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 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:

The OSC fantasy portfolio reports for the second quarter of 2018 are available

The Ottawa Share Club fantasy growth and income portfolio reports as of June 30, 2018 are now posted.

The fantasy growth portfolio has been doing very well year-to-date and overall:

  • Up 7.3% year-to-date
  • Up 38.0% since inception (January 1, 2016)

The fantasy income portfolio is in positive territory this year (and overall) but has lagged the growth portfolio (as one might expect):

  • Up 1.1% year-to-date
  • Up 16.7% since inception (January 1, 2016)

See the OSC fantasy growth portfolio page here and the OSC fantasy income portfolio page here.

Second quarter secular trends fantasy portfolio results are now posted

With the second quarter completed, I’ve updated my secular trends fantasy portfolio performance report.

It’s been a strong year so far for the overall performance, but some themes are doing much better than others.

The total portfolio has delivered a 5.89% total return so far this year. The leaders are Amplify Online Retail ETF (IBUY), up ~25% and ETFMG Prime Cyber Security ETF (HACK), up ~17%.

The laggards are Vanguard FTSE Emerging Markets ETF (VWO), down ~7% and iShares Global Clean Energy ETF (ICLN), down ~5%.

By contrast, my secular trends benchmark is up only ~1% year to date. Other major indexes have total returns year to date as follows:

  • NASDAQ (QQQ) +10.6%
  • S&P 500 (SPY) +2.52%
  • TSX Composite (XIC) +1.14%
  • Dow Jones Industrial Average (DIA) -0.91

So, secular investing this year so far has done fairly well even though performance varies widely by theme. See the full performance report here.

 

My Q2 2018 portfolio review has been published

I’ve published my second quarter of 2018 portfolio review. In it I discuss my current take on managing our household portfolio, some of the trades I’ve recently made and my thoughts for the rest of the year.

See my review here.

Breaking my own asset allocation rules

I have a confession to make. I have broken my own asset allocation rules with my second quarter trades.

I bought more equities even though I was already a bit overweight in them.

Why did I do this?

My reasoning is as follows:

  • I have a relatively low target equity weight to begin with (46% of our portfolio)
  • I had a lot of cash on hand (way over 10% of our portfolio)
  • I have more cash becoming available due to savings, bond maturities, dividends and interest in the next 12 months or less
  • quite a bit of that cash was in our TFSAs and I wanted to get that money working at better than than bond returns since the returns are tax free
  • bond yields are still not that attractive in spite of rising rates (~3.1% yield-to-maturity on a five-year investment grade corporate bond)
  • there are a lot of relatively good deals in consumer staples, utilities and telecommunications right now – several companies are off their highs and are trading at reasonable multiples
  • these three sectors are pretty defensive and could do OK in a recessionary environment
  • I only bought high quality equities with relatively low risk and often decent dividends (with one or two exceptions)
  • I did not add any new positions, just added to our existing holdings to increase their position size to something more in line with our average position size
  • Next quarter is another opportunity to review our portfolio and decide if we should trim some of the big gainers, especially in technology, which are starting to become more dominant single positions in our holdings

What I bought (all in our TFSAs):

  • Algonquin Power (AQN) – initially bought in my Canadian TFSA and journalled to my US TFSA to get the dividend that is paid in US dollars without conversion back to Canadian dollars
  • Bell Canada Enterprises (BCE)
  • Fortis (FTS)
  • Loblaw (L) – has a relatively low dividend
  • ONEX (ONEX) – this is an exception as it is a growth stock with a very small dividend in the multi-sector holdings industry
  • North West Co (NWC)
  • Telus (T)

I also bought some bonds:

  • CALLOWAY-I 3.985% 30MY23
  • FAIRFAX FINL 4.5% 22MR23
  • CANADIAN WESTERN BANK Maturity Jun 16 2022 Coupon 2.737

So, after this investment “spree,” our weightings vs. targets are as follows:

Asset Type Planned Actual Variance
Equities 46.0% 51.9% 5.9%
Bonds 36.0% 29.6% -6.4%
Bullion 9.0% 9.1% 0.1%
Total Cash/Near Cash 9.0% 9.4% 0.4%
TOTAL 100.0% 100.0%

All in all, we’re still in a pretty conservative posture and continue to have flexibility with cash levels if needed.

More to come in early July when I publish my Q2 portfolio review.

Secular trends fantasy portfolio launch

I’ve launched a new fantasy portfolio on the money4retirement.ca website to track secular, or thematic trends for investors.

A secular trend is:

An investment trend associated with some characteristic or phenomenon that is not cyclical or seasonal but exists over a relatively long period.

The rationale for doing this and the initial portfolio structure is presented here.

The first secular trends fantasy portfolio tracking report (and its benchmark) is presented here.

I’ve also added a new menu option called “Secular trends and investing” on the site for quick access.

My 2018 first quarter portfolio review is now published

I’ve completed my first quarter portfolio review.

Quite a difference from last year so far. Our household portfolio is flat so far this year. That’s a bit better than some of the major indexes, but not all.

I have a link in my review to some evidence that markets in the US might be soft until the mid-terms, and then could rebound a lot. So hopefully things will improve as the year progresses.

Find out more here.

My December 2017 annual portfolio review is now posted

Our portfolio beat it’s own target return objective in 2017: 7.82% vs. 7.00%, (or about 12% better than planned), and our asset allocations ended up mostly in line with what I expected.

We also beat our benchmark: 7.82% vs. 6.37% (or about 23% better than our benchmark).

See how it worked out in more detail here.

The deck reviewing 2017’s performance of the OSC fantasy growth and income portfolios is available

Visit my OSC member page to obtain a PDF copy of my deck presented January 9, 2017 at the OSC meeting. It features the second annual review of the Ottawa Share Club fantasy and income portfolios.

Topics include:

  • —Performance vs. portfolios’ own objectives and benchmarks
  • —Asset allocation review
    • —Asset type
    • —Geography
    • —Sector
    • —Single security
  • —Best and worst performers
  • —Trades made to date and how they’ve worked out
  • Conclusion and discussion

The OSC fantasy growth and income reports as of December 31, 2017 are now posted

The OSC fantasy growth portfolio had a total return of 16.0% in 2017, and features a two-year total return of 26.8%. The 2017 performance beat the portolio’s stated total return objective of 9.1% (as it has for two years).

The OSC fantasy income portfolio had a total return of 9.7% in 2017, and returned 15.4% over the last two years. The 2017 total return exceeded the portfolio’s stated return objective of 5.5% (as it has for two years).

The OSC fantasy growth portfolio report for 2017 can be viewed here.

The OSC fantasy income portfolio report for 2017 can be viewed here.

December 15, 2017 – It’s my quarterly trading day and what did I do?

As is my practice I only trade securities four times a year after reviewing our household portfolio performance, asset allocations, and any new ideas that I wish to act upon.

This quarter was a bit of a watershed. Today was my trading day and guess what? I did not make a single trade. 

Performance is ahead of our targeted 7% annual rate of return. Asset allocations are all close to plan. No new ideas emerged that seemed any better than those I have had before.

As I said before, it may sound boring, but I am pretty excited to be doing what I set out to do and, at least for now, being rewarded for it.

I do think sometimes the best move is no move at all.

I will do a full update on the quarter and year and post it here at money4retirement.ca in early January. Some of my ideas regarding asset allocation are evolving as we get closer to the distribution stage of our portfolio (i.e., retiring from full-time employment in the next couple of years).