Are you changing your strategy between December and January?

[Montecfo]

I reevaluate regularly. Not changing strategy but tactics get tweaked.

Defensive stocks have had a great run, but I am sticking to them in my taxable account.

Looking at beaten up stocks which I can begin to nibble on in the first two quarters of 2023.

Though the market has not bottomed, once it becomes clear we are headed to recession (if it does) the bottom will be in, as I see it.

 

[Car-Guy]

I said no earlier in the thread because the OP asked about changing strategies between Dec/Jan. But in reality I started to change mine in mid 2022... By YE I completed my move to 100% fixed income and don't plan on changing "this year". For me, that means no more equities (long or short term). If fixed income rates continue as they have over the past 6 months, I should pull down ~double what my annual spend is this year. And I don't live below my means.


I can live and sleep with that!

 

[VanWinkle]

I do it just for fun to see how much money I can lose in the new year, if I didn't lose enough in the prior year. Changing allocation based on the time of year is like rubbing a bar of soap- the bar keeps getting smaller. Just my 2 cents worth from SGOTI

VW

 

[athena53]

I'm done trying to call the bottom of the market!

My advisor, bless him, suggested I lower my exposure to tech and growth back in April so I'm sitting on a lot of cash. (Tax-loss harvesting offset most of the taxable gains.) Yes, there's a reason I have an advisor.

I'm beginning to think more about investing in individual stocks. Every ETF has a mix of good- and poorly-performing stocks in each category. The major names tend to drive moves in the ETF. Similarly, if you look at mutual fund holdings, they all hold the same big names- AAPL, GOOG, FaceBook, MSFT, etc. unless they're specialized funds and those aren't within their scope. Then there's the roulette wheel of annual capital gain distributions even if you hold. My holding that's done best this year is ULTA.

I also moved $$ out of a bond mutual fund into a Separately Managed Account of munis that I've had for a couple of years now. They buy individual bonds in my name and hold them unless there's a compelling reason to dump them, which rarely happens. Of course the market value of the bonds have tanked (and will some more after more rate hikes) but the coupon amounts are locked in.

 

[Markola]

^^^^^ I, too, have sworn off prognosticating. We have a long term plan worked out with a dedicated Vanguard CFP, who keeps it on track with their AUM program. So the core strategy is hands-off, functionally like an annuity. The things that change are DW and my part time work income, some of which I invest in home improvement and digital assets outside the plan.

 

[target2019]

Approaching retirement, for 10 years we down-shifted slowly from 60/40 to 50/50. Now we are going back to 60/40.

 

[pb4uski]

Some people plan to change their strategy at the end of the year.
I am not married with my strategy. But I rarely change it between December and January.
Still I notice that a fair share of other investor seems to change its asset allocation.
How about you, do you make bigger changes in your strategy or asset allocation between December and January?

No change expected in AA but I may start easing back into domestic equities if they fall another 20% at which point the S&P 500 P/E ratio would be back to its historical mean.

Other subtle but important changes under consideration... see below from the Investing in 2023 thread:

From what Gumby posted in the IBond thread, it looks like IBond rate inflation components will drop significantly to 2% or so for the next reset in May 2023, in which case the IBond train will be derailed for me. I'll stick with IBonds as long as their yields are competitive with 2-5 year US Treasuries.

If the IBond train does derail I'll likely transfer the money to my taxable brokerage account and invest in 2-5 year CDs/USTs/GSEs.

One unintended consequence is when I do cash out that the interest income recognized will reduce my Roth conversions for the year dollar-for-dollar.

I am also in process of simiplfying the number of accounts that I have for estate administration reasons. I got rid of most credit union CDs in 2022, one to go in 2023.

If the I-Bond money in 5 different accounts (2 individual and 3 trusts) gets moved to a single joint taxable brokerage account over 2023-2025, I could end up with as few as 5 accounts (taxable joint, his tIRA, his Roth, his HSA, her HSA) by the beginning of 2025. DW has a small $$$ Roth credit union CD (4.5% of total retirement assets) maturing in early 2023 that I need to decide whether it is worth keeping and rolling into a Roth brokerage account or just withdrawing and having one less account to deal with. I'll probably keep it in the Roth.

By contrast at the beginning of 2022, we had 17 financial accounts and added 3 in 2022 so we had 20 before the purge started... so getting down to 5 or 6 accounts with 2 different brokerage houses will greatly simplify our finances and the administration of the estate for DW and DD if I get hit by a beer truck.

 

[aja8888]

I'm staying on the same path as last year, which is about 85% fixed income (bonds, CDs, treasuries, I Bonds) and 15 % in a few dividend paying equities. I'm in the process of transferring my wife's IRA into my IRA now that she has passed and once that's done, I will sell her equities (one loser, one gainer) and decide what to do with the cash. Her IRA is small, maybe 15% the size of mine.

At my age (79), with one beneficiary (DD), I'm keeping things as simple as possible as DD is not a "financial" person and has no desire to learn the game.

 

[Dreamer]

No.

I am going to try to remember Gumby's advice about getting out of iBonds if the rates drop and go to treasuries. I have some old iBonds that have fixed interest, so I will keep those.

I am going to try really hard to get out of a variable annuity that was in my 401k for my part-time job. It is in the S&P 500 which is down quite a bit. I am going to see if I leave the pension plan, if it would just be in a 401k plan at Northwestern, that I can transfer to Vanguard. If not, then I am going to start trying to drain it by taking the 10 per cent that I am allowed to per the pension plan.

 

[Montecfo]

I expect I will stick with my ibonds for now for a few reasons.

1. Rate likely comparable to 5 year treasuries, despite insurance.
2. Can't easily re-invest if you liquidate
3. No interest rate risk with inflation protection with funds readily available if needed.

 

[pb4uski]

I expect I will stick with my ibonds for now for a few reasons.

1. Rate likely comparable to 5 year treasuries, despite insurance.
2. Can't easily re-invest if you liquidate
3. No interest rate risk with inflation protection with funds readily available if needed.

What does "despite insurance" mean?

 

[Montecfo]

What does "despite insurance" mean?

Insurance against inflation. I-bonds have it. Treasuries do not. Thus, i-bonds should return a somewhat lower rate than comparable treasuries. But I doubt this will be the case.

 

[Doc0]

My strategy has been pretty consistent since the 2008 crash. I went into 2008 with a typical "boglehead portfolio", i.e. Total US stock market, and a little in Total Foreign stocks and Total US bonds.

I learned from 2008 that the boglehead strategy is not for me. After that I transitioned to a focus on dividend growth and generating cash flow. Which I have stuck with since then.

I do track my total return and benchmark against the S&P 500. I have either kept pace with the S&P 500 or beaten it every year in total return, but I do cheat. In bull markets I use modest leverage and I have been incorporating options more and more, each year.

In 2023 I am going to start adding money to TQQQ and UPRO (3x leveraged Nasdaq 100 and S&P 500 etfs) in anticipation of a better 2024.

The S&P 500 is already a dividend strategy.

 

[RetiredAt49]

We are keeping our 100% equities AA because we trust the 150+ years of historical data and research which have shown that 100% equity portfolios have continually outperformed other AA portfolios over all 30+ year rolling timeframes.

 

[Out of Steam]

The past two years, I’ve fully calculated allocations across all retirement accounts and made changes as of March 31st.

Though we did take a diversification rollover from my wife’s company ESOP in December. It was probably our best investment in 2022, but she’s not as confident about future results.

 

[NW-Bound]

During 2022, I already lowered my stock AA from 80% down to 60%. I plan to keep it at 60%, and eventually return it to 80% when I feel it's right.

I hold mostly individual stocks to avoid frothy high-P/E growth stocks, and will continue to do so. I still need to add more defensive stocks to the mix.

So, no change in strategy.

 

[big-papa]

Nope, US/International ratio stays at 80/20 with bond portion composed of duration matched TIPS + our usual January $10K each Ibonds + $5K Ibonds via Tax refund. As always.

Retiring in April, so only question will be whether I have any space for our first Roth conversion before year's end. If there is, it won't be huge. But will start conversions in earnest in 2024.

Cheers,
Big-Papa

 

[dunkelblau]

I trade mostly microcaps (<100M USD) and the only seasonal shift I play is the "January effect". The premise is that tax-loss selling and window dressing buying at the end of the calendar year amplify share price divergence between recent good vs bad performers in 4Q. Then early in 1Q mean reversion gives last years bad performers a temporary relative bump in share price. So my play is to bias purchases towards year end and look for names that had a bad year, which means my AA equity share jumps higher in December.

In most years I believe this January effect is not strong, but 2022-2023 might be an exception. My normal rate has been to buy maybe two or three per week, but for December 2022 I counted 169 distinct names purchased. Small biotechs crashed badly in 2022, so it wasn't hard to find candidates with symbols ending in RX/DX/TX whose market cap dropped to less than half of net cash-minus-debt reported at 2022Q3 (this seems like a good margin of safety, but it often isn't because most biotechs burn cash at eye-watering rates). I noticed some of my new buys appeared in the top-10 daily gainers during this first week of 2023, so I took the time to check 5-day returns on all 169 of these.

The distribution of these 5-day returns caught me by surprise-- in normal times I'd expect a cluster spanning -10% to +10% (aka noise) with several >10% and about the same number <-10%. For this set of 169x during the 5-days ending yesterday, I see that the +10 to +30% bin actually outnumbers the -10 to +10%, with 45x >30%, and only 6x <-10%. Median 5-day share price change across all 169 names is +16.5%, and their equally-weighted average is +23.6%.

I believe the usual holding window for January effect plays is a few weeks, but given the extreme severity of the downturn in 2022 on most of these names, I wonder if the bounce may last longer in 2023? Time will tell.

 

[Koolau]

I said no earlier in the thread because the OP asked about changing strategies between Dec/Jan. But in reality I started to change mine in mid 2022... By YE I completed my move to 100% fixed income and don't plan on changing "this year". For me, that means no more equities (long or short term). If fixed income rates continue as they have over the past 6 months, I should pull down ~double what my annual spend is this year. And I don't live below my means.


I can live and sleep with that!

If you don't mind sharing, what do you consider fixed income investments? I consider that I'm about 2/3 in non-equities though they may not all be "fixed" income. I'm using I-bonds, a GIF (guaranteed income fund) in my 401(k), old SPDAs (single premium deferred annuities - similar to MYGAs) and MYGAs and a Vanguard short term bond fund as well as bonds in pssst Wellesley. Right now I have NO CDs but I'm looking. Thanks.