Time for the monthly update to my personal finance journal. The equity markets continued to rally in May. I continued to save, adding to my conservatively positioned portfolio.
In the April update, I ended the month at about $233,000. I was up about 7% versus a 20% gain the S&P 500. The relative underperformance due was to my lower allocation to U.S. equities.
CURRENT Portfolio
In May stocks continue to rally. I won’t pretend to know why, but it seems many of the big positive moves coincided with perceived positive developments for covid-19 vaccines. The EU also finally did some fiscal stimulus. As you can see in the chart below, value stocks (QVAL, RPV) and foreign developed stocks (EFA) outperformed the SPY but a little. Nothing, it seems, can beat the Nasdaq 100. These stocks are the darlings of the market. [Isn’t the “Nifty Fifty” just so more elegant than FANMAG? I think history will be a little unkind to us for this lack of creativity.]
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 (about 50% of my equity allocation).
Trend + Value Allocation
I also manage some of my portfolio based on a little systematic, trend and value strategy.
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 think this account would be 100% long stocks if I “ran the test” right now. I will be looking at the metrics I use for trend in the next week or so (not not he first of the month).
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).
The strategy is down 10% YTD. This account/strategy continues to lose YTD to the 60%-40% allocation that I reference for a benchmark, which is only down -3.09% YTD (this is a 60%-40% version with 20% in foreign stocks, 40% in total U.S. market index and 40% in the $AGG). SPY is only down -4.89%.
As a result of this trend signal account and another account that I allocate using valuation alone, I have a fair amount overall in t-bills or their equivalent. I’ve also got about 40% of my fun fund in cash.
THIS MONTH
I ended April at ~$242,000. I saved a little bit less this month. This was due to the pay schedule of my employer. I automate nearly all my savings. Since I got one fewer paycheck this month, the savings amounts were lower. I saved about $2,500 from these automated contributions.
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. My body composition goal is status quo. I started doing some cardio lately. I do not have a home gym. I have been thinking of getting a couple of kettlebells.
As for the reading goal, YTD I have finished:
When Genius Failed, Concentrated Investing, Factfulness, and Jake Taylor’s the Rebel Allocator. The Rebel Allocator was really good (and a quick read). Even if you’ve been following Buffett and Munger since the 90’s, like yours truly, it is really a neat book. I think I will look to pick up a hardback copy for my “library” if Jake ever publishes one. I am also still reading Towers of Debt (about some famous real estate developers who blew up) and a couple of other books that I will mention when I finish. It appears it may be a real challenge for me to hit my goal, but I think I can do it. In fairness, I have also read the Cat in the Hat, Green Eggs and Ham, all the Little Blue Truck books (and perhaps one hundred other board books) several thousand times in 2020.
ONWARD
I made some pretty mediocre progress this month, given what markets did. I am positioned conservatively as a function of valuations and trends (and to a small extent, my personal view of risks and rewards, in the fun fund). I am okay with being positioned conservatively with expensive markets in a downtrend (as of last decision date), covid-19, and everything else going on right now.