Time for the monthly update to my savings/investment balances. Things bounced back a bit this month, as one might expect in the strongest monthly rally since ~1987.
AAAAAAND, it’s back!
Prior Update
In the March update, I ended the month at about $216,000. My portfolio was getting crushed by the ‘rona. The most important update for April is that I and my family are still healthy, and employed. So, we are very grateful to have suffered only minor financial setbacks, thus far, in this pandemic. As for my portfolio, there was a bounce in April.
CURRENT Portfolio
In April stocks around the world enjoyed and epic bounce-back.
As you can see, U.S. stocks ripped. The SPY was up 18%. Smaller stocks, represented here by the Dow Jones Completion Index ($VXF) (everything not in the SPY – dominated by mid and small caps), were up even more. Emerging market stocks ($EEM) were only up 12% and foreign developed stocks ($EFA) were up about 10%.
I am still “overweight” foreign stocks. See Media Pin of the Week – More GMO, Weekly Media Pin – Grantham on Graham, Best Foreign Value Factor ETFs, Resource Roundup: More CAPE, and Foreign Value Factor ETFs Update. This is nothing crazy; about a 30% overall allocation to foreign stocks (but a higher figure, obviously, as a percentage of my stonks).
Trend + Value Allocation
I also manage some of my portfolio based on a little systematic, trend and value strategy. I wrote about it a little on Twitter this week.
It is not very sophisticated or special. In essence, I apply one of the simple moving average signals and combine that with a valuation trigger/overlay. The goal is to have some risk management in place when stocks are expensive and have negative time-series momentum/trend (e.g., when stocks are down over the last 12 months).
Since the first week of March, I have been out of U.S. stocks in this account. The account has about 2/3 of the balance in cash/t-bills. The remainder is in foreign stocks, because they are not expensive and so no trend rule is active (and so it getting killed like everything else).
I have about 15% of my investments in this account/strategy, but I am maxing contributions to this account. It is tax-deferred and there are no per transaction costs. I only make changes once a month to try and limit the number of “whip-saws” (when you sell and are forced to buy to get back into the equity exposure at a higher price/level).
I will say this has under-performed the $SPY year to date. The $SPY is down by -11.62% and this account is down -11.80%. The volatility has been a lot lower, but I don’t really care about that. It has also lost YTD to the 60%-40% allocation that I reference for a benchmark, which is only down -7.76% YTD (this is a 60%-40% version with 20% in foreign stocks, 40% in total U.S. market index and 40% in the $AGG).
This trend account was “whooping some ass” as far as relative performance in the middle of March, however, and I think it provides a nice “release valve” in times of market stress. I generally am a big proponent of trying to use “rules” and systems to improve my behavior.
The Return of My Empire
As I posted recently, I raised some cash last month in my discretionary Roth IRA (dubbed, the “Fun Fund”). I am compiling the relevant posts here. The Fun Fund was down almost 40% in the first quarter of 2020. It has rallied in April.
THIS MONTH
I ended April at ~$233,000. I did not make any extra savings contributions this month. I just saved about $4,500 from automated contributions (that never hit my personal cash management accounts). So it looks like I only earned about 7% on my investments. That is obviously not great compared to the overall stock market.
I currently only have about 20% exposure overall to U.S. stocks (including discretionary and index funds). I do have about a 30% allocation to foreign stocks. The other half is in bills and similar instruments so it earned basically a zero in April. I guess that works out right, if you weight the returns by the allocations. That zero-ish return on half the portfolio really drags when the market rallies 20% in a month. Then again, I suppose a 7% monthly return would compound to make me really wealthy, really quickly.
Goals, What Goals?
With the new year/decade, I established some goals for 2020.
I am on pace with my 60% savings rate goal (or right around it) and $50K in annual savings/contributions to investments. As I’ve said, I largely automate this. I do sort of run my “overdraft” through my brokerage account, so that is one reason I’m not 100% certain about the returns. I usually just look at how things have been trending and only really dig into the underlying figures maybe once a year.
My body composition goal is status quo. I started doing some cardio lately. I do not have a home gym. I am trying to eat pop tarts as I type this…not ideal.
As for the reading goal, I have finished When Genius Failed, and Concentrated Investing. I forgot that I also “read” (it has a ton of graphics/charts) Factfulness. It was interesting, but I don’t think I would recommend it.
I am pretty sure there is like a Ted Talk or something about the premise which gives you the gist. Essentially, the world has been dramatically improving and narratives (negative ones in this case) are totally untrustworthy. You have to go to the data to make meaningful inference.
I do think it conveys some very useful information (especially in the current environment) for the general population, about framing and narrative, but I don’t know how remarkable it is within the pantheon of great books extolling the virtues of taking an evidence-based, behaviorally-aware path through life.
I recently picked up Jake Taylor’s the Rebel Allocator. I am enjoying the book and should be able to finish it up this month, with any cooperation from my toddler or my job. I am also reading Towers of Debt about the Reichmanns. They were big Canadian real estate developers who did Canary Wharf in London and Battery Park City in New York, among other developments. I can see that they are going to blow up based on levering too much and it sounds like they were using short-term commercial paper to finance longer-term cash flows. I am only moderately interested in real estate outside of REITS. I get the tax and positive leverage benefits (and even the optionality of levering up and maybe mailing the keys to the bank if you blow up), but I don’t know, it seems like a lot of work….maybe if I was at all handy.
ONWARD
Well, my toddler (and wife) didn’t allow me to watch the Berkshire meeting live yesterday, so I’m going to try and sneak it in this week. Here’s the full five hour plus video (what stamina and mental acuity!):
Yahoo puts out an audio only podcast version if that works better for you. I wonder if and when Buffett.cnbc.com will have the video. They provide transcripts and the videos are searchable. I really think I might try to go to Omaha next year. I’ve never been. It seems kind of like a pain in the ass, if you aren’t going there with the first-class crowd or to market something. Maybe I will go to the Boston Omaha meeting instead.
Well, the weather is really nice here today, so think I am going to go outside and read the Viacom proxy materials which I just received. The bright sunshine should help keep me from becoming too depressed as I read through the document. Thanks for reading and stay safe!