My 2016 Year End Investment Summary

Another year has come to an end and it's time to look back and see how I did with my investments.

1-Year Return

My non-retirement accounts (Active Individual Stock Investments): 21%
My retirement accounts (Passive Index Investments): 10.2%
My average return (all accounts): 15.6%

Note: The above returns don't include dividends.

My average 1-year return is excellent, given that S&P 500 Index only returned 9.54% for the year. Also, my retirement accounts are mostly in S&P 500 Index funds and why the return of my retirement accounts is almost the same as the Index.

The overall high return on top of the passive investments was contributed by my actively and self-managed non-retirement accounts which are invested in only dividend paying stocks.

In this article, we will take a closer look into my dividend paying stock portfolio.

Investment Growth since 2009

My portfolio (includes all accounts) grew to  640%. The top green line represents growth rate of my combined investment accounts over the last seven year period. This growth is contributed by market returns, re-invested dividends, and new invested money.

Note the first bump in green line in late 2009, this is when I started to invest in individual dividend paying stocks, before that I was only invested in Index Funds within my retirement accounts and my employer's stock. It pays to invest in individual stocks, especially if you are looking for a higher than market return along with a higher yield. Of course there is a higher risk in investing in individual stocks, but the risk can be managed using diversification.


Asset Allocations


Dividend & Market Value Allocation:






Real estate is my largest sector at 28%. It is also the largest income producer. It is a bit over weight and why I will not be adding into it anytime soon.

For 2017, my plan is to invest more in Industrial and Financial sectors. I have a decent 16% allocation in industrial sector which has done quite well in 2016 and is expected to do even better in 2017 under new pro-growth policies.

Financials is another sector that has gone up substantially since the elections and is expected to go up another 20% in 2017. I only own one stock in this sector which is MAIN, it is a BDC (business development company). I used to own Wells Fargo but I sold it as soon as the news of fraudulent account practice surfaced. I am going to be extremely careful buying any banks from here on. A few big asset management companies are also looking attractive, but I will wait for the new regulations to pass before buying any.

Retail is my smallest sector with allocation of only 1%. There are some bargain stocks in retail sector due to recent disappointing sales. I will likely be picking up a few big box retail store stocks after Q1 earning reports. Currently, I only own Target in this sector.

Dividend Active Investment Portfolio

At the end of 2016, I own 42 dividend paying stocks in my non-retirement dividend portfolio. This is down from 44 stocks at the beginning of 2016.

The two stocks that I removed or completely sold off were Wells Fargo and Mattel. I only remove a complete position if the fundamentals of a company have greatly deteriorated or if there is a major trust or ethics issue with the company's management or business practice.

Here are a few key portfolio metrics as of 12/31/2016:

Total Dividend Paying Stocks: 42
Average Dividend Yield-On-Cost (YOC): 4.98%
Total 1-Year Return with Dividends: 25.98%
Average Annual Dividend Growth Rate: 6.58%

My Dividend Portfolio as of 12/31/2016
Summary

2016 has been another outstanding year in terms of my investment performance. It took me seven years to build this portfolio and there was lot of thought and effort that went into it. Now looking back, it was all worth the effort. It shows the power of long-term investment and what it can do for your money.

Hope you enjoyed my investment review and see it as an example or blueprint for achieving financial independence and early retirement.

Disclaimer: Author of this article is not a licensed/registered financial or investment advisor and does not provide investment advice. This article is for informational purpose only. Full disclaimer can be read here: Full Disclaimer

Comments

  1. That is a fantastic result. I agree that the real estate sector is a little high but at least you rode the wave while it was there, so well done for that.
    A 25% return is fantastic. If you did this every year the compound investment would be spectacular, retirement in no time. All the best.

    ReplyDelete
    Replies
    1. Thanks BHL. I have already retired early from my engineering job last year. Though, it wouldn't have been possible if I hadn't started investing years ago. Starting early is the key to get the time value of money to work for you, also dividend growth does wonders if you hold good dividend growing stocks for a long period of time.

      Delete
  2. Do the return numbers include any new contributions during the year?

    Congratulations on some great numbers! 24.98%, wow, considering your portfolio size.

    Have you shared overall net worth numbers in past posts?

    ReplyDelete
  3. Thanks, yes the return numbers include adjusted cost basis due to new contributions.

    Dividend stocks have handsomely beat the overall market with wide margins due to low interest rate environment of the past few years. If you had just invested in a dividend focused ETF such as DVY, your return would have been 18% for the year or little over 20% with dividends.

    I don't expect the same performance for 2017 as the interest rates are going up, but then again it is the income growth due to growing and compounding dividends what matters the most. The better return is just the icing on the cake.

    As for the net worth, no I haven't talked about it mainly because it is quite irrelevant to my investment goals and also because it fluctuates quite a bit due to market value of my investments. Though, I would say this much, in 20 years I have come from a three-figure net worth (basically having nothing but an engineering degree) to a net worth that is well into seven figures.

    ReplyDelete
  4. Thanks for the info. Only thing relevant about the net worth is that I guess we are at about the same level so I wondered if you altered your risk profile at all to protect against a large market correction which is overdue.

    ReplyDelete
  5. You very welcome. To answer your question, I did not do anything specific to change the risk profile due to impending market correction as my portfolio is already risk adjusted using fair or below fair valuation and sector diversification. Also since I don't depend on the returns for income, in other words I don't sell stocks to generate income, I can weather any major correction or even a recession. This is why I only invest in dividend stocks as you get paid regardless of what the market or stock is doing.

    Now, I do make conscious decisions to limit buying into certain sectors at times, mainly to limit exposure or high valuations. For example, currently I am overweight in REITs and therefore, I will not be buying any REITs anytime soon unless their valuation comes down.

    ReplyDelete

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