2019 vs 2022 - cash vs 60/40 vs crazy

[joesxm3]

I used to be very risk adverse and sat for a long time with a very cash heavy portfolio allocation. Around the beginning of 2021 I started to worry about inflation and decided that I had to take on more risk to be able to keep up with inflation caused by all the liquidity injection. I became enamored with the "disruptive new technology" theme and started to increase my equity exposure in that area.

Today I decided to try to see what would have happened had I just stuck with my 11/31/2019 allocation. I pulled up that spreadsheet and updated all the current prices. I realize that this leaves out some dividend income, but I think it is pretty close.

In 2019: 37% cash,13% I-bonds, 22% equity funds, 10% bond funds, 17% alternatives.

In 2022: 29% cash, 17% I-bonds, 33% stocks and funds, 21% alternatives.

Using the price-updated 2019 sheet as my baseline.

My current portfolio value is 11.59% lower than it would have been had I sat tight with my 2019 holdings.

Taking the total amount of my 2019 portfolio and adjusting it to reflect 60% in VTI and 40% in BND it seems to be about 2% lower than my 2019 baseline.

Interestingly, the adjustment multiplier for VTI is 1.1429, i.e. still in profit compared to .8493 for BND, i.e. about a 15% loss.

I guess it remains to be seen if my riskier current holdings will recover faster than the general market if that ever happens. Supposedly they go down more and up more than the less volatile total market.

I had sat for over five years with my ultra-conservative allocation and finally got itchy and started making changes at what, in hind sight, was not a good time.

I suppose I should do a similar comparison using my 2016 allocation. Maybe the 2016 60/40 numbers might be higher due to more equity appreciation time.

[copyright1997reloaded]

Quote:

Originally Posted by joesxm3 I had sat for over five years with my ultra-conservative allocation and finally got itchy and started making changes at what, in hind sight, was not a good time.

Is your name Randy? I ask because long ago I had the "Randy" indicator.

I've been investing in the market every since I got a job after college (late 70's). In the late 90's (I think it was Sept 99 or so), I was at a party and was chatting with a guy there (Randy). He had inherited a big chunk of change from his parents, but was super conservative with it. He had watched the market rally though the 90's, all the while this $ was in savings accounts and CD's.

He had finally decided to move the $ into the stock market. My advice to him, given how much the market had run, to dollar cost average in over the next couple/few years.

He of course ignored that advice, and moved the money into the market towards the end of 1999.

I then saw Randy (again at a party), a couple years later where he was complaining about having lost so much money in the market. He was thinking of "selling it all" and moving it back to savings/CD's. I mentioned to him that selling it all would likely not be a good long term decision.

I asked him (and our mutual friend) to let me know when he gave in and sold it all. That occurred in late 2002. I decided to increase my market allocation when I heard the news.

I'm not relaying this story to pick on you or belittle you. What I am trying to convey is that our emotions can play havoc with investing results. . I too have made mistakes because of this, and that the "madness of crowds" is a factor at market peaks and valleys. This is by definition, because SOMEONE has to be buying stocks to drive them to valuations which are unsound, and SOMEONE has to be selling due to fear even those those factors (and more) are already priced into the market.

While I play with market timing, the above is why so many here rightfully suggest that people should NOT try to time the market. Pick an asset allocation and stick with it, and stop beating yourself based on past history.

It is also why I am a very strong believer in doing things in small steps, never big changes all at once.

Why? Because I don't want my emotions to make me a Randy.

[joesxm3]

Hopefully I am not Randy, although I might be his cousin.

I have joked in the past that I should sell a newsletter so my customers could do the opposite of what I do.

I have worked out a new allocation of 50% squities and am moving towards that. Granted that I was timing in the sense that I felt the market and tech stocks were overvalued and waited for them to drop a bit. But I have been in crazy mode since early 2021 and have only moved from 20% to 33% equities during that period. So I guess I am following your DCA advice.

I did pick a few divers like SQ. But my TRBCX fund that I have been in for 20 or 30 years also seems down 34% from its high after switching managers last year and having huge distributiin.

thanks for the reply. I was thinking my thread would fade out of sight.

[street]

Thanks for your study on comparison. Your allocations differences are interesting for your current percentages.

I have always felt it is better strategy to pick an AA you feel good with through good and bad, and then sit tight with that decision. In my experience sitting on my hands and staying pat has been a benefit for me.

[copyright1997reloaded]

Quote:

Originally Posted by joesxm3 Hopefully I am not Randy, although I might be his cousin. I have joked in the past that I should sell a newsletter so my customers could do the opposite of what I do. I have worked out a new allocation of 50% squities and am moving towards that. Granted that I was timing in the sense that I felt the market and tech stocks were overvalued and waited for them to drop a bit. But I have been in crazy mode since early 2021 and have only moved from 20% to 33% equities during that period. So I guess I am following your DCA advice. I did pick a few divers like SQ. But my TRBCX fund that I have been in for 20 or 30 years also seems down 34% from its high after switching managers last year and having huge distributiin. thanks for the reply. I was thinking my thread would fade out of sight.

Don't feel bad.
I just sold a bunch of position at losses in a tax-deferred IRA, and those losses were much larger than they should have been.

They got that way because instead of concentrating on the investment, I didn't want to take losses in a tax-deferred account. So then the losses got worse.

I finally gave in, but only because I am trying to clean up (get rid of) IRA accounts (transfer them into a 457) because I have some non-tax-deferred IRA's that I would like to liquidate before I do a massive 401k/457 to Rollover IRA. I want to liquidate the small non-tax-deferred IRA so that I don't have to file form 8606's for the rest of my existence.

Anyway, the story is that I let the losses get out of hand in this one account because I let the tail (the fact that I couldn't take a tax loss on a position) wag the dog (keeping disciplined in my investments).

While it grates on me (especially yesterday selling things), the best approach is to move forward down the road and to not continue to gripe (well I guess except for this post) about my mistakes.

[joesxm3]

I had a similar tax wagging the dog event last fall. I wanted to take some profits, but I felt that I needed to keep my income at $40k for ACA. I had planned to sell as soon as January rolled over. Well the items in question tanked in late November. My lost profit was way more than my full premium.

Salt in the wound due to cloudy thinking. Some of what I wanted to sell was in an IRA and could have been sold without affecting ACA. Duh.

[joesxm3]

Quote:

Originally Posted by street Thanks for your study on comparison. Your allocations differences are interesting for your current percentages.

I think it is doing me good to try to evaluate my past actions in concrete terms. I have kept track at the macro level, but never really revisited my past trades in terms of whether the timing had a positive or negative impact. Doing this and further analysis of individual purchases and sales should help me to have a more realistic view of things.