While I’m sitting around waiting for the COVID train wreck to come to fruition I was reviewing my performance in Personal Capital over the past year. In 2109 I made a deliberate choice to “risk off”, meaning I changed my asset allocation considerably to a less concentrated allocation to stocks. Personal Capital doesn’t capture all of my holdings. For example BTC is not represented and I have a 401K which PC can’t access, so the analysis isn’t perfect. BTC and the 401K tend to further reduce my actual volatility, but I’ll use the tools I have to consider my asset allocation performance compared to other portfolios. To do that in Personal Capital I choose under “Investing”, “Performance” and choose a 1 year time frame.
I think the “Blended” portfolio is a comparison of my portfolio against the stock Personal Capital efficient frontier asset allocation for my given risk choice. Oct 25 is the day I changed my risk profile, sold equities and bought bonds and gold and BTC and opened an actively traded Roth. I compare my change in risk across all the available asset classes in this tool. Notice how my particular portfolio has a trend line that flattens out after Oct 25. The blended portfolio apparently has a greater relative risk compared to mine. The 2 portfolios meet on Feb 19.
On Feb 19 the VIX looks like this
So in a low volatility environment (VIX<15) my portfolio acts like the blended. Note what happened yesterday
My portfolio has diverged from the blended and out performed the blended by >1.5% based on a 1 year (or year over year) return, in the face of monster volatility
This is exactly the performance I’d hoped to achieve. In times of monster volatility my portfolio performs quite well. This is an end of business cycle time, post 12 years of expansion and it “was” time to take your profits, when the market “was” up. On Oct 24 the day before the day I derisked, my return was 12.62%. On Feb 19 my return was 14%. Today my YoY is 5.47% v 3.89%. So in performance terms I’ve lost 8.5% while the blended has lost 9.92% on a YoY basis. That’s 142 basis points out performance or I’ve beat blended by 16.7%. A man has to have some solace when the world is crashing. Actually a 5.47% positive return YoY can hardly be called a crash. I’m still worth more YoY this year than I was last year and that includes the money I spent as income to live on, plus the money I spent on Roth conversion, quaintly referred to a “sequence of return risk”
Compared to US stocks my portfolio outperformed 12.62% to 8.31% before derisking. In other words my portfolio was ahead of 100% US equities by 51% before I derisked and ahead by 12.8% the day after I derisked. This is the evidence proper non correlated diversity pays. As of today following a 135 point gain on the S&P, I’m still ahead by 5.47% v 3.57% or 53% on a YoY basis.
This is an extremely interesting comparison
On a 366 day basis my portfolio outperformed every other category except BONDS! Stick that in your pipe and smoke it when you are sneering at bonds. Last year would have been a hell of a year to be long exclusively long BONDS. Actually it was my switch to a greater % of bonds that improved my overall performance. You see on this chart why I am down on Foreign as a major asset allocation. I do own about 10% international stock. Most days I wish I didn’t, but it keeps me on the efficient frontier. I’ll leave you with this image of Foreign
You can think about this chart next time some dumbassed bogglehead starts quacking about owning “foreign”. Tell me about how this diversified your portfolio? My account is up 7.22% compared to – 8.14%
My advice is yes you can correctly time the market, in the face of asymmetric risk. You can see in the “all stock” portfolio there was monster upside all the way till there was monster downside. Why do you want to own that kind of risk when you can own some much more rational level of risk? What is it Bernstein says?
It’s the wrong time to trade when the VIX is 51. VIX 51 is a good time to horde cash. This market is not done falling. The US hit over 1037 COVID cases this morning with 28 deaths and only 8 recovered. In my state in the last 12 hours the cases doubled from 14 to 28. We are walking into a virus buzz saw. The government has adopted a buy and hold passive strategy. Let the buzz saw hit and wait and see what parts remain. After all parts is parts ain’t they? Korea OTOH is managing their risk actively, and winning. In case your denial is still intact, understand today is March 11. It’s not even St Paddy’s day. Harvard, the home of Man’s Best Medical School, cancelled all “in person” classes for the rest of the semester.
Oh ya life goes on long after the thrill of living is gone… Let it Rock, Let it Roll…
may as well enjoy the ride.