My Portfolio – August update

The volatility we’ve experienced in the market this past year took a little break in the latest month as we saw a pretty consistent upward pattern between July and August. The S&P 500 was up around 2.5% since our last update without a lot of big down days during the month.

It’s easy to forget how hectic the past year has been when you go through a month like this because recency bias takes over and you begin feeling good about the state of the market again.

The truth is that the market is only up about 4% since Aug 2015 and up nearly 20% since the bottom for the year hit in February. That’s a lot of volatility to stomach during one year only to end up a few % above where we started. Volatility certainly can create buying opportunities for the smart investor but it can also lead to some bad decisions if you can’t stomach the drops.

We’ve hit a price point that seems excessive based on historical averages. In my mind it has seemed that way for quite some time as the market continues to rise slowly. It’s an interesting time to be an investor as we’re also looking at a historically low interest rate that make other investments much less palatable.

My thoughts are that a correction will come eventually but when it comes is anyone’s guess. At this point, the market seems to want head up as any corrections that have happened in the past year have been very brief and difficult to take advantage of for us long term investors unless you had a ton of money on the sidelines.

The market may seem overvalued right now but I’m certainly no Punxsutawney Phil of the stock market so I’m sticking to my asset allocation and riding out any potential future volatility. Future drops just mean I’ll be buying and reinvesting at lower prices!

In the meantime, I’ll be glad to see the growth in my portfolio size even if I feel like I’m paying just a bit too much for any new contributions each month. After all, the market is unpredictable especially in this low interest rate environment so this correction we’re all expecting might take a while to come. If that’s the case then missing out on all those gains and dividends by keeping a ton of cash on the sidelines will not be in the best long term interests of many investors.

July wasn’t an overly busy trading month for me. It was a low dividend month so reinvested money wasn’t a big driver but I continued piling money into the market via my regular contributions. My cash pile is still near my 10% cap so I put some of that to use via some regular ETF purchases.

The only move I made was a small move from bonds into REITs to remedy the asset allocation issues there. For the most part, I decided I was close enough to where I wanted to be already and will allow future contributions and market movements to get everything back to target in the next few months.

That’s the lazy way of going about the process of reallocation but it helps me minimize my expense ratios and tax liability within my various taxable and tax-advantaged accounts.

Now, let’s take a look at where my portfolio stands today.

As a reminder, last month my total was $333970.71.

We’ve seen a consistent upward trend since February’s lows and this month was the second biggest increase percentage-wise since the post February bump. Standard monthly contributions and growth in the US and foreign markets contributed to a 4.1% bump in portfolio size.

My overall portfolio now sits at $347758.38!

That’s a 27.0% growth from the lows of February and 18.5% higher than when I started tracking in December.

The increase in contributions around December when I started this blog and the growth in the market since then have meant we’re seeing growth on both ends of the equation.

There were a few months early on where I was down and there will be more of those in the future but this graph certainly shows and hopefully will continue to show the long term benefits of sticking with an asset allocation plan and continuous investments.

An increase of 4.1% on a month to month basis when we’re talking about a portfolio size in the 300k range is crazy to me and I’m really happy with the results.

That’s nearly 14k growth in one month and most of that is from market appreciation! I can’t hope for that on an ongoing basis but it’s very nice to see such growth this month and the overall growth during the year. I’m not sure what the market will do in the near term but I’ll certainly keep investing no matter what as time in the market and continuous investing is the key to long-term success.

My cash pile grew a bit too much last month after I did some tax loss harvesting and sold my ESPP shares so I put some of that to use this month investing in a large cap ETF to help my under allocation there.

As a reminder, my asset allocation plan allows for up to a 10% cash allocation when I feel like the market is overvalued. I’ve seen that cash pile grow in the past few months as I’ve sold off some individual stock holdings that I felt were overvalued or I was overexposed to in my portfolio.

I put this into my investment plan for when I feel like the market is over valued or when individual attractive individual investments are lacking for two reasons.

It allows me to have dry powder ready when investment opportunities do arise but also to minimize the level of worry I have about the market when it gets overheated.

It is easy to say you won’t panic as an investor if there’s a massive correction but I like to have some level of safety built into my investment plan to make sure I don’t feel the need to sell at an inopportune time. Bonds provide that level of safety but so does cash especially if you want to add a bit of excitement to your otherwise boring portfolio via some individual securities.

I want to feel like I have the opportunity to buy when it’s most advantageous to buy and not have to sell when the market is tanking. Having some cash on the sidelines helped me feel better about buying in February which turned out to be a great time to buy. It also helped me fell good about weathering the 2008 storm as well even though my portfolio was a fraction of the size it is today.

My cash are down 4.5% this month and cash makes up 9.1% of my portfolio so that’s below the 10% max again this month. There are a few stocks that look somewhat attractive at the moment like GILD which is nearing my buy target that I may look at in the coming weeks.

My taxable accounts grew 6% this month after shrinking last month due to the aforementioned sales that buoyed my cash totals. Apple outperformed the market this month by a good deal and helped drive performance in my taxable accounts as it does some of my targeted dividend ETFs. The rest of the increase was driven by contributions from my cash account.

My tax-advantaged accounts grew 4.7% this month and a lot of that was driven by contributions but also decent performance of the various asset classes I hold in those accounts.

Dividends in July were low but that will be the case with these non-quarterly payout months as most of my investments still remain in mutual funds and ETFs.

Now let’s take a look at my asset allocation.

I didn’t make a ton of changes this month so I expected this to be largely the same as last month.

Bonds continue to shrink closer to my target as the market growth and no bond contributions shrink their overall impact on my portfolio. All other asset classes else are moving closer or sticking around the target based on my contribution inflows and individual asset class performance.

Here’s a breakdown of where I am versus my target.

  • US Large Cap at 40.6% versus 42.5% target(-1.9%)
  • US Mid Cap at 10.6% versus 10% target(+0.6%)
  • US Small Cap at 10.3% versus 10% target(+0.3%)
  • US REIT at 9.1% versus 10% target(-0.9%)
  • International Developed at 16% versus 15% target(+1%)
  • International Emerging at 4.8% versus 5% target(-0.2%)
  • US Bonds at 8.6% versus 7.5% target(+1.1%)
Bonds have pulled back the most here on a month to month basis. That is driven by the movement of bond money into REITs as well as the out performance of the stock market in the latest month. REITs have actually under performed the stock market in the last month so that asset class is almost unchanged month to month. 
I’ve made a ton of progress to get where I want to be since I started this whole process. All of my asset classes are within 2% of where I want them which is great to see. The plan going forward is to divert contributions into asset classes that need them in lieu of moving money around. 
The goal by the end of the year remains to get all asset classes within 1% of the target. The plan for next month to get closer to achieving that goal will be:
  • 401k contributions fully into US Large Caps
  • Invest additional money in tax-advantaged accounts into US REITs
  • Cash pile is at 9% – invest in ETFs(likely large-cap) or fairly valued securities if available 

That’s it for this month. An expense and savings rate update is up next and I do hope to write some additional blog entries in the mean time but it’s busy season at work which really ties up my time during the week for the next few months.

Thanks for reading and hope your month was as good as mine!

3 thoughts on “My Portfolio – August update

  1. So close to the 350k bar – congrats on a great month!
    I was curious about your cash percentages – you're not including your cash holdings in your asset allocation percentages right? So is cash in addition to the total 347K of your portfolio?
    Best wishes,
    -DL

  2. The cash is included in the 347k total but you're right that I don't class it as an asset in my asset allocation.

    I generally don't have a high cash % so this is out of the norm due to market pricing so I decided to just exclude it for the purposes of my asset allocation. I'll only use it as a way to adjust my assets back to the norm and don't want to mess around with having it as a separate asset class in there since the long term goal is to have near 0% cash.

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