Tactical Allocations

Monthly Portfolio Update: The new tactical allocation for October will be:   Large Cap Equity:   92%   Small Cap Equity:     8%   High Yield Debt:        0%    Inv. Grade Debt:        0%   Look for a re-cap of performance on November 1st. The Equal portfolio: It is now time to make our first trade in the equal weighted portfolio. The cash balance at month end is $1260.32. The Investment Grade Debt and High Yield Debt allocations are quite a bit lower than the two equity allocations and so I will split the trade into two. Half going into each.  I will buy about $600 of each AGG and JNK. I will favor AGG as it has the lowest balance in the portfolio. Total market value of this fund is $105,042.35. The TA portfolio:  The change from the previous month is another reduction in Small Cap Equity (VTWO) and an increase in Large Cap Equity (VONE). I will sell 1/2 of the V...

I have seen a number of articles recently discussing the growing wealth gap in the United States. There are many reasons for this but I think one of the most important that I have heard is that the rich hold more stock. They hold ownership in companies. They take more risk with their savings. I would point to a few observations that I think everyone should be aware of in regards to this discrepancy. What we think of as "risk-free" actually has a great cost. There are structural considerations for how much risk one can take. What can you do (if you are not rich) to tip the scales in your favor. 1) The risk in "risk free" investing:  There is no "risk-free" asset. Over time money markets (short term Treasury bonds) have barely kept up with inflation so if we take inflation out of the equation money markets earn you nothing. Yet many consider them a "risk-free" asset. While there may be very little risk that you do not get paid back there ...

TRADES  (performed on October 2nd) : Equal Weight Portfolio: Beginning cash $889.92 No trade made because allocations were within acceptable range and cash was below $1000 Expect to make a trade next month TA Portfolio: Beginning cash $93.04 Sold 76 shares of VTWO at $119.43 per share, $7 commission, total proceeds $9,069.68 Purchased 79 shares of VONE at $115.6628 per share, $7 commission, total cost $9,144.36 Cash left over $18.36 Enhanced TA Portfolio: Beginning cash $230.36 Sold 167 shares of IEMG at $54.02 per share, $7 commission, total proceeds $9,014.34 Purchased 182 shares of JXI at $50.7392 per share, $7 commission, total cost $9,241.53 Cash left over $10.17 I will update last months performance with the allocation adjusted for today's trades later today. 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...

PERFORMANCE: In September the  Equal weighted portfolio  returned   1.9% and is the baseline for the other portfolios.  The  TA portfolio  (which actively allocates among the four asset classes that are in the equal weighted portfolio) outperformed the equal weighted portfolio returning 2.7%.  The  Enhanced portfolio  (which uses the allocation of the TA portfolio and seeks to enhance those returns with security selection) did the worst, returning 0.8%. The relevant security returns (used in the above three portfolio's) for the month of September (excluding dividends) were: For  Equal  and  TA portfolios :  VTWO   6.0%,  VONE  1.6%,  JNK  0.2%,  AGG  -0.8% For  Enhanced portfolio :  IEMG  0.0%,   DSEUX  1.7%,  KXI  -0.9%,  JXI  -2.6% Co lor significance for whole post: Red  is small cap equity...

Monthly Portfolio Update: The new tactical allocation for September will be:   Large Cap Equity:    83%   Small Cap Equity:    17%   High Yield Debt:        0%    Inv. Grade Debt:        0%   Look for a re-cap of performance on October 2nd. The Equal portfolio:  There are no changes to the equal portfolio. The cash balance at month end is $889.92, total market value is $103,957.14. I will only rebalance when weightings get off by 5% or more (i.e. one of the asset classes has less than a 20% or more than a 30% weighting) or the cash balance hits $1000. The TA portfolio:  The change from the previous month is a reduction in Small Cap Equity (VTWO) and an increase in Large Cap Equity (VONE). This makes the portfolio a little more defensive, however it is still 100% in equities and therefore very bullish. I will sell 1/3 of the VTWO shares (which is 228/3 = 76)....

In The Lord of the Rings, Gollum's final riddle to Bilbo Baggins was: This thing all things devours:   Birds, beasts, trees, flowers;    Gnaws iron, bites steel;    Grinds hard stones to meal;   Slays king, ruins town,   And beats high mountains down. The riddle's answer is "time". Time has a huge impact on all things.  In my previous post "Why Now" I discussed the important impact of time on investment returns. In this post I would like to discuss the impact of time on risk. There are many types of risk. For this discussion I focus on two critical types of risk which I will name "volatility" and "destruction". Volatility is the risk that comes because prices move both up and down. The bigger the moves, the higher the volatility. You might think of this as the price being less dependable. Destruction is the risk of the investment permanently going away (think bankruptcy for a company). You might think of this as fragility. A ver...

PERFORMANCE: In August the  Equal weighted portfolio  returned 0.0% and is the baseline for the other portfolios.  The  TA portfolio  (which actively allocates among the four asset classes that are in the equal weighted portfolio) underperformed the equal weighted portfolio returning -0.3%.  The  Enhanced portfolio  (which uses the allocation of the TA portfolio and seeks to enhance those returns with security selection) performed very strongly, returning 1.4%. The relevant security returns for the month of August (excluding dividends) were: For  Equal and TA portfolios :  VTWO -1.2%,  VONE 0.2%,  JNK  0.4%,  AGG  0.7% For  Enhanced portfolio :  IEMG  2.3%,   DSEUX  0.5%,  KXI  -0.2%, JXI 3.5% Co lor significance for whole post: Red  is small cap equity  Orange  is large cap equity Purple  is high yield debt Green ...