After several years of blindly guessing what stocks and mutual funds to invest in, I decided to take control of my portfolio. In 2015 I set out to educate myself on the stock market, I took several day trading classes and even hired a full-time mentor for a year. I now feel more empowered than ever before to control my investments and navigate the waters to an early retirement.
My current stock market portfolio is made up of index funds, individual stock holdings, and real estate. Despite what financial advisors may tell you, investing does not have to be complicated and you do not have to go buck wild with diversification. In this post I will discuss my current holdings and why I chose to invest in each stock ticker.
Total Stock Market Index Funds
The majority of my holdings, about two-thirds, are held in one index fund, the Vanguard total stock market index fund VTSAX / VTI. The index mirrors the entire U.S. stock market by purchasing shares in all 3,592 publically traded companies. This is the ultimate index for diversification and someone who wants to be a lazy investor. The index also carries one of the lowest expense ratios at 0.05% which keeps cost low.
Below is a list of the top 10 company holdings in the index which account for 15.8% of the portfolio.
- Apple Inc.
- Microsoft Corp.
- Alphabet Inc.
- Exxon Mobil Corp.
- com Inc.
- Berkshire Hathaway Inc.
- Johnson & Johnson
- Facebook Inc.
- JPMorgan Chase & Co.
- General Electric Co.
About one-third of my stock portfolio is made up of three individual stocks in an attempt to outperform the stock market. All three stocks are in the tech sector because I have in-depth knowledge of the industry due to my line of work. The three stocks are Facebook, Amazon, and Twitter.
I began purchasing shares of Facebook after Mark Zuckerberg and his wife committed to donate 99% of their Facebook shares to education, curing diseases and helping connect people in December 2015. The stock had recently passed $100 per share, and I felt that the $100 mark was a significant milestone which would become a price support level against any future price dips. I bought in around $104 and a few weeks later thesis failed as the stock dropped to $89 during the first two weeks of January 2016. I got emotional and sold the stock for a loss, but I eventually bought back in a few months later after the stock recovered over $100 and showed signs of strength. I re-bought the shares around $112, sold the shares at $128, rebought them at $119 and sold half at $125. I now plan to hold the remaining shares indefinitely, because I believe the key to a great company and motivated employees is a great leader and I believe Mark Zuckerberg exudes many of these qualities.
After my interview with the company last year for a position on the Internet.org project, I was able to gain insight into the long-term vision Zuckerberg has for the company. I decided to become more bullish on the company and loaded up on additional shares. I am also a fan of the $2B acquisition of Oculus Rift which I believe is additional evidence that Facebook is focused on the future of technology, not just social media. I believe virtual reality and augmented reality will play a big role in consumer entertainment, business analytics, and medical care in the future.
Facebook is now debt free and exponentially increasing cash on hand. Now who doesn’t like a company with good financial management practices!
Amazon is my second largest individual stock holding and the most expensive in my portfolio as it is currently trading at $845. If the stock can break $900 per share, I believe it can easily run to $1,000 a share. I have been a huge fan of Amazon and Jeff Bezos for over a decade. He is a cutthroat businessman, and I know first-hand from trying to compete with Amazon in the cloud computing space that he is willing to run the company at a short term loss to build long-term customer loyalty and a majority market share. If you don’t believe me check out this story about how Amazon took our Diapers.com and eventually acquired the company.
Like Facebook, Amazon is focused on the future of technology and is investing heavily in multiple markets. For example, over the past three years, Amazon has quietly grown into the largest online apparel retailer with over $16.3B in sales. Amazon has already started their own private label of electronic accessories and baby products, and I wouldn’t be surprised if they came out with their own line of clothing and shoes in the near future.
Amazon is also working on re-inventing the grocery shopping experience. I was in Seattle last weekend visiting friends and I got to stop by the new Amazon Go prototype store. Unfortunately, it is only open to beta testers and employees at the moment so I was stuck with my face pressed up against the outside window. Here is a great video that summarized the concept store.
The last stock pick is a small gamble on Twitter, it represents only 1% of my portfolio. I believe the platform plays an essential role for an unfathomable number of online communities and is too big of a social media giant to fail. I feel that Twitter is ripe for an acquisition. The company is approaching it’s 11th anniversary this month and has still not turned a profit. I find this unbelievable when the company made $2.5B in revenue last year. I’m speculating that the company is trying to be hip and trendy like Google and other tech companies by offering a ridiculous set of employee benefits. Such perks would be fine if the company was making a profit, but in lieu of any profits, they should be focused on cutting cost in the best interest of the shareholders.
I stalked the stock ticker for several months looking for a signal of support. I found my entry last July and entered at $17.56. A few months later there was a rumor of a buyout and the price shot to $24 in two days, but once the rumors were quenched the stock dropped back to the $16.50 to $18.50 price range. I’m currently running at a -$120 loss on this stock which is not too upsetting. I’m willing to let this stock run all the way to $0 because the probability of that happening is very unlikely and my risk is only $2,000. This is a speculative play and I don’t intend to make more than $1,000 profit if the company is acquired.
Real Estate Investment Trust (REIT)
Lastly, I decided to dip my toes into the world of REIT’s to build a small dividend portfolio in 2017 which will make up about 2% of my stock portfolio. A REIT is a type of business that owns and income producing real estate. The companies usually focus on a specific market niche. To qualify as a REIT, the company must maintain the majority of its investment assets and income in real estate investments and they are required to distribute at least 90% of its annual taxable income to shareholders through dividends.
My REIT of choice is the Senior Housing Properties Trust (SNH), a health care REIT, which owns 431 commercial properties consisting of senior living communities, skilled nursing facilities, office buildings leased to medical providers, clinics, biotech laboratory tenants, and wellness centers. I like these sectors because the baby boomer generation has finally begun retiring and I forsee retires selling off their houses and moving to cheaper housing with amenities that cater to their needs. In my opinion, this sector will show growth in the coming decades.
I purchased my shares at the beginning of January 2017 for $19.18 per share. I’m kicking myself for not finding out about this REIT sooner. In December the ticker was trading at $17.14. This lower the price on this ticker the more shares I want to buy. The reason is because the REIT has paid an increasing dividend of $0.30 per or more every quarter for the last 16 years, and they have been paying $0.39 per share every quarter for the past five years. This equals $1.56 a year, per share. At $17.14 that would be a 9.1% annual return from the dividend alone, one of the highest REIT dividend payouts out there. At my purchase price of $19.18, I intend to make an 8.1% annual return off the dividend alone.
The above is my entire portfolio of stock market investments. Please note I am not a professional financial advisor and the above information is based upon my research through public resources. All theories for future growth are my personal speculation and should not be construed as financial advice. The purpose of this post was to give readers insight into what type of qualitative data I use to pick long-term stock holdings.