Every Tuesday, I will publish with comments, my core portfolio and my fun portfolio holdings and the activity which took place on Monday. Following holiday Mondays, we will publish this information on Wednesdays.
CORE PORTFOLIO (tax-advantaged)
Following Paul Samuelson’s advice that investing should be more like watching paint dry or watching grass grow, yesterday, Monday, 02/11/2019, as usual, I did nothing with this portfolio. (in April 2014, Paul Samuelson became the first American to win the Nobel Prize in Economic Sciences.)
47.70% (about five years’ worth of my usual annual income) of this portfolio is in a US Money Market Fund (TDB166).
A Money Market Fund is a near-money security, that is, a non-cash asset which does not fluctuate in value and can be quickly converted into cash. TDB166 is currently yielding 2.28% annually, the highest in a long time. Two weeks ago, it paid 2.27%. A year or so ago, it paid in less than 0.5%.
The rest of the portfolio is in an exchange-traded fund which parallels the S&P 500 (SPY) which itself is an excellent proxy for the entire US economy.
My asset allocation (50% money market/50% exchange-traded fund which mirrors the S&P 500) outperforms a dropping market. In a rising market, it underperforms. Over the course of a full market cycle (peak to trough to peak) it equals the S&P 500 with half the volatility, that is, half the risk. The MarketWatch article ‘Nifty 50/50′ portfolio keeps investing simple is well worth studying.
CORE PORTFOLIO PERFORMANCE
Because we took advantage of the four buying opportunities in 2018 (a market drop of 10% or more), our core portfolio is up 1% over the last 12 months. The market is down 4% and because of my age, we were required by law to withdraw 4.5% from this tax-advantaged portfolio. In other words, we outperformed the market by 9.5%.
My wife Rosi’s core portfolio is similar to mine.