Check out the portfolios below to see how I use the same stock market basics from the blog to invest in my stocks through Motif Investing
I’ve tried just about every online investing site both as an investment advisor and to buy my stocks and other investments. While I still keep a few accounts open for research tools, one website has won out for nearly all my investing.
Not only does this new investing site help me save thousands of dollars in fees but I get instant diversification and rarely worry about the ups-and-downs of my investments.
I use Motif Investing to create funds around my stocks and investing themes and save big time on fees. Motif allows you to group up to 30 stocks, customize the group for how much of each stock you want and then buy them all with one trade.
There’s no annual management fee like with exchange traded funds and each time you invest, it’s the same low commission. You get instant diversification and save thousands on fees.
Besides the savings, you worry less about each individual stock because it’s in a group of many others. The portfolio of stocks rises and falls much more smoothly so you don’t freak out and panic-sell out of your investments.
I invest in funds that I created around five of my favorite investing themes. These five funds hold some of my favorite stocks and have nearly all beaten the market so far this year. I regularly update the blog with ideas for the funds and my stocks as well as some basic reasoning why I picked some of the investments.
My Retirement Stocks Fund
This is my best all-around investing fund for my stock portfolio. As with all my investing funds, I use the core-satellite approach. This means you invest a large chunk of your money, the core of the portfolio, in diversified ETFs around a theme or asset class. This helps to lower your investing risk because you get exposure to hundreds of individual stocks within each fund.
That’s going to smooth out your returns when any one company takes a nose-dive. The remaining part of your investment, the satellite portion, is invested in individual stocks that you like for the theme and can offer upside returns over the wider fund.
I hold two bond funds, the US Bond Index (AGG) and the SPDR High Yield (JNK), for 25% of the retirement fund. Your own allocation to bonds may be higher or lower depending on your investing goals and risk tolerance. I have about 30 years to retirement and make enough off passive investments that I may never retire.
That means I can put less money in safe investments like bonds and real estate while leaving most in my stocks. Learn how to create your own personal investment plan and decide the assets you need to meet your investing goals.
I’m updating this page just after the 2016 presidential election and bonds have been slammed lately. The AGG bond fund is down for the year though the high-yield bond fund is still sporting a nice 13% gain.
It doesn’t worry me and everyone should have some bonds in their investments. Bonds provide stability when stocks are crashing and can be used to buy more stocks at bargain-basement prices. Bonds also provide cash flow for expenses for retirees.
I like the Vanguard REIT ETF (VNQ) for my 15% exposure to real estate. The fund offers exposure to hundreds of companies that own and manage commercial real estate. Beyond the 2008 crash, real estate has historically been one of the safest investments and a great long-term asset for retirement portfolios. Real estate offers protection against inflation and the stability of a real asset, something missing from stocks and bonds.
Just over half (60%) of the retirement fund is allocated to my stocks with about half of that in ETFs. The half not invested in broad funds is spread across a range of sectors including healthcare, financials, basic materials, energy, utilities and agriculture. A few of these sectors have really been hit lately but offer strong long-term upside over the next couple of decades.
The retirement fund portion of my stocks has been a great performer since I put it together. The fund has matched the return on the stock market (S&P 500) but with less risk since much of it is invested in safer bonds and real estate.
Over the longer-term, I think the fund could continue to match the return on the stock market or come really close. With a retirement fund, you’re still looking for a good return but you need to balance it with safer investments that might not grow as fast but will provide overall stability.
Even on the recent selloff in bonds, my retirement fund portfolio has returned 14% so far this year. That’s good for a group of different asset classes and the fund has much lower risk that a purely-stock fund. I’m fine with the 14% return plus the 3.4% dividend because I know it’s safe and will be there when I need it.
My Dividend Stocks for Growth and Cash Flow
I love dividend stocks! Over the 15 years through 2014, the stock market lost money a third of the time. Investors lost an average of 16% each year stocks crashed but dividend stocks provided a source of positive cash flow every year.
Over the last four decades, companies that regularly increased their dividends returned an annualized 9.3% compared to a return of just 1.8% on companies that didn’t pay a dividend.
Dividend payments act as spending discipline on management looking to burn through cash flow and seeing a dividend deposited in your account is a huge motivator to keep investing. I love dividends so much, I included them in my Step-by-Step Investing series of books.
I put together a fund of 15 investments in some of the best dividend names in the market.
Half the fund is invested across three ETFs that pay strong dividends and could provide the potential for even stronger growth of returns. The energy sector has been slammed with a 70% crash in the price of petroleum but is there really any question about our future need for more oil and gas? The Vanguard Energy ETF (VDE) pays a 3.3% dividend and spreads my risk across 144 companies.
The Vanguard Dividend Appreciation Fund (VIG) pays a 2.4% dividend yield and holds shares of companies in the U.S. Dividend Achievers Index, companies with at least 10 consecutive years of increasing annual dividend payments. Any company that was able to increase its dividend over the tough 2008 and 2009 crisis is definitely going to be on my dividend radar.
For the individual dividend picks, I spread my stock picks across multiple sectors for diversification and looked for companies with a huge cash stockpile and a history of returning it to shareholders.
The dividend fund portion of my stocks has beaten the return on the S&P 500 by 1.4% annually over the last 10 years when adjusting for dividends. The recent three-year return has been limited by the steep drop in energy investments held in the fund but this is by design.
I set the fund up this year to take advantage of the long-term rebound in energy stocks and expect the long-term return to be much higher than the general market, adding to the 4.4% dividend yield.
Update: My dividend stocks have not disappointed with a 24% return so far this year, beating the S&P 500 by 5% plus the dividends I’ve collected. Utilities have fallen lately but they are a solid part of the portfolio and will do well in the future. Eight of the 15 investments in the group have gains of over 25% so far this year.
The Warren Buffett Way for Dividend and Value Stocks
Warren Buffett is arguably the world’s best investor and has made a career of investing in companies for more than 50 years. Besides the experience of decades in investing, Buffett and his Berkshire Hathaway holding company have the power of billions of dollars in cash to turn companies and investments into success stories.
Large investors like Buffett are required to report their stock holdings to the Securities & Exchange Commission (SEC) in a 13-F form every three months. As an investment analyst, I watch these forms for stocks that big money players are picking up for ideas on turnaround stories.
The 13 stocks in the fund below are some of Warren Buffett’s biggest investments. I’ve added two ETFs for diversification in value stocks, those with lower price ratios, and for dividend stocks.
The Warren Buffett Way fund has returned 5% annually over the last three years not including the massive gain Buffett made in his Kraft Heinz investment. The Oracle of Omaha hasn’t done as well on other investments like IBM or Deere & Co. but these are strong companies and I share Buffett’s long-term view for upside.
The fund pays a 2.64% dividend yield, well above that paid by the overall stock market, and Buffett has proven his savvy time and again for turning companies around.
Update: Buffett’s patience in IBM has paid off with a 28% jump in the shares this year. My own Buffett fund has actually beaten the market and Buffett’s portfolio of stocks. The Warren Buffett Way has returned 17% this year with winners like USG rocketing 55% and the dividend yield is just the icing on the cake.
The American Future Fund of My Stocks
The American Future Fund is my most ambitious investment among the five stock groups and my favorite stock picks.
As an economist by education, I love looking at long-term trends when I look for stocks in which to invest. Nobody can predict where stocks are going over the next year but you can spot larger multi-year trends that will play out over the next decade or longer. These are generational forces that will benefit all the stocks in a sector and could drive big returns for investors.
The price of oil has crashed more than 70% over the last 18 months and investors have nearly completely abandoned shares of energy companies. Is there any doubt though of the need for oil and natural gas in the future? Emerging markets like China and India are growing their economies by 6%+ a year and demand for oil is expected to exceed supply through 2035.
In fact, BP estimates that there will be a supply deficit in oil growing to 180 million tons a year by 2035. The selloff in oil company stocks may not last long.
Update: Since I started this fund in February, energy stocks have jumped and contributed to a huge gain on the investment. The price of oil is still less than half of what it was in 2014 and there is still a lot of upside left over the next couple of decades.
Farmers in North America have had historic harvests over the last couple of years, pushing crop prices down to multi-year lows. The lower prices are scaring investors with memories of previous farm crises still fresh in their minds.
But record harvests still haven’t changed the World Bank’s prediction of massive food shortages over the next 34 years. The agriculture industry needs to increase grain production by 50% through 2050 or we won’t be able to feed an estimated global population of nine billion. It gets worse, the World Bank is also forecasting that climate change could cut crop yields by 25% over that period.
Farmers are going to be using much more fertilizer products to increase yield and still crop prices could soar on the demand. The fund holds more than 30% in agricultural companies from seed engineers like Monsanto to equipment-makers like Deere.
Healthcare is the third sector that will drive America’s future over the next several decades. As of 2011, more than 10,000 baby boomers reach the age of 65 every day and will continue to do so every year until 2030. Almost 20% of the population will be retired by that year compared to just 13% less than ten years ago.
The aging of America is going to be a dramatic shift in the economy, especially around healthcare and senior services. Companies from drug manufacturers to medical insurers and senior-living real estate owners could face record profits as the trend continues.
The stocks in the American Future Fund have lost a weighted 28% over the year to February 2016 but that’s exactly why I created the fund. Companies in the energy and agriculture space have been slammed but there is no doubt that oil and food will be scarcer in the future.
Of all my stocks and the funds I’ve created on Motif, I am most excited about this one and its potential over the next several decades.
Update: Energy stocks have jumped this year and the fund is up 23%, easily beating the rest of the market. Agriculture and healthcare haven’t come through yet but these are long-term themes and I’m confident this will be one of my best investments for years.
My Pharma Stocks on Motif Investing
I just recently created a new fund with my stock picks in drug-makers and biotech stocks.
These stocks got hit hard in the buildup to the 2016 presidential election as candidates piled on the companies for high drug prices. Political risk around elections is one of the most consistent themes in investing and I love taking advantage of these short-term selloffs to buy great stocks.
Seriously, is there any doubt about the upside to drug stocks? Everyone complains about the high price of prescription drugs but we only have the breakthrough treatments because companies are able to recoup billions in research costs and protect themselves with patents.
Washington knows this and isn’t going to cripple the drug industry.
Just like in my American Future Fund, the demographics are firmly behind my drug stocks. We’re all getting older and one of the best ways to hedge your own prescription drug costs is to invest in the companies that make the drugs.
As usual, I’m using a core-satellite approach for my stocks in the fund. I hold 35% of my investment in two funds that invest in biotechnology and pharmaceutical companies. This gives me access to hundreds of companies.
The remaining 65% of the fund is invested in 13 drug-makers and generic drug companies. Investing in both types of companies means I make money when a blockbuster drug is developed and when it comes off patent protection and generics make money on it.
In less than a month I’ve got some huge gains like 40% on Ariad Pharmaceuticals and 9.3% on my largest holding, the biotechnology fund. The surprise election of Donald Trump took some pressure off the drug-makers and these stocks are poised to move higher. So far, my stocks in the fund have jumped 5% in less than a month.
|Stock Fund Name||Types of Investments||Return (one-year)||Dividend Yield|
|Ready-Made Retirement Fund||60% in stocks, 25% in bonds, 15% in real estate||14%||3.4%||Check out this fund on Motif|
|Dividend Stocks for Growth and Cash Flow||Top dividend-payers in energy (25%), utilities (16%), financials (16%) and dividend growers (43%)||24%||4.4%||Check out this fund on Motif|
|The Warren Buffett Way||13 of Buffett's biggest investments plus 40% in value and dividend funds||17%||2.6%||Check out this fund on Motif|
|The American Future Fund||Investments in energy (41%), agriculture (31%) and healthcare (28%).||23%||2.2%||Check out this fund on Motif|
|Pharma's Bright Future||Pharmaceutical and healthcare stocks to benefit from rebound and long-term upside.||5% (three weeks from Oct 24)||0.6%||Check out this fund on Motif|
Why I Invest My Stocks on Motif Investing
I detailed in my Motif review why I’m investing almost all my money now on the website but thought I would outline it here if you don’t want to click over and read the review.
First is the obvious saving on investing fees. I own 74 stocks and ETFs in the five funds on Motif Investing. Buying each of these just once a year would cost at least $740 on even the cheapest investing site. Instead, I pay just $50 to buy each of the five funds on Motif.
Since each fund is a group of more than 10 stocks and funds, the value doesn’t rise and fall as quickly as individual stocks. I used to check my stocks on other sites weekly and sometimes daily if one was falling fast. I would freak out and have lost money selling at the wrong time.
This doesn’t happen with Motif Investing because I look at the fund value rather than individual stocks.
I recently found another reason to love Motif Investing. It’s been a great way to find new investing ideas by sorting through some of the other funds created by investors on the site. All I have to do is sort by the category I want to find stocks, i.e. dividend investing, and then scroll through some of the investments held by others.
About the only investing I don’t do on Motif right now is my peer lending investing strategy which I do on Lending Club. Peer loans pay cash every month and are returning upwards of 10% on my money.
Compare the investing site you’re using to Motif Investing and see how much you could save by grouping stocks into a fund. There are a lot of reasons to consider investing on Motif and I invest almost exclusively on the site when picking my stocks. Click through to the site and see how Motif is changing investing.