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Last week, I talked a little bit about the recent performance of my dad’s income portfolio.
In case you missed that column, the upshot was that every new recommendation I’ve made is up and beating the broad stock market since we launched in June. I also gave you five strategies that I’m using to help the portfolio outperform.
Of course, as a skeptic would note, we’re just a few months in and the wind has been at our backs so far.
You’ll get no argument from me on that. And, look, the last thing I really like to do is toot my own horn anyway.
But I absolutely want you to understand just how powerful a carefully chosen list of dividend stocks can be. Which is why I feel compelled to point out the following …
If You Look at My Bigger, and Longer-Lived, Dividend Stock Portfolio
You’ll See the Same Basic Story of Market-Beating Gains!
I launched my Dividend Superstars portfolio back in June of 2007, with the stated goal of helping investors generate above-average income while beating the broad S&P 500 stock market index.
Considering that interest rates were already pretty low back then, the timing couldn’t have been better. Of course, that was also just about the time that the U.S. stock market was topping out … at a level we have yet to revisit, even after all the recent gains.
So, how have my stocks done?
Using the same time period I cited last week (inception through October 21, 2010) … 33 recommendations outperformed the market vs. 17 that underperformed.
Moreover, the sum total of ALL my recommendations — including open and closed positions, winners and losers — have beaten the S&P 500 by a whopping 22 percentage points!
Perhaps the best part is that so far this year through October 21, my current recommendations had produced a return of 15.6 percent vs. a gain of just 6.1 percent for the market.
Take a look at the following table, which shows each individual position next to the S&P 500′s performance over the same period …
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As you can see, I highlighted the ones that are not only showing open gains but also beating the index over the same timeframe. And heck, even a couple of the “underperformers” are showing nice gains.
But let’s say you haven’t been getting these recommendations. What can you take away from all this as you continue to manage your own portfolio? [Editor's note: To start getting Nilus' market-beating recommendations right now, for just $69 a year, click here.]
Four Important Lessons I’ve Learned
While Building My Dividend Portfolio …
The economic landscape is always changing. Different firms are emerging as leaders while others are watching their businesses go down the tubes. To be successful you have to look at each individual company very carefully before you buy it.
Still, besides my earlier statement that dividend stocks are a great investment category, here are a few bigger rules I’ve used to build my portfolio:
First, you cannot just go with the crowd. Refer back to that table again and you’ll see what I mean. A lot of my recommendations came at times when everyone else was running away from U.S. stocks altogether!
It’s easier said than done but you cannot let other people’s opinions be your final guide. Instead, examine the facts for yourself and have the confidence to act when others won’t. That’s true whether we’re talking about broad markets or individual companies.
Second, paying attention to sectors is critical. Why are there so many consumer staples and utility companies in the list above? Well, as I’ve said in these columns many times before, these particular sectors happen to be great places for solid dividends. Plus, they are great defensive pockets during prolonged economic weakness. This was something that I recognized before — and just as — the crisis was hitting.
I believe paying attention to where other investors will be going later, and finding the best companies in those sectors first, is the key to continual outperformance in a more actively managed portfolio.
Third, cut losers before they get out of hand. Early on, I made this mistake myself a couple times. But since then I’ve become a lot more vigilant about letting the market have the final say at a certain point. That’s why you see so few losers in the current portfolio!
Does this mean I don’t stick to my guns? Of course not. However, I also define the risk I’m willing to take and draw lines in the sand a lot more often … especially given the volatility we have now.
Fourth, let your winners run when fundamentals warrant it. I’m the first person to recommend taking profits when a position has run too far, too fast or when I think a stock is truly at a fair price.
At the same time, look at that consumer staples recommendation that’s risen 88 percent or the Master Limited Partnership that’s up 67 percent while the market has fallen 19 percent! I could have easily told subscribers to take profits a long time ago. Instead, I thought it was better to stay in and watch the gains continue piling up.
Bottom line: There’s a lot more to consistent success than these broad guidelines. Yet I’m confident that just doing these four things can greatly improve nearly any investor’s performance and I hope you keep them in mind as you continue to navigate these interesting times.
Best wishes,
Nilus
P.S. While there’s no guarantee that my strong run will continue, I have every reason to believe we’ll keep racking up gains in Dividend Superstars going forward … and I’d love to have you along for the ride. Just click here to learn more and start a risk-free subscription today.
