My portfolio – June update

It’s time for my regularly scheduled portfolio update! I look forward to crunching this data each month because it lets me see my progress on both portfolio size and asset allocation.

It’s been a pretty solid month for the market although it ended on a dour note with an across the board red day last Friday. Still the S&P 500 was up 1.89% since our last update. While the S&P isn’t all that relevant to my portfolio due to large differences in asset allocation, it’s still a good indicator of the overall health of the market and worth looking at monthly.

I did my usual taxable and retirement account contributions this month but also played around with my asset allocation a bit. I transferred some funds around in my tax-advantaged accounts where there are no tax implications with an aim to get the large/mid/small caps as close as I could to their asset targets. I made no individual stock purchases this month.

Now, let’s take a look at where the portfolio ended at this month.

As a reminder, last month’s total was $317281.55, a 1.3% improvement over the previous month.

I’ve seen steady growth in portfolio size since the market turbulence in February and this month is no different. The month to month growth in the market along with additional contributions on my end has yielded a 2.8% increase in my portfolio since the last update.

My overall portfolio now stands at $326325.56!

That’s an 11% improvement since I started tracking back in December and nearly a 20% improvement over the market lows in February. It’s exciting to see this type of progress but I also have to keep a level head about it all because it’s clear from the movement in February that the market can swing in the wrong direction pretty quickly.

As I’ve said in the past, as a long term investor, I actually don’t mind the market dips because it allows me to buy securities that I plan to hold long term for a lower price. Part of the solid returns I’ve seen in the past few months were driven by the fact that I was fortuitous enough to get my raise and bonus in March and was buying a higher number of securities than I typically do monthly at a lower price due to the market volatility during that time.

My cash pile shrunk by about 1% this month but still sits at 7.6% of my overall portfolio. My asset allocation plans allows for up to 10% cash from my individual stock bucket when I can’t find a ton of attractive values on the street. This allows some level of control on my end but also prevents me from timing the market as I always have contributions flowing in through my 401k/IRA and taxable accounts.

My taxable account grew 4.5% this month.

United Healhgroup drove the majority of that growth as they increased their dividend by 25% this month to 62.5 cents per share and were rewarded for that by the market. The stock still only yields 1.8% at the current price but has shown the willingness to grow their dividend in the past few years which started at 3 cents in 2010. Their payout ratio is still a very reasonable 31% so there’s potential for more dividend growth from this cash cow.

I sold off a good portion of my holding a few months ago for two reasons. I was worried about potential future government intervention in healthcare but mainly because I had become too dependent on the stock within my portfolio. My initial purchases of the stock were years ago at an average cost basis below $40 and through reinvested dividends and price appreciation, it had become nearly 1/3rd of my overall portfolio. I still hold some shares but sold the rest despite the tax hit, diversifying into other securities as I didn’t want the risk associated with holding that much in one security.

My tax-advantaged account grew 2.6% this month and saw some reshuffling as I tried to get closer to my asset allocation targets on a few classes.

Now let’s take a look at that asset allocation and see where I am today.

This is looking a lot better now than when it started! The biggest class is only 2% away and only two other classes are more than 1% away from the target.

The few changes I made within my 401k to get the large/mid/small-cap allocations in line really helped and future contributions are set in a way to get the large caps closer to the pin as well.

The only two that are out of line here are bonds which are a bit too high and REITs which are actually further away from target than last month due to poor performance in that class. The simplest way to fix that is to move some bond money into REITs which I’ll likely do this month.

Here’s a breakdown of where I am versus my targets this month.

  • US Large Cap at 40.5% versus 42.5% target(-2%)
  • US Mid Cap at 10.4% versus 10% target(+0.4%)
  • US Small Cap at 10.1% versus 10% target(+0.1%)
  • US REIT at 8.4% versus 10% target(-1.6%)
  • International Developed at 15.9% versus 15% target(+0.9%)
  • International Emerging at 5.6% versus 5% target(+0.6%)
  • US Bonds at 9.1% versus 7.5% target(+1.6%)
Lately I’ve been toying with the idea of adjusting my asset allocation of bonds to 10% and making the portfolio a bit safer but I think it’s too early for that type of risk averse move. I’ve still got a long ways to go and need to maximize potential growth over safety so I decided to stay at this level for at least another year or two and then revisit. The cash pile I have on the taxable side also made that decision easier as it gives me extra funds to invest if the market heads south in the near term.
It’s nice to see everything pretty much where it needs to be now instead of being way off like when I started. I still have a few areas to tinker with and I know how to fix them. Soon I’ll be able to start targeting my contributions more strategically to areas that have fallen out of favor each month as I’ll be able to see that within my asset allocation rather clearly.
Stocks are a fluid thing so I’ll never be right on the pin with all of my assets but getting closer to where I needed to be was on my main goals with this whole process. The next goal is to get within 1% of each target and to do that I’ll be doing the following.
  • 401k and taxable contributions will be nearly 100% large cap to remedy the shortfall there
  • Move some US bonds money into US REITs in my tax-advantaged Roth IRA
  • Invest any additional money into US REITs in tax-advantaged accounts
  • Use excess cash to look for attractively valued individual securities
I’m not sure I’ll be able to get to within a point next month but it’s looking like I’ll be able to get my asset allocation where I wanted it to be rather quickly, likely within the next few months. The goal was to do it mainly via contributions while avoiding a ton of tax exposure and I’m almost there within a year so that’s nice to see.
Next week – I’ll have my savings rate for May which I think will be somewhat similar to April as I didn’t have a ton of extra cash to invest beyond my regular contributions.
Thanks for reading and let me know what you think about my strategy or share your own. See you all in another month for the next update!

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