review

2020 Portfolio Review: What a Year

Without a doubt, 2020 will be a year few will ever forget. A global pandemic upended normal life for so many people. Business were forced to close, schools turned to virtual learning and wearing a mask became a part of everyday life.

Early in the year, stocks went through a massive selloff as it appeared that the world was headed for at least a significant recession, if not depression. Timely stimulus from central banks and governments helped to prevent this, though millions remain out of work thanks to Covid-19.

The S&P 500 Index had a total return of 16.3% this past year, but 11.7% of this gain occurred over the last three months.

The portfolio that my wife and I are building, which I have nicknamed The March to Freedom Fund, had a total return for the year that was slightly behind the market index at 12.8%. Much of our gains came in the last quarter as well. As always, our total return includes dividends received but not additional capital added to our accounts.

Over the last six years, when we first began publicly tracking our portfolio on another platform, our portfolio has a total return of 86.3% compared to a 75.9% gain for the S&P 500. This is the first year that the index has beaten our portfolio in that span of time.

As stated in my first quarterly update here on GuruFocus, our portfolio is designed to produce enough dividend income to cover our expenses in retirement. While the gains in share price are most welcomed, we believe that dividend growth is most important as this will be how we plan to pay for retirement in 15 to 20 years.

Second-half purchases

As long-term investors, we try to limit how much selling we do within our portfolio, though we do trim positions from time to time. For example, we trimmed Microsoft Corp. (MSFT) at around $180 in early February as the position had become quite large and we wanted to redeploy to other positions. Of course, shares have gained since then, but we have no regrets as we wanted to limit the size of our holdings at that time.

We did make one significant change to our portfolio this year as we decided to rollover my wife’s pension from a previous employer. She has no plans to return to that profession and we conducted many different scenarios and found we would likely come out ahead investing it on our own as opposed to waiting 30 years for her to be able to start collecting a set amount. We normally make 20 to 25 trades per year, but ended up making 70 purchases this year due to this additional capital. We will most likely make a similar number of purchases in 2021 as we invest the second half of her pension.

Listed below are the dates and prices of the stocks we have purchased since the first-half update and their gains or losses through the end of the year.