Yesterday was a humdinger as the S&P was down 58.14 or -1.77%. I tend to use the S&P as my benchmark as it’s a broad US index with many multinational companies. My portfolio was down almost exactly half of that 1.77%. This is what I’ve been aiming for, a portfolio that is half as reactive as a pure passive equity play. This means if 4M in equities goes to 2M in a crash my 4M will drop to 3M. In doing a efficient frontier analysis
My portfolio risk of 9.9% is virtually 1/2 of a pure equity risk of 19.76%. My projected return is 7.6%, which is 76% of the projected 9.99% of the 100% equity portfolio. I get 75 cents of every dollar to the upside, but I risk only 50 cents of every dollar to the down side. Given my 20 year longevity regarding the sustainability of my portfolio, I think my odds are good, especially since my portfolio is tax optimized. My odds will further be enhanced in 2 years when I pull the trigger on Social Security. If the market dies sooner I can pull the SS trigger if need be, since pulling the trigger at 68 is not hugely different than pulling the trigger at 70, so it would quench my need to deplete my portfolio in a bad SORR scenario. If I pull that trigger it will cut my portfolio WR in half. Each month I get closer and closer to 70, so each month my relative value of SS increases. It’s a nice place to be in.
The majority of my Roth conversion has taken place. If the market dumps it will cut the value of my remaining assets to convert, and therefore I will be able to convert more (cheaper) assets for the same tax dollar. The tax money to pay for conversion is already in the bank. I sold high, paid the taxes, and didn’t look back. If the market doesn’t dump I will simply convert a smaller amount over a longer time ( to age 72 vs age 70) and lower my tax bill that way.
I recently sold some QQQ and bought some BRK.B to reduce my risk exposure while increasing my return. BRK.B has a 11.3% return and a 17% risk while QQQ has a 8% return and a 24% risk. Better return, lower risk = no brainer. The 2 also have only a .16 correlation. Compared to the 1.77% loss in the S&P, BRK.B lost only 1.5%.
Who says you can’t time the market! My conversions are parsing out exactly according to plan.