I am not attempting to beat the stock market when I choose stocks. I am simply trying to build my passive income over time so that I can retire comfortably at an early age (late 40's). I've been dividend investing for about 2 years now and have never sat down to compare my results to the market indexes. It won't change my strategy, but I decided it was time to see how my choices have done.
This is a chart showing each purchase individually compared to the DOW. I chose the DOW since it's a good representation of the type of stocks I like to own. This is a price comparison only, it doesn't take dividends into account. Check the last column to see how each purchase has performed. 0% would mean it matched the DOW. Right now the DOW is 13,158
On average my picks have performed 4 percentage points better than the DOW. Again this is just price, it gets better when you include yield. I'm still not sure if it means I'm a good stock picker or it's just that investors have flocked to the dividend stocks I was buying in 2010-2011. I don't know the answer.
Looking at the chart you'll notice my BWP and MCD picks were terrible. I wanted MCD to be in my portfolio so badly that I overpaid for the priviledge. BWP is a case of chasing yield. Actually due to the massive yield, BWP is total return positive but I could have done better elsewhere.
Take away point: Valuation is important, don't overpay for stocks.
You'll make a lot more money buying when the market is low, but there is always something with a favorable valuation. Right now I'm looking at INTC.