A 27-year-old investor building a $2 million retirement portfolio in 8 years shares why he’s buying a fund that’s up 324% since inception and made up of cheap stocks with strong competitive advantages
- Austin Hankwitz has been exploring investments that could increase his returns.
- His goal is to hit a $2 million retirement portfolio in eight years through growth and yields.
- This fund is focused on well-priced stocks that have wide economic moats.
Austin Hankwitz, a personal finance content creator, decided to launch a public challenge at the beginning of the year: build a $2 million retirement portfolio in eight years, or up to 15 years if the stock market falls or he has low-income years.
Hankwitz, a former healthcare analyst, rose to prominence on social media in 2020 after posting short TikTok videos about companies he thought were good investments based on their fundamentals or future earning potential. It began as a hobby and evolved into a full-time job with over 700,000 TikTok followers, a newsletter, sponsored videos, consulting, and a podcast.
He recently wanted to put his skills to the test and create something that others could emulate. That’s when he came up with the idea of creating a retirement portfolio with a set dollar goal that he needed to meet in a short period of time. To meet this challenge, however, you must set aside at least $10,000 to $15,000 per month and find ways to accelerate that growth. So far, his strategies have included cash-flowing dividend stocks, index funds, and a 12% annualized yielding options fund.
On December 23, 2022, he published his plan on his Substack with the intention of putting it into action in January. According to records reviewed by Insider, he has approximately $57,000 in a brokerage account and nearly $69,000 in a retirement account. They are worth a total of $126,000, down from over $132,000 in early September, before the market had its worst month of 2023. Before beginning the challenge in January, he had $2,822 in the account.
A new fund
Much of this year’s gains have come from large-cap tech stocks, while other S&P 500 holdings have been mostly flat — a trend that has Hankwitz concerned.
“Are you telling me that the stock market, aka the S&P 500, is only green because of the big tech companies?” What about the other companies that aren’t part of the mighty seven?” Hankwitz explained. “Which of those is doing well, and how do I find them and invest in them?” Because, at the end of the day, while I have great exposure to the magnificent seven, I also want to be exposed to companies other than these big, big, big tech names.”
As a result, he began to investigate various ETFs that have outperformed the S&P 500 over three, five, and ten years. That’s when he came across the VanEck Morningstar Wide Moat ETF (MOAT), which seeks to replicate the yields of the Morningstar Wide Moat Focus Index (MWMFTR), a basket of mostly large and mid-cap US companies with sustainable competitive advantages that are reasonably priced.
The ETF has risen 324% since its inception in April 2012, with Alphabet (GOOGL), Gilead Sciences (GILD), and Comcast (CMCSA) among its constituents. It tracks the Morningstar index, which has gained 336% over the same time period and about 528% since its inception in 2007. Meanwhile, the S&P 500 has lagged both since MOAT’s inception, trailing by 209%.
“Let’s remove all the noise and look at the companies that haven’t been bid up like crazy multiples with emotion and excitement around something recent that happened,” Hankwitz said, adding that “they look at companies that are attractively priced in terms of price-to-earnings ratio, in terms of historical averages.” Is this company historically overpriced or underpriced?”
The ETF’s companies have low price-to-earnings ratios, with an average of 16.10. A company’s P/E ratio may differ depending on its industry; for example, growth-oriented technology stocks tend to have higher P/E ratios, whereas a lower ratio may indicate that a stock is cheap if its fundamentals remain strong.
A comparison of S&P 500 returns to MOAT returns revealed that a $10,000 investment in 2012 would have returned 267.85% versus 290.5% over the previous 10-years.
MOAT has a dividend yield of 1.08%, while the S&P 500 has a yield of 1.57%. The expense ratio for MOAT is 0.46%.
Companies in the ETF have long-term competitive advantages, making it difficult for competitors to take over their market share quickly or easily. This is known as having a large moat. They also have the lowest current market price to fair value ratios, which is a proprietary metric for determining a stock’s potential long-term intrinsic value. Morningstar defines it as a combination of expected cash returns and how predictable they are.
Hankwitz is currently allocating his earnings to this fund with the goal of having $10,000 invested by the end of the year.
