Beating the Market on Autopilot?
1 Year with Automated Investing
I started automating my investments in June 2023.
Rain or shine, bull or bear, $1,000 gets deducted from my bank account and into the markets.
The beauty of this strategy is that I don’t have to worry about things like savings rate, or what stocks I should buy.
This takes a huge load off my mental headspace.
By now, you would be curious as to what stocks I included in my automation.
How did I choose these stocks and their respective allocations?
The website that I use is Portfolio Visualizer.
The beauty of this website is that I can choose stocks and play around with the allocations, to see which one gives me the best risk-adjusted returns.
What are the stocks I chose to automate?
I structured the portfolio to be balanced, with a mix of established and mature companies to growth companies.
1. Vanguard S&P 500 ETF (VOO) - 35%
The market return that many benchmark their portfolios to.
If you can’t beat the market by investing in individual stocks, stick with a diversified broad based index fund like this one.
As the saying goes, if you can’t beat them, join them.
2. Amazon.com Inc (AMZN) - 30%
What more needs to be said by about this tech giant.
Starting off as a bookstore, the company has since expanded into diverse business lines, including
Physical stores
3rd party sellers services
Advertising
Subscriptions
AWS
3. Berkshire Hathaway (BRK.B) - 25%
The brainchild of Warren Buffett and the late Charlie Munger, being a shareholder of Berkshire gives you automatic diversification.
Berkshire operates like an insurance company, with insurance revenue making up more than 25% of its total revenue.
It’s also how insurance companies make so much money.
4. Tesla (TSLA) - 10%
It used to be Tesla that got the most media coverage (this is now Nvidia).
Whether you believe that Tesla is a car company, there’s no doubt that most of its revenue comes from automotive.
Portfolio Performance
A return of $1,563 on $12,000 works out to a 13% return.
While this might seem like a decent return, it’s nothing to shout about.
Investing a lump sum into the S&P 500 would’ve netted more than 20% returns.
That aside, there are benefits to automated investing, not least the peace of mind it gives us.
So if you’re someone who is prone to panic selling during market downturns, then automating your investments is an option to consider.
What next?
Automating my investments was an experiment I wanted to test out for a year.
Now that the experiment is over, and it has underperformed the index, it’s back to the drawing board for me.
Not to say that these returns are bad, but active investing might be more suitable for me (famous last words that may come back to bite me).
I hope you enjoyed reading this piece as much as I did writing it.
If you’d like to connect, I am spending a lot more time on Twitter/X these days. Follow me over there for more investing and personal finance content