Revealing My Six-Figure, Market-Beating Portfolio At The Age Of 30

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Revealing My Six-Figure, Market-Beating Portfolio At The Age Of 30

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Planning for retirement or financial freedom is a lifelong process.In this article, I share experiences shaping my investment style and my complete 21-holding investment portfolio.I discuss the key ...

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Jacob Wackerhausen Planning for retirement is a lifelong process, yet the earlier one starts, the better. In fact, the duration of an investor's ability to let his money compound is arguably more important than the size of the monthly contributions and the ROR one earns. I started my investing journey back in 2017, when I was finishing my Finance and Accounting degree, initially investing my cash in volatile assets such as Bitcoin  and Ethereum , being reckless with the bit of money I had saved up without a proper understanding of risk.  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Jacob Wackerhausen Planning for retirement is a lifelong process, yet the earlier one starts, the better. In fact, the duration of an investor's ability to let his money compound is arguably more important than the size of the monthly contributions and the ROR one earns. I started my investing journey back in 2017, when I was finishing my Finance and Accounting degree, initially investing my cash in volatile assets such as Bitcoin (BTC-USD) and Ethereum (ETH-USD), being reckless with the bit of money I had saved up without a proper understanding of risk.  Anyway, who cares about risk management at the age of 23? All that matters is outsized returns! Soon enough, a harsh reality struck me, wiping out 90% of my initial $6,000 investment, prompting me to reconsider my investment approach and set realistic goals if I aim for any financial freedom after all. After the initial hiccup, for which I am very grateful it came early enough, having just a few thousand bucks to lose, I realized investing is not a \"get-rich-overnight\" scheme, and highly volatile assets are not my cup of tea. Instead, it's a process of figuring out our own risk profile, learning to control emotions, and, most of all, doing our own due diligence to understand what we invest in. After all, if one does not understand the business behind the stocks we own, we often buy or sell the shares at the wrong time. The capital loss has taught me that, as an individual investor, permanent loss of capital is the most painful experience, more painful than earning a meager return on my investment for a prolonged period. This ideology has defined my investment style ever since. While I focus on investing in growth companies, especially those set to compound wealth for generations, I focus on quality, blue-chip businesses with wide moats and industry-leading profitability, trying to avoid commodity businesses or those with too cyclical earnings. Likewise, balance sheet health and low financial gearing are essential for businesses to thrive and grow over decades, unlocking market-beating returns with arguably less volatility during prolonged economic drawdowns. To put it into perspective, businesses like Visa (V) or Mastercard (MA) are perfect examples of quality that make the cut for my portfolio with industry-leading profitability and blue-chip business models without a significant cyclicality to their earnings. In fact, Visa's business in the last 15 years experienced only one year of negative earnings growth. V Valuation (Fast Graphs) Of course, for a 30-year-old, perhaps that's not the most exciting business to invest in, but I value sleeping well at night and earnings stability over outsized returns. Yet, even though it may seem like a relatively boring business on the surface, Visa's stock delivered 22.19% CAGR appreciation in the last 15 years, beating the market (SP500) by 1.6x. That's precisely the type of business I want to own in my portfolio. Now, my Seeking Alpha nickname, Millennial Dividends, would automatically suggest that I exclusively focus on dividend investing. To be fair, in my heart, I am a dividend investor, as I particularly enjoy the positive cash flow of my assets, which hits my account on a monthly basis, and I can either reinvest the proceeds or redirect the cash toward other endeavors. Dividend-paying companies are often regarded as superior quality, and are mature businesses (in the good sense of the word) with less volatility, particularly during an economic recession. All of these factors fit my investment style, but by focusing purely on dividend-paying companies, investors would leave too many high-quality names on the table. As a 30-year-old, I cannot afford this, as I have at least another three decades of compounding before I start relying on the distributions to finance my lifestyle. Very often, I see in my surroundings that fellow young investors, who by no means rely on the distributions, focus overwhelmingly on mature companies lacking growth just for the sake of their appetizing dividends. Let me show you a few examples:   Take, for instance, Coca-Cola (KO). It's a great business, if you ask me, and its flagship product is even tastier. Yet, buying shares of a company with 5.4% EPS growth in the last 20 years without future catalysts is simply leaving money on the table for someone in their 20s or 30s despite the 2.7% dividend yield. Another great example is Altria (MO). The company pays a 7.7% dividend yield, but the forecasted bottom-line growth is 4% annually in the best case. That's not to say that the company is operating in an inferior industry of smoking and drinking, which is falling out of fashion, particularly with younger generations.  By selecting inappropriate assets for their portfolios, some investors risk robbing themselves of hundreds of thousands, if not millions, of dollars in the future. Even a minor change in annual ROR, such as 1-2% over 30 years, can, thanks to compounding, create an enormous difference in the final wealth.        Invested Annual ROR 8% Annual ROR 10% Annual ROR 12%   $100,000 $1,006,265.69 $1,744,940.23 $2,995,992.21   Click to enlarge With that, let me show you my investment portfolio, which I manage as a 30-year-old with real asset allocation. 80% of my net worth is wrapped up in my 6-figure investment portfolio (excluding the equity in my apartment). For the record, aim of stating 6-figure portfolio by the age of 30, is not to brag, but rather to underscore how serious I am about investing and financial independence. After all, what's a 6-figure portfolio in today's world of unlimited opportunities? Investment Portfolio I often hear from other investors or read in comments on Seeking Alpha that younger investors should focus on investing their money in market-weighted ETFs with low expensive ratios, earning market returns while dollar-cost-averaging with their savings, such as:   Ticker Fund Expense Ratio   (VIG) Vanguard Dividend Appreciation Index Fund ETF Shares 0.06%   (SPY) SPDR® S&P 500® ETF Trust 0.09%   (QQQ) Invesco QQQ Trust ETF 0.20%   Click to enlarge That's certainly one way to approach it - even a smart way if you ask me and undoubtedly suitable for most of the population not interested in stock picking. Investing in indices provides better industry and geographical diversification, owning more equities (goods and bad ones alike), but steals the possibility to beat the market. As a natural-born stock picker, I enjoy the thrill of building my investment portfolio, aiming to beat the crowd's returns. Even though I think diversification is vital for most investors, true wealth is built through concentration. Looking at the wealthiest people on our planet shows us that concentration in a single business is the true path to riches, yet I would not generally recommend it. I aim to own around 20 holdings (currently 21) in my portfolio, concentrating my bets on the highest-conviction ideas rather than spreading my capital across mediocre opportunities. Even though I cover a wide variety of companies on Seeking Alpha, I own just a few. That's not that I do not trust my due diligence, but concentrating my bets on high-conviction picks can ultimately lead to market-beating performance. With that, these are my holdings, with their actual % allocations.        Holding % Allocation Sector   SPDR® S&P 500® ETF Trust 16.8% ETF - Diversified   LVMH Moët Hennessy (OTCPK:LVMHF) 13.5% Discretionary   Berkshire Hathaway Inc. (BRK.B) 10.1% Financial   Visa Inc. (V) 8.4% Financial   Amazon.com, Inc. (AMZN) 5.1% Discretionary   NVIDIA Corporation (NVDA) 4.4% Tech   Alphabet Inc. (GOOGL) 4.0% Communication   Booking Holdings Inc. (BKNG) 3.4% Discretionary   Prologis, Inc. (PLD) 3.3% Real Estate   Microsoft Corporation (MSFT) 3.0% Tech   Broadcom Inc. (AVGO) 3.0% Tech   ASML Holding N.V. (ASML) 3.0% Tech   Realty Income Corporation (O) 3.0% Real Estate   UnitedHealth Group Incorporated (UNH) 2.8% Healthcare   Merck & Co., Inc. (MRK) 2.7% Healthcare   MSCI Inc. (MSCI) 2.4% Financial   MercadoLibre, Inc. (MELI) 2.4% Discretionary   Chipotle Mexican Grill, Inc. (CMG) 2.4% Discretionary   Caterpillar Inc. (CAT) 2.4% Industrial   PepsiCo, Inc. (PEP) 2.2% Defensive   NextEra Energy, Inc. (NEE) 1.7% Utilities   Click to enlarge From what you can see, few things become evident right away. First, my single-largest holding is the market-weighted SPY, which tracks the S&P 500 index, even though I just said a few paragraphs above that I tend to avoid ETFs. Before you think I lost my mind, let me explain why. The ETF offers exposure to 500 US businesses, giving my portfolio far better diversification than the rest of my holdings. Effectively, it allows me to own a stake in all major, profitable businesses, providing access to potential winners of tomorrow—just as Apple (AAPL) and Microsoft once were. This elevates the pressure to chase individual growth stories. From the sector allocation standpoint, SPY's exposure is very different compared to mine:   SPY's Sector Weight (State Street) My investment portfolio is heavily weighted towards the discretionary sectors, driven by the 13.5% position I recently built in LVMH, a point I will return to in a moment. The second-largest sector is represented by the Financials, though again, this is somewhat misleading as the 10.1% allocation to BRK purely drives it, yet Berkshire's business, outside of its insurance operations, is hardly a typical financial business. The technology sector, which is the most prominent in the SPY's weighting, is 16% of my overall sector exposure. Yet again, one can argue that businesses such as Google, Amazon, and Visa are, in many ways, tech businesses, and it's not my objective to increase exposure in this sector by adding new names. At the end of the day, I rarely look at the sector weighting, as today's businesses are diversified across different product offerings, and the official sector naming is often skewed, particularly among the mega-caps. Author's Sector Exposure (Author's Pie Chart) What's more important, though, is the significant % gap allocation between LVMH, and BRK, and the rest of the portfolio, which, with a combined exposure of 23.6%, demonstrates my concentration in the two highest conviction picks. First LVMH. I owned the business in my portfolio for the past 5 years, as LVMH's business is arguably among the highest quality on this planet. Its strong brand portfolio with 75 prestigious luxury and heritage brands makes it impossible to replicate, setting fashion standards that, in return, drive consistent growth. In the past 20 years, the company delivered annual EPS growth of 12.5%, with a shareholder-friendly policy as 48.4% of the company is owned by the Arnault family, beating the market annually by 1.54%. LVMH's EPS CAGR (Fast Graphs) Its share price has recently declined, falling as much as 33% since its all-time high, driven by soft sales in its largest market, China. The Chinese economy faces the negative wealth effect of falling real estate prices, prompting consumers to reconsider big-ticket purchases. With the stock trading around 20x this year's earnings, I am buying the shares aggressively and will continue adding as the stock price falls further. An eventual recovery in China will help bring consumers back, and India is slowly becoming the next luxury hotspot. LVMH Price % off ATH (Seeking Alpha) Now, Berkshire Hathaway. I have long owned some of the conglomerate's shares, but there is rarely an excellent opportunity to buy them well below their intrinsic value. However, recently, I increased my position at around $420/share, not due to its favorable valuation but because I like to see what Buffet is doing. It's hard to say whether we will face a full-blown recession over the next 6-12 months, the market will witness a growth scare, or neither of those, but Buffet recently trimmed 49% of Apple's holdings, increasing its cash pile to $277B, ready to strike if the opportunity comes.   BRK's Cash Pile (Chaiki Analytics) I also recently exited all my Apple holdings; an article where I covered the move can be read here. The cash pile serves as a pillar in the storm, unwavering in strength when all else is shaken, which bodes well with me, particularly as the market is entering an inherently uncertain period amidst FED's rate cuts and GDP growth slowdown. Certainly, at its size, I am not expecting any outsized returns with this position, but it instead serves as a \"safer harbor\" for my capital. Likewise, through Berkshire's stock, I gain exposure to its wholly owned subsidiaries such as BNSF Railroad and GEICO. Both the industrial and insurance sectors are areas that my portfolio lacks. The period of the elevated FED's fund rates to a multi-decade high has provided its own opportunities, pressuring the REITs as higher borrowing costs impacted the business's valuations. The favorable valuation has allowed me to buy quality real estate businesses at a fraction of the cost, bringing REIT's exposure to 6.3% via Prologis and Realty Income. However, as we are nearing rate cuts (as soon as next week) and investors start pilling money back into REITs, their valuations are no longer as attractive as they were a few months back. Following their 3-month solid performance, I plan to cut my Realty Income position as the upside has become very limited. 3M Returns (Seeking Alpha) I expect no better than 9.5% annual returns moving forward, and that's far too low for somebody looking for the next 10-bagger. I might rotate the leftover cash to boost my LVMH position further if the French-domiciled shares pull back below €550/share. O Potential ROR (Fast Graphs) In the last two years, Nvidia and Broadcom have also become significant portions of my portfolio, even though initially, each started in positions below 1.5%. In fact, including ASML, the semiconductors make up 10.4% of the total portfolio, which is relatively a lot given their high volatility. Yet, I am not planning to trim any of these holdings, as the AI narrative has a long runway to play out. Instead, I prefer to cut my weeds and water the flowers. I still see good opportunities in the market outside the ones I mentioned, such as Amazon and Google. Google's stock has recently faced pressure after losing the US Antitrust Lawsuit on its search engine monopoly. The DOJ threatens to break up the business or potentially restrict its exclusive agreements with Apple and Samsung, with the likelihood of losing some search market share. I covered the lawsuit in detail in my last Google coverage, yet I still see the harmful effect of the remedies as unlikely to hurt Google's established position. The stock is now trading 22.18x its Blended P/E at a relative discount to its historical valuation, with future annual EPS growth in the 13-15% range. GOOGL Valuation (Fast Graphs) On the other hand, Amazon's business has pulled back as the company issued weaker-than-expected guidance for Q3 2024, with the uncertain market backdrop. Yet, the company's OCF is expected to grow massively over the next few years, supported by strong AWS growth, and investors could be well rewarded if the stock's valuation reverses back to its historical 25x its P/OCF. AMZN Valuation (Fast Graphs) One challenge with a portfolio of someone in their prime earnings years actively investing earned income is that in the early stages, the portfolio might be disproportionately influenced by the monthly contributions, affecting its overall composition. Let's say each month I add anywhere between 2-5% of the total portfolio value in cash; I am nonstop tasked with searching for new investment opportunities or revisiting existing holdings, whether the current valuation allows me to add more shares. That's one of the good problems to have. However, this demands continuous research and decision-making, particularly in unpredictable market conditions. Overall, despite the erratic monthly contributions, which affect the portfolio's performance, my portfolio has managed to beat the market by 1.7% over the past four years with a lesser drawdown. Even though I started investing in 2017, I have not kept track of the portfolio's performance before 2021.        Year My Portfolio S&P 500   2021 29.8% 27.2%   2022 -9.0% -18.3%   2023 17.2% 24.3%   2024* 20.1% 17.9%   Average: 14.5% 12.8%   Click to enlarge While a 1.7% delta over the market's performance might not sound like a lot, don't forget that $100,000 invested today with an ROR of 14.5% annually over 30 years has the potential to grow into $5,809,845 and $100,000 earning an ROR of 12.8% would end up being \"only\" $3,709,139. The 1.7% could potentially be responsible for an extra $2,100,703 in 30 years; the effort definitely worth it. Of course, earning 14.5% annually for 30 years is wishful thinking, yet my goal is to beat the market annually by at least 1.5%. Takeaway Some time ago, I read a great article by an unknown economist outlining the difference between the satisfaction level during progress and achieving a goal. The study mainly focused on how much more satisfying a progress is compared to achieving the goal. A few years ago, I set a goal to achieve $100,000 invested in my portfolio by the age of 30. I experienced progress towards the goal, which felt very fulfilling and exciting, yet hitting the goal felt rather lackluster, just like any other day. Nevertheless, the journey proved invaluable, allowing me to learn and grow. As I approach my 30th birthday in two weeks, I planned on writing this \"portfolio special,\" sharing experiences that shaped my investment philosophy, and sharing my portfolio with my followers. From now on, I plan to provide at least a quarterly update on my portfolio, including any adjustments in my core holdings and key financial information explaining why my portfolio might be superior to the broader market. I hope you enjoyed this one, and here's to the next goal of $1,000,000. Thank you for reading and for your unwavering support. I look forward to your feedback in the comments section and hearing what you think about my portfolio's holdings.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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