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 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.
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.
Rosi 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. She does not have a fun portfolio.
Core portfolios (all are tax-advantaged)
We withdrew our entire annual budgeted income needs from my personal core portfolio. If things go as planned, we will not need to do that for another 12 months.
The withdrawal changed our asset allocation balance so that our INVESCO S&P500 exchange-traded fund (symbol RSP) stood at 54.4% of the portfolio. We sold enough of the RSP to bring the 50/50 asset allocation back into alignment.
Following Paul Samuelson’s advice (Samuelson is an economics Nobel laureate) 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% two weeks ago) and 50% in the RSP ETF with the changes mentioned above. 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.
Last Friday, ABBV closed above the strike price and I was assigned. That put the portfolio entirely in cash allowing me to write cash-secured, just-in-the-money uncovered puts which paid $560 per ten contracts.
My fun portfolio suffered a serious loss when I committed all of it to ABBV, the underlying, which tanked soon after. Since my fun portfolio makes up only 5% of Rosi’s and my 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.