Investing,  Portfolio Updates

My portfolio – May update – snowball effect

It’s exciting to see how fast a portfolio can grow once you hit a certain dollar amount. The snowball effect is real!

The market still grew this month with the S&P 500 trending up 1.77%. That doesn’t sound like a ton but even 1.77% is quite a bit of money when your portfolio sits at 400k. That milestone was hit with the last update!

That sort of movement yields almost $7000 in growth at my level. That dollar total is pretty damn exciting. That means that now these types of months and even smaller ones can yield portfolio growth that’s much larger than my monthly contributions.

It’s interesting that now organic portfolio growth through security appreciation is now the biggest driver of portfolio increases. That’s a change from how it was earlier in my life. Back then additional contributions drove most of the growth.

I’m not quite sure when that shift happened but only recently have I started to notice large jumps in my portfolio size in these monthly updates(I’m talking 10K+) when I don’t contribute anywhere close to even half that amount.

That’s great to see but also makes you think about the other end of the coin flip. We’ve been lucky enough to have a bull market that has continued to run. That looks great on the page when it comes to portfolio size but one always has to be ready for the reverse as well if we see a large drop.

It’s great to see 10k+ monthly growth but the reverse won’t feel so great when it happens. I’ve had 8 straight months of portfolio growth and 14 positive months out of the last 15. That’s pretty amazing but as a more realistic investor, that sort of consistent growth makes me a bit nervous that one of those negative periods is coming.

I’m not even talking valuations here, I’m just talking about expectations. The stock market does trend up in the long run but it also takes pauses in the short run. Don’t get me wrong, I don’t mind those pauses as they’re an opportunity to buy at lower prices. That ain’t so bad even if it looks bad on the page.

With all that in mind, I don’t have any plans to change my investments right now and have continued to purchase on the way up. However, I do have expectations that this sweet ride will probably take a slow pause eventually.

On the subject of valuations, the Q1 earnings that I’ve talked about in the past have been mostly excellent. According to fact set, with 83% of companies in the S&P 500 reporting, 75% have beat mean EPS estimates. 66% have beat sales estimates.

The q/q growth rate so far is 13.5% which is the highest rate since 2011. A good deal of that is driven by energy companies which had negative earnings last year. Even without them, the earnings growth is still above 9%.

I mentioned that the last estimates for Q1 growth rate were around 9% so if we end up seeing 13.5%, that’d be pretty damn fantastic. That’s pretty optimistic considering there’s still a good amount of companies left. That includes a ton of retail companies which may show weakness in their earnings growth this year.

The bottom line is that it looks like we’re finally back to growth again which is great for the stock market. That growth follows a few years of muted earnings. Q2 guidance is largely negative with 70% of companies that issued guidance going negative versus expectations.

That seems but it’s standard and actually below the 5-year average of 74% so it’s not anything to worry about. Companies just prefer to be pessimistic and beat.

If this level of growth can continue into Q2 and for all of 2017 then this stock market may still have a ways to go before we see a pause. Still,  I can’t help but be wary whenever we see such a long term sustained growth cycle. Even if it means great things for my portfolio.

Let’s take a look at how my portfolio did this month.

snowball effect

8 straight months of growth power the portfolio to a total of $415,018.94!

That’s a 3.03% increase over last month or growth over $12k! That means 4 out of the last 6 months have seen increases over $10000 in that month. That’s freaking awesome and means my portfolio has grown more in those four months than I contributed in all of 2016!

Contributions help a lot with that growth. Still, nothing beats good old fashioned market returns once you start getting to a certain dollar level.

The S&P 500 returned 1.77% this month and my portfolio was powered by that. However, great returns in the European markets  buoyed by the French elections and good returns in two of my largest individual holdings helped. Apple and United HealthGroup were up which explains the out performance on my end. The contributions certainly don’t hurt that comparison either.

My taxable accounts were up 6.2% this month and part of that is driven by a new purchase.

My tax-advantaged accounts were up 2.9% this month.

Cash was down 6.7% as I initiated a position in a small-cap company this month in my taxable account.

Cash now makes up 7.2% of my overall portfolio. That’s a good deal below my 10% max. I’ll continue deploying it as I find values and to prop up any asset classes that are below their target allocation.

Let’s take a look at the asset allocation now.

asset allocation

I was pretty close to target across the board last month. That hasn’t changed much. There have been asset classes that out performed(international developed). Also classes that have lagged behind(REIT and bonds) so there’s some work to do but I’m still pretty close to where I want to be right now.

Here’s the breakdown of each class versus target.

  • US Large Cap at 42.52% versus target of 42.5%(+0.02%)
  • US Mid Cap at 10.02% versus target of 10%(+0.02%)
  • U.S Small Cap at 10.11% versus target of 10%(+0.11%)
  • US REIT at 9.73% versus target of 10%(-.27%)
  • International Developed at 15.29% versus target of 15%(+0.29%)
  • International Emerging at 4.98% versus target of 5%(-0.02%)
  • US Bonds at 7.35% versus target of 7.5%(-0.15%)
REIT performance this month was lacking when compared to the other classes which shows in it’s move from being right on top of target last month to being well below this month.
Bonds were behind last month and will always lag further back without additional contributions if stocks perform well any given month. The French elections sent Europe up quite a bit and I’ve shored up the small cap shortfall by taking a small stake in a little company(George Risk Industries) that seemed fairly valued to me when looked at through the Benjamin Graham value lens. I’m in the process of doing a write up/valuation of that purchase and should have that up in a few days.
The plan for next month is as follows.
  • Buy US Bonds and US REIT in tax-advantaged accounts.
  • Cash pile at 7.2%, look for value.
I’m in a good spot with my asset allocation and these monthly updates are key in letting me know where to direct my money. That way I’m buying assets that hasn’t performed well in the last month which means that I’m likely buying it at a better value than the other classes.
That’s it for this month. How did you portfolio do in April?


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.