Last year I blindfolded myself, threw darts at a list of stocks, and bought the first 10 that I hit.
I let them ride for a year and showed you the results.
This year I’m embarking on a ploy that’s a tad less crazy, but far more heated:
I’m competing against 19 financial writers in a tournament to see who can rock the hottest investment gains.
Here’s how it’s going down:
#1: At the beginning of January, 20 financial writers each invested $500(-ish) across a maximum of 30 stocks. All of us received this money from Motif Investing.
#2: Each of us created a “motif,” a basket that collects the entire investment.
#3: Every motif is tracked on a scoreboard.
As of this morning, the Afford Anything motif holds the #4 position. C’mon, say it with me: “We’re number four! We’re number four!”
The 20 competitors will track our investments for a year.
Next January, the winner takes the crown. (Um, the metaphorical crown.)
No-Fee and Low-Fee
“Hold on — investing in 30 stocks would trigger massive trading fees. Wouldn’t it?”
Awesome question!
As I mentioned in my last article, fees consume a HUGE bite from your gains.
Back in the day, I used to pay $10 to trade a single stock. Bleech.
The errors of youth.
We’re using Motif Investing for this year’s competition, which charges $9.95 to buy a “motif” (basket) of up to 30 stocks. You can custom-build your own motif or use one of theirs.
Their motifs capitalize on the ways our world is changing, offering themes like “BioTech Breakthroughs,” “Fossil Fuel Free,” “Fighting Ebola” and “Tablet Takeover.” These motifs track companies related to a trend.
The “Wearable Tech” motif, for example, tracks everything from Garmin and GoPro (brands you know) to the behind-the-scenes manufacturers and suppliers that play a crucial role in creating the critical chips and components within every FitBit or Jawbone or Apple Watch.
Motif “mimics what many of the best global hedge fund managers do,” notes the managing editor of Forbes, Matt Schifrin.
Obviously, I prefer paying $0 in trading fees. But paying $10 to buy a curated basket of 30 stocks (that’s 33 cents per stock) is a screamin’ deal, considering that you get access to almost any stock you want.
Best of all: As a limited-time bonus, they’ll give you up to $150 if you open an account now with at least $2,000. (This is an affiliate link, but I only get $45. You get $150. Lucky duck.)
What Did You Invest In?
The Afford Anything motif is filled with cheap stocks. If you’re going to bargain-hunt anywhere, do it in your investments!
It features an average price/earnings ratio (also known as P/E ratio), a measure of the share price relative to per-share earnings, of only 2.28.
If you’re not familiar with P/E, suffice to say: that’s cheap. The average P/E of the S&P 500 is historically around 15 and currently 21.3.
The companies within the Afford Anything motif represent wearable technologies, diabetes treatments, energy companies and a few others.
Point. Counterpoint. What’s the Point?
“I don’t understand — What’s the point of entering this competition?”
Part of my mission is to destroy myths around investing, which include:
1) Investing is complicated.
2) Investing is risky.
3) Only rich people invest.
By showcasing investing in a fun, friendly and lighthearted way, I’m hoping more of you will feel comfortable investing.
I want to show you:
- It’s easy to start
- It’s fun
- You can start with tiny sums of money
- You don’t need a fancy diploma
Speaking of which, let’s tackle those three myths I listed above:
Myth: Investing is complicated.
Reality: Investing is a skill, like tying your shoelaces. The more you practice, the easier it gets.
Have you tried to teach a child how to tie shoelaces? (Or do you remember learning it yourself?)
Have you noticed how the kid looks overwhelmed at the complex labyrinth of twists and loops and knots?
If you don’t possess a skill — ANY skill — that action feels infuriating, overwhelming, impenetrable.
But once you’re practiced, that action becomes old hat. You can tie your shoelaces while jamming out to music and thinking about an upcoming meeting and gnawing on a burrito filled with four types of salsa and extra guacamole. (Wait, is that just me?)
Investing is the same — regardless of whether you’re operating in the world of index funds, rental properties or analyzing sector-specific funds. When it’s new, it feels complex. Once you know what you’re doing, it’s infinitely easier.
(By the way, check out my Ultimate Beginner’s Guide if you’re new to this scene.)
Myth: Investing is risky.
Reality: Investing is risky if you don’t know what you’re doing.
The word “investing” is that this term gets thrown around by people who are speculators and gamblers, rather than true investors.
- “I’ll buy this rental property, even though it doesn’t come close to meeting the one percent rule, because I’m hoping it’ll rise in value.”
- “The markets rose 12 percent last year. It’ll do the same this year, right? Riiiighhhtt?“
- “I bought 400 shares of XYZ Corp. at $8 per share and sold them a week later for $12. I made $1,600 in a week! I’m a pro!”
What’s the common thread? There’s no strategy in the statements above. Hope is not a plan.
Myth: Only rich people invest.
Reality: That makes as much sense as saying, “Only healthy people eat well and exercise.”
“Investing” isn’t confined to only the stock and bond markets. Investing encompasses creating any asset — such as launching your own business, selling your own creative works, or building a portfolio of rental properties.
You’re a rebel. Think outside the 401k.
Afford Anything
Awesome!! I’ll download it and check it out!
weenie
Good luck with this challenge!
As a matter of interest, where did you come in the Blindfolded Monkey experiment, out of the 20 that took part?
Afford Anything
@weenie — I’d love to know! I have no idea. That’s the downside of everyone exchanging emails with one another to report their earnings — there was no official scoreboard. (I suppose we could have someone pile everything onto a spreadsheet, but nobody that I’m aware of has done that).
I know anecdotally that I landed somewhere in the middle — not the Top 5, but not the Bottom 5, either. Jeff Rose, the man who organized the challenge, came close-to-last after he bet everything on oil stocks just before they tanked.
Tiffany Alexy
OK, so this is awesome. Can I join in the competition?! Or can there be an “Afford Anything Rebel” competition?
I’d heard of Robinhood but as far as I know it’s only available on mobile devices… which is a huge turn off for me.
Off to check out Motif… whee!
Afford Anything
Thanks Tiffany! This particular competition is only open to bloggers, but you can definitely track your own investments and see how you perform! And of course, take the One Percent Challenge (and then shovel that money into investments). That’s the best win!!
Jill
I like what you said about investing as creating ANY asset. I am investing traditionally (stocks- mostly penny stocks). I also buy cheap, beat up properties, fix them up and rent them out. I have 401k through work. I have accounts in different currencies.
I am also working to build myself up as an asset. I have a blog (www.captjillsjourneys.wordpress.com) that I hope someday I will be able to earn something from. I am working on learning to write and photograph for publication. I am constantly taking classes so I can improve my standing at work.
Although I have not done bad with the stocks, I think the investments in myself (training for a better job) has done the most for me so far. Because I have the job I do now, I have been able to invest in the properties that I hope will allow me to ‘retire’ much sooner than usual.
Karen
I am participating in a no-money online stock picking contest in a group I belong to. Right now, I am in #4!
Which tickers did you pick? Beware of value traps!
Frank
Love your blog. Read it regularly.
I find myself in agreement with you so often and love your writing style– so I have nothing to say.
Finally! Something to comment on! Myth 3 only rich people invest: I like most of what you have to say but I completely disagree with your exercise/food analogy. Plenty of sickly people eat right and do there exercise and never get better. SOOO many people eat wrong and smoke and never exercise and were born with lucky genes that allow them to live well in spite of the abuse to their bodies (in your analogy—trust fund kids?). Once one is out of shape it is truly PAINFUL to deprive yourself of food and to move your excess weight around as exercise. Now to say only healthy people ENJOY exercise, or exercise only comes easy- even nearly effortless (by comparison) to healthy people– that I could agree with!
But, creating an asset! Totally!
Afford Anything
@Frank — I agree with you; you’re absolutely right that people who were born with illnesses, disabilities, or other less fortunate health conditions might do everything right, but suffer due to the lottery of genetics. In my example, I was referring only to people who have no illnesses/genetic problems/other non-environmentally-caused health issues.
Thanks for being a Rebel — and please comment more often! I love hearing voices in this forum. 🙂
Allen
How are you calculating the P/E of your Motif? Your 2.28 number caught my attention so I strolled over to look at your portfolio, and my off the cuff calculation is no where near yours. Anyways other than that, I do like your blog, very open and refreshing take on things.
Afford Anything
@Allen — That’s the calculation that Motif Investing created, which I showed in the screenshot. Motif creates the P/E calculation based on the relative weightings of each individual stocks within the portfolio. Thanks for checking out the investing challenge!
Allen
Thanks for the reply! It looks like Motiff is including companies with a negative earning and using a P/E of zero for these companies. This pushes your average way bellow what it actually is.
Afford Anything
@Allen — Ahh, so that’s how they adjust for negative earnings! Two of my stocks — Cypress Semiconductor and SMTC — register with a P/E of zero; the rest range from anywhere from 0.10 (Tandem Diabetes Care) to 32.6 (Garmin Ltd, the highest). Most of the stocks in my portfolio have P/E’s in the teens. Of course, I can’t take a straight average — since I hold different weightings of each stock — but it looks like my 7.8% exposure to the energy sector certainly drives down the average (both in value and returns!) 🙂
Joseph Hogue
I love that you are debunking these myths about investing that people use as excuses to somehow convince themselves not to invest. But they really just need to take the time to do their homework and learn and seek advice of course, and they would agree, it is fun!