Our household investment plan has been updated

I have updated our household investment plan which was last updated December 31, 2018.

The format has been greatly simplified and abbreviated. This format came from an investment plan I drafted for a friend of mine to consider for his portfolio. It occurred to me this simplified version is sufficient (subject to improvements of course).

My new investment plan is here.

The September 2019 OSC fantasy growth and income portfolios are posted

It’s been a good year to be an investor so far.

The Ottawa Share Club fantasy growth portfolio is up nearly 14% year-to-date. The portfolio report can be found here.

The Ottawa Share Club fantasy income portfolio is up about 13.5% year-to-date. The portfolio report can be found here.

I broke the same investment rule again….

I once again broke my investing rule of trading only once per quarter (if at all). What to do when two rules conflict with each other? I tried to err on the side of lower risk. I re-balanced early as one asset class breached a target threshold.

More here.

My second quarter 2019 portfolio review is posted

I have completed and posted my Q2 2019 portfolio review. We’re up 9.8% so far and things are looking good notwithstanding some possibly growing headwinds.

Read my full review here.

I broke one of my own investment management rules….

I have to make a confession. I broke one of my investment rules. I traded in May instead of in June when I normally would.

I typically trade only quarterly, but this time was different. I only lasted two months.

What was the trigger? One of our stocks has been soaring past single-holding thresholds lately and I thought I’d like to re-balance on a high note.

Find out more here.

Why I am not changing my portfolio now that the yield curve is no longer inverted

New reports indicate the yield curve in the US is no longer inverted. Since many suggested that when the yield curve did recently invert it was time to raise cash by selling risky equities, what are they saying now?

Presumably it’s time to put cash back to work in risk-on trades.

I’m not making any changes to my portfolio, just like I didn’t when the yield curve inverted.

My reasons are much the same as before, but in reverse:

  1. My cash levels are largely unchanged through the inversion and return to “non-inversion” so I don’t need to make adjustments
  2. I already have good exposure to riskier equities: for example about 20% in technology stocks
  3. I have nearly 50% in equities now, and am slightly overweight, so I don’t need to add more
  4. Markets remain at the higher range of valuations compared to historical norms so I see no reason to increase equity exposure
  5. I don’t know which risk-on stocks to buy as I like the ones I already have and don’t feel compelled to add to them
  6. It is unclear if there is likely going to be a recession anytime soon so I can’t make a case to change my portfolio accordingly, even if I was so inclined (which I am not)
  7. It’s not cleat to me what a yield curve “un-inversion” might be forecasting, if anything
  8. i am assuming, without evidence to the contrary, that the chance of recession in the near term is as likely as ever, so there is no obvious signal to make any re-allocations
  9. Odds are there won’t be a recession in the near term as most indicators, including the yield curve, don’t point to one
  10. The US Fed could still surprises by lowering interest rates, and the Bank of Canada is signalling a pause in raising rates, both of which could help equities
  11. If I did buy more risk-on equities would I then “have” to sell them if the yield curve re-inverts?

i know it’s very boring but staying the course is working well for me. My portfolio is up about 7% so far this year. That’s well ahead of my 4.5% annual goal.


Why I am not changing my portfolio even though the yield curve has inverted

On Friday it was reported that the yield curve in the US inverted for the first time since the last (great) recession. This is supposed to be a reliable harbinger for a future recession in 12-18 months.

What does it mean when the yield curve inverts?

It means the US short-term interest rate (as measured by the 3 month Treasury Bill rate) is now higher than the long-term interest rate (as measured by the 10 year Treasury Bill rate). An inversion like this is generally regarded as a negative market/economic sentiment that can affect economic and market behaviour.

The yield curve inversion has sent some scurrying to make changes to their portfolios by raising cash, selling riskier stocks and becoming more defensive (buying utilities, telcos, REITS and consumer staples equities).

Why I am not scurrying to do anything on the news:

  1. I already have some cash (about 10% of my portfolio, including high-interest savings and short-duration bonds maturing later this year)
  2. I already have good exposure to defensive equities: ~18% utilities + ~11% consumer defensive + ~6.5% communications services + ~3.5% real estate = ~39.0% defensive
  3. I have less than 50% of our total portfolio in equities so a market downturn should be offset somewhat by non-correlated holdings in fixed income, cash and bullion (this was true in 2018, when my portfolio returned ~+1% in spite of equity drawdowns in Canada and the US)
  4. If I sell something to raise cash there could be tax consequences in our non-registered accounts, due to potential capital gains being taxed
  5. I don’t know which non-defensive equities to sell to raise cash – I like all my holdings for the long haul or I wouldn’t own them
  6. Recessions tend to be short and I believe my long-term portfolio is structured well for riding out short-term events
  7. An inverted yield curve has reportedly accurately predicted upcoming recessions eight times (by some sources) since 1968 but, if on January 1, 1968, I bought and held the S&P 500 (^SPX) I would have made a return of 2.81K% in spite of the eight recessions (including the Great Recession of 2008-09)
  8. According to Forbes, the chance of a recession in the next year is always about 27% (based on their data pointing to 16 recessions since 1960) and today the chance is 30%, hardly more than average
  9. If the chance of recession is 30% next year there is also a 70% chance there won’t be a recession next year which means, based on probabilities alone, I should be buying risk-on stocks
  10. If the US Fed surprises by lowering interest rates, that could change the situation immediately
  11. I don’t know how to time when to start re-buying the risk-on equities I am supposed to sell now – presumably when the yield curve corrects to non-inversion

I am not saying a recession won’t happen in 2019-20. It may well.

What I am saying, as a long-term investor who buys, holds and monitors a portfolio of retirement assets designed for all markets, who relies primarily on asset allocation rules when making security weighting decisions, and who makes limited and selective trades intended to improve overall portfolio quality, I don’t react to news like this.

Do you?




The updated OSC fantasy growth and income portfolio 2018 performance deck is posted

The deck on the 2018 performance of the two OSC fantasy portfolios that was presented on March 12, 2019 is now posted.

The deck has a slide at the end about how much difference 10 weeks can make in the markets.

There was a typo on the 2016 fantasy income portfolio returns that has been corrected as well.

See the deck here along with other member content from the Ottawa Share Club.

OSC fantasy growth and income portfolio 2018 performance deck is posted

The deck on the 2018 performance of the two OSC fantasy portfolios that was to be presented on February 12, 2019 is now posted. The deck may be presented at a future meeting since the February 12 meeting was cancelled due to bad weather.

The deck has a slide at the end about how much difference six weeks can make in the markets.

See the deck here along with other member content from the Ottawa Share Club.

Annual performance for my secular trends fantasy portfolio is now posted

I’ve posted the annual performance review for my secular trends fantasy portfolio which consists of nine ETFs representing thematic investment opportunities.

2018 was not kind to the portfolio (down around 10%) but cyber-security was a particular bright spot, up about 7%. More here.

My annual portfolio review and updated household investment plan are now posted

I’ve posted my annual portfolio review as well as an updated version of my household investment plan.

My annual review shows a small gain in our portfolio for 2018, well ahead of major North American indexes. More here.

The updates to my household investment plan feature continued focus on sequence of returns risk and asset allocations based on “buckets” along with a reduction in our target portfolio performance going forward as we start to glide into retirement. More here.

The December 31, 2018 year-end reports for the OSC fantasy growth and income portfolios are posted

Here are the December 2018 Ottawa Share Club fantasy growth and income portfolio reports:

Maybe the US president does affect markets after all

Many thought when Donald Trump became US president markets would react badly. How wrong was that?

Tax cuts and de-regulation have provided a boost to markets. However trade policy has also provided uncertainty. Rising interest rates, often not good for equities, have been seemingly offset, so far, by low unemployment and inflation and rising corporate profits.

With the most recent events in Washington, including Trump’s out-of-left-field tweet announcing an immediate troop withdrawal in Syria, followed by resignations by Defence Secretary Mattis and US anti-ISIS Envoy McGurk, Trump asking if he can fire Fed Chairman Powell, Trump associates being indicted and convicted by Mueller and other prosecutors, the Trump foundation closure due to inappropriate use of funds, the government shutdown that Trump said he would be proud of, Treasury Secretary Mnuchin’s calls today to top banks to check on their liquidity (was that even a problem?), to name a few, may mark a tipping point where the unpredictable deeds of Trump and his administration start to affect consumer and business confidence as well as market sentiment.

Investors have to be scratching their heads and wondering where all this is going and how much damage the seeming chaos might bring. 2019 doesn’t look like it will get much better with unresolved trade issues with China and others, the ongoing Mueller investigation and with the Democrats taking a majority role in the House of Representatives, where they will have the power of subpoena to conduct ever more investigations into Trump et. al. No one knows what tweet will next emanate from Trump’s fingers.

Powell is signalling a slowing of interest rate increases for next year. That might help markets settle. But forecasted profit growth is also slowing for 2019, same for global growth. Trump’s erratic behaviour seems to be amplifying uncertainty.

I can’t help thinking 2019 will be more volatile than 2018 as the drama, or do I say crisis, south of the border plays out.

We certainly live in interesting times.

Update: The Washington Post has a piece about how investor expectations may be adjusting to the reality of a Trump presidency.


OSC Executive Member Brad has updated the Steven Brown Retirement Forecaster tool

Brad has made some updates to Steven Brown’s Retirement Forecaster Excel spreadsheet tool (version  2.7.3).

The changes he’s made are improved accuracy with the calculations for CPP Survivor Benefits and CPP Death Benefit.

See Brad’s member page here for more..