The State of the Stash: Q2 2024

It is time for my personal finance and investing journal update. Let’s update the State of my Stash.

If you are new to my blog, or this series of posts, I am tracking my liquid savings/marketable investments. These posts are sort of a finance and investing journal, so I can look back and see what I was thinking and (hopefully) how I achieved certain financial and savings goals. The primary benefit for me is to have a “forcing function” to make me drill down and see what’s going on.

CURRENT PORTFOLIO

First, we will run through an update on my investments. Including all of the accounts discussed below, my overall allocation is about 60% in stocks and 40% in bills.

Value Based Asset Allocation

In my largest account, I allow myself to allocate between 50% and 100% to stocks (equally split about 1/3rd each between equivalents of the ETFs: SPY, VXF, and EFA). I make these decisions based on valuation and expected future returns. This “asset allocation” account is my largest and comprises about half of my total liquid investments.

Year-to-date in 2024, the account was allocated 30% in EFA and 15% each in VXF and SPY.

Through June 30, 2024, EFA was up 5.77% and SPY and VXF were up 15.22% and 3.27%, respectively. The outperformance of the megacap stocks driving the S&P 500 has been something to behold. I invested through the 1990’s, so I feel like I’ve seen something like this before.

Actively Participating in CAPITALISM

I’ve got about 20% in accounts where I actively pick stocks. This includes the “Fun Fund” account.

I’ve been doing some stuff. I totally sold off all exposure to S.L. Green ($SLG), about which I have previously written. I sold common units above $50 and above $20 for the preferred shares. I have been accumulating some of the positions I hold in the Fun Fun account so that they have a chance to make a real impact on my overall net worth if I’m right.

Comcast has probably been chief amongst these. To put it very simply, cable stocks are trading at valuations like they are coal stocks. I don’t believe they are. I will do another more detailed discussion in future.

VALUE + TREND

I also manage some of my portfolio based on a very simplistic, systematic trend and value strategy. This account is about 20% of my overall portfolio. I have ceased contributions to the account for the time being.

When long, the account is divided equally: 33% each to the S&P 500 (SPY), the Dow Jones Completion Index (VXF), and foreign stocks (VXUS). Basically, if the valuation of one of these indices/funds is rich (as determined by me, based on a somewhat discretionary “process”), then I apply a simple moving average trend-following rule.

The idea is to have some risk management in place when stocks are expensive by selling when they have negative time-series momentum (for example, when stocks are down over the last 12 months or below the long-term moving average).

When stocks aren’t expensive, I just want to be long and strong (so no trend-following overlay). I only allow changes once a month in an effort to limit the number of “whipsaws”(when I sell and later buy back into the equity fund at a higher price than I sold, because the trend rule says so, resulting in a loss).

If you’re interested in learning more about trend following, I would recommend you start by searching for info on the Alpha Architect and Meb Faber sites. Jeremy Siegel also touched upon the subject of trend a little bit in Stocks for the Long Run.

As of 06/30/2024, this account was 100% long (33% in each SPY, VXF, and VXUS).

Year-to-date through Q2 2024, this account was up 7.99%. The primary benchmark I’m using for this account is the $AOR ETF. AOR tracks a globally diversified version of a “60-40” portfolio. AOR was up 6.31% for the YTD through June 30.

The account under-performed the SPY’s 15.22% YTD. I attribute this to diversification into smaller stocks and international stocks. I’m find with that and remain pretty pleased with the overall performance of this account.

STASH STATS

Now on to the balance update. As a reminder, I have dialed back my savings and ramped up spending with a newly expanded family.

Coast Contributions

I am currently following a Coast Financial Independence plan (“Coast FI”, likely for the next several years). If I work another ~20 years, assuming a 7% rate of return, my assets should double about 2 times. That would put me around $2mm. With some other assets like my deferred compensation/defined benefit annuity, social security, etc., that should be plenty. If I coast from here (and don’t save any more), I should be financially independent in 20 years.

At that time, I would be around the “normal” retirement age. I really do not like the prospect of working another 20 years, but that’s the plan for now. I need to ease off the gas for a bit and this is the plan that is letting me get comfortable with that. I am pretty sure I will ramp the savings back up in the future.

In any case, I’m not really just coasting. I am still planning on maxing my 401(k) and HSA. So, that means I’m currently saving/investing about $3,000 monthly.

Stash Size Update

I missed a few updates. As of June 33, 2023, investments were at about $470,000.

Since that date, I have continued to automatically save. Automating my savings is my strategy for managing my behavior (and limiting the willpower required to stay on plan). I save/pay myself first, then deal with the consequences in the rest of my budget.

I have been saving about $3,000 per month automatically into my relevant accounts. The portfolio balance as of the end of Q2 2024 was about $550,000.

Assuming I saved about $3,000 per month, it seems the increase was due to savings and investment appreciation in nearly equal parts.

HOW FAST IS My STASH GROWING?

In 2021, I started tracking the rate growth including both savings and investing gains (or…losses). This is an odd metric for most use cases, but it is easy to compute, and reflects both saving and investing (the two levers that I am trying to use here).

Thanks to an idea from a twitter friend (@DadInvest follow him if you don’t), I also started tracking the 5-year trailing CAGR for my total invested assets (this also includes both gains and contributions….Beardstown Ladies style (Google it)).

First, my percentage increase in the stash from saving and investing from June 30, 2023 to June 30, 2024 was 17% (80/470). The five year trailing portfolio/savings CAGR is 21.64% (06/30/2019 to 06/30/2024). This 5 year CAGR is much lower than the almost 40% rate when I computed this at year end 2021, but is about the same as when I computed it back in June 2023.

THAT’S A WRAP

So, that’s the state of my stash. I’m not saving as much but thanks to investment gains my portfolio increased decently.

Thanks for reading!