Our personal portfolios, 5/20/19

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.

Usually, I publish with comments, Rosi’s and my core portfolios and my fun portfolio holdings and the activity which took place, on Tuesdays. I did not get a chance to do so yesterday, so here it is today.

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

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.

Finally, last month, our fun portfolio did better than either the US or the Canadian market. However, since inception, the portfolio is down significantly because the only security in the portfolio, AbbVie (symbol ABBV), tanked immediately after we bought it 20 weeks ago.

Since that time, we sold derivatives on ABBV each time that we were assigned. (Covered calls 11 times and cash-secured uncovered puts 9 times.) We have recovered 2/3 of the loss overall but still hold a loss position.

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 last week, 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% two 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.

 

 

 

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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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