cleaning.