Dec 2017 Performance

By
PERFORMANCE:


Cumulative returns of each of the strategies as though you had invested $100,000 in them at the beginning of the blog.

In December the Equal weighted portfolio returned 0.4%. This portfolio is my version of a buy and hold portfolio and I use it as my benchmark for the two portfolio's below. 

The TA portfolio was the best performing portfolio and returned 1.1%. This portfolio invests in the same securities as the Equal weighted portfolio but actively allocates by adjusting how much is invested in each asset class.

The Enhanced portfolio returned -0.3%. This portfolio uses the allocation of the TA portfolio and seeks to enhance those returns by buying funds that access the asset class in a different way.



COMMENTARY:

Equal Portfolio: This portfolio is invested about 25% in each of four asset classes (investment grade debt, high yield debt, large cap equity and small cap equity). It is the baseline or benchmark against which I judge the other portfolios.

TA portfolio: This portfolio had a great month as US large cap equity performed well, likely driven by hopes that the tax reform will be good for US businesses. 

Enhanced portfolio:  This portfolio struggled again in December. The heavy weight to international equity continues to hurt. Earnings reports and economic indicators are stronger outside the US. Valuations are also lower in international markets. At some point I expect international prices to adjust.

This fund is also overweight to defensive sectors which have under performed more growth oriented sectors. These sectors should do better if we have an equity market downturn.
    ALLOCATION:

    Color significance:
    Red          =   Small cap equity 
    Orange    =   Large cap equity
    Purple     =   High yield debt
    Green      =   Investment grade debt

    The relevant security returns (used in my three portfolio's) for the month of December (excluding dividends) were:

    For Equal and TA portfolios: VTWO -0.9%, VONE 0.7%, JNK -0.6%, AGG 0.2%

    For Enhanced portfolio: DSEUX -3.2%, KXI 0.9%, JXI -6.3% DSEEX -6.3%

     NOTE: DSEUX, DSEEX and JXI had large year end distributions which influenced these returns, including the dividend impact on their returns results in DSEUX 0.0%, DSEEX 0.3%, JXI -4.7%

    Allocations during December were:


    Allocations after today's trades (January 2nd) are:


    ATTRIBUTION:

    Dec - 17 3 Mo 
    Allocation Rt   0.7% 3.7%
    Selection Rt  -1.4%-4.7%

    The way to think of this is that the "Allocation Rt" is how much the TA portfolio out (or under) performed the equal weighted portfolio (how much did the asset allocation benefit returns). The "Selection Rt" is how much the enhanced portfolio out (or under) performed the TA portfolio (how much security selection benefited returns).

    DISCLAIMER:
    Past performance is not a guarantee of future performance.  This strategy is presented for informational purposes only and is not a solicitation to buy or sell any securities. October is one of the peculiarly dangerous months to speculate in stocks in.  The others are July, January, September, April, November, May , March, June, December, August and February. ~ Mark Twain

    Comments

    1. Gregory SkidmoreJanuary 3, 2018 at 8:34 PM

      Is there ever a minimum by which you would wait to re-allocate? For example, in your Tactical Portfolio if you had extra small cap and wanted to make it 100% large cap, is there a minimum amount by which you would wait to trade the small to large cap? Does that make sense?

      ReplyDelete
    2. Bryan BaggenstosJanuary 10, 2018 at 9:55 AM

      This comment has been removed by the author.

      ReplyDelete
    3. Bryan BaggenstosJanuary 10, 2018 at 10:01 AM

      Thank you for the question.

      The key comes down to the total cost of the trade. If it costs $7 to trade then a purchase and sale is twice that ($14). So the performance needed to earn back the cost of the transaction is less if you trade in larger dollars. The math is to take the cost and divide it by the trade amount. i.e. A $500 trade has to make $14/$500=2.8% just to pay for the commission. $250 would need 5.6%, $1000 only needs 1.4%. $10000 only needs 0.14%.

      The lower your cost, the smaller the minimum trade that makes sense is. I hope this helps.

      ReplyDelete

    Post a Comment

    Popular posts from this blog

    What is all the fuss about Bitcoin?

    By
    Image
    "Lack of Clarity gives Birth to Disappointment" ~ Dan Rockwell Bitcoin's meteoric rise What Is Bitcoin? Everyone is talking about it, but what is it? At the most basic level it is an electronic voucher that says you own it (sounds redundant, no?). It is an electronic record stating who owns how many "bitcoin". There is no physical thing that is a Bitcoin, no one has ever seen, or touched, or tasted one. Its power comes from something called the "blockchain" which makes it (to date) impossible to hack or replicate. So although it is nothing, it is not (currently) replicable or hackable and it is transferable (kind of like money without the paper and metal). The blockchain allows for the exchange and creation of more Bitcoin without a third party middleman. No bank is needed to verify the transactions or to store the Bitcoin or validate their authenticity. No one but the blockchain "system" can validate exchanges or create new vo
    Read more

    The Retirement Question

    By
    Image
    I have had many people ask me the very difficult question: When can I retire? Most people are looking for an age but underlying this question is a dollar amount. What we really want to know is "When can I retire and live comfortably for the rest of my life without financial worries?". The answer to this has just as much to do with your retirement savings as it does with your age. Without a crystal ball, there is no way to know the exact answer. So like most things, the answer is, "it depends". There are so many unknown's (how long will you live, how will your spending habits change, what will your investment returns look like, what will inflation do)?  But there are also some things that we control and those are what I would like to analyze together. To do this, we will look at the retirement related decisions we make and their impact on retirement age (holding all the unknowable things constant). We will find that decreasing spending is more powerful t
    Read more

    Crypto Currency - Just A Worthless Commodity

    By
     Prediction: At some point Crypto Currencies will all become worthless. I know that this is a strong statement that will irritate many but a review of the facts about the underlying basis for its value can lead to no other conclusion. Crypto Currency Dynamics: The brilliance of cryptocurrency is in its structure which gets rid of the need for intermediaries in its monetary system. No Governments or banks needed.  This is brilliant. The cost of intermediaries on a system is high, I won't go into that but if you look it up there is plenty written about it. Demand for crypto is strong and growing. People are learning about this new interesting monetary tool and seeing some get rich and it is very enticing. People are justifiably curious and more and more people are dipping their toes into the space. The Crypto Currency Myth:  Supply of crypto is limited. This is the crypto lie that everyone seems to be swallowing. The whole valuation argument for crypto is that it is limited and no o
    Read more