Annual check in

[hotwired]

Good morning!
I like to check in every so often to run my investment strategy up the flagpole and get critiques. Here's a summation:

I've always struggled between a set it and relance it strategy using 5-7 index funds vs. doing that with a chunk, then picking a diversified self-chosen collection to supplement. That is what I'm doing now. I do NOT measure the exact performance of my portfolio mostly due to laziness, honestly, but I know that I am more or less in line with a 60/40 approach.

I've also decided to use tactical asset allocation, at least on the stock portion of my index funds, because A.) Historically TAA has resulted in a MUCH lower drawdown while providing close to the same return, often higher, but rarely too much lower. B.) TAA has gotten clobbered since roughly 2009 due to the fact that we've been in a secular bull market and generally B&H beats timing models when we're in a strong bull market. Hence, my voice is nagging me that TAA's time has "come round". My technique is to sell the asset to cash when the moving average of the asset falls below the 200 day exponential moving average. I check and do the trade monthly, last trading day of month.

Here's my portfolio: Target is 40% stock (25% US / 15% INT, and the INT is both large & emerging market, like 50/50) 40% bond (including some preferreds CEF's and Lending Club / Prosper, then 20% alternative. My alternative is overweight right now and I will be moving some from there to stock soon. Here's what it looks like. I'd love some feedback. Again, part of me wants to just pick a nice diversified index portfolio and be done with it, and that's where about 65% of my funds are, but I like to dabble a bit and usually do OK. (bitcoin, 2200% return, ROKU, 150% return, etc.)

US BONDS / INCOME (40%, 35% US, 5% emerging markets)
Vanguard Total Bond VBMFX
Vanguard GNMA VFIIX
Vanguard ST invst grade VFSUX
iShares US Preferred Stock* PFF
Pimco Floating Rate PFN
Pimco Dynamic credit PCI
Nuveen Pfd & Inc Fund JPS
Farmland Partners PFD FPIPRB
Oxford Lane Capital OXLC
Sachem (HML) SACH
Peer to Peer lending LC/PSPR
Vanguard Tips VTIPX
FOREIGN BONDS / INCOME
Emerging Markets Bonds EMB

Stock (40%) (70% of my stock holdings are in Vanguard total stock market, and small cap value, then the rest are fairly evenly distributed)
US STOCK

Vanguard Total Stock Market VTSMX
Roku ROKU
ATT T
Dividend & Income Fund DNI
Vanguard Energy Fund VGENX


U.S. Small Cap
Vanguard Small Cap Value VISVX
Rite Aid RAD
Royce Value Trust (SCV) RVT (in cash right now due to signal)

INTERNATIONAL STOCK
Int Lg Cap
Vanguard International Stock VGTSX

Emerging Market
Greek 20 GREK
Vanguard Emerging MKT VEIEX
Russian Small Cap ETF RSXJ

Alternative (majority of "alternatives" is 7% REIT & 7% Private equity/BDCs, then 3% PM)
GDX Gold Miners GDX
PM (physical G&S) ***
Saratoga Investment SAR
Powershares Private Equity PSP
McQuarrie Infrastructure MIC
Apollo Investment Group BDC AINV
MLPA MLPA
Aries Capital (Private Equity) ARCC
REIT mREIT MORT
REIT US GLP
REIT US VNQ
REIT INT VNQI
iStar STAR
Washington Prime Group WPG
Commodities RJI (in cash due to signal)
Crypto (all 5 cryptos avail. at coinbase)
Wine & Collectibles (note: wine, crytpo and collectibles only account for .04% of my portfolio)

 

[Mdlerth]

Lazy? I'll show you lazy!

Good morning!
I like to check in every so often to run my investment strategy up the flagpole and get critiques.

Whew! There's an awful lot of individual bits in your list. Which brings me to my critique:

I do NOT measure the exact performance of my portfolio mostly due to laziness, honestly,

The above statement doesn't really fit with a portfolio containing that many moving parts. Diversification is good, but wouldn't you already get diversification in an index fund or three? Keeping track of dozens of positions is NOT laziness.

I have a friend who makes 20 option trades every day, selected from a group of some 200 stocks he follows. Even with software packages and custom spreadsheets it takes him 5 hours to sift through. It's been profitable for him, but it's obvious he simply enjoys "the chase". I wonder whether the same applies to you.

Crypto (all 5 cryptos avail. at coinbase)
Wine & Collectibles (note: wine, crytpo and collectibles only account for .04% of my portfolio)

I don't see any harm in a little speculation. For the same reason I buy an occasional $2 lottery ticket: I get my money's worth in entertainment value.

I guess I'd summarize my comments as, "You indicate that you employ an allocation strategy, which is what you should do. OTOH, your portfolio is way more complicated than I would be interested in managing. I couldn't begin to dissect it. But if you're happy immersing yourself in detail, then carry on."

 

[jIMOh]

Good morning!
I like to check in every so often to run my investment strategy up the flagpole and get critiques. Here's a summation:

I've always struggled between a set it and relance it strategy using 5-7 index funds vs. doing that with a chunk, then picking a diversified self-chosen collection to supplement. That is what I'm doing now. I do NOT measure the exact performance of my portfolio mostly due to laziness, honestly, but I know that I am more or less in line with a 60/40 approach.

I've also decided to use tactical asset allocation, at least on the stock portion of my index funds, because A.) Historically TAA has resulted in a MUCH lower drawdown while providing close to the same return, often higher, but rarely too much lower. B.) TAA has gotten clobbered since roughly 2009 due to the fact that we've been in a secular bull market and generally B&H beats timing models when we're in a strong bull market. Hence, my voice is nagging me that TAA's time has "come round". My technique is to sell the asset to cash when the moving average of the asset falls below the 200 day exponential moving average. I check and do the trade monthly, last trading day of month.

Here's my portfolio: Target is 40% stock (25% US / 15% INT, and the INT is both large & emerging market, like 50/50) 40% bond (including some preferreds CEF's and Lending Club / Prosper, then 20% alternative. My alternative is overweight right now and I will be moving some from there to stock soon. Here's what it looks like. I'd love some feedback. Again, part of me wants to just pick a nice diversified index portfolio and be done with it, and that's where about 65% of my funds are, but I like to dabble a bit and usually do OK. (bitcoin, 2200% return, ROKU, 150% return, etc.)

US BONDS / INCOME (40%, 35% US, 5% emerging markets)
Vanguard Total Bond VBMFX
Vanguard GNMA VFIIX
Vanguard ST invst grade VFSUX
iShares US Preferred Stock* PFF
Pimco Floating Rate PFN
Pimco Dynamic credit PCI
Nuveen Pfd & Inc Fund JPS
Farmland Partners PFD FPIPRB
Oxford Lane Capital OXLC
Sachem (HML) SACH
Peer to Peer lending LC/PSPR
Vanguard Tips VTIPX
FOREIGN BONDS / INCOME
Emerging Markets Bonds EMB

Stock (40%) (70% of my stock holdings are in Vanguard total stock market, and small cap value, then the rest are fairly evenly distributed)
US STOCK

Vanguard Total Stock Market VTSMX
Roku ROKU
ATT T
Dividend & Income Fund DNI
Vanguard Energy Fund VGENX


U.S. Small Cap
Vanguard Small Cap Value VISVX
Rite Aid RAD
Royce Value Trust (SCV) RVT (in cash right now due to signal)

INTERNATIONAL STOCK
Int Lg Cap
Vanguard International Stock VGTSX

Emerging Market
Greek 20 GREK
Vanguard Emerging MKT VEIEX
Russian Small Cap ETF RSXJ

Alternative (majority of "alternatives" is 7% REIT & 7% Private equity/BDCs, then 3% PM)
GDX Gold Miners GDX
PM (physical G&S) ***
Saratoga Investment SAR
Powershares Private Equity PSP
McQuarrie Infrastructure MIC
Apollo Investment Group BDC AINV
MLPA MLPA
Aries Capital (Private Equity) ARCC
REIT mREIT MORT
REIT US GLP
REIT US VNQ
REIT INT VNQI
iStar STAR
Washington Prime Group WPG
Commodities RJI (in cash due to signal)
Crypto (all 5 cryptos avail. at coinbase)
Wine & Collectibles (note: wine, crytpo and collectibles only account for .04% of my portfolio)

I would break this down differently to even begin discussion (and I agree with other poster, I wouldn't dive into detail unless this was better organized/presented).

Overall asset allocation
I think you said 60-40 was the target?

Account 1
IRA
% stocks, % bonds, specific holdings in % of this account

Account 2
taxable
% stocks % bonds, specific holdings in % of this account

Accounts 3,4,5... same

Then list amounts in each account


I think you hold too many

I hold a few positions (I have a sector ETF for each of the sectors in the S&P 500), and I track my weighting relative to the S&P (50% of my holdings track the the S&P, with other 50% I buy the under performing sectors of the previous year or what has been hit hard this year)

 

[flintnational]

I count 43 separate investments! On another thread we are debating if 3 funds is adequate. The consensus seems to be that somewhere between 3 to 7 funds covers most folks needs. Even if you wanted to include some alternative investments, you should be able to get down to 7-12 investments. Unlike other human endeavours, increasing investment activity tends to decrease returns. IOW, less may be more. And, with fewer investments, you could track your performance against a reasonable benchmark.

 

[ESRwannabe]

hotwired,

Some other CEFs you might want to check out:
DSL = doubleline managed (Jeffrey Gundlach) junk bonds
HTD = tax managed 50/50 in utilities and preferred stocks, all qualified divs
UTG = mostly utilities, tax efficient
UTF = mostly utilities
FOF = fund of fund of CEFs
STK = focused on IT and growth stocks, covered calls
QQQX = covered calls on nasdaq, tax efficient
SPXX = covered calls on s&p 500, tax efficient
ECC = IMHO, a better CLO fund than OXLC which you have

For municipal bond CEFs you might want to check out the ETF of muni CEFs ticker XMPT. Also Vanguard's tax managed balanced fund is a good one for munis. Its tax managed half US stock index and half munis.

You might want to also add in some Business Development Companies with BIZD. Some Master Limited Partnerships with MLPX and MLPA. I think you already had mortgage REITs but if not REM is a good one.

You might want to also add in some div growth focused like: VYM, VYMI, NOBL

You can get access to Vanguard managed hedge funds with fund VPGDX for only $25k. Its the only way I know how to get access to Vanguard's Alternative Strategies fund VASFX provides access to a new asset class not correlated to stocks/bonds with equity like returns.

Vanguard's got a new commodity fund coming out this month for a min entrace of $50k. If we get stagflation it will probably outperform both stocks and bonds for the next economic cycle.

...

In my own portfolio I am using Vanguard High Div Yield index in taxable, Vanguard Managed Payout in Roth IRA, and in 401k I have it in a state managed endowment fund, same as used for the state pension system. Also 17 years and counting in state pension plan.

In taxable I have $417k in VHYAX. Dividend income for 2019 should be around $14k-$15k. I want to get that up to $18k and then I will focus on adding other assets if I don't early retire first.

Whenever I retire early, withdrawal strategy for pre-60s is to only spend the dividends from VHYAX which should be growing around 8% per year. On a total return basis withdrawal rate will be around 3%. At 60+ my pension will be enough to live off of. Everything else is just gravy from then on.

With pension, 401k, and Roth IRA I have access to same options as the big endowment funds. In taxable, keep it simple. Best bang for the buck IMHO is VHYAX. Withdrawal strategy is solid and reliable, i.e. just spend the dividends. Very conservative 3% on total return basis and on a "widows and orphans" basis. Total return on VHYAX is comparable to S&P 500. Taxes are 100% qualified dividends and expense ratio on VHYAX is only .08% and will probably continue to decline.

I'm 43. I may early retire at 45. For slow traveling expat I just need $1,500 a month to start with. Start out in Mexico, Thailand, etc. By the time I am 60 I'll have more than enough money to start traveling in the most expensive countries. Start out at $18k a year from VHYAX dividend income. That will grow around 7%-8% a year. Every year I will have more money to spend. By 52 should have around $30k in divs. At 60+ I will be making more money in retirement than I ever did while working. Pension is worth around $600k currently I guesstimate and I currently have $417 in VHYAX and another $100k in 401k/Roth IRA which will double by the time I'm 60.

 

[HI Bill]

Woah. A very diverse portfolio, but it seems unnecessarily complicated. Are you actively managing your investments within the portfolio, or are you a long-term investor? If it's the prior (active management), I can perhaps see the point in this mix. But it seems somewhat chaotic, hard to manage, and hard to evaluate actual AA, and overlap in MFs. I can't see the need for 14 bond funds.

Have you looked at the fees for each of your investments, and compared the returns, after taxes and fees? How do you track your performance to know if this complicated mix is doing better, than, say, the S&P500?

 

[hotwired]

I had to hold my breath to share this. I've always been reticent with disclosing actual balances but here goes! I really do think I'm overdiversified. I think the biggest danger is that I have overlap and probably can't keep track of it. Most are pretty low fee funds. I will most likely sell out the two single country funds (GREK and RSXJ) and move to EM fund but am holding out for now. @ESRWannabee, I do already have 3 BDC's just not BIZD.

Though hard to tell I do have 65% of my assets in INDEX funds, 35% is my own tinkering.

ALL of this is in retirement accounts EXCEPT the peer to peer, physical gold, wine.

I listed the asset category with total amount ($) then total percentage of portfolio (i.e. US BONDS income, I have 164K and it represents 25% of my portfolio)

US BONDS / INCOME 163,793 25.00% (broken down below)

Vanguard Total Bond VBMFX 22,000 12.28%
Vanguard GNMA VFIIX 12,500 6.98%
Vanguard ST invst grade VFSUX 22,716 12.68%
iShares US Preferred PFF 8,603 4.80%
Pimco Floating Rate PFN 3,863 2.16%
Pimco Dynamic credit PCI 2,324 1.30%
Nuveen Pfd & Inc Fund JPS 1,288 0.72%
Farmland Partners PFD FPIPRB 2,348 1.31%
Oxford Lane Capital OXLC 5,260 2.94%
Sachem (HML) SACH 2,826 1.58%
Peer to Peer lending LC/PSPR 60,000 33.50%
Vanguard Tips VTIPX 20,065 11.20%

FOREIGN BONDS / INCOME 15,331 5.00%
Emerging Markets Bonds EMB 15,331 8.56%


>>TOTAL US & FOREIGN BONDS 179,124 (30.00% of portfolio)


US STOCK 91,873 25.00%

Vanguard Total Stock VTSMX 53,880
Roku ROKU 4,276
ATT T 5,280
Dividend & Income Fund DNI 3,745
Vanguard Energy Fund VGENX 800 (TAA'd out, 8,500 in cash)


U.S. Small Cap 23,892 8.00%

Vanguard Small Cap Value VISVX 20,800
Rite Aid RAD 2,673
Royce Value Trust (SCV) RVT 419 (TAA'd out, 7,500 in cash)


INTERNATIONAL STOCK 56,971 15.00%

Vanguard International Stock VGTSX 32,000 7.50%

Emerging Market 24,971 7.50%

Greek 20 GREK 5,221
Vanguard Emerging MKT VEIEX 14,803
Russian Small Cap ETF RSXJ 4,947


>>TOTAL STOCK 15700 148,844 (50.00% of portfolio)


Alternative
GDX Gold Miners GDX 7,213
PM (physical G&S) *** 6,221
Saratoga Investment SAR 5,012
Powershares Private Equity PSP 4,728
McQuarrie Infrastructure MIC 5,328
Apollo Investment Group BDC AINV 5,581
MLPA MLPA 4,395
Aries Capital (Private Equity) ARCC 6,978
REIT mREIT MORT 6,569
REIT US GLP 4,467
REIT US VNQ 5,379
REIT INT VNQI 5,845
iStar STAR 5,230
Washington Prime Group WPG 4,900
Commodities RJI 290 (TAA'd out, 10,500 in cash)
Crypto VARIOUS 13,700
Wine & Collectibles *** 6,500


>>TOTAL REIT/ALTERNATIVE 10000 $98,336 (20.00% of portfolio)

Cash
TAA Risk Capital 25,700 (amount indicated in parenthesis above that I've moved into cash until the price rises above the 200 EMA of that asset)

 

[REWahoo]

I really do think I'm overdiversified. I think the biggest danger is that I have overlap and probably can't keep track of it.

I doubt you'll find many folks here who would disagree with your assessment.

Now that you've identified the problem, what do you plan to do about it?

 

[pb4uski]

Yup. Way too many tickers. But.... why?

 

[hotwired]

the why

well...I have a pretty simple core (like total market funds) but I keep learning new thngs and like to have 5K positions in this or that. It really is a collection problem more than anything else. I love to diversify but I recognize that, despite having an asset allocation that is NOT to concentrated in any one area, is way too much for me to COMPETENTLY deal with and for that reason I'm going to simplify. My plan is not 100% clear yet ... but simplify it is. Because the bulk of my $ comes from our real estate portfolio anyway, so there's really not enough alpha available with the course I'm taking. After simplifying I still plan to experiment using my "many nets" approach, but with a smaller amount. That is to say maybe 10% of my funds will be cast out using a barbell approach (90% stable well diversified index fund portfolio / 10% swing for the fences)

It's just a matter of finishing my plan and then executing it over the next 90 days. I will most likely end up like this:

US stocks will be divided into VALUE / GROWTH / with a small cap value tilt (3 funds)
INT just a total int fund and one EM fund
(I have a couple of regular stocks I might keep until it's time to sell based on fundamentals. Like ROKU and RiteAid)

BONDS
I'm not sure. I don't like total international bond for the bulk because I think it's too heavily weighted toward long term. Maybe simply short term investment grade and an intermeidate? I like the idea of keeping some in "variable rate" bankloan funds as well, like some of PIMCO's.

Alternatives: Just 20% of port in REIT, mREIT, MLPs, BDCs, crypto.

I will keep my wine until it matures. That was just a silly path I went down, but have very little percentage wise in that.

That's not polished yet ... but that's the gist. More importantly I want to be able to look at every position I have and know WHY I bought it wihtout looking or struggling to remember.

 

[Another Reader]

The way I see this is you don't have a huge portfolio ($500k?) and you are taking a lot of risk which you don't really understand.

The majority of my money is in rentals as well. They are stable and the mortgages are being paid off as cash accumulates. My paper assets are largely stock mutual funds and ETF's, with some in Wellington in a IRA. Some sector funds, some small cap, and some boring index stuff. I do have some individual stocks, mostly relics of the past I haven't sold.

Other than short term treasuries, I don't buy bonds. In my view, the underlying risks of bonds are largely ignored by the market. Wellington does hold some, hopefully curated by management. I certainly don't fool with bonds outside the US. GAAP seem to be optional when convenient in a lot of countries, and I want no part of that.

Real estate takes the place of bonds for me, plus I have two small pensions and the SS annuity.

Your portfolio is too fancy and too risky for me. In your shoes, I would stop trying to pick the next big winner, dump everything in a simple and boring mostly US portfolio and go unclog some tenant toilets.

 

[easysurfer]

All those investments will keep you busy .

“Don't mistake activity with achievement.” ― John Wooden

 

[Another Reader]

You say you are looking for alpha. Have you actually found any alpha? If so, your portfolio should reflect the higher rate of return from that alpha. I don't see any discussion of your rate of return, except for a couple of your "winners." Those winners will show up in a lot of diversified funds and ETFs as well, so you would have benefited from them had you been invested in the funds that owned them.

I like to say I'm smart enough to know I'm not smart enough and I don't have the right tools to find alpha in paper asset markets and successfully apply it. Therefore, I pick some diversified mutual funds and ETFs that have been consistent over the long term and some sector funds that have also consistently performed over time. That's good enough for me.

With my skills, knowledge, and experience, I can generate a significant alpha in the relatively inefficient real estate markets. I would rather spend my time on investments where the extra return is measurable and long term than on guessing what paper assets will produce higher returns.

 

[dtbach]

I'd trim that whole thing down by at least 2/3rds. Still would give you 15 funds/stocks to work with and would most likely give you at least as good of return as you are getting now. Plus a whole lot less confusing.

 

[The Cosmic Avenger]

That is to say maybe 10% of my funds will be cast out using a barbell approach (90% stable well diversified index fund portfolio / 10% swing for the fences)

That makes sense, as long as by "well diversified" you don't mean too many index funds. Index funds are generally fairly well diversified, although I know some people here like to have 2-3 US market funds and an international fund or two. And I let myself dabble in stocks with what was about 5% of our retirement funds, mostly in companies whose industries I followed, and who I thought were doing a lot of interesting things in addition to their main business line: Apple, Google, and Tesla. The first two have done well enough that I find myself chafing a bit at my self-imposed restraints, although I set an order to bail on Tesla if it hits 273 again. I also put a little less than 5 figures in cryptocurrency and lost a bit when I gave up on it, but that was therapeutic as it got the dabbling bug (mostly) out of my system and renewed my faith in sticking to a long-term strategy. If I try another venture like that again in anything that risky it'll probably be in the low 4 figures at most.

 

[Scratchy]

Bear in mind that if one of your alternative investments in taxable does rise significantly, you will be stuck with it long term or will have to pay capital gains tax to get out of it.

You portfolio is certainly not my cup of tea. My sense is it is high on risk with only minimum marginal diversification benefit over a three fund portfolio of index funds.

But, to each his own. I'm certainly no expert.

 

[Marq]

For years I managed my work 401K while I had Merrill Lynch manage my personal finances but last year made the switch and now I manage everything.

ML had me in around 80 different investments and I have worked to pare that down to a "manageable" 37!

I don't find that to be difficult, but clearly each to their own!

 

[Brat]

Why not just buy Wellington and let the experts do it?

 

[hotwired]

That's where I put my daughter's money ... I've dreamt of just doing that with mine, and being done with it. Great suggestion and not unreasonable.