2016 Portfolio Performance Summary

On January 1st, 2016 my portfolio was valued at $319,169 and you can see that here along with all the stocks I owned then. One year later, my portfolio is worth $322,626 which is a gain of $3,457 for 2016. That is a gain of about $1.1% for the year. The market averages started the year at these levels:

Dow – 17,425 

NASDAQ – 5,007 

S&P 500 – 2,044

Now, one year later on January 1, 2017 they look like this: 

Dow – 19,762 (Up 13.4%)

NASDAQ – 5,383 (Up 7.5%

S&P 500 – 2,239 (Up 9.5%

The Cost Of Not Diversifying

I wrote here about my portfolio not being diversified and this year it really cost me. I only have about 10 stocks and that is not enough with a portfolio of this size. In fact, if you buy only individual stocks like I do, it is practically impossible to properly diversify. Here is a screen print of my portfolio and the stocks I own at the end of 2016:

$300,000 Portfolio

I did attempt to rectify my diversification problem a bit by buying the market tracking SPY exchange traded fund every month but I didn’t follow through on that which was unfortunate. I should have 160 shares right now (had I bought every month) and I only have 80 at this time. Honestly, most investors should just buy a market mirroring ETF every month or every quarter and not bother with individual stocks. After looking at my results this last year, I should probably do that as well but buying individual stocks is fun and challenging for me so that’s why I do it. 

2016 Was A Very Confusing Year For Me

I honestly was scared most of the year to buy stocks. The first month and a half of 2016 was the worst beginning to a new year EVER! I held steady and didn’t sell anything and was rewarded when the market came charging back. But that big drop to begin the year did have an effect on me and did make me gun shy. 

S&P 500 2016

Next came Brexit in the middle of the year which was another scary drop in the market followed by a quick recovery and more gains. Again, I didn’t sell anything but didn’t buy anything either. 

Then there was a solid two month steady drop in the market leading up to the U.S. election on November 8. That crazy election where everyone, including investors, thought Clinton would win but didn’t. The night of the election the futures were down 800 points and had to be halted and the world markets were all down as well. But then a strange thing happened: investors decided that a Trump victory was actually good for businesses and the stock market took off for the rest of the year.  

Unfortunately, I was paralyzed for most of the year in fear that all the impending doom and gloom articles circulating about the stock market would come true. Those articles and the severe drops I just discussed kept me from wanting to put more money in the market. As a long term investor, I was willing to just sit tight and see what happened. That might have been okay up until the election but I really missed out at the end of the year. 

With Only 10 Stocks, Each One Carries More Weight

2016 was the best year for the stock market in the U.S. since 2013 but my portfolio didn’t come close to matching the market gains. That is because five of my stocks (COST, CVS, DIS, F, GILD) that I held for the whole year went down plus my recent buy of NTDOY also went down. With about half of my stocks going down for the year, I feel fortunate to have made an overall gain at all! 

Again though, this shows the importance of diversifying because if you don’t, too much is riding on the individual stocks you pick. Buying individual stocks means you have to accept that your portfolio performance will not match the performance of the overall market. Of course this could go the other way as well and if all my picks were spot on and had a great year, it would be possible to outperform the market and even make money in a down year.

I think it would be prudent for me to recommend any beginner investor wishing to get started buying individual stocks to at least put aside some money to buy one of the market mirroring ETF’s. Buying individual stocks is fun and it is the way I got started but exchange traded funds weren’t highly publicized and I didn’t even know about them then. But now ETF’s (that mirror the market or mirror specific industries) are as easy to buy and sell as individual stocks and they cost the same per trade fee.

I think buying some individual stocks (if thats what you want to do) along with buying an ETF is the right way to start investing for most people today and that is what I would do. In 2017 I will try to add to my SPY position and continue to look for individual stocks that I think have good businesses that will do well long term. 

2 Responses to “2016 Portfolio Performance Summary”

  1. stephen beesley says:

    Hi Bruce,

    Just found your blog today. I like your honest approach to investing. I have just started exploring investments myself and currently have shares in 8 companies (not close to the 300k mark though). Two questions:

    1. How did you choose your current stocks and could you explain why you stopped at 10 stocks?
    2. What is the ideal number of stocks to invest in to achieve diversification? Although that requires some knowledge of what classes diversification.

    SB

    • Bruce Alan says:

      Stephen,

      There is a link on the front page of my blog below the snapshot of the portfolio that leads you to a post for each of the stocks I have bought detailing why I bought them. I didn’t stop at 10 stocks, I just haven’t found anything else I want to buy right now.

      As to your second question, there isn’t a number like that and in fact, your definition of diversification may be different than mine. There is a wide range of opinion among financial “experts” as to how diversified an investor should be. Many recommend that no more than 5% of your money should be in any one stock. Obviously, that is not the case for me but I am comfortable with less diversification and I have even written about that here: http://startbuyingstocks.com/my-portfolio-is-not-diversified/

      Thanks for reading

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