Error on my part. Using IRR, I extended the IRR calculation for $12.50 weekly contributions to only 52 weeks. I should have done it for 104 weeks. That will match your 19.61%.
Great question. SCHD is a large holding in my personal accounts, so I've been tracking SCHD's performance closely with our Classroom Stock Portfolio. As of today, our Classroom Stock Portfolio's value is $1,717.23. If we had instead invested the same exact amounts into SCHD on the same days, the portfolio's value would only be $1,491.51 (a difference of 15.1%). Obviously, there is no guarantee that our portfolio will keep outperforming SCHD at such a high rate, but I've been gradually selling off my personal SCHD holdings and reinvesting in our Classroom Stock Portfolio. I also prefer our actively-managed Classroom Stock Portfolio strategy rather than SCHD's purely algorithmic approach where no one is overseeing the stock selection. SCHD has, at times, had large positions in what I consider value traps.
Would be interested to see companies that do buybacks and reinvest in company, instead of paying divideds. Dividends are taxed so. There is a tactic (not to pay any taxes) where you never sell assets, and borrow against them, therefore better not to have dividends, as dividends are taxed at 15%. Its called buy, borrow, die. You kind of need 500k+ portfolio for it, but it can also include house, bonds, wine, exotic cars, etc.
Hi Don, thanks for the info. Stock buybacks are part of our methodology for choosing our stocks. And there are at least 2 ways to pay no taxes on dividends. The easiest is to have your income-producing assets in a Roth IRA. Also, if one is retired and married, qualified dividends are not taxed if total income is less than $123,250 (0% tax bracket plus standard deduction). For a single person, it's $61,625 (0% tax bracket plus standard deduction).
@@RexJacobsen I am talking about taxable account. Though, now got me thinking, would not be surprised, that you can actually borrow against your roth, and all those other retirement accounts. Bank of america even has art department, where you can borrow against your art. It is a neat tactic that rich uses, but you do not have to be super rich to use this tactic. p.s. great content, only 1st video i seen of yours, about to watch more. I rarely get interested in most youtubers, as i seen a lot, but you are onto something. p.s. last year i actually even outperformed nasdaq, at one point my portfolio was 58%, nasdaq 32%, and thats not even with crypto included, just stocks.
Rex - Nicely done in all regards. How did you calculate the 19.61% Annual Return? - - - I get a higher number. Both Excel and my financial calculator say the return for a $50 investment for 24 months ending with $1,692 is 2.86% per month. Extending the 2.86% to a full year is materially higher than your 19.61%. You provided a large amount of information about the portfolio, except what are your criteria for buying a stock? There are many more dividend paying stocks than the 10-15 you named. How did you did which to buy? What are you going to do during the next bear market?
"What are you going to do during the next bear market?" Good question, Jim! I'll do the same thing we did when we last had a bear market (which was 2022, -19.44% that year) ... keep investing. I know of no one who can successfully and consistently time the market ... if someone could, they would be on the list of richest people, and those on the list are either business-owners, or "buy and holders" like Warren Buffett. When everyone is scared and stocks are dropping, that's the best time to buy. And for investors who are afraid to invest at all-time highs, investing at all-time highs between 1950 and 2020 resulted in an annual return percentage of 10%, versus 11.1% for those that didn't only invest at all-time highs. So the difference isn't large.
Jim, I calculated the return using Excel's internal rate of return function. Remember, the portfolio is designed to represent an accumulation portfolio of a young investor, starting with a weekly investment of $12.50. As people advance in their careers, they usually get at least a cost-of-living increase in their salary (usually about the rate of inflation, which is historically 3% per year). Since most people invest more as their career advances, we boost the $12.50 weekly investment once a year by the amount of inflation. So in 2023, our 2nd year, we boosted the weekly investment by $0.82. So the weekly investments in our 2nd year was $13.32. And now for this year (2024), we boosted it by $0.49 (inflation was lower this time around, hence the lower increase). So in 2024 we are investing $13.81 weekly. Maybe that accounts for your higher calculation?
The 2.86% I mentioned above is a monthly rate. 12 times that is 34.38%. So, I tried Excel's IRR function. I got 37.12%. (The IRR function uses an estimating algorithm.) - - - I also used $12.50 for 53 weeks and the IRR
I would think your students would want to know that. - - - Also, you may want to consider teaching them how to determine the intrinsic value of a stock. That process would likely support your accounting teaching objectives.@@RexJacobsen
