It is time for my personal finance and investing journal update. Let’s update the State of my Stash…
If you are new to my blog, or this series of posts, I am tracking my liquid savings/marketable investments. I am using these posts as sort of a finance and investing journal, so I can look back and see what I was thinking or (hopefully) how I achieved certain financial and savings goals.
If you are a returning reader, sorry for the long period between posts. I have been absolutely buried at work. Also, I was without a personal computer for a few weeks, since I spilled water all over my laptop (apparently frying the motherboard).
I am now typing on my new unit and really like this keyboard. This is good because I’m planning to go back to monthly journal updates in 2022.
CURRENT PORTFOLIO Allocation
As I’ve mentioned before (despite being a poseur active investor), most of my stock exposure is through index funds.
At year end, I had about 15% each in SPY and VXF (or their equivalents). About 20% was allocated to foreign stocks (~15% EFA and 5% VXUS).
EFA was up 10.87% in 2021 (01/01 – 12/31). The S&P 500 was up 30.60%. The completion index (VXF) was up 13.99%. VXUS was up 8.34%.
Bills and bonds make up about 35%. This is partially a function of my largest account (401k). In that account, I allow myself to change the allocation between 90% and 45% invested in stocks based on valuation. I am only at about 60% allocated to stocks in that account. I also have a larger than usual chunk in cash because I am planning to pay for some home renovations at some point in the near-ish future (still trying to wait out the surge in demand and supply kinks).
This 35% is mostly in cash and short term instruments. I still don’t like the risk/reward on offer for locking money up for a long period of time (in return for sub 2%) when the people who print the money are telling you they are want to generate (at least) 2% inflation. The recent inflation reports of 7% annually (though apparently decelerating) reinforce this view. The “option value” of cash and bills seems to be rising with rates and increasing earnings yields as stock prices decline.
Minor Adventures in Capitalism
As stated, I allow myself to pick stocks with a “sleeve” of my portfolio. It was 10% of the total as of the last update in June 2021, but has grown faster and was at ~15% of the total portfolio at year end. I have not really been contributing to this sleeve (other than funding my HSA which is in this bucket).
My “fun fund” is probably going to be the best proxy for how I’m doing in this bucket, since I track that more closely than the other accounts in this category. I have not published the post for the Q4 2021 Fun Fund update yet (working on it), but the account was up 5.32% in Q4 and was up 25.79% for 2021. I’ve still got a cash drag in this account (~15%) but that balance came down as I bought $SMG, $CMCSA, and some more $USB in the second half of 2021.
As another proxy, value stocks mostly kept up with or beat the SPY in 2021. RPV was up 35.95%. GSPY was up 29.20%. QVAL was up 34.70%. I don’t actually have much $$$ allocated to value funds, but they tend to correlate closely with my active stock picks.
In addition to the stocks I have discussed in the Fun Fund articles, I own a decent slug of BRK.B. I was consolidating other positions into BRK over the second half of 2021 (mostly rolled some gainz from WFC purchases in the mid to low $20s). Though I haven’t bought any recently, BRK was approaching 10% of the portfolio at year end. WFC was up 63.75% in 2021 (is that good?) and BRK.B was up 30.88%
Value + Trend
I also manage some of my portfolio based on a very simplistic, systematic trend and value strategy.
The account is divided equally: 33% each to the S&P 500 (SPY), the Dow Jones Completion Index (VXF), and foreign stocks (VXUS). Basically, if the valuation of one of these indices/funds is rich (as determined by me based on a somewhat discretionary “process”), then I apply a simple moving average trend-following rule.
The idea is to have some risk management in place when stocks are expensive by selling when they have negative time-series momentum (for example, when stocks are down over the last 12 months or below the long-term moving average).
When stocks aren’t expensive, I just want to be long and strong (so no trend-following). I only allow changes once a month in an effort to limit the number of “whipsaws”(when I sell and later buy back into the equity fund at a higher price than I sold, because the trend rule says so, resulting in a loss).
If you’re interested in learning more about trend following, I would recommend you start by searching for info on the Alpha Architect and Meb Faber sites. Jeremy Siegel also touched upon the subject of trend a little bit in Stocks for the Long Run.
I have about 20% of my investments in this account/strategy. I am prioritizing contributions into this account. It should become a larger allocation over time (unless the relative performance stinks).
As of 12/31/2021, I was 100% in equities in this account. Since June 2020, this account has been 100% long. In 2021, this account was up 14.00%. This beat the primary benchmark I’m using: $AOR. AOR tracks a (globally diversified) version of a “60-40” portfolio. AOR was up 11.46% in 2021.
I’m pretty pleased with the performance of this strategy/account so far. It put up a 17.29% return in 2020, smoking the 10.75% return for $AOR (and basically matching the 17.24% return for SPY). While I took a loss to SPY in 2021 (~30 vs. 14), that was due to the 33% each in VXF and VXUS (there were no trend sales).
I also really like how the strategy has served as sort of a psychological “release valve,” providing reassurance that even though the market was expensive I am rolling with some risk reduction. I have taken a few whipsaws over the last few years (for example a small one in 2020 during the covid collapse), but those haven’t been huge or bothered me much.
I will discuss this in more detail in my next update, but I went to cash/bills in 66% of this account as of early January, which has been a good move so far, and seems to be making me more comfortable with standing pat with the rest of my portfolio.
Stash Stats
As a reminder, I ended the last update in June at about $390,000.
For the rest of the year, I continued to automatically save. Automating my savings is my strategy of managing my behavior (and limiting the willpower required to stay on plan) by basically saving first and then dealing with the consequences in the rest of my budget.
I had a 2021 goal to max out/contribute ~$50,000 to various tax advantaged accounts. I got there, but the mix was a little different than I had planned (a little more in IRA contributions, and didn’t quite max out my 401(k)). If we maxed out all of our tax advantaged accounts, we could get about $85K per year socked away (I don’t include my spouse’s assets/savings in these posts). That seems to be a stretch for us right now, but I would love to be able to fill all those buckets some day. I have just been sort of incrementally trying to move in that direction each year.
Anyway, with help from savings and investment gains, I ended 2021 with about $423,000 in my portfolio.
In 2021, I started tracking the rate of how quickly the stash is growing, including both savings and investing gains. This is an odd metric for most use cases, but it’s easy and does reflect both levers that I am trying to use here (saving and investing). Thanks to an idea from a twitter friend (@DadInvest, follow him if you don’t), I’m also going to start tracking the 5-year trailing CAGR in my total invested assets (also including gains and contributions).
First, my percentage increase in the stash from saving and investing for 2021 was 30.55%. My five year trailing portfolio/savings CAGR is basically the same: 31.15% (12/31/2016 to 12/31/2021)(again, this includes contributions and is not evidence of an investing savant).
This rate of growth should slow down as the portfolio grows. The stash was barely 6 figures at the start of the trailing 5 year period. I guess the upside of not having much money is that your savings can really increase the balance at a high rate (good for motivation).
That’s a Wrap
So anyways, that’s the 2021 year end state of my stash. I made nice progress this year (about +$99,000…market gains are about half of that). As I write this, however, the S&P 500 is down about 8% YTD, so the next update might not look so great. I need to take a stab at my total net worth (including less liquid assets). I will plan to do that with my end of January update.
Thanks for reading!