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My Investment in the Grow Your Dough Throwdown

Grow Your Dough

If you’re a regular reader of Frugal Rules you know I love to talk about investing in the stock market. It’s part geek and part wanting to grow our wealth so we’re not having to work like crazy in our 80s. So, when Jeff Rose threw out an investing challenge several weeks ago for the 2014 year I was quick to jump at it.

What is the Grow Your Dough Throwdown?

I’m glad you asked! :-) The general purpose behind the challenge, on one level, is to have a little competition between fellow PF bloggers to see who has the most game when it comes to investing. On another level, it’s also intended to help teach those who’re not investing in the stock market (or any other mode of investing) to start thinking about their future and put a plan together to help them along the way. With that in mind, following are some of the details about the Grow Your Dough Throwdown:

  • Open a brokerage account at the beginning of the year
  • Fund said brokerage account with $1,000
  • You may not add funds to this account over the year
  • You can trade as much as you want and what you want, though no margin is allowed (you wouldn’t be able to use margin anyway as margin accounts have a minimum balance of $2,000)
  • Write a blog post and share publicly what you’ll be buying
  • Track the progress over the year and hopefully be the winner

Who Will I Be Investing With and What in?

I’ve written quite a number of brokerage reviews as I believe it’s important to know what your options are in the brokerage space. That said, I’ve opened another account with Scottrade. As I shared in my Scottrade review, they’re my favorite brokerage for a number of reasons. They’re very competitive in terms of pricing at $7 per trade, they have over 500 local branches (one of which is about five miles from our house) and they offer great service. I also have several accounts with OptionsHouse, though we do the majority of our investing with Scottrade. There are various other good brokerages out there, including TradeKing, OptionsXpress, Etrade and TradeMonster. Now that I’ve got my account with Scottrade open and funded, my investment choice for the throwdown will be…drumroll please…VTI, or the Vanguard Total Stock Market ETF – of which I was able to get 10 shares at a limit price of $95 per share. Real exciting for an investing contest I know. ;-) However, I do have a number of reasons for the decision. Largely, I like to invest in index funds or solid dividend paying stocks and while I do have a small part of our portfolio dedicated to more speculative (though still researched) investing, my approach to investing is long term in nature. Essentially, when it comes to investing, boring is good as you want to be investing with the market as opposed to trying to beat the market. I’ve spoken with many retail investors over the years who waste time and WAY too much money trying to beat the market when they only end up behind it in the end. So, my point in my investing choice for this is not only to try and practice what I preach, but also show that investing with the market, for the long term, is generally the better approach to take.

My Hope in This Challenge

I’ve spoken ad nauseam in the past about investing basics. If you’d like to read some of those posts, you can look here, here, here, or here. With that in mind, there are various reasons as to why individuals do not start investing or make “bad” investing decisions and they generally go back to lack of time/education on investing to thinking they can actively beat the market, to everything in between. It is my hope that through this year-long challenge we as a personal finance community can encourage others to take investing seriously and begin to plan for their financial futures. Not only is it a part of being financially literate, but it also involves thinking past today and looking at “tomorrow.” My other hope is that it encourages others to see that they can start investing too and that it’s not rocket science. Yes, investing in the stock market can be difficult to start in the beginning, but the beauty is that it only takes some simple education to begin. If you’re in that boat, then please know that with a little education you can make it far with your investing endeavors. I would also like to point out that my investing decision for this challenge is not a recommendation as each of us have our own unique situations. The reasoning behind my particular decision is that I lack the time to actively manage more stocks and simply want to invest with the market as I believe it’s generally the better approach to take as my view is a long term one and not something I’m going to accomplish quickly. That said, if you do have questions about your specific situation please consult with a trained and certified financial advisor as to what best fits your needs. If you have questions as to what brokerage to choose to begin your investing journey, you can check out my online brokerage page or you can contact me. So, what do you think of my plain vanilla investing strategy with this challenge? What do you have planned for the weekend? Photo courtesy of: 401(k)2013

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. If you're wanting to grow your blog, check out my blog coaching services to see how I can help you take your site to the next level.

36 Comments

  • Liz says:

    I always go for index funds and they don’t disappoint. Why fix the strategy when it isn’t broken in the first place? Have a great weekend!
    Liz recently posted…What My Parents Taught Me About MoneyMy Profile

    • John says:

      That’s my thoughts exactly. I would’ve also considered some solid dividend payers, but index funds make it much easier for me. Hope you have a great weekend as well Liz!

  • Oh, I wish we could do this!!!! Love your plan, but have to go with Liz on the Index Funds, particularly Vanguard. Knowing you though, John, you’ll kick tail at this. :-)
    Laurie @thefrugalfarmer recently posted…The Frugal Farmer Family’s 2014 GoalsMy Profile

  • Good luck with the throwdown! So is the “winner” determined at the end of the year? I’d be interested to see what other investing methods are being used. I’m definitely rooting for you as I’d a big proponent of index funds. But even if you don’t win the throwdown, it doesn’t mean that index funds aren’t winners. Probably need a longer term to really see the results the lower fees.
    Andrew@LivingRichCheaply recently posted…Shamed For My FrugalityMy Profile

    • John says:

      Thanks! Yea, he’s running it for the year and will report back through the year on it. I love index funds, and for me it works out great as I was going to do this anyway and I just don’t have the time right now to manage something else that is more “active” – if that makes sense. :)

  • Sounds like an interesting challenge John. I posted an infographic recently about the performance of index funds vs some of the world top investors and the funds often came out on top, so why waste your day worrying about lots of individual investments hey.
    Adam @ Money Bulldog recently posted…Resisting the temptation of the January SalesMy Profile

    • John says:

      That’s exactly my point Adam. Why try and waste time trying to beat what the market is doing. I do have a small portion of my portfolio set aside for speculation, but by and large it’s in index funds or high dividend paying stocks.

  • I was thinking about joining this challenge, but then realized that I could use the money when we sell and buy a home in a few months. Maybe if we do this in 2015, I will join! Best of luck John and I think you have a good strategy.
    Grayson @ Debt Roundup recently posted…Republic Wireless Giveaway – Free Phone and ServiceMy Profile

  • I’m so glad that you are sticking with the simple on this. From what I’ve seen most participants are using up a good portion of their funds with multiple trades and commissions and that seems counterintuitive to what growing your money should be about.
    I’m rooting for your success, John – and in no small part because this is our investment strategy, too!
    Mrs PoP @ Planting Our Pennies recently posted…PoP 2013 Spending SummaryMy Profile

    • John says:

      I’ve seen a bit of that as well Mrs. Pop. While I understand the felt need to be “sexy” with it, that would be defeating the purpose in my opinion. I have a very, very small amount of our portfolio in speculative investments – but the overwhelming amount of it is in index funds, or high dividend payers. Slow and steady wins the race in my opinion, so why mess with it? :)

  • This sounds like a fun challenge! I also find it kind of cool that you took the index fund approach and should be fun comparing to how other participants do. I’m opening an IRA for the first time this year and I have been looking very closely at the Vanguard ETFs.

    • John says:

      That’s awesome DC! You really can’t go wrong with many, if not most, of the Vanguard index ETFs. I know you’re limited on time like me, so they’re a no-brainer in my book.

  • If it was play money then I’d be plowing it into some high growth or penny stocks. Real money, especially your own, changes that a lot. So an index is a solid way to go.
    JC @ Passive-Income-Pursuit recently posted…Dividend Update – December 2013My Profile

    • John says:

      Completely agreed JC. If it were play money I’d go into something more speculative, but being in my retirement portfolio it changes it a lot. At the end of the year, it’ll just be combined with my other Scottrade Roth. :)

  • I totally agree with your investing strategy! People think they need to get “sexy” with their choices; however, all of the research indicates that a “slow and steady” approach is the best way. I also love that you are highlighting using a brokerage account to invest “non-retirement” funds. People think they only have two buckets of money, cash and retirement funds and they lose the opportunity for growth and returns in a portion of their cash by not setting up a brokerage account.
    Shannon @ Financially Blonde recently posted…FB Foodie Friday – Ratatouille – Remy StyleMy Profile

    • John says:

      Completely agreed Shannon. Slow and steady wins the race in my opinion. I could go crazy and start trading out of this or that stock, but that would only eat up my money with fees and open me up to other risk I’m not comfortable with.

  • I’ve had that Vanguard Total Stock Market Index Fund for a little over a year and it has skyrocketed.
    Stefanie @ The Broke and Beautiful Life recently posted…Tips for Gambling ResponsiblyMy Profile

  • Index funds are a great way to go. It’d be interesting to see the results at the end of the year and who really wins out, the aggressive ones or the safe and sound ones. Best of luck!
    Amanda @ Passionately Simple Life recently posted…The Long List of Goals…My Profile

  • Sounds like a fun and interesting challenge. I also have that index fund in my portfolio. Doing great so far. Good Luck!
    Raquel@Practical Cents recently posted…Lessons Learned in 2013My Profile

  • Finally!!! Let’s get some people going on this and see how we do. With such a big run last year in equities, this year may be a big challenge. I like it…

  • Very cool challenge. Will we get to see quarterly, semi-annual update or will it just be at the end of the year?

    It’ll be great to see the progress amongst the challengers in a snapshot. May get many other reader into learning more about index funds and other ways of investing throughout the year.
    The Phroogal Jason recently posted…5 Must Do Financial Checkups in JanuaryMy Profile

  • Wow, good luck! One of my goals this year is to invest in the stock market outside of my retirement investments. I think I might play along without actually entering the official throw down.
    Daisy @ Prairie Eco Thrifter recently posted…Friday Links – Colder Than Mars EditionMy Profile

  • Jamie V says:

    I’d like to start doing something this year beyond my 401K and Roth IRA, but need to figure out what. In my quest to understand more, I do have a question (which may seem rather elementary, but I’m new at this..): Why did you go through Scottrade to buy a Vanguard ETF rather than go through Vanguard Brokerage Services themselves? I know you listed reasons why you chose Scottrade overall, but was there any other factor that helped you decide to not use Vanguard’s services?

    • John says:

      That sounds like a good problem to have Jamie. :) That said, that is actually a very good question and is not elementary by any means. There are several reasons why we went with Scottrade, largely boiling down to that I prefer their trading platform and we don’t just invest in Vanguard funds. We do have some Vanguard funds, but also invest in a few different fund families as well as some dividend paying stocks.

      I also like that Scottrade has a local branch office that I can call or go to and deal with someone who knows who I am and not have to pay for it or deal with a different person each time. We have six or seven accounts with them total, so it’s nice to be able to have that familiarity. I think Vanguard is a great option for many, I just prefer Scottrade a little more.

  • LaTisha says:

    Good luck! I’ve decided to do a bit of passive and active investing for this challenge. I’m excited to see where all of the challengers stack up by the end of it all.
    LaTisha recently posted…The 60/40 Passive Active Investing PortfolioMy Profile

    • John says:

      Thanks LaTisha – to you as well. That sounds like an interesting approach. I’m excited to see where everyone ends up at the end of it to – I think it’ll be interesting to see what strategy ends up pulling ahead.

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