Still, the portfolio’s total return of 15.7% in just over seven months trails the S&P 500‘s gain during that time. That index has gained around 16% during that same window, and when you add the dividends paid by S&P 500 companies to the total return, the index has easily outperformed the iPIG portfolio.
So what?
A strong case can be made that if your investing strategy can’t beat a reasonable benchmark index, you’d be better off investing in the index. The thing is, in a rapidly rising market like the one we’ve been experiencing recently, it’s very possible for the market to stay ahead of even proven winning strategies and master investors. Even Warren Buffett may be on track to trail the market for the first five-year period in basically forever.
Of course, the iPIG portfolio doesn’t even pretend to be anywhere near the same league as Buffett. Still, it is built on many of the same principles of dividends, valuation, and diversification that Buffett’s investing mentor, Benjamin Graham, spelled out in his classic work, The Intelligent Investor. And while the iPIG portfolio may be trailing the overall market, it still looks to be on track for its primary goal of trying to build an income stream that grows at least as fast as inflation.
When all is said and done, if you’re on track to reach your goals as an investor, does it really matter whether you’re trailing the overall market?
Speaking of those goals…
Last week, two companies paid their dividends to the iPIG portfolio: railroad giant Union Pacific Corporation (NYSE:UNP) and car parts magnate Genuine Parts Company (NYSE:GPC). Union Pacific Corporation (NYSE:UNP)’s dividend added $4.14 to the iPIG portfolio’s coffers, while Genuine Parts Company (NYSE:GPC)’ added $12.36. Union Pacific Corporation (NYSE:UNP) has held its dividend steady for three quarters, while Genuine Parts Company (NYSE:GPC) has paid two dividends at its current level. Both companies have track records of annual increases, and the iPIG portfolio looks forward to seeing if that trend continues.
Additionally, fellow iPIG pick Raytheon Company (NYSE:RTN) went ex-dividend last week, setting into process a payment of $0.55 for each of the 27 shares that the iPIG portfolio holds. As with Genuine Parts, Raytheon Company (NYSE:RTN)’s dividend has been at that level for two quarters. If Raytheon Company (NYSE:RTN)’s board continues with its pattern, the dividend will be reviewed for a potential increase after four consistent quarters.
Dividends, reliably paid and regularly increased, form the basis of the iPIG portfolio’s strategy to try to build an income stream that grows at least as fast as inflation. While seven months is way too short to declare victory, thus far, the portfolio is certainly living up to early expectations.
iPIG portfolio snapshot as of July 5, 2013
| Company | Purchase Date | No. of Shares | Total Investment (including commissions) | Value as of July 5, 2013 |
|---|---|---|---|---|
| United Technologies | 12/10/2012 | 18 | $1,464.82 | $1,737.54 |
| Teva Pharmaceutical | 12/12/2012 | 38 | $1,519.40 | $1,479.72 |
| J.M. Smucker | 12/13/2012 | 17 | $1,483.45 | $1,753.04 |
| Genuine Parts | 12/21/2012 | 23 | $1,476.47 | $1,926.02 |
| Mine Safety Appliances | 12/21/2012 | 36 | $1,504.96 | $1,739.88 |
| Microsof | 12/26/2012 | 55 | $1,499.15 | $1,881.55 |
| Hasbro | 12/28/2012 | 43 | $1,520.60 | $2,004.23 |
| NV Energy | 12/31/2012 | 84 | $1,504.72 | $1,973.16 |
| United Parcel Service | 1/2/2013 | 20 | $1,524.00 | $1,750.80 |
| Walgreen | 1/4/2013 | 40 | $1,501.80 | $1,770.00 |
| Texas Instruments | 1/7/2013 | 47 | $1,515.70 | $1,692.00 |
| Union Pacific | 1/22/2013 | 6 | $805.42 | $944.88 |
| CSX | 1/22/2013 | 34 | $712.50 | $790.84 |
| McDonald’s | 1/24/2013 | 16 | $1,499.64 | $1,597.76 |
| Becton, Dickinson | 1/31/2013 | 18 | $1,518.64 | $1,776.06 |
| Aflac | 2/5/2013 | 27 | $1,466.35 | $1,543.32 |
| Air Products & Chemicals | 2/11/2013 | 17 | $1,510.99 | $1,561.96 |
| Raytheon | 2/22/2013 | 27 | $1,473.91 | $1,777.68 |
| Emerson Electric | 4/3/2013 | 28 | $1,548.12 | $1,580.04 |
| Wells Fargo | 5/30/2013 | 37 | $1,525.48 | $1,556.59 |
| Kinder Morgan | 6/21/2013 | 42 | $1,518.37 | $1,614.48 |
| Cash | $271.01 | |||
Data from the iPIG portfolio’s brokerage account, as of July 5, 2013.
The article It’s OK to Trail a Rising Market originally appeared on Fool.com and is written by Chuck Saletta.
Fool contributor Chuck Saletta owns shares of Aflac, Texas Instruments, Microsoft, McDonald’s, Genuine Parts, United Technologies, Wells Fargo, Teva Pharmaceutical, Emerson Electric, Becton Dickinson, Walgreen, Union Pacific, Hasbro, United Parcel Service, CSX, J.M. Smucker, Air Products & Chemicals, Mine Safety Appliances, NV Energy, Raytheon, and Kinder Morgan. The Motley Fool recommends Aflac, Becton Dickinson, Emerson Electric, Hasbro, Kinder Morgan, McDonald’s, Mine Safety Appliances, United Parcel Service, and Wells Fargo. The Motley Fool owns shares of Hasbro, Kinder Morgan, McDonald’s, Microsoft, Raytheon, and Wells Fargo.
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