Welcome to our weekly passive income portfolio (PIP) update—#9 in the series! Before we get to the update, I wanted to take a moment discuss my take on stock picks and/or recommendations and why you should never buy a fish!
The old saying goes that if you give a man (or woman) a fish, you feed him for a day. However, if you teach him to fish, you feed him for a lifetime. This sage wisdom is absolutely true for the investing world!
If you spend 5 minutes on YouTube, you know all too well that social media—as well as the other media and internet sources—are literally chocked full of stock picks and recommendations.
This raises an important question: Are these picks and recommendations actually a good thing for the investing community and, more importantly, retail investors—especially beginners?
Or, are they simply the modern/investing equivalent of snake oil?
I created Wicked Capital to serve one purpose: To teach others how to fish for themselves—to be successful and independent dividend growth investors.
This mission was born from my own experiences over a 15-year journey as a retail investor and swing trader. There have been tremendous advances for the average retail investor over that period of time—advances that have added significant value and efficiencies. For example, robust online and mobile investing platforms, as well as free investing options with simple auto-invest and reinvest functionality.
However, one inescapable fact remains—the waters are still filled with sharks. These sharks prey on naïve (though well-intentioned) retail traders—offering worthless systems, dubious strategies, and dangerous stock picks and recommendations. They make it difficult for folks to learn to fish for themselves, stay focused, and avoid disasters (i.e., lose money).
The truth is that stocks differ from fish in one critical aspect—they are inherently risky. You can run to your local supermarket every day and buy a fish for dinner… and you will be just fine. But with stocks, if you buy the wrong one the wrong way, the results can be devastating to your portfolio and your long-term financial goals.
There is a lot of bad information (and questionable motives) out there that can hurt hardworking folks—folks who are simply trying to do the right thing by investing in their future and building financial independence. To be blunt, it pisses me off as much today as it has for 15 years.
It’s vital to me that you understand the risks of buying “fish” and why I feel so strongly that it is a bad idea. So, let’s explore the 5 fundamental reasons you should learn to invest for yourself rather than simply buying “fish” from stock pickers.
The first problem with buying a fish is that you have no idea what the seller’s qualifications are to pick or recommend the stock for you in the first place.
When you have a medical problem, you have a reasonable level of confidence that your doctor is qualified to properly diagnose and treat it (i.e., sell you a fish). This confidence is base on their accredited education, medical certifications, and professional associations. Throughout their journey, their performance is closely monitored and peer-reviewed.
Unfortunately, you have zero expectation that a person on the internet or social media is qualified to provide you with accurate, reliable and actionable information on a given stock.
You can’t verify their knowledge, skills or abilities—and you (nor their peers) can review their actual performance history.
When you buy a fish (stock) based on their recommendation, you are blindly placing your trust—and your money—in their hands. You might as well buy a lottery ticket because your gambling with your money either way!
A second problem with buying a fish is that you have no idea what the seller’s motivation is for selling you on it.
Unfortunately, most people selling you on a particular stock(s) are doing so to make money. They are either seeking to (a) market other products to you (e.g., a stock-picking service) or (b) drive metrics (like views, likes, etc.) to earn greater revenue (e.g., ad revenue).
Now, there are well-intentioned folks out there. However, you have no way of knowing who’s who. And the sharks don’t care if you lose money years from now—they just care about generating their own revenue now.
This is even more concerning when you realize that most of the sharks either (a) have no clue what they’re doing, (b) have no real-world investing experience or skin in the game, or, even worse, (c) were unsuccessful investors now trying to make money any way they can—selling you a bad fish!
Finally, if my business model is predicated on stock picking, then I don’t want to teach you to fish for yourself or understand how the sausage is made. Rather, I want you to have to come back to me for your fish! Thus, my modus operandi is to make you as dependent on me as possible.
The third problem with buying a fish is that investing is a complex and highly-personal process.
When someone recommends a stock, they are basing the recommendation on their own personal frame-of-reference. As such, it may be a great fit for their unique risk tolerance, risk profile, investing approach, or portfolio strategy.
While that stock may be a great fit for them, neither you nor they have any idea how that investment will fit into yours!
A doctor would never blindly recommend a random treatment to you without knowing your unique condition, history, and situation. To do so would be highly irresponsible and dangerous—no matter whether they were well-intentioned or not.
Investing is no different. The truth is that is that it is equally as irresponsible and dangerous to recommend stocks to folks you don’t know. There are a vast number of material variables that must be carefully considered when investing in a company—variables that require an intimate knowledge of yourself that only you have.
Again, the stock pusher could have the best of intentions and the stock may be a really great opportunity and fit for them. However, that doesn’t mean it’s a great fit for you or your portfolio.
It’s wise to remember that the most effective treatment for one ailment can turn deadly when it’s used to treat the wrong thing or when it is used improperly!
The fourth problem with buying fish is that you rarely have timely and complete information regarding the transaction.
The waters you are buying fish from are further muddied by the fact that you have no way to know whether the underlying information regarding the stock is timely and complete.
You don’t know when their research and analysis was completed. Even if it was valid at the time, it may no longer be valid—material events may have occurred since then.
Furthermore, you rarely have access to the underlying data and information they used to build their investment thesis. Thus, you have no way to verify it or their findings. Was their data wrong? Did they cherry-pick data? Did they miss something? What were their assumptions?
Finally, you don’t have full transparency when it comes to their own actions. Did they initiate or add to a position? How much total risk capital do they have deployed? How much did they invest in the stock (i.e., position size)? What’s their portfolio allocation and how does this stock fit into it? Is this investment part of a hedging strategy? What’s their investing time-frame look like for the stock? What is their exit strategy? How do they know if their thesis is wrong?
The questions (and lack of answers) just go on and on when it comes to buying a fish.
You simply can’t make effective investing decisions if you don’t hold all the cards. You must have timely and complete information to base your decisions on. In other words, you must be able to fish for yourself.
The final problem with buying fish is that—like a drug—it creates dependency.
Even if—for argument sake—the recommendation pans out for you, where does that leave you?
It leaves you dependent on them for your next stock. You fed yourself today, but now you’re out of fish, hungry, and unable to catch your next fish on your own. Your stock picker now owns you!
And what happens if this source disappears? You get left high and dry!
Financial independence isn’t just about having the cash flow to pay your bills and retire. Rather, it is about taking control of your finances and being able to independently generate that cash flow.
There’s no difference between being dependent on an employer and being dependent on a stock picker!
Learn to fish for yourself!
Simply put, we do not recommend investments. Rather, we seek to teach folks just like you how to successfully dividend-growth invest for themselves. We teach you how to fish—what you catch is up to you.
The goal of our site is to provide you with the knowledge and skills you need to develop your own unique dividend-growth investing plan, strategy and portfolio.
With these fundamental building blocks, you can create your own success—doing what works for you and your unique situation. After all, no one knows you better than you do. Furthermore, this knowledge enables you to design and implement a repeatable system for yourself—providing you and your family with fish for a lifetime.
Run from those who want to sell you a fish and, instead, embrace those who want to teach you to fish for yourself.
Obviously, this is a portfolio update post and, thus, we do share one of our dividend growth portfolios on our site. This is done solely to provide a teachable example of what’s possible and to be able to integrate it into our teaching articles (viz., how we manage our portfolio).
While this provides a large degree of transparency, always remember that this only represents one of many portfolios we hold. It’s a great teaching tool—but that’s all it is.
It is not meant to be a model for you to precisely follow or duplicate. Rather, it serves as a means to illustrate principles and ideas related to the fundamental building blocks of investing. Nothing—and I mean nothing—in our portfolio is meant to be a “pick” or “recommendation.”
Now let’s get our weekly passive-income portfolio update!
As we close out the week and our fourth month since portfolio inception, we currently have a portfolio value of $2,835.47—up from our starting value of $500 on March 13th.
In terms of market performance, we are down -1.5% since inception, down -0.4% over the past month, and up +0.4% over the past week.
We have earned $28.15 in dividends since inception, $10.11 over the past month, and $2.51 during the past week. We’re looking forward to the end of the month, when we can share the information on our dividends paid—including our updated trend.
Dividends continue to trend in the right direction with roughly 36% of our earned dividends coming in the past month (representing 21% of the portfolio’s lifespan).
Our yield-on-cost (YOC) is 7.4% and our current yield is 7.4%. Here are our current allocations by capitalization and asset type:
We have made some changes to our holdings over the past two weeks:
We exited our positions in Northwest Natural Holding Company (NWN) and Aqua America (WTR). This was part of a move to consolidate the holdings in our utility sector.
We initiated positions in CVS Health (CVS) and Conagra (CAG). This move was based on what we felt were substantial value opportunities combined with strong long-run dividend-growth potential:
We hope you’ve enjoyed this week’s update on our public-view dividend growth portfolio.
You can always view our Wicked Capital dividend growth portfolio at https://m1.finance/1zUclN2JL
If you’re interested in starting an M1 Finance portfolio, please consider using our referral link https://mbsy.co/sZVS3 and we’ll both get some free cash!
That’s just one more reason to start your dividend growth investing today! It’s never too soon to start working towards your financial freedom!
Remember, when it comes to investing… never buy a fish!
Instead, learn to fish (invest) for yourself!
While there is a plethora of reasons to follow this sage advice, five big reasons not to buy a fish are:
If you’re interested in dividend growth investing—you’re in the right place! We focus exclusively on helping others be as successful as possible with this approach and we hope you’ll continue to return to our site to learn, grow, sharpen your skills, and find effective and positive ideas and motivation!
Soak it all in, take and use what you want, modify it to fit your unique situation, and keep building your own portfolio with an effective long-run plan and strategy.
Financial independence is achievable for anyone willing to put the time and effort into it—you just need to learn how to fish!
Remember, there’s no free lunch. Everything comes with a cost and, when it comes to buying fish, the secondary, unseen costs can be much higher than you think!
Enjoy your week and good investing!
Always remember, investing involves substantial risk of loss and is not suitable for everyone. The valuation of investments may fluctuate, and, as a result, you may lose substantial amounts of money. No one should make any investment decision without first consulting his or her own financial adviser and conducting his or her own research and due diligence.
You should not treat any opinion expressed on the Wicked Capital website as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion for entertainment purposes.
The opinions are based upon information we consider reliable, but neither Wicked Capital nor its affiliates, partners and/or subsidiaries warrant its completeness or accuracy, and it should not be relied upon as such.
Past performance is not indicative of future results. Wicked Capital does not guarantee any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website.
As noted above, strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested.
Investments or strategies mentioned on this website may not be suitable for you. The material presented does not take into account your particular investment objectives, risk tolerance, financial situation, or needs and is not intended as recommendations appropriate for you. You must always make an independent decision regarding investments or strategies mentioned on this website. Before acting on information provided on this website, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own licensed financial or investment adviser.