My portfolio – January update

I won’t be doing a full out account by account update with holdings every month – maybe that’ll be something to do once a year or even more rarely but I do want to keep a monthly account of my totals and how far or how close I am from my desired asset allocation. I started with an in depth analysis of everything last month.

If you remember last month – I was mainly short small-cap and REITs and overweight bonds/large caps. In the past month, I’ve done the following to try to remedy these issues.

  • Readjust future HSA/401k contributions to be almost 100% small-cap funds including a 50% contribution for the last two paychecks of 2016
  • Direct future Roth IRA contributions for CY 2015 and CY 2016 into the REIT fund
  • Sell off some of my large cap individual holdings(UNH and DIS) due to belief that both are overpriced. I have discussed both sales in other posts.
In the past month – we’ve also seen a pretty big market decline especially in the early parts of 2016. From a long term perspective, this is a good thing since I’m still well into my accumulation phase and plan to contribute quite a bit this year so buying at a lower price is better than buying at a higher price. The market growth in the past few years has been driven by easy access to money, growth in the US despite challenging conditions overseas and an expansion of price multiples as money poured into stocks due to a lack of good alternatives, Low yields in bonds and a bearish commodities market drove some prices up to very unattractive levels based on historical price points. Whether those price points are relevant in today’s market conditions is hard to say but the recent volatility in the market might be an indication that some people aren’t so sure and seek to move money out of a market that may or may not be overpriced. The next few weeks/month of earnings calls and 2016 projections will be telling to the health of the economy of the US and when combined with issues in China could make for an interesting few months. In the end this is all short-term noise that might impact portfolio totals for the next few weeks/months/years but for us long term investors – these small or large movements shouldn’t really matter. I’ll keep pumping dollars in every week even if I see my portfolio move down like it did this month because this is a long term game and short-term fluctuations don’t matter.
As with last months update – let’s take a quick look at portfolio totals this month when compared against last month. 
2016 is off with a bang! Not really – the portfolio has gone from a number just a bit above 308k in December to a number just just a bit above 300k in January. Remember that this includes a bump in 401k contributions to my 401k for the last two pay checks in 2015 talked about here. If that didn’t happen the we’d be quite a bit below 300k. Even with new contributions flowing in and a big dividend month in December – we are looking at a 2.3% reduction in portfolio size. At least that means the next wave of purchases will be at a lower price!
On top of that you can clearly see my cash position has increased since the last update due to my reduction in my UNH position and my sale of all my DIS shares. In case you haven’t read my investment strategy posts, my asset allocation plan allows for up to 10% cash in my overall portfolio that I look at as being outside of my asset allocation and can use to either buy new shares of companies that are valued well or to adjust my asset allocation as needed. I can also hold this money on the side when I don’t feel like the market is fairly valued at the moment. This prevents any market timing by limiting my cash portion of investable funds to 10% but helps keep it interesting and allows me to do some individual analysis as I keep some cash on the side an wait for values to emerge.
In this month’s case – we’ve let that cash portion exceed our asset allocation max so I have about $4800 to invest before the next update into either ETFs or any particular values that emerge in the next few weeks if the stock market keeps decreasing. I may just buy a few more shares of APPL stock if the price gets to the low 90s or use the funds to re-adjust my asset allocation.
Speaking of asset allocation – let’s take a look at that now and see where we stand compared to last month. It’s only been a month and the stocks I took to remedy my shortfalls were rather limited choosing to take a longer term approach and letting my future contributions even everything out so I don’t expect huge changes here.


Let’s a look at where I am and where I want to be based on my asset allocation.
  • US Large Cap – 43.8% versus target of 42.5%(+1.3%)
  • US Mid Cap – 11.6% versus target of 10%(+1.6%)
  • US Small Cap – 5.2% versus target of 10%(-4.8%)
  • US REIT – 6.4% versus target of 10%(-3.6%)
  • International Developed – 17.1% versus target of 15%(+2.1%)
  • International Emerging – 5.8% versus target of 5%(+0.8%)
  • Bonds – 10.1% versus target of 7.5%(+2.6%)
I’m still a good ways of on the small cap and REIT allocation although the changes have gotten smaller with recent contributions. I’m not overly worried about the REIT allocation as I have a big ROTH IRA contribution coming up soon that will help remedy that. However, the small cap adjustment went from a -5.6% shortfall to a -4.8% shortfall this month which isn’t a huge jump considering the big contributions recently which all went into the small-cap fund. The issue we have as evidence by the mid cap exposure growing from being 0.9% overweight to being 1.6% overweight is that the vanguard small-cap funds all contain 30-50% mid-cap exposure so I may have to make an additional adjustment next week to move some of my mid-cap fund(which is 15% large cap/85% mid cap) dollars straight into my small-cap fund which should help reduce my mid-cap exposure a bit as well as grown my small-cap exposure.
I could also use the ~5k in cash I have to use based on asset allocation to buy a full small-cap ETF such as IJR in my taxable accounts(don’t have it in 401k or my ROTH). However, since small-cap stocks often don’t pay out qualified dividends and often have the largest capital gains, I’d rather have them contained in my tax-advantaged accounts and used taxable funds for more tax friendly equity types.
We also saw a reduction in large-cap allocation due to the sell-off of my individual securities but also saw growth in international developed and emerging despite 0 contributions there and also the bond allocation. The bond fund is natural as bonds do well whenever stock markets move downward but I’m surprised by the international allocation change. It might just be due to the reduction in overall portfolio size with the move into more cash as well as potential short-term out performance of the active international fund over my other index funds. To adjust for the bond allocation – I might get a head start on the REIT correction and move some funds from my bond fund to my REIT fund in my ROTH.
And that’s that for the month – the asset allocation fix is on the way as the portfolio shrinks due to market volatility. Contributions will continue to flow in and I luckily sold a few securities at a good point before the market move downward. Now according to my asset allocation, I have a few $$ to put back into the market and as always will look for good values if the market continues to fall.
Here’s the plan of action for the next month.
  • Continue full assault on the underweight small-caps by directing all of my 401k contributions into it and also move some of my mid-cap fund money into the small-cap fund to speed it along
  • Move some of my overweight bond fund money into the underweight REIT fund
  • Use the 5k in cash I have that falls above my 10% max cash rule to purchase either ETFs or any attractively priced securities(time to do some research!)


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