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investing in 2021 with the dad investor

What I’m investing in for 2021 (and how)

Table of Contents

Can I beat the market with my investing in 2021?

Watch and see what I’ve done and am about to do with my own money this year.  

I’ll take you through the ideas, strategies, techniques and decisions that I end up making as I aim to grow and build a better investment portfolio.

Find out if I really have any skill as a “Dad Investor” or is it just luck that I’ve managed to find success in the past?

Article Outline:

  • Disclaimer
  • My 2021 Investing strategy
  • The rules and parameters I’m setting
  • Tools I’m using
  • Research process
  • Building a Waitlist
  • Actions taken

Disclaimer

This year I’m going to show you what I do with my own money to add to my investment portfolio.

But before we go any further I need to explain some things.

Call this a disclaimer, or a word of warning.

This post and project is for entertainment purposes only. That means I’m doing this to give you something to read, enjoy and find interesting. Please don’t use this as a guide or framework for how you should or could invest. Every decision I make it applicable to me in my situation.

I already have a sizable investment portfolio. I’m not starting from scratch, I’ve been investing for decades and am not going into this cold. Take care of your financial position before you start investing.

The investments I make this year will be more ‘active’. This is due to me wanting to find more growth opportunities, which will mean I’ll be reading researching and spending time finding specific stocks I think are going to grow. It goes against the passive approach so many experts recommend, but it’s what I want to do this year.

If you are new to investing, then you could likely be overwhelmed with what you are about to read. find conflicting perspectives with what you have read elsewhere. Investing does not need to be this complicated. I am making it because well, its in the name here, so I want to do this. You can easily be a passive investor. I have plenty of articles already that can help you do that in this section of the site

My investing strategy for 2021

I’m a massive advocate for starting any investing journey with a strategy.

It’s the first thing I question when people ask me about tools, stocks or apps.

A good enough investing strategy (doesn’t have to be a 15 page compendium) can be a helpful, reliable guide to reference throughout your decision making process.

The short version: Rebalance and buy more growth stocks

If you want to know the long version, it’s:

  • To rebalance towards my allocation targets, investing in growth stocks on the US and ASX while keeping alignment with my geographical allocation priorities
  • I will investment monthly (at a minimum) half of any surplus our household has, with the aim to hold these investments for at least five years
  • I will look to be more active in selecting (via research) individual stocks or niche ETFs that represent good growth opportunities.
  • This will be a hands on, manual approach to investing rather than an automated for the time being
  • I will be using apps, brokers and research providers to help me with my decision making and execution through the year (more below)

If you want to read more background on how I establish the rules of my investing strategies, read the next section. If you want to skip to what I’m actually doing then skip to the section on tools.

Rebalance

Balancing and rebalancing is an important part of DIY investing.

Without a rebalance you may find yourself over invested in something, which can distort the way your portfolio continues to run. Setting parameters for how you target each investment type – whether by my groups, geography, risk or fund – helps you build something aimed to meeting the goals you have in mind.  

E.g. You buy $100 in bitcoin and $100 in gold, wanting 50% of each. Bitcoin doubles in price and gold stays the same so now you have 75% bitcoin and 25% gold in your portfolio. It’s out of balance and you’ll need to rebalance to get back to the 50/50 you were aiming for.

How I review my investment portfolio

I look at my portfolio in few different ways – by geography, sector, product type – but the one format I like the most is via investment type.

This is the name of a custom type of grouping that I’ve put created to give me a way to build a safe, income generating portfolio but also be able to chase more “exciting” opportunities.

Basically, it gives me a way to be boring and reliable but also active in investing.

For this type of grouping have four labels that every investment I own finds itself in.

  • Income – basic fixed interest investments like bonds
  • Dividends stocks- Stocks and ETFs that have a decent regular dividends
  • Growth Stocks – Stocks and ETFs that target capital growth
  • Alternatives – currencies like gold, bitcoin and REITs

You could look at that list from top to bottom in order where the top is safe and predictable while the bottom is higher risk through speculation.

Using my portfolio management tool of choice Sharesight, I’m able to review the diversity of my portfolio by these groups.

Here I can review and see how much each type of investment contributes to my overall portfolio.  There are about 20 investments that I have that make up the portfolio currently.

  • Dividend stocks include IOO, VGS, MLT, VAE and other ETFs
  • Growth stocks include my Spaceship voyager portfolio and other individual stocks
  • Alternatives include currencies like Bitcoin and REITS like CHC
  • Income is pretty much all my cash savings and bonds.

My Target portfolio by investment type

For my own investment type group here, I have a personal target that I’ve set that I want each allocation to align with. These targets are:

  • 10% in income.
  • 50% in dividend paying stocks,
  • 25% in growth stocks
  • 15% in alternatives

As you can see dividend stocks make up more than 65% of my current overall portfolio. I would like to shave this down closer to 50%.

How I’ll rebalance my portfolio this year

I’m going to rebalance in two ways this year.

  1. By buying more growth stocks
  2. By aligning the products I use to invest

The most typical way to rebalance is to sell off some of your over allocated investments (in my case div stocks) and rebuy you underexposed group (in my case growth stocks). Because I’m planning to invest regularly I’m just going to focus on buying mostly growth stocks to make up for its low exposure.

Realignment by product type

This is getting really particular now.

The other way I’m going to rebalance is by the investment tool I use.

I currently use half a dozen or so investment platforms.

  • Vanguard
  • SelfWealth
  • CommSec Pockets
  • Raiz
  • Spaceship
  • Independent Reserve

This year I’m going to close some accounts and try to consolidate as many products as possible.

One great opportunity I’m excited for this year is to start using Raiz’s custom portfolios.

This is a way to build an all in one portfolio of up to 14 ETFs (plus bitcoin) that I can easily invest into like it’s a savings account.

Rather than buy individual ETFs via CommSec Pocket or SelfWealth, I can add them to my Raiz custom portfolio and buy into a portfolio that will always be balanced the way I like.

Ok enough spruiking that product, here is how my portfolio works by what products I’m using for each investment type.

A note on investing strategy: This type of investing strategy is not for beginners. It’s a DIY strategy suited to my personal preferences. I’m not in the business of giving strategic or product recommendations. Please proceed with caution as you read this and discuss with a financial partner, planner or someone close if you are looking to make big financial decisions with your money.   

Going for growth (stocks)

There are also a few questions I’m looking forward to finding the answers to, especially with the focus being growth this year (which means I kind of need to use some skill). 

  • Will putting in more effort get me better results?
  • Has 15 years of investing taught me anything?
  • Will emotions get the better of me?
  • Is a year a good enough time frame?

Because my investing this year is going to be focussed on growth stocks and also open and completely transparent here on the page, I want to give it some structure and cohesion.

This will be good for me (and you) as it’ll help me avoid running off instinct which is never good.

Rules:

  • All investments will need to pass through my process review (below) before becoming purchasing.
  • Investments can be an ETF, individual stock, managed fund or an alternative investment.
  • Investments should be brought to help rebalance the diversity of the Investment Type allocation of my personal portfolio
  • Keep investments within the realm of familiarity –  markets like ASX, NYSE , Nasdaq and sectors that I know of (more on that soon)

Tools I’ll be using to invest this year

Throughout the year I’ll be relying on a few tools from the tool bag to help me build that portfolio.

SelfWealth – my online broker of choice. Now with their ability to do US trading, I’m pretty stoked. Nice, clean interface, well priced and you can get 5 free trades when you sign up! Read more here.

Raiz – Since launching custom portfolios, this is my preferred choice to invest in ETFs as all the ones I want to buy are able to be added to the one portfolio I can easily invest in.

Sharesight – Phenomenal portfolio account management. Would not be where I’m am with confidence and investing strategy without it. The tools to replace your spreadsheet and combine all your investments into one place.

Simply Wall St – Fantastic Australian made research tool that helps aggregate information on stocks that help you make strong financial decisions.

Independent Reserve – Is my choice for buying and holding currencies. Yes, we’ll get to Bitcoin and Gold in this article.

TBC – A couple of tools that I’ve thought of using and may look to during the year. I’m in no way apposed to paying for premium tools but need to find value to bear the cost.

  • Morningstar Premium
  • Rask Investor

Time to research and filter stocks

Research is paramount if you are picking individual stocks.

I’ve been exposed to this failure in the past.

You don’t buy Apply stocks cause you like the iPhone or Nike stocks cause you like the shoes.

You are buying a share of a business so you need to act like a manager.

To do that I set myself some ways to identify whether a stock that im interested in is going to be one I want to manage (as a part owner).

Here are the two lenses I look through:

Macro

For a company to make to get me interested in researching them it has to speak to me at a MACRO level. This means it needs to be:

  • Something I know and understand
  • Able to solve problems for millions
  • A business I want to own (not a sector, country or price)
  • Want to invest in it for a long time
  • Match my personal values

Once I feel like I’m on to something I then look at the details, the more micro details.

Micro

This is really a due diligence progress.

Ill be expanding on this area a bit more when I get time, but for the moment I look at the numbers and filings f the companies. This is all publicly available information so it can take a bit of time to find. I do use Simply Wall St to help speed this process and fact finding up.

I look for each company that passes the micro test to have:

Strong Growth

  • Free Cash Flow

Strong Return

  • High Return on Capital
  • Excellent Management & Good Governance

Low Risk

  • Simple
  • Predictable
  • Dominant Companies with Large Barriers to Entry
  • Limited Exposure to Extrinsic Risks
  • Strong Balance Sheet

Action and decisions I'm making this year

This year I have a few things I’ll be aiming to do to help support my strategy:

  1. Adding to pool of alternative investments through currencies
  2. Begin research of growth companies, then invest if ready
  3. Consolidate and realign the products I use

A note on dividends

For most of my investments I have investments paid directly to me (as opposed to participating in dividend reinvestment plans).

I’ll pool all this money together and use to either add to alternative investments or growth stocks.

Dividends get paid in Jan and July for most of my investments, with some also having quarterly or monthly payments as well.

Alternative Investment tactics

Through 2020 I was investing weekly into Bitcoin and Gold currencies as an alternative investment.

For the time being I want to continue to do this, while adding Ethereum to the mix.

Why Ethereum? I’m happy with the size of its market cap.

With this making it three currencies I’ll be investing in I want to automate it all.

Using my favourite crypto exchange Independent Reserve I’ll invest in each currency on a 3 weekly basis. e.g. Gold week 1,BTC week 2, ETH week3, then repeat.

The same amount, the same day and same time.

This can all be automated through Independent Reserve. I just need to make sure there is enough money being sent to that account to have these trades take place.

With this all setup and automated I can spend more time on…

Tactics to find growth companies.

Anything is possible here.

I could find an investment that is on the brink of breaking out, or the exact opposite (and about to crash). I’ve invested in both before  and probably everything in the middle.

For growth stocks, I’ll be looking at mostly individual stocks, but ETFs aren’t out of the question as my search will be sector specific.

I’ve told you about the vetting process I use to filter companies from like to want (the macro and micro process), but here is a run down of each point I take to find companies.

There are certain sectors that growth companies find themselves in. Such as:

  • Materials/Resources
  • Energy
  • Discretionary products
  • Industrials
  • Technology

An easy way to invest in these sectors is to invest in an ETF that covers one sector like these. On the ASX there are a few:

  • Materials – QRE
  • Energy – FUEL
  • Industrials – the WHF LIC
  • Technology – NDQ, TECH, ASIA

I haven’t been able to find a ETF for discretionary spending on the ASX but there are a few in the US, like XLY on the NYSE.

So that’s an easy way but many ETFs diversify too much for my liking and I don’t want to have everything, just the winners.

So how do we find the winners?

What I like to do with ETFs like these is have a look at the holdings, or the companies within the fun.

Each product page should allow you to find the entire listing of holdings (either on the page for via a download).

NDQ for example has 100 tech companies, with TECH has 34.

I also look through the lit of holdings and highlight any companies I might want to research further, have invested previously in or are common in other funds.

Me highlighting companies I know and have interest in.

Here is me looking over the holdings of ETF TECH. 

Having investigated a few ETFs already, I have slowly built a list of stocks to research.

Currently they are all ASX stocks as I have an a high weight towards global stocks and want to bring that back.

Companies I've researched (the watchlist)

After finding some interesting companies via the methods above, I now have a bit of a watchlist. This list is something I’ve put together over the last year.

Note: these are not stock recommendations or even companies I want to buy. They are just a a list of interesting companies I need to find out more about to see If I want to invest in them.

NameSectorDiscount (at time of writing)
AppenTech13%
CloverDiscretionaryNA
BapcorDiscretionary26% under
RedBubbleDiscretionary5%
AltiumTech13%
Technology OneTech23%

Now its time for some micro analysis.

I’ll be aiming to find out – is there potential for strong growth, without too much risk?

To do this, I’ll turn to one of my favourite stock analysis tools Simply Wall St.

Portfolio view of companies I have in the watchlist
Get an indication of what the intrinsic value of the company is vs its share price.
More data to help verify that a company is actually running well

On the platform, each stock has a profile page you can review. The fantastic thing is that the tool does a heap of calculations for you (massive time saver) including a crack at the real intrinsic value.

It’s up to you how much you use this data as fact as it is aggregated and generated from public sources.

Building the stock waitlist.

If a company goes from being interesting to investable then it sits on the waitlist.

This is a list of companies good enough to be bought when the price is right.

What I aim to do is buy the company below its intrinsic value. Otherwise, known as the sticker price (by someone like Phil Town).

It’s like getting something on sale.

When do stocks go on sale? Mostly when investors are fearful.

The news cycle breaks stories that have investors going in and out of stocks.

During periods where the market reactions, we can then buy the stock knowing the business is worth more than what the market is selling it for.

So what companies made it to my waitlist?

None yet. I still need to research.

I can't understate the importance of thorough research prior to investing in a specific stock.

Read the annual reports, documents on the ASX, history of management, performance and what sets it apart from its competition.

Companies I'm researching right now include:

  • Microsfot
  • Magellan
  • Shave Shop

All three are in my circle of competency. Meaning I understand exactly what they do and how they do it.

The calcs I’ve done It actually looks like they are all trading at a discount at the moment.

This means I might be be adding to them as a practice to see if I am right about this discount and still feel comfortable as an onwer.

Wait, what – a practice? Yeah a practice. It's a way for me to sink my teeth into something without sacrificing too much.

Rather than go 100% all in on a stock, I'll ease my way in.

Let's use $10k as an example. I might put $500-$1000 into that company as a practice investment. Owning a stock changes many things for an investor. Emotions, thought process, strategic thinking. Once you have skin in the game things become a lot clearer.

If I still feel confident after the ‘practice' I'll then add my parcel for investing in installments. Maybe $2k of that $10k at a time until I'm happy to be invested.

So what am I doing?

  • Automating money to be sent to my currency exchange (IR), broker (SelfWealth) and Raiz (custom portfolio) on a regular basis
  • Set an auto transfers to buy currency on a weekly basis until I’m happy with the balance in there
    • Invest in Bitcoin, gold, Ethereum on a rotational basis
  • Buying into the three growth stocks find value and opportunity in
    • Continue to use money transferred to broker to add to positions
  • Continue to regularly add infrequently earner money (tax return) if possible to larger pool of passive investments (existing ETFs) that are in RAIZ

That’s it for now.

A bit of homework for me and some actions I’ll take in the first quarter of this year.

Hopefully I can be in a place soon where I can feel confident in my decisions and just ride my investments while adding more money to them.

Ideally I’d like to beat the market or at least the long term average of 7% that the market seems to find.

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