DIY individual stock fund

Discussion of the Stock portion of the Permanent Portfolio

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tarentola
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Re: DIY individual stock fund

Post by tarentola » Mon Jun 29, 2020 6:13 am

I tried out individual stocks, as described in another thread in November 2019 viewtopic.php?f=1&t=10178&p=181885#p181885. I am a Euro investor.
1. PP 4x25%
Stocks
50% individual Euro dividend shares (Sanofi, Vinci, Red Electrica, Renault, Air Liquide etc)
25% German Dax ETF (DAX from Lyxor)
12.5% each Nasdaq and Emerging Markets ETFs (ANX and AEEM from Amundi)

Bonds
About 50-50 long and medium Euro bond ETFs (MTH and MTD from Lyxor)

Gold
ETF (GBS from ETFS)

Cash
Mostly just cash, with some in a short 3-5y bond ETF (MTB from Lyxor)

2. VP
About 30 individual dividend shares, One-third sterling and Euro, two-thirds USA.
40% defensive sectors (consumer staples, utilities), 30% cyclic (materials, consumer discretionary), 30% other (energy, industry)
Includes Shell, Unilever, Volkswagen, Macdonalds, Procter and Gamble, Realty Income and other popular shares.

The PP is a bit complicated but this is partly for historical reasons: I had the Euro shares and some bond funds already and did not want to sell everything and start again. Not much dollar exposure in the PP, as there is plenty in the VP.

The VP yields just under 4% and is something of an experiment. When the next crash comes, I would hope that the dividend stream remains relatively unchanged even if the capital value goes down.

If I had my time over again, or if I decide to simplify matters, I would probably go for a PP with 40-40-20% Euro, US and Em Mkts, one long bond fund, one gold ETF such as SGOL, and cash on deposit and in some short bonds.
Well the next crash did come in March 2020, and the dividend stream suffered, and the capital value went down. My share selections were conservative, and spread out across sectors, but over the last few years have not matched the relevant indexes (Eurostoxx for the Euro PP shares or S&P 500 for the US VP shares). Although I trade as little as possible, the stock value fluctuations are distracting, and require internal rebalancing sometimes. It is nice to see dividends coming in, It but they are eclipsed by the individual shares' capital gains and losses (Macdonalds +130%, Tupperware -95% for example).

I can see that regular dividends would suit some investors, and there might be a case for having a portfolio of dividend aristocrats and just taking the income. Also the idea of direct ownership has appeal and might have some diversification benefit. But for me at least, individual shares mean a lot of thought and work for no gain, and I intend to replace the individual shares progressively with index funds for simplicity and occasional rebalancing.
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mathjak107
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Re: DIY individual stock fund

Post by mathjak107 » Mon Jun 29, 2020 6:58 am

you still need share appreciation to at least equal the dividend payout or you don't see a positive total return
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