2018 YTD investment performance thread

[mrfeh]

Jan 31
YTD 3.2%, however for the risk level its not what it should be.

75% Equities Funds (50% US/20% Foriegn/5% Reits)
21% Bonds (in balanced funds) (16% US/5% Foreign)
4% Cash
Source -Personal Capital
Their program suggest a higher allocation to Alternatives would improve risk. I think reducing the bond duration may do more.

Last year ended 80% of the S&P, This year tracking <60%
Not sure what is worse, the bond negative returns or the Value stocks under performing, but I think the underlying allocation to Healthcare was a big finishing drag down this week.

I wouldn't be so concerned about one month. It means nothing in the long run.

 

[Turboslacker]

19.8% YTD or last 12 months? If that is your return for just January of 2018 then you are DA MAN!

Yep, real return just Jan 1 to Jan 31. Not even annualized DOH!

Hence ridiculous [emoji54]

 

[Turboslacker]

I remember that Turboslacker mentioned in earlier posts that he was concentrated on one stock: Boeing. And indeed Boeing price gain was exceptional last year, and also YTD.

With a single-position portfolio, yes, it can happen. My brother-in-law did the same thing back in the late 90s. He tripled or quadrupled his 401k over a couple of years.

Correct. I know it seems insane but I'm all in with the big money for the near term. Hoping for another double over the next few years.

I do macro moves in and out with market timed moves measured in years. Pretty much the antithesis of what most of y'all do here, but it's worked okay over my 28 year career. I have been involved in US equities investing, pulsing macro economics and tracking the Aerospace Industry for 40 years. Well informed and experience may form my instincts, but I know it's no guarantee for success. Luck and good fortune is probably a more significant factor.

Simply enjoying the ride after riding thru the bumpy tough years. More ebbs and flows to come.

 

[Turboslacker]

I remember that Turboslacker mentioned in earlier posts that he was concentrated on one stock: Boeing. And indeed Boeing price gain was exceptional last year, and also YTD.

With a single-position portfolio, yes, it can happen. My brother-in-law did the same thing back in the late 90s. He tripled or quadrupled his 401k over a couple of years.

Holy smokes. It really can happen; that's what is so amazing.

Care to share the company name, if appropriate?

 

[Turboslacker]

Stock and bond investments up 6.73% for the month of January. Incredible.

Throw in a work cash bonus that after taxes was equal to 4% of my cash on hand... and it was a very, very good month. But not setting these expectations for the future, just enjoying the moment.

Wow, that's awesome. Congrats.

 

[Hermit]

But isn't re-balancing a form of market timing?

Market timing is based on future performance. Rebalancing is based on past performance.

 

[Fermion]

Market timing is based on future performance. Rebalancing is based on past performance.

Technically you should increase your losses with rebalancing since in a falling market you will be constantly catching the knife by moving money from your bonds to your stocks.

Really doesn't sound that much better than market timing.

BTW, market down some 700 points the last 2 days so we better do some updates on YTD.

 

[NW-Bound]

I remember that Turboslacker mentioned in earlier posts that he was concentrated on one stock: Boeing. And indeed Boeing price gain was exceptional last year, and also YTD.

With a single-position portfolio, yes, it can happen. My brother-in-law did the same thing back in the late 90s. He tripled or quadrupled his 401k over a couple of years.

Holy smokes. It really can happen; that's what is so amazing.

Care to share the company name, if appropriate?

It was McDonnell Douglas. The time was earlier than I recounted initially. It was in the early 90s, not late 90s.

At that time, McDD hit a bad stretch. Its A12 project was cancelled, and there was a billion-dollar lawsuit with the US Navy. It's been a long time now, but I think at that time it was also having some problems with its commercial aircraft operation.

I could not find any chart about the company stock, as it was bought out by Boeing in 1997. However, prior to this merger, McDD stock already recovered well. On the Web, I saw that the stock went through a 3:1 reverse split in 1995, then 2:1 reverse split in 1996. So, you can imagine that whoever bought at the bottom made out like bandit.

Of course, it could have gone the other way too. Risk and reward go together.

 

[NW-Bound]

...On the Web, I saw that the stock went through a 3:1 reverse split in 1995, then 2:1 reverse split in 1996. So, you can imagine that whoever bought at the bottom made out like bandit...

I am getting demented, and mistyped. The above were stock splits, not reverse stock splits. A share in 1995 became 6 shares in late 1996, not 6 shares into one.

Again, I could not find historical price of McDD shares, but with two splits like that in two years, the gain had to be exceptional.

 

[Turboslacker]

Amazing how well McDD stock did during that period when they were dramatically losing market share to Airbus and Boeing on the commercial front. Their defense and space was a great purchase by Boeing and had real value...and still does. Stonecipher and his cronies did a great job over-selling the company's perceived future value to Wall Street and Boeing, hence the uncorrelated rise in the stock value relative to it's real business book value. But timing of buy/sell combined with good luck is everything!

I loved McDD as an Aerospace company and am glad Boeing merged with them.

 

[NW-Bound]

Amazing how well McDD stock did during that period ...

It might not be what it seemed. McDD stock might have cratered in 1991, so that the stock split simply reflected the recovery of the stock price. A look at the stock historical price chart would tell the whole story. Alas, I cannot find anything any more about that.

 

[NW-Bound]

But isn't re-balancing a form of market timing?

Market timing is based on future performance. Rebalancing is based on past performance.

Ummm.... Rebalancing is based on predicting future performance too.

That is, you are counting on reversion to the mean. What goes up a lot recently tends to go down in the future, and vice versa.

You are not making an exact prediction, but are still betting that something is likely to happen. If the market were really random like a coin toss, there would be no mean reversion, and rebalancing would not work at all.

 

[Totoro]

If the market were really random like a coin toss, there would be no mean reversion, and rebalancing would not work at all.

? https://en.wikipedia.org/wiki/Law_of_large_numbers

It's a bit counter intuitive so I might be wrong, but if you buy after a negative toss (price drop) and sell after a positive toss (price rise), after a large number of trials you should get outperformance, no?

 

[NW-Bound]

Are you talking about true coin toss or about market flip-flop?

For a true coin toss, it does not work at all. You can try a simulation on the computer, or doing it with a real coin to see for yourself.

For the market, the problem is you can have a long string of flops. Even though in the long run the market goes up, you may run out of money, particularly if you need to draw on it to live.

 

[Totoro]

Talking about true coin toss.

Just did an Excel experiment ... might be doing it wrong but in this version I actually find that rebalancing has a negative effect.

I'm probably confused.

 

[Hermit]

Technically you should increase your losses with rebalancing since in a falling market you will be constantly catching the knife by moving money from your bonds to your stocks.

Really doesn't sound that much better than market timing.

BTW, market down some 700 points the last 2 days so we better do some updates on YTD.

If you rebalance at set decision points, you will not be trying to keep up with a falling market on a daily basis. That is why I don't have money in a balanced fund which does rebalance on a daily basis. I prefer to rebalance on an annual basis or when the investments get out of kilter to a large degree, say 5%. I may not buy stocks at the bottom all the time, but I certainly will not buy them at the top either. This approach worked out for me in 2008/9 when I rebalanced pretty close to the bottom because the allocation was off about 5%.

BTW, I just checked my investments at Vanguard, my stocks are down 2.4% from the allocation goal. I won't be doing much of anything for a while.

 

[NW-Bound]

Talking about true coin toss.

Just did an Excel experiment ... might be doing it wrong but in this version I actually find that rebalancing has a negative effect.

I'm probably confused.

If you keep repeating the experiment, you will see that sometimes it helps, sometimes it hurts. This means that the expected outcome is neutral and depends purely on luck, and cannot be predicted.

 

[mrfeh]

Rebalancing isn't about returns. It's about risk management.

 

[NW-Bound]

? https://en.wikipedia.org/wiki/Law_of_large_numbers

It's a bit counter intuitive so I might be wrong, but if you buy after a negative toss (price drop) and sell after a positive toss (price rise), after a large number of trials you should get outperformance, no?

OK, I realize I did not address your link about the "Law of Large Numbers".

What that is about is that for a large number of coin tosses, the ratio of heads over tails will approach 50%. You can take that to the bank.

However, that's not the same thing as the random walk that you try to bet on. What you bet on is # of heads minus # of tails, or # of tails minus # of heads if tail is your preference.

It actually does not matter if you bet on head or tail, because in the long run, the difference between heads and tails does not converge to anything. It's a random walk that meanders around. Theoretically, it has the average of zero, but its dispersion increases boundlessly with time. Its standard deviation is proportional to the square root of the number of trials, to be exact.

Hence, you do 1000 runs, you get some results. You do another 1000 runs, you get something else. No consistency can come out of that. But in both cases, the ratio of heads and tails will always approach 50/50.

 

[NW-Bound]

Rebalancing isn't about returns. It's about risk management.

It's about both. It's a trade-off.

Not rebalancing out of stocks will get you higher returns in the long run if you are patient, have a strong stomach, and have a long time to live.

Rebalancing gives up the potential for outsize returns in exchange for less fluctuation. And this helps if you have a limited lifespan and plan to spend most of your stash.

If you want to leave money to your heir and have a very low WR, then a high stock allocation can work better.

 

[mrfeh]

It's about both. It's a trade-off.

Not rebalancing out of stocks will get you higher returns in the long run if you are patient, have a strong stomach, and have a long time to live.

Rebalancing gives up the potential for outsize returns in exchange for less fluctuation. And this helps if you have a limited lifespan and plan to spend most of your stash.

If you want to leave money to your heir and have a very low WR, then a high stock allocation can work better.

My point is - pick your AA according to your risk tolerance. Don't expect rebalancing to increase the performance of your portfolio.

Come up with a strategy for when to rebalance, and follow it. Recent market changes should not be a factor.

 

[ducky911]

crossed back into positive territory today

 

[Dtail]

crossed back into positive territory today

Same here.

 

[KCGeezer]

Same here, well it was actually a day or two ago. January was above average, February was ’interesting’.

 

[LOL!]

My point is - pick your AA according to your risk tolerance. Don't expect rebalancing to increase the performance of your portfolio.

Come up with a strategy for when to rebalance, and follow it. Recent market changes should not be a factor.

Recent market changes should not be a factor in your asset allocation, but market changes are the only factor in rebalancing whether they are recent or not. After all, if the market doesn't change, then you will not have to rebalance a portfolio that is already in balance. It is the fact that the market changes that causes portfolios to get out of balance.