My personal portfolios, 03/11/19. Major changes this time

I will occasionally publish with comments, our core portfolio and our “fun” portfolio holdings and the activity which took place on Monday. Following holiday Mondays, we will publish this information on Tuesdays.

Core portfolios (all are tax-advantaged)

On Monday, March 11, 2019, Rosi and I made major changes to our core portfolios.

Maintaining the same 50/50 asset allocation ratio of a market index exchange-traded fund (ETF) and a money market fund, we changed our ETF from SPY to RSP.

Why did we do that?

Our December 17, 2018 blog stated: The subject of exchange-traded funds is complex but all that Monday Morning Millionaire Program members need to know is that primarily, the three ETF’s shown below are the ones which interest us.

  1. SPDR S&P 500 ETF (Symbol SPY)
  2. iShares Core S&P 500 ETF (Symbol IVV) and
  3. Vanguard S&P 500 ETF (Symbol VOO)

The charts of SPY, IVV, and VOO are practically identical. All are capitalization-weighted ETF’s. Each of the 500 stocks in the index influences the ETF according to the stock’s market capitalization. When they were hitting new highs about one year ago, Facebook, Apple, Amazon, Netflix and Google represented more than 11% of the S&P 500. One percent of the S&P 500 stocks equaling 11% of the ETF!

The Guggenheim S&P 500 Equal Weight ETF (Symbol RSP) is an equal-weighted ETF. Irrespective of its market capitalization, each of the 500 stocks in this ETF represents 0.2% of the S&P 500.

Investopedia has an excellent article comparing SPY and RSP. Keep in mind that Investopedia is funded by folks whose income depends on your being an active trader so, they will encourage you to trade. Active trading is a loser’s game over the long run. Don’t go there except in your fun portfolio. Yes, active investing can beat the S&P 500 over the long run. The chances of so doing are much closer to 0% than they are to 10%.

The chart below, the 10-year performance of these two ETF’s, shows why Rosi and I changed our ETF’s from SPY to RSP in all but our fun portfolio.

Our changes are based on the assumption that history does not repeat itself but it rhymes (Mark Twain?)

Fun portfolio

Since my shares of ABBV were not called away at the end of last Friday’s trading, I was able to write (sell) covered calls on these once more. I wrote a strike price of $US78.00, expiry date this coming Friday (C 15MAR19 78.00) and received $US940.00 per contract. That is the most that covered calls on ABBV, written on a Monday at a just-out-of-the-money strike price, expiry date on the Friday of the same week, have paid over the last few months. Nevertheless, this portfolio is down significantly because ABBV itself (the underlying) took a real beating since I bought it.

My “fun” portfolio represents only 5% of my invested money. It will have a small overall effect regardless of what it does. Investors who run a “fun” portfolio could, however, stumble across an exceptional opportunity which they can then apply to their core portfolios.

Rosi has her fun skiing, making muffins, walking our dog, spending time with our grandchildre. She does not have a fun portfolio.

Dr. Milan Somborac

The Monday Morning Millionaire Program supports do-it-yourself (DIY) investors which I have been for over 50 years. About my team and me

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