It is time for another update to my personal finance journal. Luckily, we are so far basically unscathed financially by the covid-19 crisis. This month the markets continued to rip and I continued to lag. My saving efforts were very mediocre. Thankfully, Mr. Market chipped in a bit more to build my balances.
In the prior update, I ended June at about $257,000.
CURRENT PORTFOLIO
In July, stocks continued to rise. As you can see in the chart below, value stocks (VBR, RPV) under-performed the SPY by a little. Nothing, it seems, can beat the Nasdaq 100 (up over 6%!).
Foreign developed stocks lagged the SPY by a few percentage points. I am still “overweight” foreign stocks. See Media Pin of the Week – More GMO, Weekly Media Pin – Grantham on Graham, Best Foreign Value Factor ETFs, Resource Roundup: More CAPE, and Foreign Value Factor ETFs Update. This is nothing crazy; about a 30% overall allocation to foreign stocks (about 50% of my equity allocation).
TREND + VALUE ALLOCATION
I also manage some of my portfolio based on a little systematic, trend and value strategy.
In essence, I apply one of the simple moving average signals (thanks to covid-19, everyone is very familiar with moving averages and their use to smooth “lumpy” data to try and show a trend) and combine that with a valuation trigger/overlay.
The goal is just to have some risk management in place when stocks are expensive and have negative time-series momentum/trend (for example, when stocks are down over the last 12 months).
Since the first week in June, due to the positive price trend, I have been long U.S. stocks in this account. The account has about 10% in cash/t-bills. The remainder is divided equally: 30% each to the SPY, the Dow Jones Completion Index ($VXF), and foreign stocks (basically, $VXUS).
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 in an effort to limit the number of “whipsaws”(when you sell and are forced to buy to get back into the equity exposure at a higher price/level). I made a change back in June to go back “full long” after moving to t-bills with the U.S. allocations in the account back in March.
The account is down (6.15%) YTD. This account/strategy continues to lose YTD versus the 60% – 40% allocation that I use as a benchmark. The benchmark is up 2.93% 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 now up down 2.49%. YTD. So this trend following account is losing both to a 60-40 benchmark and the the SPY YTD.
Overall, I have about 30% in t-bills or their equivalent. In my larger 401(k), I allow myself to modify the asset allocations based on valuations (within limited bands). I’ve also got about 30% of my fun fund in cash and I have some cash in my HSA.
THIS MONTH
I ended June at ~$265,000. I only saved a little over $2,000 this month. So market appreciation and income from investments added about $6,000 to my ledger in July.
GOALS!
With the new year/decade, I established some goals for 2020.
I am on pace with my $50K in annual savings/contributions to investments. My body composition goal is status quo…
As for the reading goal, YTD I have finished:
When Genius Failed, Concentrated Investing, Factfulness, the Rebel Allocator Walden, and The Automatic Millionaire Homeowner by David Bach. I am not including a link to that book because it is not worth your checking out in my opinion. It was not exactly “evergreen” content and was written before the big housing bust during the GFC. It has a lot of bubble logic, complete with talk about interest only, zero-down mortgages and how real estate has always gone up over time in the U.S. as a whole. Bach usually walks the enthusiasm in each chapter back, just a little, by saying crashes can happen at the close. I do think Bach is much less shady than most of these “financial coach” types who sell all the classes and workbooks. He also is, in my opinion, very right about the automating thing, but I definitely wouldn’t recommend this Homeowner book. It is a hard pass. At least it was a quick read.
I am also still reading Towers of Debt (about some famous Canadian real estate developers who blew up) and a couple of other books. I’ve got Sapiens going now in parallel (and a book about Ebay). I am really enjoying Sapiens so far. I will try and put together a blurb on it when I finish it up.
ONWARD
I made some pretty decent progress in July. Depending upon what we do about child care in the fall, I might be able to jack up my savings rate to an all time high. Then again who knows what will happen with our jobs and the economy.
I didn’t save a ton in July, largely just due to timing and some seasonal spending. Yet, it is always cool when the market does more work growing the portfolio than I did grinding at my “9-5.” (and I HAVE been grinding lately, sheesh). I suppose I should just be very grateful to have the chance to work hard in return for some reasonable pay.