2023 was the year that fooled most everyone. While analysts predicted flat or negative returns for 2023, the U.S. market had a mind of its own delivering 26% for the cap weighted S&P 500 (IVV). The growth oriented Nasdaq 100 (QQQ) posted 55%. And of course, it was technology stocks and the Magnificent 7 that did most of the heavy lifting. It’s quite likely that you did not beat the market in 2023. While we were in that same camp, we had a very solid year in 2023 thanks to some modest tech exposure. Our U.S. stock portfolio continues to beat the market from inceception – early 2015. Here’s our U.S. stock portfolio performance update for Cut The Crap Investing readers.
Here’s the post on my blog that goes over the returns of asset classes for 2023. You’ll also find the returns by decade for the last several decades for U.S. stocks. You’ll also find some key posts of the year.
Momentum can be a powerful force
While this is for entertainment purposes only, a strong first half of 2023 led to a strong year and strong sprint to the 2023 finish line. Momentum and sentiment can be a powerful market event.

And it was a year in which AI and tech stocks made all of the headlines. Seven stocks delivered most of the returns for the S&P 500.

In 2023, the Magnificent 7 was up a massive 75% while the remaining 493 companies were up just 13%. Combined, the S&P 500 was up 25%, more than doubling the S&P 493’s total return. For much of the year, the other 493 stocks were in a negative position. A year end rally brought them into positive territory.
The Magnificent 7 are Apple Inc. (AAPL), Microsoft Corp. (MSFT), Alphabet Inc. (GOOG), Amazon.com Inc. (AMZN), Nvidia Corp. (NVDA), Meta Platforms Inc. (META), and Tesla Inc. (TSLA) – this group has grown in market capitalization by US$4.7-trillion in 2023 alone.
If you didn’t own the Magnificent 7 and other tech in 2023 you probably underperformed. But I would suggest that is not a problem. If you’re a value investor or a more conservative retiree, you would likely not have sizable positions in stocks that are undoubtably very expensive.
In mid 2023 I put together a portfolio concept, without any of the Magnificent 7. Surprisingly it beat the S&P 500. Here’s the update …
Beating the market without the Magnificent 7
For the record, we (for my accounts and my wife’s accounts) hold Apple and Microsoft. We also hold Berkshire that has a massive position in Apple. Qualcomm (QCOM) also had a standout year.
Our U.S. dividend growth portfolio
In early 2015 I started an “experiment” on behalf of Seeking Alpha readers. I purchased 15 of the largest cap dividend achievers (VIG). At the time, I also had 3 stock picks. The experiment was with real money – in fact, our entire U.S. dollar amount was moved into these 18 companies. The investment thesis was based on many years of research – observing the performance of the largest companies with quality and wide moat characteristics. The dividend growth mix has outperformed the S&P 500 while delivering better risk-adjusted returns. The 3 picks take the portfolio over the top.
The 15 companies that I added are 3M (MMM), Pepsi (PEP), CVS Health Corporation (CVS), Walmart (WMT), Johnson & Johnson (JNJ), Qualcomm (QCOM), United Technologies (UTX), Lowe’s (LOW), Walgreens Boots Alliance (WBA), Medtronic (MDT), Nike (NKE), Abbott Labs (ABT), Colgate-Palmolive (CL), Texas Instruments (TXN) and Microsoft (MSFT).
We also have 3 U.S. stock picks by way of Apple (AAPL), Berkshire Hathaway (BRK.B), and BlackRock (BLK).
United Technologies merged with Raytheon (RTX) and then spun off Carrier Global Corporation (CARR) and Otis Worldwide (OTIS). We continue to hold all three and they have been wonderful additions to the portfolio. In fact, from the time of the spin-off in 2021, the 3 stocks have greatly outperformed the market and the dividend achievers (now called the dividend growth index). Given the spinoffs, the U.S. portfolio now stands at 20 stocks.
The U.S. portfolio 2023 returns
The portfolio delivered 15.3% compared to the 26.1% return for the cap weighted S&P 500. Keep in mind that I greatly overweight Apple and Berkshire, with a slight overweight position in BlackRock. The stocks have not been rebalanced, I let them run.
Here’s the chart …

And here’s the stocks for 2023


Just like the markets, the portfolio leaned heavily on the tech stocks.
From the time of the United Technologies spin offs in 2021 the total portfolio has danced back and forth between outpeformance and underperformance vs the market.

We’ll take it considering portfolios have had to do battle with the Magnificent 7. The market delivered an average of 10% annual for the period. The spinoffs offered a nice beat. Given that, they will offer a modest boost in returns to the total portfolio over the last 3 years.
The U.S. portfolio from 2015
Here’s the performance from the portfolio inception. Remember I am unable to include the spinoffs (they offered a very slight boost).
The total stock portfolio delivered 14.0% annual vs 11.8% for the S&P 500.

Here’s the portfolio assets

The outperformance is courtesy of tech, including fintech pick BlackRock, plus Lowe’s. Lowe’s is a company that I could buy all day long as I often write.
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I have held the picks for over a decade from 2014.
Defensive stocks
The defensive stocks for retirement have been solid, but solid underperformers nonetheless. And that’s just fine. The portfolio was not constructed to provide a market beat (but the beat is gladly accepted). The U.S. stock portfolio is part of a total portfolio mix with the goal of providing reliable and growing income through a few market cycles – including through recessions.
From that article link you’ll see that the defensive sectors of healthcare (XLV), consumer staples (XLP) and utilities (XLU) were far superior to a traditional balanced portfolio through the financial crisis. In fact, using the defensive equity sectors moving through the financial crisis created a portfolio value 50% larger, compared to a balanced portfolio using bonds.
Our portfolio is still waiting to be tested
Our U.S stock portfolio has not truly been tested from 2015. That said, it is nice to see that the outperformance arrived when the world changed in 2020 with the first modern day pandemic and the economic and market stress that followed. It was a modest test, but the portfolio rose to the occasion.
Keep in mind that I also use a modest amount of bonds – long and short. Our Canadian stocks slant to defensive sectors and also provide very generous and growing income. My research leads to the conclusion that this is the optimal arrangement for retirement.
- Defensive stocks
- Quality skew for stocks
- Generous and growing income
- Stock growth kicker
- Bonds and cash
- Inflation protection
Dedicated inflation fighters are an essential part of an all-weather portfolio.
While many investors seek a higher income approach, I’d offer a warning that those are the investors/retirees who were sent back to work or were forced to greatly reduce their lifestyle thanks to the financial crisis. The higher yield sector and specialty income sector got wrecked.
There is a false sense of security relying on income.
In my opinion, the above strategy is likely to again provide much more income in a reliable fashion through economic cycles.
If you are in the accumulation stage, remember that more money buys or creates more income. Go for growth. It is very beneficial to separate the accumulation and decumulation stages.
Thanks for reading. And please add your two cents in the comment section.
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