2019 FY Performance
In 2019, the markets rebounded after a large selloff in Q4 of 2018. Market strength has continued despite many concerned voices about high valuations.
In the TA portfolio, the decision to focus on large cap stocks was very beneficial in 2019. Of the four options, VONE was the top performer gaining 31.12%. The small cap VTWO was next advancing 25.81%. Lower quality bonds JNK were up 14.88% and investment grade bonds AGG returned 8.46%.
In the Enhanced portfolio, we replaced AGG with GOVT which returned 7.36% and underperformed AGG by 1.1%. A small portion of VONE was replaced with DVY and IEMG both of which detracted from returns. DVY returned 22.62% and IEMG returned 17.79%. Both great returns but far behind VONE.
The earlier inversion of the yield curve, the high levels of corporate debt, and the euphoric rise and fall of a few stocks (see TSLA, BYND or any of the Marijuana stocks) have me worried. Trumps desire to have the economy strong for his election offsets these worries, at least until election jitters start to creep in around the third quarter of the year.
Performance as of Dec 31, 2019 was:
In the TA portfolio, the decision to focus on large cap stocks was very beneficial in 2019. Of the four options, VONE was the top performer gaining 31.12%. The small cap VTWO was next advancing 25.81%. Lower quality bonds JNK were up 14.88% and investment grade bonds AGG returned 8.46%.
In the Enhanced portfolio, we replaced AGG with GOVT which returned 7.36% and underperformed AGG by 1.1%. A small portion of VONE was replaced with DVY and IEMG both of which detracted from returns. DVY returned 22.62% and IEMG returned 17.79%. Both great returns but far behind VONE.
The earlier inversion of the yield curve, the high levels of corporate debt, and the euphoric rise and fall of a few stocks (see TSLA, BYND or any of the Marijuana stocks) have me worried. Trumps desire to have the economy strong for his election offsets these worries, at least until election jitters start to creep in around the third quarter of the year.
Performance as of Dec 31, 2019 was:
Current Allocation:
- Large Cap Equity (VONE): 67%
- Small Cap Equity (VTWO): 0%
- High Yield Debt (JNK): 0%
- Inv. Grade Debt (AGG): 33%
Equal Weight Portfolio:
VONE = 225 Shares
VTWO = 234 Shares
AGG = 248 Shares
JNK = 264 Shares
TA Portfolio:
VONE = 622 Shares
AGG = 372 Shares
AGG = 372 Shares
Enhanced TA Portfolio:
VONE = 378 Shares
IEMG = 158 Shares
DVY = 172 Shares
AGG = 96 Shares
AGG = 96 Shares
GOVT = 1055 Shares
In this blog I share and discuss three portfolios.
The first is a "buy and hold" strategy that does not ever change. I call this the Equal portfolio because it is made up of four equal parts allocated to different asset classes. It is 1/4 in Large Cap Equity (Ticker VONE), 1/4 in Small Cap Equity (Ticker VTWO), 1/4 in Investment Grade Bonds (Ticker AGG), and 1/4 in Junk Bonds (Ticker JNK). The allocations never change. The only thing needed is to rebalance every so often as performance differences will cause the weights to get out of whack.
The second portfolio is a "tactical" portfolio. It is tactical because it adjusts the weights to the four asset classes above based on market conditions. I call this the TA portfolio. It can go 100% into any one asset class or be a mixture of them. 1/12th of this portfolio can change each month as I make a monthly call on what i expect will do best over the next year based on current market conditions. Historically I have picked the best asset class about 50% of the time, the second best about 25% of the time, the third best 18% of the time and the worst 7% of the time.
The third portfolio is also a "tactical" portfolio. I call it the Enhanced portfolio because I follow the same allocation as the TA portfolio but I try to pick other vehicles that will give a better return than the four basic ones used in the Equal portfolio. This allows for exposure to International Equities, Emerging Markets, and Commodities among others.
DISCLAIMER:
The first is a "buy and hold" strategy that does not ever change. I call this the Equal portfolio because it is made up of four equal parts allocated to different asset classes. It is 1/4 in Large Cap Equity (Ticker VONE), 1/4 in Small Cap Equity (Ticker VTWO), 1/4 in Investment Grade Bonds (Ticker AGG), and 1/4 in Junk Bonds (Ticker JNK). The allocations never change. The only thing needed is to rebalance every so often as performance differences will cause the weights to get out of whack.
The second portfolio is a "tactical" portfolio. It is tactical because it adjusts the weights to the four asset classes above based on market conditions. I call this the TA portfolio. It can go 100% into any one asset class or be a mixture of them. 1/12th of this portfolio can change each month as I make a monthly call on what i expect will do best over the next year based on current market conditions. Historically I have picked the best asset class about 50% of the time, the second best about 25% of the time, the third best 18% of the time and the worst 7% of the time.
The third portfolio is also a "tactical" portfolio. I call it the Enhanced portfolio because I follow the same allocation as the TA portfolio but I try to pick other vehicles that will give a better return than the four basic ones used in the Equal portfolio. This allows for exposure to International Equities, Emerging Markets, and Commodities among others.
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. The writer of this blog owns many (long positions only), if not all, of the securities discussed in this blog. 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
While I know it takes a lifetime of investment experience to be able to read the markets to determine which asset class will grow or not, I am curious at a very basic level what metrics you look at to make the determination, for example, that large cap stock is likely to keep growing even if it may be overpriced.
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