Tactical Allocations

Investing can be compared to a relationship. It is not a casual, short term relationship but a serious long term commitment.  It needs to be well thought out and one needs to have conviction and staying power in order to make it work.     Right now stocks have been on a very long, positive run. This is when most people get interested in investing and this is often the worst time to get started investing. My portfolio is not saying to take risk off yet, but the next change will be to take risk off, it is also not adding risk. Of the four asset classes I have chosen to allocate between, Large Cap Equity is the second safest or most conservative asset class. Only Investment Grade Bonds are more conservative. Investing is difficult because of time and how the recent past affects our current mood. A real world example to help you understand the difficulty: On 11/16/2015 you look at stock A (graph below). It has been going up and looks and feels like a good purchase. ...

October was a scary month, and yet the portfolio's did pretty well. I am particularly excited about the TA portfolio's 1 year return.  It is now higher than any of the Morningstar followed managers.  See below for more details. QUESTION:   How did the portfolios perform? Cumulative returns of each of the strategies as though you had invested $100,000 in them at the beginning of the blog. ANSWER:  October was a a "risk off" month.  Assets that are considered risky, such as equity, did very poorly. Assets that are very safe, such as high quality debt, did less poorly. For a recap of the differences between each of the three portfolios go here .   QUESTION:  What happened in the market that impacted portfolio returns? The Federal Reserve announced that they would be raising interest rates faster than they had previously indicated. A raising of interest rates means that borrowing money is more expensive and generally slows down th...

Equal Weight Portfolio: Cash balance on November 1st = $787.63 Bought 3 shares of AGG at $104.35, with $7 commission = $320.05 Bought 13 shares of JNK at $35.11, with $7 commission = $463.43 Cash after transactions = $4.15 TA Portfolio: Cash balance on November 1st = $1,155.53 Buy 9 shares of VONE at $125.10, with $7 commission = $1,132.90 Cash after transaction = $22.63 Enhanced TA Portfolio: Cash balance on November 1st = $302.94 Sold $9160 of DSEEX, with $7 commission = $9,153.00 Bought 75 shares of VONE at $125.10, with $7 commission = $9,389.50 Cash after transaction = $66.44 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 ...

Happy Halloween Everyone! Monthly Portfolio Update: Although the markets seem scary right now (pun intended), there is no change to the tactical allocation for November but there are trades to be done as cash needs to be invested. Large Cap Equity (VONE):   100%   Small Cap Equity (VTWO):      0%   High Yield Debt (JNK):              0%    Inv. Grade Debt (AGG):             0%   The Equal portfolio:   I will use the cash that has built up in the account to buy more JNK and AGG in approximately equal dollar amounts to rebalance this portfolio. The TA portfolio:  I will use the cash that has built up in the account to buy more VONE as that is where 100% of the allocation currently resides.  The Enhanced portfolio:  The purchase I made one year ago was DSEEX .  I will sell half of that position and buy VONE as I c...

MICE (Money, Ideology, Compromise/Coercion, Ego/Extortion) - a CIA acronym that highlights the main motivations for a person becoming a spy.  It is crucial for the CIA to understand the motivations of those who give them information. It is just as crucial for investors to understand the motivations of those who say they want to give them money. When you look at an investment opportunity, if you do not understand how the money flows and the motivation of everyone involved then you should not invest. This is not to say that you have to talk to all the people involved but you must be able to understand the structure and see why each person is willing to play their part. If you cannot see this then you should not invest. Lets go through a couple of generic examples: A public company ~ A public company has many stakeholders (people who are interested in how it runs its business). It is important to understand each and how they might influence the course of the company. It is ...

September showed the defensiveness I have built into the enhanced strategy as it held up in a month when markets in general did very little. QUESTION:   How did the portfolios perform? Cumulative returns of each of the strategies as though you had invested $100,000 in them at the beginning of the blog. ANSWER:   September was a flat month for investments in general. Small cap equities (VTWO) lost money (a pull back after a long stretch of very good results) while large cap (VONE) had modest gains. High Yield bonds (JNK) performed ok while their higher quality counterparts (AGG) lost a little. Interest rates and not risk drove bond returns in September.   QUESTION:  What happened in the market that impacted portfolio returns? Equal Portfolio:   This portfolio is invested equally in each of four asset classes. In September it returned -0.5%. It is the baseline or benchmark against which I judge the other portfolios. TA por...

Monthly Portfolio Update: There, again, is no change to the tactical allocation for October:   Large Cap Equity (VONE):   100%   Small Cap Equity (VTWO):      0%   High Yield Debt (JNK):              0%    Inv. Grade Debt (AGG):             0%   The Equal portfolio:   There are no trades for this portfolio. The TA portfolio:  There will be no trades in this portfolio.  The Enhanced portfolio:  The purchase I made one year ago was JXI.  There will be no trades in this portfolio.   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. I own all of the securities suggested in all three portfolio's.    October is one of the peculiarly dangerou...