The best that one can say about new ”products” is that they provide jobs for those who create and who manage them. They do so at inexperienced investors’ expense.  The Monday Morning Millionaire Program investing philosophy protects us from them.

My Fun Portfolio

Today, I sold covered calls on ABBV, expiry date 7/19/19, strike price $71.00 and received a premium of $430.00 — the lowest ever! Not much fun!

You can see personal portfolio details here.

You can see the Monday Morning Millionaire Program investing philosophy results below.

On Sept 2, 2010, MarketWatch Assistant Commentary Editor, Jonathan Burton published a paper titled ‘Nifty 50/50’ portfolio keeps investing simple.  Investors only need to study this impactful and actionable article for a few minutes to develop a mindset which will give them investing peace of mind. We have frequently referred to this paper in our blogs. This approach uses three index-tracking exchange-traded funds (ETFs) — one for US stocks, one for international stocks and one for bonds. Half of the money is kept in stocks and the other half in bonds. It is a rebalanced annually to maintain that 50/50 ratio.

Leading up to September 2010 and going back 10 years, this 50/50 portfolio outperformed the S&P500.

Leading up to September 2010 and going back 25 years, this 50/50 portfolio just underperformed the S&P500.

Monday Morning Millionaire Program members know that over the course of a decade, holding an exchange-traded index fund which mirrors the S&P 500 outperforms over 90% of portfolios including professionally managed ones.

Leading up to April 2019 and going back 7 years, the Monday Morning Millionaire Program outperformed the S&P500. Our program differs from Nifty 50/50 in two ways.

First, it keeps half the money in only one ETF (SPDR S&P 500 ETF (Symbol SPY) or iShares Core S&P 500 ETF (Symbol IVV) or Vanguard S&P 500 ETF (Symbol VOO) or the Guggenheim S&P 500 Equal Weight ETF (Symbol RSP).) It keeps the other half in a money market fund (TDB166 now paying 2.13%).

And second, instead of rebalancing annually, our program rebalanced any time that the S&P 500 dropped by 10%. There were four such opportunities in 2018.

The Monday Morning Millionaire Program recently changed the required rebalancing drop to 5% from 10%. Our return roughly equals the S&P 500. Because we keep 50% in a money market fund, our portfolio has half the volatility, that is, half the risk of being fully invested in an index ETF tracking the S&P 500.

We see no reason to change this approach to investing.

1. Forty years ago, you could get stock market television news for about one hour daily. Most of it was drivel and was not actionable. That is, it was useless. Today, you can get 18 hours daily. Much like 40 years ago, investors would be better off if they ignored all that and simply practised the six habits of Monday Morning Millionaires.

2. Three-year returns on initial public offerings are negative almost 100% of the time. The founders of these companies know more than you or I do about their companies. They are cashing in their chips.

3. On Wall Street/Bay Street, great money manager wealth rarely indicates great money manager investment performance.

4. After taxation and inflation, the return on most bonds is almost always negative.

5. Over the course of a market cycle (peak to trough to peak) beating the market is nearly impossible. Fortunately, any high school student can equal the market.

Finally, unrelated to the above, please note that we offer a free half-hour discussion with you to allow you to see whether our six-hour, one-on-one coaching program ($C1,700 including taxes) suits your investing needs. Contact me at milan@drmilan.com.

Happy Canada Day and Independence Day!!

Members’ main source of financial stress

Our June 24, 2019 survey asked our embers for their age category, citizenship and response about their main source of financial stress.

By the end of June 25, we received responses from 53% of our subscribers. (Average response rates to surveys are 10% – 15%.)

Of those who responded:

• 63% were between 50 and 70 years old.
• 24% were between 30 and 50 years old.
• 8% were 30 years or younger.
• 5% were over 70 and/or retired.

Just under one half were Americans, just under one half were Canadians and the rest were from other English-speaking countries.

Our April 2019 survey asked whether health care students should receive investment education. Our members who are not in health care would likely be interested in the results of this survey as well.

• 53% of our members responded. (Average response rates to surveys are 10% – 15%.)
• 85% of those who responded said “yes”.
• 15% said “no”. Probably the negative ones feel that the curriculum is too crowded as it is.

High-income earners such as healthcare workers are the target of aggressive salespeople.

The need for unbiased investment education is obvious.

Happy Canada Day and Independence Day!!

Also, survey results of members’ main source of financial stress

Motivated by our objective to increase the percentage of members with no financial stress, we have introduced a no-charge half hour session for members and followers to see if our six one-hour sessions would be useful for them. Take a look.

*Quote: D. H. Lawrence The Rocking Horse Winner

As I stated previously, since January 2012, we have outperformed the market slightly in our core portfolios. It is almost a certainty that we will not be able to continue to do so. However, since we have the six habits of highly effective investors, it is an absolute certainty we will be able to equal the market minus a small transaction fee. Seasoned members on the Monday Morning Millionaire Program do so.

On most Tuesdays, I publish with comments, Rosi’s and my core portfolios and my fun portfolio holdings and the activity which took place on Monday.

Rosi does not have a fun portfolio. She has her fun skiing, cycling in the skiing off-season, making muffins, walking our dog, reading, making our travel arrangements and spending time with our grandchildren.

My Fun Portfolio

Can’t brag about that one at cocktail parties.

Please note that the only way to beat the market is to ignore one or more of the six habits of highly effective investors. We ignored two. One, the portfolio is fully invested, that is, it cannot be rebalanced to a sensible asset allocation and two, it has only one stock, that is, it is not diversified by owning the entire US market via an exchange-traded fund which mirrors the S&P 500 index.

Since inception, the portfolio is down significantly because the only security in the portfolio, AbbVie (symbol ABBV), tanked immediately after we bought it.

Since that time, we sold derivatives on ABBV at each expiry date and each time that we were assigned. (Covered calls 12 times and cash-secured uncovered puts 9 times.) We have recovered 2/3 of the loss overall but still hold a 1/3 loss position.

Yesterday, I sold covered calls on ABBV, expiry date June 28, strike price $78.00 and got a premium of $US520.00 per ten contracts.

The premium has been as low as $US500.00 and as high as $US1,200.00 per ten contracts.  Go figure!!

Since my fun portfolio makes up only 5% of our market holdings, it cannot have a major impact overall.  It could, however, come up with an unusually good opportunity which we could apply to our core portfolios.

Core portfolios (all are tax-advantaged)

After withdrawing our entire annual budgeted income needs from my personal core portfolio recently, I followed Paul Samuelson’s advice (Samuelson is an economics Nobel laureate) stating that investing should be like watching paint dry or grass grow. We maintain a 50/50 asset allocation with 50% in a US money market fund (TDB166, now paying 2.24% annually, down from 2.25% four weeks ago) and 50% in the RSP ETF.   That 50/50 asset allocation equals the market over the course of a market cycle (peak to trough to peak) with half the volatility, that is, half the risk.

On June 20, the US dollar dropped 2 cents relative to the Canadian dollar.

Somewhat fewer than 50% of Monday Morning Millionaire Program members are Americans, somewhat fewer than 50% are Canadians and the rest are from other English-speaking countries.  The millions of Americans and Canadians visiting each other’s countries each year have a long accepted the currency difference. ($US1.00 roughly equals $CAD1.30.)

A two cent daily move, that is, a 2% move up or down, is meaningless when buying a hamburger or gasoline or going to a show. We tend to ignore it. But it is a $50,000 gain or loss in one day in the portfolios of many Monday Morning Millionaire Program members. That is hard to ignore.

Let us look at the math.

On June 3, 2019, our blog Enough! How much is enough?  referred to a CNN article titled Is $2 million enough to feel wealthy?  That article mentioned an interesting survey by Charles Schwab which showed that a net worth of $2.27 million would allow most people to feel wealthy.

Consider the following:

1. Members of the Monday Morning Millionaire Program have an annual income of about $100,000 on the average. (Most are dentists, veterinarians and optometrists. Their average incomes are easy to find on the Internet.)
2. The six habits promoted by the Monday Morning Millionaire Program promise that members will be able to maintain their career income level into retirement without encroaching on the principal.
3. A 4% rate of withdrawal is widely considered by experts as a safe way to do so.
4. The portfolio(s) size which would allow a 4% withdrawal rate to generate $100,000 without encroaching on the principal is $2.5 million. (4/100 x $2,500,000 = $100,000)